From Paul Krugman's MasterClass

What Is Economics?

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

Topics include: Economics Is About People • People Are Predictable Enough • The Incredible Complexity of Ordinary Life • Economics Studies Good Times…and Bad • Don’t Expect a Happy Story • Economics Makes Us Better Thinkers

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

Topics include: Economics Is About People • People Are Predictable Enough • The Incredible Complexity of Ordinary Life • Economics Studies Good Times…and Bad • Don’t Expect a Happy Story • Economics Makes Us Better Thinkers

Paul Krugman

Teaches Economics and Society

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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.

I like his style and I am now reading some economics, in my seventh decade.

Great primer to learn the economics way of thinking.

I really appreciated the critical thinking component that was taught.

I have taught high school economics for 20 years. This class was very enlightening and I will be sharing the materials with my fellow teachers.

Comments

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.

Pedro J.

Decent introduction. I think in general terms the "predictable" concept may apply, in the sense that you can count on people to keep doing roughly the same as yesterday in their everyday lives. That applies even more to whole cities. However, that's not what makes economics a science. It's not about probability and prediction. It's about human action and incentives - I actually find it amazing how prof. Krugman didn't mention "incentives" for 10 minutes, although the focus on people and humans is a good feature of the lesson. To finish my point: you don't need averages or the law of great numbers to make economics scientific: human action implies the striving for a better situation, the relief of uneasiness, and that's the constant feature of human beings which makes economics (exchange - catallactics) and general philosophy of action (praxeology) a science. Still, as I said, it's a decent introduction. I'm afraid it's going to be all downhill from here... (btw, if you're amazed at the jacket example, it's basically the pencil example coined by Leonard Read and later popularized by Milton Friedman)

CRAIG R.

The mention on the focus of people and behavior is refreshing. As Paul mentioned to many people believe its about money, yet moneys simply the transactional facilitator. The transaction is different by a choice to meet a want or need.

Bradley P.

I appreciate his reference to the making of the jacket. We tend to forget about the real globalization involved in our day-to-day lives. I'd never heard the Malthus comment before (There is no progress), but I'll be thinking about it and the expansion of opportunity over the last two centuries that Paul mentions here. What I think I'll really be considering for the next few days is the idea that disparity in income is more the norm. Recent years of economic balance are more of the aberration.

Ron C.

I really liked his example of the making of a jacket. He mentioned that the cloth might have been made in the USA while the components might have been put together in Thailand. I agree!! These are the benefits of international business. The only problem is that I do not believe that international trade has resulted in an equitable distribution of the benefits of international trade. While I believe everyone should receive a "fair return", I unfortunately believe that the rich have gotten richer while the developing countries have not received their fair share. Economic knowledge can help us understand how this came to exist, but how can we help to make international trade better for all?

A fellow student

Just signed on today. I have the workbook, but wondering if there are specific questions/assignments that go along with each chapter/lesson?