Business, Politics & Society

Seeing the World Like an Economist

Paul Krugman

Lesson time 11:28 min

For Paul, being an economist requires thinking critically and learning from others. Learn his critical thinking methodology, like how to look for natural experiments, think past your own bias, and use the information at your fingertips.

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Paul Krugman
Teaches Economics and Society
Nobel Prize-winning economist Paul Krugman teaches you the economic theories that drive history, policy, and help explain the world around you.
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In terms of ready accessibility of data, we're living in a golden age. And the internet means that solid, reputable data sources are available for free to anybody. They don't cover everything, but most stuff. So the problem is not so much availability of data, as the fact that mostly, that basically never, economic data doesn't come from controlled experiments. You don't get to have one group of subjects who don't receive a fiscal stimulus and another that do receive a fiscal stimulus and you compare the results. So what you get is almost always a lot of things are happening at once. And assigning causation is always going to be a problem. I mean, one very influential set of economic research-- changed my views quite a lot-- involved minimum wages. And the trick there is that we have a national minimum wage, but we also have a lot of state minimum wages that, in many cases, are substantially above the national rate. And states don't change their minimum wages in sync. So you have a lot of cases in which New Jersey raises its minimum wage, but Pennsylvania doesn't. And you can look at what happens to employment, especially, you can look at what happens in adjacent counties, nearby places. So when New Jersey raises its minimum wage, what happens to the number of jobs on this side of the Delaware versus on that side of the Delaware. And that turns out-- so those are natural experiments, almost like a controlled experiment. And they say, pretty clearly, that in the range of minimum wages that we have in the United States, there is no adverse effect on employment. If you asked me 25 years ago, I would have said raising the minimum wage surely has to reduce the number of jobs. It turns out, not in the data. And then we can start to think about what's wrong with the simplistic economic model that led us to think otherwise? [MUSIC PLAYING] I'm a big believer in learning from other countries America is a big country. And we've had lots of things happen. And we have lots of experience. But people are pretty much the same everywhere. And the rules of economics are pretty much the same everywhere. So if you're looking for valid experiences, you want to cast a wider net. We don't get to do very many experiments on economics. We look for natural experiments, which means that a crisis in Brazil, or an economic boom in Vietnam, or the rise of the Bangladeshi clothing industry are all going to be things that are going to contribute to your understanding of how the economy works and can be brought back home. So even if your only ultimate concern is the US economy, which is actually probably itself wrong, but even if your focus is all very local, the world is your laboratory. I feel like countries are the laboratories of economics and it's not just your own country, but everybody's. [MUSIC PLAYING] Doing economics, it's always, ultimately, about people. Alfred Marshall, again, the great Victorian economist, had some rules. He said, u...


Think like an economist

For Nobel Prize-winner Paul Krugman, economics is not a set of answers—it’s a way of understanding the world. In his economics MasterClass, Paul teaches you the principles that shape political and social issues, including access to health care, the tax debate, globalization, and political polarization. Heighten your ability to read between the lines and decipher the underlying economics at play.



Reviews

4.7
Students give MasterClass an average rating of 4.7 out of 5 stars.

It was a beginner's class with a refreshing wide range of topics which consider everybody´s lives in every country (i am from Germany) and should be thought to all young people in the age of 12 or 14!

A very good overview of how the economy works! I would like to see a masterclass class that goes into more detail on each of the topics offered here.

Very clear, concise and inspiring. He's a great teacher and taught me to think critically regarding economic issues. 10/10!

Very informative, I'll be watching this again, Thank You


Comments

Graeme R.

Such excellent advice. My admiration for Paul Krugman has grown throughout this course. He has political views, and he is honest about them. But ultimately he tries to respect the evidence and avoid partisanship. Bravo!

Pisko

Who controls FRED/OECD/World bank data is not manipulated towards specific agendas?

A fellow student

The necessary minimum wage in one area is not the necessary minimum wage in another area, Thus the necessary minimum wage should either be set by the local government or by the free market. The federal government should not set the minimum wage.

charles S.

"If everything you see when you're doing economics confirms your view of the world, you're not doing it right.' Love the series - thank you ... Though actually, it does seem to confirm my view of the world, so maybe I'm not doing it right?

A fellow student

Minimum wage is weird. If you run a thought experiment with a $20/hr worker and two $10/hr workers, you find raising the minimum wage to $20/hr and getting a $30/hr and two $20/hr workers just transfers wealth down. If you run it backwards—lower minimum wage to $5/hr—the $5/hr workers get poorer and, so long as the $20/hr worker is still making more than $10/hr, there is buying power to produce more $5/hr jobs. Put another way: raising minimum wage by 100% won't raise the average wage by more than 100%. This gets you a situation where low minimum wages can imply more jobs and broad-spread poverty, so you would assume raising minimum wage would cause job loss—except apparently it doesn't, and our model suggests it wouldn't. High minimum wages might restrict population growth, but don't necessarily restrict economic growth because high minimum wages lead to loss of employment in low-productivity jobs and gains in employment in high-productivity jobs, causing an overall gain in productivity and thus GDP. The economy can do weird things.

Robert G.

I think before I speak but when I write it then read sometimes I just delete. lol. Sometimes I just post whatever comes out from my thoughts when I hit delete. lol lma..Sometimes saying something without saying a lot. is fun for some.

Robert G.

The hardest part is to look past bias. Sorry but true empathy is liberating sometimes. lmao

Victoria W.

Learning to discern information is critical- super comments. Step outside the box and think past your own vision is great advice.