Victorian historian Thomas Carlyle deemed economics “the dismal science” over a hundred and fifty years ago.

There is no doubt that the study of economics, especially when it concerns itself with the current economy, continues to be gloomy and depressing. But however bleak, the future will be bleaker still if the American population does not learn basic economics. Laissez-faire is dead; politics and economics are inseparable. Karl E. Case and Ray C. Fair define economics in their textbook as “the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.” The two main scopes of economics are micro and macro. Microeconomics focuses on the functioning and behavior of households and firms, whereas macroeconomics encompasses the functioning and economic behavior of the whole national economy.

The rise of the “market economy” created a society of individuals, free economically to sell their labor as each individual saw fit. This freedom released serfs from the land, allowing for a mobile workforce that could move from region to region, from country to country; a mobile laborer can now immigrate to areas with better economic prospects. In The Immigration Crisis, UC Riverside Professor Armando Navarro examines the economic elements that caused the first great immigration wave from the 1840's to 1860's. Labor demand in some European economies was too low to support the population boom, forcing many of their citizens to immigrate to America to labor in the expanding factories of the American industries.

Like immigration law, the American economy has changed since the 19th century. Economic policies have increased government interference. The laissez-faire economics of the 1920s (laissez-faire is the idea that firms and individuals best operate when “allowed to do” without any central direction or regulation) ended with the Stock Market Crash of 1929 and the Great Depression. In 1936, John Maynard Keynes’s General Theory guided the new direction for macroeconomics and framed modern macroeconomics.

Keynesian policy initially indicated that an increase in government spending would compensate for the lack of demand from individuals, and raise the level of production for firms, thus increasing employment. This new, active role of government expanded further during the 1940s. The government started taking advantage of their fiscal abilities, taxing and spending, to affect demand. In addition, the government used interest rates (the mechanism of monetary policy that changes “money supply”) to control price levels. These basic policies are still used by most industrialized nations to stabilize their national economies against high inflation and unemployment.

Since Keynesian policy leads to governmental participation in the economy, our politicians and their decisions impact our future economic condition. Just as citizens need to understand politics to insure the protection of freedom, citizens need to understand economics in order to regulate fiscal and monetary policies. Once citizens comprehend how the economy works, they are able to demand effective policy from the government.-g