Ever since Thomas Carlyle coined the phrase, “the dismal science,” economics has gotten a bad rap. This has not been entirely unearned: even though Carlyle’s epithet was based on a misreading of Thomas Malthus (of which more here), economics has been saddled with concepts like the self-interested individual and the invisible hand, which turn society into an egotistical free-for-all. This then calls for the intervention of a theoretically altruistic state. This comes about because the scope of economics has been truncated. Economics then becomes an irreconcilable individualist/collectivist either/or.
Our approach differs. We take society as it is, a congeries of institutions and associations developed and differentiated within the framework of a common legal order; it is a division of labor in which all are dependent upon all. This is the presupposition. From there we introduce various concepts, ranging from more simple to more complex, to elucidate the functioning of this order at the economic level. The result will be to understand how the modern economy functions, and what policies and practices are helpful or hurtful to that economy.
The peculiarity of our approach is highlighted by differentiating what is known as “the market” into two distinct entities: the “ordinary” market, which is the residence of the real economy, and the “financial” market, which is a different circuit. Money circulates through both, but this circulation is not uniform, nor does it flow freely from the one market to the other. Here is where many problems have their origin.
This is the great insight to gain a proper understanding of how the modern economy really functions. Mainline treatments do not recognize this distinction and work with simplified presuppositions upon which they erect sophisticated rational constructs — but if the foundations are of sand, what good are the constructs erected on that sand?
There is a reason why traditional economic theory and financial theory are each pursued independently with very little interaction. It is because this thesis of the two markets is not recognized and thus not applied. These markets are analyzed and reconstructed in isolation. In this course, we will go beyond that: we take them both into account in a synthetic treatment.