Why Economics

A bit of history. The systematic study of economics starts with the publication of a book in the year 1776. Adam Smith is the celebrated father of modern economics. He was one of the greatest minds of what is known as the Scottish Enlightenment. About 250 years ago he wrote a book titled “An Inquiry into the Nature and Causes of the Wealth of Nations.”

At that time, there was no discipline called “economics.” It was called “political economy” which was a part of “moral philosophy.” Adam Smith was a moral philosopher. In that tradition, economists have been called “the worldly philosophers.”

This course is not directly about economics. So why this chatter about economics? This course aims to introduce the subject of how the world works. A great deal of how the world works is explained by economics.

Let me stress that. Economics explains some aspects of how the world works. It doesn’t seek to explain all aspects of the world. The world is far too big and far too complex for any one discipline to explain it all.

Economics explains an important part, as you will eventually see. Learning how the world works is a rewarding exercise. You get answers to some questions that may have puzzled you. But there’s more. You will learn answers to questions that you didn’t even have.

Here I am going to make a bold claim. It is this: Most people don’t know how the world works. But it’s worse than that. What most people believe they know about how the world works is actually wrong.

How do I know that? I know that from personal experience. Only after I began learning economics did I realize that much of what I thought to be true was actually false.

The one important thing that a study of economics does is that it makes you less wrong. I think there’s utility in being less wrong. Because if we are wrong, people who know better will think we are stupid when in fact we are just ignorant. Stupidity cannot be cured but ignorance can be easily fixed.

But we are ignorant of a vast number of disciplines. So why this focus on economics?

Fact is that economics is different from other domains in one particular sense. People have preconceived notions about economic matters but not in other matters.

A person who has never studied quantum mechanics (or evolutionary genetics or whatever) does not hold wrong ideas about quantum mechanics (or evolutionary genetics or whatever.) Why? Because he simply does not hold any ideas about any specialized subjects outside his expertise.

But everyone has some ideas of how the world works. And nearly all of those ideas are related to economics. And they are generally wrong — unless of course one has studied the subject. Our naïve intuition (common sense) is a very, very poor guide when it comes to understanding how the world works. 

Economics helps us develop our common sense. In fact it is fair to say that all the fundamental truths of economics are nothing but common sense. Fortunately, we all have the mental capacity to get a very strong grasp of those fundamental truths. This is not true of quantum mechanics. Most of us — including yours truly — are just not capable of understanding QM even if we were taught by the great Richard Feynman. (Video of Feynman talking about QM.)

To understand how the world works, we have to exercise our common sense muscles. That involves looking at the world through different sets of “optical instruments” (if you would pardon the mixed metaphors.)

Normally we just use our unaided eyesight to examine the world, so to speak. But sometimes you have to use a microscope and look at tiny details; and sometimes you have to use a wide-angle lens to capture the big picture. Then you combine the microscope view (or ground level view) with the wide angle view (or 40 thousand feet view) to understand a bit of how the world works.

Among other things, this course will introduce a set of tools that will help us understand how the world works. Here’s a hammer, here’s a saw, here’s a screw driver, here’s a tape measure, here’s a spirit level, here’s a circular saw. Here’s how to use those. Practice using them and soon enough you will be able to construct something that’s useful and elegant.

So too this is just an introduction to a few tools on how to think about the world, and a bit of demonstration of how to use them. You’ll be surprised how elegant the product is.

Author: Atanu Dey

Economist.

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