The basic mistake economists make

Economics is about choice and making decisions about different paths. We place a lot of emphasis on choice in early economics but then the notion gradually gets dropped the higher up the subject one proceeds. Individuals and their psychological dispositions are gradually faded from view as mathematical modelling takes over. In the upper echelons of the subject the notion of individuality has been thoroughly silenced in favour of constant or slightly fluctuating variables.

Accordingly, the concept of choice has been reduced to a system of mathematical levers in which masses of people are assumed to respond to changes in the system in generally predictable ways.

The mathematically minded economists will say that this is the hall mark of science. No, it isn't. Science just means knowledge and what method is appropriate for learning a science depends on the subject. Economics involves action - human action - and therefore choice. Choice is dependent upon values and these values are inherently subjective. No matter how much we extol the beauty of a thing or the necessity of some course of action over another, the argument is still subjectively based. There are no objective values. There may be many values that we all agree have some special place in our lives, but that does not mean they are objective. There are courses of action that are more suitable to human living than others, but that does not mean that we ought to pursue them. Choice is dependent on value and value is subjective.

This is forgotten in the higher levels of economics. Instead of having to deal with the variability of culture and individual experience, all is reduced to simple variables to place in a mathematical system or diagram. And because of that, policies are formed that are inherently destructive.

Indeed the entire edifice of economic policy making is based on the vain assumption that people can be assumed to act like bricks. And while we can all agree that there re levels of predictability in collective behaviour, we cannot presume that a certain code or regulation will cause a certain individual to react in a certain way. When governments say that the individual's reaction does not matter and that the collective response is more important we certainly apprehend the general thrust of policy that you are not important but that also the detrimental effects on individual lives are thereby to be ignored by shuffling them away into the stochastic variable at the end of a linear equation that abolishes all things interesting.

Choice implies value. Values are subjective. Subjectivity is the essence of our nature. Yes, we are social animals and we need society to live and flourish, but ignoring the essence of our nature means that the entire orthodoxy of current economics is a nonsense upon flimsy stilts (to paraphrase Bentham).

Economics can be built properly on the principle of individuality and subjectivity and that's where the Austrian school has much to teach the world.