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Welcome to economics, all you students (and aid workers)

Today, for the first time in my professional career I taught Principles of Economics. I’ll be teaching this all semester long and giving occasional reports from the classroom.

The officially required duty of all Principles instructors is to first define economics. Here is the definition from the 18th edition of McConnell, the most popular text on the market and actually the exact same text I used in my own first econ class 35 years ago:

Economics is the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

OK, just kill us all from acute boredom right now. [If you are an economist, try introducing yourself to someone: "I am somebody concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity."]Is there some conspiracy to make econ so boring that the number of economists stays low and we get high salaries from our scarcity?

The boredom of economics education also has the unfortunate effect of making economics scarce in aid work, given the number of aid ideas that violate elementary principles that all economists (from all points on the political spectrum) agree upon.

Sorry, I’m not all that concerned with “how individuals, blah, blah, optimal choices, blah, blah, scarcity, blah, blah…”  I’m concerned why some people are so rich and other people are so poor. I want to understand why some economies work and others don’t, and why even the ones that work still don’t work for everyone. I want to understand how other Americans and I got 64 times richer than our ancestors.

I want to know why Robert Iger, the CEO of Disney, makes $140,000 a day, andwhy some rock-breakers I met in Ghana make $1 a day. I think a differential of 140,000 times is pretty important to understand (obviously includes both domestic and international inequality).

Economics principles are a set of tools that have evolved to transcend scarcity into abundance.  When students use these principles to solve problems in an Econ class, they are recreating the process of historical problem solving in which poor people discovered the principles to become rich people.

I am going to try to convince the students that Principles of Economics gives considerable insight into the slightly different outcomes experienced by us and by our ancestors, and by Disney CEOs and Ghanaian rock-breakers. Stay tuned.

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26 Comments

  1. Mike Lane wrote:

    It may not answer all of your questions, but one of the best, most engaging books on economics I’ve ever read is “The Worldly Philosophers” by Robert Heilbroner.

    Posted September 8, 2010 at 12:17 am | Permalink
  2. Rod wrote:

    Interesting stuff as usual. As someone involved with aid I am always interested in “the number of aid ideas that violate elementary principles that all economists (from all points on the political spectrum) agree upon.”

    While I appreciate the subtle and slight jabs you take at these ideas I would look forward to some more explicit discussions of what elementary principles are being violated.

    Posted September 8, 2010 at 12:22 am | Permalink
  3. Damien wrote:

    I like Tyler Cowen and Alex Tabarrok’s Modern Principles. Their “biggest idea of all” in the first pages is that economics is fun and “is about the difference between wealth and poverty, work and unemployment, happiness and squalor”.

    Posted September 8, 2010 at 3:49 am | Permalink
  4. Eva wrote:

    As a former TA for Principles of Economics, it heartens me to see Prof. Easterly putting some life into a class that has so much potential (that is rarely ever reached)

    Posted September 8, 2010 at 8:30 am | Permalink
  5. Jeff wrote:

    I wish my econ professors would have approach econ in this way. Makes me want to go back for grad school…

    Posted September 8, 2010 at 8:38 am | Permalink
  6. Curious wrote:

    I think many aid workers (when they study Development) tend to have false notions of marxism and they ironically write off all econ classes. that being said – if 101 classes didn’t focus so much on absurdly reductionist supply-demand curves and widgets – and spoke in English about broad strokes – that would be better!

    Posted September 8, 2010 at 9:50 am | Permalink
  7. Patrick wrote:

    Nice article, I really like the tone and style… and making economics more exciting is a great idea :) I’d probably have had a better time if you’d been my lecturer.

    > Economics principles are a set of tools that have evolved to transcend scarcity
    > into abundance.

    Transcend scarcity? Sounds good! But we’ve just the one planet so far. Maybe when we have Fusion Power providing clean energy worldwide, Matter Editation to transform light into silicon or whatever else anyone might need, and a super-efficient proto-socialist legal system to keep everyone’s wealth in roughly the same bracket… but while the Ghanaian rock-breakers are still at work we’ve still got a bit more transcending to do yet.

    Posted September 8, 2010 at 10:11 am | Permalink
  8. nahsrad wrote:

    I wish I were a student in your class. we’re supposed to be doing development economics but the econ students / profs rarely go beyond the lifeless economics u mention here :( waiting to read more on your classes.

    Posted September 8, 2010 at 10:32 am | Permalink
  9. I think there will always be a poor / rich split but your right the gap need to close slightly, when you have extremes such as these rock breakers $1 a day, tut tut.

