In Chapter 1, we observed that we should expect to pay a premium for a ‘no logo’ shirt, since Ralph Lauren implicitly pays me an advertising fee for having a polo player embroidered on my shirt. Now, in Chapter 2, we will instead observe that I should pay less for a ‘no logo’ shirt since I don't get the status value of observers noting that I had the popular and expensive Polo shirt. Indeed, the economist Thorsten Veblen observed in the Veblen effect that demand might actually go up as the price of the Polo shirt increases.

This is how economics works. There is no one right answer. Instead, we each – drawing upon our experience and judgement – tell our stories, our descriptions of the world. The exercise is an art, a craft. Something has gone wrong if we all tell the same story (not least, because we would then need a lot fewer economists). In the other direction, something has gone wrong if our stories are disconnected from the history of economic lore, and we start telling stories that would previously have been viewed as bizarre. I would argue that nothing in the past of economic thought would have argued for an extended period of zero interest rate monetary policy – particularly in full employment labour markets – sustained by a ten-fold increase in the monetary base. The worst situation is when virtually all of economists are telling the same, implausible story.

Economics is about using our endowments (natural resources, technology, physical and human capital) to produce outputs to meet our preferences. In the days of an isolated family farm, the organization of this exercise was straightforward. It suffered from the autarky of having to do everything oneself, without the benefits of social enterprises and regular trade. Now, the world is interconnected, and we can gain efficiencies of production and distribution as well as the social development of products and technologies. However, potential inefficiencies from poor organization and social decision-making can lessen or even eliminate the available gains.

News stories regularly appear of how two sides of a family fight in the law courts (or, following a methodology we will regularly use in this book, refer to the Dickens’ novel Bleak House) and destroy the fortune that is the subject of the case.