Where to Begin Learning Economics for Beginners

[medwatt]

Hello,
I have very limited knowledge in economics and have always been trying to do something about it. When I was in school I had to choose between Geography and Economics and chose Geography. In university I did engineering management which I think didn't help much.
So for someone who wants to learn economics from scratch to a level where I can start understanding when economists talk, please advise where to begin.
Video lectures or books recommendation will be helpful.
Thanks

 

[phinds]

If you prefer watching/listening to reading, I highly recommend the basic economics lecture series on The Teaching Company (just don't buy them for "listed price" --- EVERYTHING they sell goes on sale a couple of times a year and the prices are about 1/3 of normal). Also, you might be able to find them on eBay for even less.

 

[Matterwave]

There are broadly two areas of economics that people study. Microeconomics and macroeconomics. Microeconomics is the study of single firms, or groups of firms, and individuals and their buying/selling practices. This would include topics like how do firms optimize their profit, how do firms determine their supply curve, how to people decide what to buy and in what quantities.

Macroeconomics is looking at economies as a whole. This would include topics like what does the tax rate do to the economy of a country, what does minimum wage and the existence of labor unions do to the firms who employ people and the people who are employed. How does money play a role in economics, and how does subjects like inflation and the savings and investment rate have to do with the health of an overall economy? How does trade and trade barriers affect an economy?

Which area are you more interested in? Economists on TV, like on CNN or CSPAN, would probably talk mostly about macroeconomics because they want people to know what will happen as a whole in the country.

If you actually want to learn economics as a subject (e.g. what you would do by getting an economics degree at a college), you will have to learn both micro and macro economics. If you just want to know what people are saying when they talk about things like "the budget deficit" or "US debt", etc., you can probably just learn a bit of macroeconomics.

Be warned though, although there are many formal theories of economics, as economics is a social science and not a physical science, and since economics can not really be "tested" in any way other than to look at the past, you will get a LOT of different theories and explanations for anyone thing. The merits of the theories are not always obvious.

So even if you learned, for example, Keynesian economics, or monetary theory, you may not hear views espoused by people that are exactly in line with the theory. There is a big gap between the theory of economics and the practice of economics.

 

[phinds]

... So even if you learned, for example, Keynesian economics, or monetary theory, you may not hear views espoused by people that are exactly in line with the theory. There is a big gap between the theory of economics and the practice of economics.

I would state that a little more firmly by saying that there are STRONGLY disagreeing views on many macroeconomic subjects. It's pretty much exactly like listening to the news on FOX vs MSNBC.

 

[Matterwave]

When you start putting politics into economics, then you will get pretty widely different views...democrats and republicans hold very opposing views on macroeconomics on most issues...but this is usually because of who their voting base is, rather than any genuine belief in anyone economic system. If your voting base and support for campaign money comes from the big corporations, you better not be zealous about higher corporate taxes for example...or higher taxes on the rich, etc. Probably you are going to be espousing the view that cutting taxes on big corporations will "energize" the economy by helping them to hire more employees, make more innovations, etc.

 

[medwatt]

There are broadly two areas of economics that people study. Microeconomics and macroeconomics. Microeconomics is the study of single firms, or groups of firms, and individuals and their buying/selling practices. This would include topics like how do firms optimize their profit, how do firms determine their supply curve, how to people decide what to buy and in what quantities.

Macroeconomics is looking at economies as a whole. This would include topics like what does the tax rate do to the economy of a country, what does minimum wage and the existence of labor unions do to the firms who employ people and the people who are employed. How does money play a role in economics, and how does subjects like inflation and the savings and investment rate have to do with the health of an overall economy? How does trade and trade barriers affect an economy?

Which area are you more interested in? Economists on TV, like on CNN or CSPAN, would probably talk mostly about macroeconomics because they want people to know what will happen as a whole in the country.

If you actually want to learn economics as a subject (e.g. what you would do by getting an economics degree at a college), you will have to learn both micro and macro economics. If you just want to know what people are saying when they talk about things like "the budget deficit" or "US debt", etc., you can probably just learn a bit of macroeconomics.

Be warned though, although there are many formal theories of economics, as economics is a social science and not a physical science, and since economics can not really be "tested" in any way other than to look at the past, you will get a LOT of different theories and explanations for anyone thing. The merits of the theories are not always obvious.

So even if you learned, for example, Keynesian economics, or monetary theory, you may not hear views espoused by people that are exactly in line with the theory. There is a big gap between the theory of economics and the practice of economics.