    Posted September 8, 2010 at 10:57 am | Permalink
  10. casey wrote:

    Prof Easterly, so what text are you using for your class? I’d be interested.

    Posted September 8, 2010 at 11:15 am | Permalink
  11. Rebecca Burlingame wrote:

    You took it where I hoped it would go, turning scarcity into abundance. As soon as I saw the definition, I said, kill the definition..make it “conditions of scarcity and non-scarcity”. For me a big part of what makes economics fascinating is understanding the difference because the minute one thinks they know, another factor comes into play. For instance while an individual can’t be an infinite resource because of the limitations of time, collective humanity is an infinite resource. And yet, the mind of the individual does have the capacity to be an infinite resource.

    Posted September 8, 2010 at 12:30 pm | Permalink
  12. “Economics is the Science of Choice.”

    Students want to hear about that. Spread the word.

    http://metadoxy.blogspot.com/2010/01/from-lectern-week-1.html

    Posted September 8, 2010 at 1:01 pm | Permalink
  13. fundamentalist wrote:

    My students usually wake up when we get to poverty issues. I wish I could get rid of the sections on pure competition, monopoly, monopolistic competition and oligopoly. They are utterly, totally without any redeeming value. But I’m with a private school that determines the curriculum for me. People want to know why some are rich and other poor.

    Posted September 8, 2010 at 1:24 pm | Permalink
  14. TheoB wrote:

    “I want to stress again that capitalism, modern machine production, and so on, is not something material! The tools and machines are the material results attained by a certain spiritual mentality, by a certain ideology. Capitalism or modern conditions, modern standards of living, are not simply the outcome of technology. They are the outcomes of certain ideas about social organization and about the cooperation of men under the division of labor and private ownership of the means of production.These ideas must be adopted in these “backward” countries if they want to change conditions.” – Ludwig von Mises

    Posted September 8, 2010 at 2:00 pm | Permalink
  15. Raphael wrote:

    We certainly need more economists in this field!

    Btw, why are we “aid workers” and not “relief and development workers”? Aid is only one of many means to a particular end.

    Posted September 8, 2010 at 2:30 pm | Permalink
  16. c-sez wrote:

    @Raphael

    It’s called “writing a headline” not “parsing the nomenclature.” Chill out.

    Posted September 8, 2010 at 4:09 pm | Permalink
  17. Raphael wrote:

    @c-sez. Didn’t mean to be an ornery contrarian. ;-) The terminology is often ‘aid workers’ (in this headline, other Aid Watch posts, and many other places). I’m just asking why this term is used, generally.

    Posted September 8, 2010 at 5:10 pm | Permalink
  18. David Dolejsi wrote:

    When I was a freshman at my university, they gave us Economics in One Lesson as the first book about economics. This course was mostly about property rights, human action and why some are rich and others are poor. And this class was the best that I have ever had.

    I would like to know what a BOOK you recomend for students who hear about economics for first time?

    Posted September 8, 2010 at 5:32 pm | Permalink
  19. Dan Kyba wrote:

    Market economies and the economics that underpins it has also been, over the centuries, the subject of a capitalist and anti-capitalist cultural, moral and political debate. A very good tour d’horizon starting from medieval theologians and ending with Hayek is: ‘The Mind and the Market’ by Jerry Z. Muller.

    Posted September 8, 2010 at 5:40 pm | Permalink
  20. “The number of aid ideas that violate elementary principles that all economists (from all points on the political spectrum) agree upon.”

    Surely a major over-simplification, for the purpose of rant?

    Maybe the demand for such rants outweigh the supply, hence their inflated value :)

    Posted September 8, 2010 at 8:01 pm | Permalink
  21. Katrina wrote:

    You should videotape your lectures and put them online for those of us who never took econ courses.

    Posted September 9, 2010 at 9:54 am | Permalink
  22. Christos wrote:

    Dr Williams question took me back trying to navigate between the dual economy (the urban and the rural) with in an African country. If there is one answer to the question of why some economies work…, it is lack of market information. In most of Africa it does not exist at all. When it does exist, and are better organized as they are in a few countries the higher the income and the more opportunities to create wealth, not to mention a ‘better’ distribution of income in society.

    Institutions and market information are badly needed to crank up the engine of poor economies. I find it fascinating to see how Aid agents completely ignored the fundamentals of markets that made it possible to make them donors.

    Within contries like the US where the economy works and information is readily available the gap could be explained by the lack of knowledge in interpreting complex Economic information.

