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What do students gain from studying economics today?
They learn how to think, and
they gain a wonderful window on our world.
As a social science, economics seeks to apply rigorous
analysis to human situations. Student of economics
learn a lot about logical reasoning and empirical
investigation. Even more important, they learn how
to take an everyday problem and reformulate it in
a way that is capable of deeper analysis. And they
acquire the habit of confronting theories with evidence.
With these tools, economics
is able to shed light on many common phenomena,
and help us make more sense of our ever changing
world. Why have we made such a mess of the environment?
Is globalisation a force to fear or a huge opportunity
to consolidate prosperity?
What should we expect of the
digital age? Or of an ageing population? Huge themes
about which economics has a lot of practical things
to say.
Being familiar with modern economics
therefore equips students to go out into the world,
not merely as better qualified job seekers but as
better informed citizens. It will help you run your
life better, at work and at home. Employers recognise
that competitive advantage comes increasingly from
having the human edge. Today, more than ever before,
understanding economics is of one the ways in which
to acquire that edge.
Can you outline economics in
one sentence? What would your definition be?
Economics is the study of how
society decides what goods and services to make,
how to make them, and who gets them.
This definition does not mention
markets, prices or incomes. The market economy is
one way to resolve these decisions, but not how
they are resolved in a monastery, in the US army,
in dishwashing disputes within the home, or in communist
countries. Economics is therefore the study of when
it makes sense to use the market and when it is
necessary to regulate or override the market.
Does this make economics
an art or a science ?
The distinction is often exaggerated.
Renaissance artists mastered the science of perspective
and Impressionist painters the science of light.
Conversely, however methodical a laboratory experiment,
knowing which question to ask is often the result
of intuition that borders on art.
Since economics is the study
of particular aspects of human behaviour in society,
its subject matter might be classed in the humanities
or arts. However, its method endeavours to be scientific
- the formulation of theories, and their testing
against the evidence. Economics is not a subject
in which every opinion is valid, however many internal
contradictions it entails or however much at variance
it is with the facts.
What lies behind the question
is partly the widespread popular belief that economists
never agree with one another. This view is largely
incorrect. On many of the central ideas in economics
there is widespread agrement among professional
economists (though every subject has its eccentrics).
It would be quite wrong to think that scientific
subjects such as physics are not also the subject
of serious disputes within their profession. Sometimes
these are simply less accessible to the ordinary
citizen. Economics is so much about everyday lives
that everyone takes some kind of an interest.
It is true that economics, like
other nonexperimental sciences such as astronomy,
cannot always conduct controlled laboratory experiments
to measure the results of questions that would otherwise
be hypothetical. Nobody suggests astonomy should
be regarded as an art rather than a science. Economics
is classified correctly as a social science, the
application of scientific methods to the study of
behaviour by human beings in a group or social context.
Why did you write Foundations
of Economics ?
For nearly two decades our introductory
textbook Economics has been the market-leading
text for people beginning the study of economics,
to such an extent that BBC Radio 4 featured
it 1999 in their series Student Bibles.
For us it was an honour to be in company like
Grays Anatomy.
Nevertheless, doctors go to
medical school for years and years and years. Students
of economics have to complete more quickly. Nor
are single-subject economics courses the only channel
through which students now come to economics. Increasingly,
economics is taught in shorter modules as part of
interdisciplinary courses. Foundations of Economics
has been created to offer a streamlined introduction
to economics for the student who needs a fast-track
approach. It covers all the important ideas contained
in Economics, but it presents them more succinctly.
Foundations of Economics is still rigorous
and a reliable way to develop good habits of theoretical
reasoning and empirical verification, but, as a
fast-track approach, it dispenses with some of the
more technical arguments contained in the larger
text.
Which students will want
to read Foundations of Economics,
and why?
