Today’s Quote of the Day…

…is from Page 6 of the Foundation for Economic Education’s 1996 edition of Bastiat’s classic 1850 magnum opus Economic Harmonies:

The moving parts [of economies] are men, that is, beings capable of learning, reflecting, reasoning, of making errors and of correcting them, and consequently of making the mechanism itself better or worse. They are capable of pain and pleasure, and in that respect they are not only the wheels, but the springs of the machine. They are also the motive forces, for the source of the power is in them. They are more than that, for they are the ultimate object and raison d’être of the mechanism, since in the last analysis the problems of its operation must be solved in terms of their individual pain or pleasure.

Economics has long forgotten this simple insight: economies are human.  They are made up of human actors who have their own motives.  The bundle of plans, what my GMU professor Richard Wagner likes to call “an ecology of plans”, that emerges from these trillions of interactions is what we call an “economy” or “society.”

Models are helpful for thinking about a situation, but we musn’t forget that our models are populated with people and not “representative agents.”