    The widest gap between the super rich and an average American could well be mass marketing (IT accelerated it further in the last decade), trampling on antitrust laws by the big guys through lobbying and the frenzy to maximize paper value did contributed greatly.

    Looking at the picture of the CEO of Disney and Ghanaian rock-breakers, and knowing Africa, the role would have reversed if they switched places.

    I highly recommend redefining foreign Aid as an interest maximizes industry of fund raising for a cause (market). At least, it will transform the marketing system for the better if it did not work.

    Posted September 9, 2010 at 10:36 am | Permalink
  23. fundamentalist wrote:

    David Dolejsi, I like Hazlitt’s book a lot, but it is a little dated. Bob Murphy has written “Lessons for the Young Economist”

    Posted September 10, 2010 at 9:41 am | Permalink
  24. Jiajia Wang wrote:

    I wish my Econ professors explained the reasons –or at least tried to- why people should understand and study Economics in my freshman year. I guess in every aspect of human life, it is important to have the conviction for our actions and decisions to keep walking ahead. I’ve meditated over and over during my four years of college that studying Economics would allow me one day to make certain contribution to society’s happiness; not only to understand why some people make more money than me, why Africa seems condemned to poverty, but also that I could change something. Now, at the end of my college journey, I feel like keep studying Economics is not the path that I should follow in order to achieve my goals. Instead of doing Economic researches, I need to do Economics through actions. Several days ago I read an article by Mankiw in NYT; it says “The next generation will shape its own economy, as the young Bill Gates and Mark Zuckerberg shaped ours.” I thoutht maybe we don’t need so many economists, but real heros who apply the basic economic principles and personify ethical values. Vicente Ferrer, a Catalan philanthropist who worked his whole life in India and changed the life of 2.5 million poor people. I’m wondering how would be the humanity if there were one thousand Vicente Ferrer. Would there still be so much poverty and suffering as today? Would we still be debating on aid ideas that violate elementary principles that all economists agree upon?

    Posted September 11, 2010 at 6:31 am | Permalink
  25. No1KState wrote:

    Can anyone, preferably a PhD or PhD candidate, suggest a beginner’s econ book that is absent partisanship. I’ve read Krugman’s most recent book, and Dr. Easterly’s WHITE MAN’S BURDEN, as well the occasional article/op-ed piece. So I think I understand the basics: ie, recessions occur when the flow of money stops regardless of how much is actually available; Japan lost a decade because the govt would never pump enough money into the economy.

    And a question – do/should economists take into account that people often intentionally fail to make optimal choices? That other values, not always good, are involved in economic decisions? For example, I would really like to understand our current economic crisis and what should be done to solve it absent partisan-posturing.

    I’m politically progressive, but if Keynes is wrong, I don’t want to support bad economics just because it’s the “party line.” If someone can point me to a good book, article, or essay that ranges from beginner to intermediate-beginner and is absent partisan bias – that’d be really great.

    Thanks.

    Btw, is it just more or is it a bit ironic that some in the West would impose the same austerity measures that have failed in other places on ourselves?

    Posted September 11, 2010 at 11:52 pm | Permalink
  26. No1KState wrote:

    That should be “range from beginner to advanced beginner.”

    Posted September 11, 2010 at 11:55 pm | Permalink

4 Trackbacks

  1. [...] This post was mentioned on Twitter by Trey Hicks, Conduit Journal. Conduit Journal said: Welcome to economics, all you students (and aid workers) http://bit.ly/ck0iXU [...]

  2. [...] is one of my favorite economists. Tasked with teaching Econ 1 this semester, he’s decided not to follow the usual (boring) pedagogy: Sorry, I’m not all that concerned with “how individuals, blah, blah, optimal choices, blah, [...]

  3. By RadarLake » Scarcity blah blah on September 8, 2010 at 4:45 pm

    [...] Aid Watch this morning. A textbook definition of economics versus Bill Easterly’s definition of economics. Which do [...]

  4. By a moz quixote on September 10, 2010 at 12:35 pm

    [...] WILLIAM EASTERLY IS TEACHING EC1101 at NYU. Anyways, this is what he wrote: http://aidwatchers.com/2010/09/welcome-to-economics-all-you-students-and-aid-workers/ Possibly related posts: (automatically generated)Wafting gently downwardUndeniable [...]

  • About Aid Watch

    The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

    "Conscience is the inner voice that warns us somebody may be looking." - H.L. Mencken

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