From your explanation I gather that both micro and macro economics are essential to have a clear picture of the concept. Macroeconomics is ubiquitous but microeconomics might actually help me more by ameliorating my business acumen in case I want to start some business which I think is more important to me at this stage.
Also I hear words like hyperinflation (as in Zimbabwe) and although I know the dictionary definition, I do not have a deep understanding of the causes. For example, I remember once traveling to Ghana and noticed that the exchange rate was $1 to 8000 cedes. A few years ago they changed their currency and suddenly its $1 to 2.82 Cedes. I don't understand why a country changes its currency which is surprising to me because if for some reason their economy is 1000 folds better why should they bother changing the name of the currency.
These are the questions I'd like to have answers for along with many other such as why Marxist economy failed in Russia and blossomed in China . . .
Please suggest a good book that you know of.

 

[Ryan_m_b]

These are the questions I'd like to have answers for along with many other such as why Marxist economy failed in Russia and blossomed in China . . .

It's late here but I just want to post on this point. These are complicated questions and as others have said economics is dominated by politics (unsurprisingly). Economics is like any other science in that it tries to develop predictive models about how the world works but IMO it suffers from its political bias. I'd argue that this is even apparent in the assumptions most models make which are usually of the spherical chicken in a vacuum variety. Just note that whilst there are various forms of mainstream economics that might not mean quite the same thing as mainstream physics, it would be worth reading up on heterodox economics just to get an idea of the variety.

Note that neither the Soviet Union or China are "Marxist". Marxism is not an socioeconomic system, it is a method of societal analysis that focuses on class struggle. Marx himself advocated communism which is supposed to be a classless, stateless and moneyless society.

After Marx died Marxism-Leninism developed in Russia, this ideology sought to bring about a communist society by way of a vanguard party that would be in charge of establishing a socialist republic that would eventually grow into a true communist society. In practice this lead to the establishment of state-socialism (or as some call it: state-capitalism) in which investments, and therefore firms, are state controlled with heavy market regulation and welfare. The Soviet Union was able to achieve a lot of good economic growth and development, of course there was a lot of corruption and the dream of socialism seemed to fall by the wayside in favour of oligarchy. If you do some googling you can find accounts on what day to day life in the USSR was like but I'd strongly advise reading widely on the subject on the viability of the economic model, why the USSR failed and what even it was. There's a lot of bias on this subject as you can imagine and the only way to cut through it is to read a lot of different things.

In China Maoism developed which is similar to Marxism-Leninism but focused on agrarian reform. Since the late 70s however the Chinese Communist Party initiated reforms known as Socialism with Chinese Characteristics. In essence these reforms allowed private ownership and markets but with heavy regulation and a large public sector. It again is argued by many that China abandoned any prospect of socialism and instead is an example of a state capitalist society.

 

[Matterwave]

From your explanation I gather that both micro and macro economics are essential to have a clear picture of the concept. Macroeconomics is ubiquitous but microeconomics might actually help me more by ameliorating my business acumen in case I want to start some business which I think is more important to me at this stage.
Also I hear words like hyperinflation (as in Zimbabwe) and although I know the dictionary definition, I do not have a deep understanding of the causes. For example, I remember once traveling to Ghana and noticed that the exchange rate was $1 to 8000 cedes. A few years ago they changed their currency and suddenly its $1 to 2.82 Cedes. I don't understand why a country changes its currency which is surprising to me because if for some reason their economy is 1000 folds better why should they bother changing the name of the currency.
These are the questions I'd like to have answers for along with many other such as why Marxist economy failed in Russia and blossomed in China . . .
Please suggest a good book that you know of.

My training in economics was formal (I got a B.S. in economics) so I always learned from textbooks and lecture notes. I could recommend you textbooks, but I'm not sure of the utility of learning textbook economics. The point I was trying to stress was that economics is very assumption dependent. Different models give different assumptions. In theory, to verify your model, you should look at history, and economies in the past, but in practice one can always make arguments go your way because there are just far too many variables to deal with.

Give you an example. During the late 1920's, and early 1930's, the US was going through the great depression. It was only after the many new programs of FDR that the US was pulled out of the depression in the later 30's and early 40's. This is usually hailed as THE successful example of so-called Keynesian economics. Keynesian economics advocates the use of government spending to bolster the economy and many people (economists included) credited this "new deal" economics in which FDR spent lots of government funds on infrastructure as the healing of the economy.

