Ask An Economist — Year in Review
In 2023, FEE supported a series of articles by me titled Ask an Economist. Over the course of the year, I answered 16 questions. In this article, I wanted to highlight a few of the questions and answers I received throughout the year. After that, I want to talk about the future of the Ask an Economist series.
Ask an Economist Highlights
Most Popular Answer: According to readership numbers, the most popular question and answer was from August titled, Why Do Some Countries Stay Poor? The popularity of this article may be surprising. The topic isn’t particularly newsy. However, I think it’s safe to say this is one of the most important questions asked in economics.
Many historians of thought credit the beginning of the field of economics to Adam Smith in his famous Inquiry into the Nature and Causes of the Wealth of Nations. Smith’s question was the same as the one asked by a reader in my August article — why do some countries grow rich while others stay poor?
For a full picture, you should read the article, but here’s the simple summary. Explanations like natural resource endowments and educational attainment are seductive, but the logic and evidence simply don’t support those views. Instead, the reason why some countries grow rich while others do not stems from the fact that different political institutions are compatible with economic growth while others are not.
Free markets generate both the knowledge and incentives necessary for countries to move from subsistence to wealth. So, while I brought some new things to the table in my answer, the core of the answer does not stray far from Adam Smith’s original answer:
Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.
Most Difficult Question to Research: The article I spent the most time researching was, Did FDR Create the Middle Class? This question was submitted by Ryan who had a friend who claimed FDR’s New Deal policies were responsible for the creation of the middle class.
One of the reasons this question is difficult to research is that scholarship on the Great Depression and aftermath is very partisan. The causes and consequences of crises and responses to crises are often viewed as opportunities to vindicate a particular worldview. As such, a lot of bias lurks in the answers.
A related difficulty is that the school textbooks which cover the history of the Depression and its effects are notorious among economists for being inadequate if not self-contradictory. You can read an article about this recently put out by Independent Institute scholar Phil Magness and some co-authors here.
So how can such a fraught topic be addressed? Well, one way to handle this is to avoid the Great Depression Research entirely. Economic historian Robert Higgs wrote a book titled, The Transformation of the American Economy, 1865-1914. In this book, Higgs highlights that the conditions necessary for the development of the middle class actually preceded the Great Depression.
In the time period examined, Higgs highlights that incomes were on the rise, capital goods were increasing in number and usage, health was improving, the number of annual inventions was increasing, and people were moving from subsistence farming into cities in the US. All of these improvements, which gave rise to the middle class, preceded the New Deal and FDR.
In the article I address some other issues with the FDR explanation, and I highlight the true causes of growth, but I’ll leave you to read up on that in the piece itself.
My Favorite Question: My favorite question I received came from Steve R. Steve’s question was very different from the usual Ask an Economist question because it was about the Bible rather than politics!
Steve pointed out a particular Bible story in the book of Kings about God miraculously multiplying oil through the prophet Elisha. He then asked how a miracle like that would be the same or different from the Federal Reserve’s creation of new money.
The question provided a useful springboard to talk about how money is different from all other goods. When a good rises in supply, its price falls relative to other goods; everything else held constant. So if you have more oil, oil becomes relatively cheaper. In contrast, when the supply of money rises, all money becomes cheaper relative to all goods.
What that means is the price of every good is affected by an increase in the supply of money whereas the price of only one good is affected by an increase in the supply of oil.
This question gave me a chance to talk about a topic I enjoy (the intersection of faith and economics) as well as give a full-blown lesson on supply and demand. You can read more on this here.
Most Common Topic: The most popular topic of questions will likely come as no surprise to you. In 2023, around a third of questions had to do with inflation, the Federal Reserve, and Banking. This is no surprise given that inflation raged for all of 2022 and the first part of 2023.
Throughout the year I got questions about the Fed’s 2% target, different measures of inflation, fractional reserve banking, and inflation as taxation.
Unsurprisingly, these sorts of questions have, for the most part, stopped. As prices begin to increase more slowly, inflation no longer dominates headlines. Recent drops in fuel prices have likely taken the pressure off your budget somewhat. It will be interesting to see if this trend of lower inflation holds in 2024. If not, expect a lot more articles on inflation going forward.
The Future of Ask an Economist
Let me begin discussing the future of this series with two comments. First, Ask an Economist is continuing in 2024. Second, the best way to ask questions is to send an email to me at pjacobsen@fee.org.
You may have noticed (at least one reader did in my email) that Ask an Economist articles have slowed down a bit. The reason for this is that I’m not receiving as many questions as I did in the beginning!
One reason for this is that towards the end of last year, the FEE Daily email newsletter process changed, and this lowered the visibility of the Ask an Economist process.
So in 2024, I hope you’ll ramp up the questions and send them to my email pjacobsen@fee.org. The answers will continue to be published on the website in article form, and I look forward to answering more.
Finally, I wanted to take the time to highlight a few types of questions that I probably won’t answer. I’ve received some of these over the course of the last year, and I wanted to make it clear I won’t answer these types of questions — so you don’t waste your time asking.
First, I won’t answer any questions seeking financial advice. We live in a world of legal certifications and liability. It would be risky for myself and FEE if I began to give people specific advice about their finances. I appreciate the trust people have in me to send me your financial details, but you shouldn’t do that! I can’t help there I’m afraid.
Second, I likely won’t answer questions about very specific policies and laws in other countries. This isn’t as hard of a rule as above, but sometimes I’ll get questions about the policies of the central bank of some country I know little to nothing about. Oftentimes these questions have been about countries with government websites in languages I don’t know.
If the extent of my knowledge about a topic comes from a Wikipedia article, I probably won’t feel comfortable answering. Again, that doesn’t mean I’ll never talk about the policies of other countries, but the more specific and obscure the policy is, the less likely I am to know enough to feel comfortable answering.
Finally, I tend to avoid “should” (sometimes called normative) questions. My reason for this is pretty straightforward. Ask an Economist is about getting economic answers to economic questions. Economics as a science is not suited for answering moral and ethical questions.
Economics can inform us about what options are feasible for succeeding in our moral or ethical goals, but it does not tell us which goals are moral or ethical!
That isn’t to say that I’ll never give my moral or ethical views, but I try to stick pretty closely to my economic expertise in Ask an Economist.
To all of you who enjoyed Ask an Economist in 2023 I appreciate it. Please send me more questions in 2024.
Editor’s Note: This article originally was published by the Foundation for Economic Education.