ABSTRACT
Why is economics so difficult? We argue that widespread economic misconception derives from an acute mismatch between the complexities of economics and the constraints of human cognition. In this chapter we flesh out the former side of the mismatch: the aggregate, dynamic, multifaceted, and impersonal nature of economic explanation. Economic explanations rely on aggregate measures which abstract away and across individuals and their transactions. Most laypeople focus on individuals. Economic accounts integrate direct, indirect, and feedback effects into a coherent system of causal links, explaining how effects evolve over time from diffuse sources. Laypeople give excessive weight to direct effects, locating causality at a focal place and time. Economists account for aggregate measures by the dynamic interplay between them, and often invoke equilibrium states where economic “forces” gradually balance each other. This kind of thinking is foreign to everyday thinking. Finally, economic explanations are impersonal and amoral. In economic models effects flow irrespective of the intentions or morality of the individual agents and transactions involved. Laypeople mostly explain economic events in terms of the beliefs, desires, intentions, and goals of individuals and groups involved in them.