Talk to a monetarist; however, and he might point to FDR's monetary policy (where he devalued the dollar against the gold standard at the time) as the harbinger of economic recovery. What real conclusions can one draw? There's never only one variable (which we LOVE to work with in science), there's always too many.

This is why I don't know about the utility of a formal education in economics, unless you want to, for example, become an economist, or research economics, or perhaps just do it for the interest. Learning economics formally will give you the tools to analyze complex economic situations yourself, but it won't necessarily allow you to really UNDERSTAND those situations...nobody really UNDERSTANDS those situations, not even professional economists.

This holds true for business. If your goal is to learn how to run a self-run business, I would suggest you learn business instead of economics. Economics is a formal science based on assumptions like that you can know your demand curve. Or that you can known your cost curves, or predict your costs in the future. You are better served, in my opinion, getting more practical knowledge from either people who have run businesses, or from perhaps taking some business-related classes at your local college. It wouldn't hurt to learn some microeconomics, but just don't think that with knowledge of microeconomics, you will be able to run your own business! Perhaps there is a community college nearby who will offer courses on economics and business?

 

[Ryan_m_b]

Learning economics formally will give you the tools to analyze complex economic situations yourself, but it won't necessarily allow you to really UNDERSTAND those situations...nobody really UNDERSTANDS those situations, not even professional economists.

I'd say this was a good way to put it though to be clearer it might be best to say that there is no consensus in economics as there is in other subjects. Also whilst economics can look to history to test theories it can also be done in the present by suggesting economic policy, making a prediction with a model and then comparing the outcome to the prediction. Like you say though the variables in economics are very hard to isolate.

 

[AlephZero]

You might want to consider J K Galbraith's opinion of economists:

http://www.goodreads.com/author/quotes/23458.John_Kenneth_Galbraith
http://en.wikipedia.org/wiki/John_Kenneth_Galbraith

“The only function of economic forecasting is to make astrology look respectable.”

“If all else fails, immortality can always be assured by spectacular error.”

"Economists are most economical about ideas. They make the ones they learned in graduate school last a lifetime."

"Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof."

And a one-sentence summary of the entire subject:

“Economics is extremely useful as a form of employment for economists.”

 

[Matterwave]

I love those quotes!

 

[AlephZero]

In the interest of full disclosure, I started a course on economics as part of a math degree, but dropped out of it after I realized that (1) the mathematical content was negligible, once you stripped away the attempt to hide that fact by using complicated notation and (2) the practical implications of the economic content were even more negligible.

 

[Czcibor]

Ideas:
1) I'd would distinguish between economics used in politics/media and economics in academia. Within the main stream of economics there are no so strong controversies. However, economics is partially a soft science, so if you are in great need you may select a weird school that would support your ideological stances if you really want that and that's abused in politics/media.
2) Usefulness - there are plenty of media economics experts, which speak absolute nonsenses. (but the news sounds shocking so got high audience) With some knowledge of economics I risk less following such "brilliant" advices and instead can behave reasonably. If your business is anyway boring, then you may live without economics knowledge (just knowing your business and some law/tax law would be enough). If you wanted to invest in gold because media experts told about imminent dollar collapse or you believed that housing prices can only go up - then courses in economics may protect your money from imprudent move.
3) It's very interesting to know how the economy operates, but unfortunately I have to admit that's hard to turn that knowledge into cash.

(I'm a Ph.D. student in economics)

 

[Tosh5457]

Although short-term macroeconomics is somewhat unpredictable, long-term macroeconomics is better understood. There are many models that attempt to explain long-term economic growth, and they all incorporate 3 main factors: capital accumulation (foreign investment and domestic investment, whereas the later comes from savings), total productivity growth (which includes technological innovation) and increase of the labor participation rate.
In emerging economies like India and China, capital accumulation by foreign investment and increase of the labor participation rate are the most important factors, while in developed countries, technological innovation is the most weighing factor.

http://www.imf.org/external/pubs/ft/issues1/
http://en.wikipedia.org/wiki/Solow–Swan_model

As an example, see US long-term economic growth:

Now, this isn't the case for all developing countries, but in general it's a much more predictable time-series than the trimester growth for example.

 

[coffeejunky]

I personally found Freakonomics to be a fun read when I took AP Macroeconomics back in high school. There are many other books out there which are more "formal", such as Naked Economics. However, both were written to entertain and give you an idea about economics.