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Try a free month trial of The Great Courses plus and watch the full course here: https://www.thegreatcoursesplus.com/special-offer?utm_source=US_OnlineVideo&utm_medium=SocialMediaEditorialYouTube&utm_campaign=136238 What is economics, exactly? Well, economics takes as its subject material some basic questions about how a society produces and consumes, and explores how a society answers those questions. In fact, you can take those questions that are asked and break them down into basically three questions. Question one would be, what should be produced by a society? Question two is, how should it be produced? Question three is, who gets to consume what is produced? So those three questions—what should be produced, how it should be produced, and who gets what is produced—are fundamentally the three questions that any economic system has to answer. Now, those questions are unavoidable. They're asked in a market capitalist system; they're asked in a communist system. They're asked in a poor country; they're asked in a rich country. This is not economics that is just for the United States. These sets of questions are very broad and every society has to figure out how to grapple with them. When we think about the study of economics and we think about this course as it's going to evolve, we want to think about it in two big chunks. Those two big chunks are microeconomics and macroeconomics. Now, microeconomics is the study of how households and firms make decisions, in goods markets, in labor markets, and in financial capital markets. It's the study of how those markets sometimes work well and sometimes how they work very, very badly. It will focus on individual decisions, decisions that people make about consuming, about working, about saving. It will focus on decisions that firms make about how much competition exists, about whether there's a monopoly or not. It will focus on public issues—when these firms and individuals come together on issues like what should society do about poverty, or the environment, or technology, or education; and when can the government do something useful, and when might it not quite be so useful. So microeconomics is the view of the individual actors. Macroeconomics, on the other hand, takes an overall view of the economy, and it focuses on policies like unemployment, inflation, budget deficits, economic growth, and international trade. It focuses on how the policies of national governments can affect all of these outcomes in a global economy. In fact, what we'll do in macroeconomics is we'll take four main goals. We'll take fast growth, low unemployment, low inflation, and a reasonable balance of trade, and we'll think about how the government can pursue those main goals, using its budgetary polices and also using the monetary policies that are controlled by the Federal Reserve. When I think about macro and micro together, I sometimes think of the old saying, "You can't see the forest for the trees." In a way, macroeconomics is looking at the forest and not worrying too much about the trees. Microeconomics is looking at the trees individually, not worrying too much about the forest. But they're both a view of the same overall subject. As we think about all these issues and putting them together, we want to think about the study of economics as requiring a willingness to put together all sorts of bits and pieces. It should put together theories, and logic, and facts, and evidence, and history, and all sorts of things. Let me quote John Maynard Keynes on "the master economist." Keynes said: [T]he master economist must possess a rare combination of gifts. He must reach a high standard in several different directions and must combine talents not often found together. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in light of the past for the purposes of the future. No part of man's nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician. That's a lofty goal, but we can get a little bit of the way there in these lectures. We don't have to try and make everyone an ace economist, ready for that tenured chair in economics at Harvard or Stanford. What we want to do is convey the basic economist's way of thinking. That's a modest goal, that's a moderate goal, and we can achieve that goal in this lecture series.