Business, Politics & Society

What Is Economics?

Paul Krugman

Lesson time 9:32 min

Paul believes that at its heart, economics is about people—how they earn a living and how they spend their income.

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Paul Krugman
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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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Economics is, it's about people. I mean, that's the most important thing that economists often forget, and certainly, other people do. It's not about money. Money may come into it. It's not about corporations. It's about people. It's about what people do. But it's about a fairly limited set of things that people do. So economics is not about love. It's not about the meaning of life. It's about the prosaic stuff. The great Victorian economist, Alfred Marshall, said it's about the ordinary business of life. It's about buying and spending and making a living. And you restrict the domain a bit. You focus on these relatively prosaic things, because those are the areas where you think that some relatively simple motivations, simple stories can get you a long way. And it always ends up being about what people do. So we have a kind of a running joke among some of my friends in economics. With graduate students, particularly from some institutions, can we get them to actually say the word people? They'll have this elaborate mathematical model. And they'll be talking about what agents do. And can you get them to actually say, so what are the people in your model? And then he'll say, well, the agents are. If you can't bring yourself to say people, then you're not doing it. It's always a story about what people do. [MUSIC PLAYING] If you're thinking about economics, it sometimes looks as if you're treating human beings as if they were mechanisms. You're talking about, you know, there's a supply curve, whatever and reducing the behavior of people to math. And at one level you say, but, you know, I am not a number. I am a free man. This is true, that people make choices that you can't predict. And yet, we wouldn't be able to have the economy as we do if people weren't at least on average reasonably predictable. There's actually a passage in Adam Smith, where he talks about the fact that everyday, people in London count on being able to buy the food they need. Now, who's making sure that enough food was delivered to London, already a city of, or close to a million people? Who was making sure that the food was available? And the answer is nobody. It was all the invisible hand of the marketplace, which said that basically, you were able to count on people's self-interest to sell enough food. People were predictable enough that nobody even gave it a second thought, that there would in fact be a continuous supply. And this is true all the time, that we count upon people being be predictable enough. I don't necessarily mean that you or this guy is going to. I know what this person's going to do next minute, but if we're asking what a million people are going to do, then on average, they're going to be predictable enough that we can build our lives on that predictability. [MUSIC PLAYING] Economy most of the time is this miracle of success, of provision. We have a world in which-- and any ordinary object, you know, the jacket that I'm w...


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 has definitely broadened my perspective on what goes into understanding Economics at it's multiple levels. I liked the big picture Macroeconomic approach Krugman took. Looking forward to reading his books and retaking this class.

Stories still are the best method of teaching.

College taught me a lot of false things about economics, and the world only made those false teachings worse. Thank you so much for sharing the truth about how the world truly is! I plan to use this information to get more involved in politics now that I feel like it is easier for me to talk about this subject!

Very good introduction. Looking forward to the rest of the class.


Comments

Tapan P.

A good lesson- interesting to see a negativity-based default. My question there would be, if that is deep rooted in human biology, why not come up with an economic system that is better coordinated with it?

A fellow student

I think this lesson, as well as all the lessons of this course, are well delivered and timely, providing some history along with current information. I've read Paul K's New York Times articles for quite a while. Good stuff.

A fellow student

I enjoyed it, especially by reading a lot of the recommended material. Thanks for including material that does not necessarily reflect only one particular point of view, but many. I reacquainted myself with those old truths...and those "that are not so evident today ones" of A Smith; felt an eerie sensation with Malthus's premonition...( Professor, how can we be sure that he was wrong?...shouldn't we wait a little longer to see what happens with this world getting to 10, 15 billion people, and most of its food sources depleted?, isn't current California, with its duality of billionaires and homeless people a dire warning sign?). Which brings me also to another point. I would recommend to read the basics of Marx's theories alongside those of A Smith. Smith's writing seems antiquated, Marx's ideas ARE antiquated and fictitious, mainly in its base, basing the value of the economy on labour alone... I liked a lot your quote that loosely translates into "Economics is not what we want it to be, but what it really is"... I may not agree with all the points of view expressed here, but I am certainly enjoying this gift my son gave me!

Cynthia H.

I like his bursts of insight on economics...however, I feel that this needs to be edited in a way where there is a better flow. Starting with a clear cut definition of economics - then building on subcategories of this. He is definitely stating things that are true of economics - however, for someone just starting this study, there may need to be better editing to help someone through this introduction process.

Cynthia H.

My writing has carried me into a number of subjects that I was only briefly introduced to - with a basic course in college -- such as Economics 101. I would like to learn more - because this is a very important piece to understand in my investigative journalism - and understanding WHY certain things have played out within a historical context.

Ekin Ö.

Economics is about restraints. Yes! And if you think about that, economics is not a limited part of our lives as Paul says. It's everything. Everything's about economics when you're not talking solely about money.

A fellow student

I supervise 7 restaurants and I am often amazed at how well we can predict sales on an weekly, daily, and even hourly basis. While we as individuals make individual choices, we are still creatures of habit. I tell people when we hire them that we cant tell people when to order, but we do a very good job at guessing. This class is very interesting and look forward to finishing it.

Ana N.

"Open minded, challenging yourself, try to be rigorous as much as you can". I am a novelist and these sound like principles that not only apply to science but also to the arts :D I think this talking is very accesible to everybody. Thank you.

Mike M.

I learned A LOT from this class. Mainly, that I’ve been on the right track by reading Basic Economics by Thomas Sowell and listening to the ContraKrugman podcast.

Terry H.

I'm intrigued by his mention that the middle class is looking like an aberation, historically. Also, am interested in reading more behavioral economists.