How can we tell if someone knows (understands) how the economy works? If the person refers to the economic actions of individuals and then attributes their behavior to striving for excellence and the acquisition of virtues then they pass the litmus test. Even if this is not specifically referred to, but implied, then there is evidence of economic understanding.
By definition, a litmus test is a test in which a single factor determines the outcome. To have a single factor as a determinant is a tremendous tool for analysis. It turns out that all of the economic commentary about how the microeconomy works, whether made verbally or in written form, whether presented in an academic medium or pronounced to be true in the popular media, can be tested easily.
Value and wealth only have meaning and the human institution of the economy only exists because we are human. Without humans these (value, wealth, and economy) would be irrelevant!
Value and wealth are inseparable from the attributes of God that we call virtues. We buy because of the prospect of more beauty, power, peace, justice, mercy, contentment, strength, love, etc. I highlighted the word 'more' because it demonstrates the inherent striving for excellence that is part of the human operating system. These are what we value and acquisition of these in all the various forms constitutes our wealth. The economy is the institution that encompasses all of the actions related to these human functions.
Any economic pronouncement that takes the stance that there is no connection between the economy and the ethical foundation of human action fails the litmus test. Quickly such pronouncements can be relegated to the dustbin of economic quackery.
