Adam Smith vs the Engineers of Utopia
19th November 2025
Ha-Joon Chang recently wrote an article in the Financial Times criticising the state of economic education, which drew considerable attention. What went almost unnoticed, however, was a letter published in response. Surprisingly, one of the most prominent Austrian economists, Mario Rizzo, agreed with Chang. He wrote:
“Recently, I had a chance to look at some exams in undergraduate economics courses, including the first course, generally called ‘Principles.’ What I saw was disturbing. The students were given, mainly or only, problem sets of a completely mathematical nature. The emphasis was on mechanical problem-solving. There were no questions involving critical reflection on the ideas or frameworks taught.”
What explains this unlikely agreement between two economists from opposite schools of thought? The simple answer is that there is something wrong with economic education. But the deeper problem lies not in what is taught, but how it is taught.
No, the problem is the entire concept of the ‘field’. Like psychology, economics pretends to be a science whereas it’s actually a new form of astrology.
The foundation of Real Science is mensurability and predictability. Complex systems like the human personality and a large economy are only partially measurable and only statistically predictable. If you drop a rock, you can measure how fast it falls and how far it falls; you can predict how far and how fast it will fall and be right every single time. If you try to measure an ‘economy’, or predict what it will do, you can only quantify a very limited portion and you can only make predictions in terms of probabilities.
Ask an economist what his field is all about and he will say, “Production, distribution, and trade.” WRONG. “Economics” deals with production and distribution only to the extent that what is produced or distributed is traded. If I cut down a tree, cut it into boards, and make myself a workbench, economics has nothing to say about it: it cannot be measured, nor can it be predicted, because no part of it was traded. If I give that workbench to my brother-in-law, economics has nothing to say about it: it cannot be measured, nor can it be predicted, because no part of it was traded. ECONOMICS DEALS ONLY WITH TRADE, and production/distribution only as things produced/distributed are traded.
Consider the classic tool of ‘economics, the famous supply and demand curves. Those deal only with trade, as made plain by the fact that one of the dimensions of the graph is price, a thing that only has importance in trade. If the price of widgets rises from A to B, the number of widgets people are willing to buy will drop from X to Y. Who is offering those widgets? Economics can’t say. Who is buying those widgets? Economics can’t say. It can only say that in general when the price goes up the amount sold (TRADED) goes down. When the price goes up but the number sold (TRADED) stays the same, economics can’t tell you WHY; all it can do is some hand-waving about “inelastic demand”, which is another way of saying “We don’t know.”