We have already had an enthusiastic
response to Foundations of Economics from
students taking streamlined introductory economics
courses - for example those that take a term rather
than a year - and from students whose first exposure
to economics is as part of a wider course in business
studies, financial markets, banking and financial
institutions, or general social science. These students
tell us that Foundations of Economics does
the business. It provides a comprehensive and exciting
introduction to economics, that is manageable within
the time that the students have on such courses
to master the basics. Foundations is also
a lot of fun. It makes people think, challenges
their preconceptions, and provides a host of amusing
and highly relevant examples of economics in action.
People have always told us Economics is easy
to read. Foundations is easier to read.
It is shorter, and (even) less technical. Even on
longer economics courses, some students find this
attractive. Not everyone struggles up the stairs,
even though doctors say it is good for us. Sometimes,
especially when under pressure, we take the lift.
The Preface
to Foundations
of Economics decribes the book as a toolkit.
What are the most important tools with which an economics
student should be equipped?
A toolkit is a set of principles
and techniques that can be applied to think about
current and future problems. Good tookkits are light
enough to be portable, yet comprehensive enough
to do the job. Economics is no different.
Microeconomics emphasises the
theory of choice, the role of incentives, and the
central role of information. From this we develop
theories of how markets work, what distortions may
arise, and when government intervention may do more
good than harm. These principles are very general
and very reliable. For example Foundations uses
them to explore how the internet will affect the
way we live and work.
Macroeconomics examines how
the economy works as a system at national and international
level. It teaches students how to track down not
just the first-round effect but all the induced
effects that follow. This leads on to ideas of dynamics,
and hence growth and cycles. Students come out of
macroeconomics with the big picture - inflation
and unemployment, the business cycle, long-run growth,
creeping international integration.
In what way has your experience
of teaching economics affected the material in Foundations?
The guiding principle is that
modern economics is important, useful, and relevant,
and can be simplified sufficiently to make this
claim convincing even to students just starting
our in economics. Teaching advanced postgraduate
courses, and conducting research in economics, helps
us stay abreast the frontier of economic knowledge,
but that knowledge is worth nothing if it cannot
be communicated successfully to students who many
face other competing claims on their attention and
interest.
Foundations therefore
reflects not just our academic experience but our
practical experience in talking to policy makers
and people in business, sceptical audiences who
need to see clearly the thread of the argument and
the clarity of the conclusion. Years of talking
to them has made us aware that the best ideas in
economics can be expressed simply. Anything
that takes pages of argument usually turns out to
be a special case. Things that are general and robust
- and hence properly belong in our toolkit - rely
on ideas that, once mastered, are obvious. We need
to study economics because, like gravity or the
spherical earth, the key ideas of economics are
not obvious until they have been set out. Thereafter,
nobody should forget them.
Foundations therefore
embodies our conviction that good economics is simple.
Of course that does not mean that everything that
is simple is good economics.
The second element of our experience
that is reflected in Foundations
- and again this applies as much in the boardroom
or the cabinet office as in the classroom - is that
people put more effort into things they find fun.
Reading a new detective story is more fun the first
time: when you dont the outcome, you experience
the excitement of trying to puzzle it out for yourself,
and enjoy the satisfaction of seeing how the author
makes sense of it all at the end. Using economics
to illuminate how our world works should also be
the source of pleasure and intellectual excitement,
and strange practices are explained and myths debunked.
We have tried to make Foundations fun to
read - we hope you agree.
Will economics continue to be a valuable discipline
in the 21st century?
You bet. There is no slowing
in the pace of technological change. Breakthoughs
in computing, telecommunications, and transport
continue to shrink our world and make the future
less like the past. Bumbling along in old ways is
less and less possible. The payoff to being able
to think strategically is rising all the time.
Economics is a set of tools
for understanding many of the key activities as
we produce, consume, and relax. Particular industries
may rise or fall, political groupings may ebb or
flow, but economics has a proven track record as
a prism through which such events may be understood
better. If you are still unconvinced, read the sections
of Foundations on the internet revolution
or the pressures for European integration. You will
see that economics is not merely one window on the
changing world, it may afford the best view of all.
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