Build a Solid Foundation
If you want to build something that lasts, start with a solid foundation. This means stripping economics back to its foundational ideas, and then showing the power and reach of those ideas.
Four Core Principles. Endless Applications.
Should you stream one more episode? See Chapter 1.
Economists know that the core principles of economics can be applied broadly, to just about any decision. Our goal is for students to walk out of the principles course thinking the same way. In Chapter 1, we introduce students to the four core principles that are the foundation of economic reasoning:
- The marginal principle: Ask “one more?” instead of “how many?”
- The cost-benefit principle: Compare the relevant costs and benefits
- The opportunity cost principle: Remember to consider the opportunity costs
- The interdependence principle: Take account of the broader effects of your decisions
Throughout the book, we show students how these four core principles form a simple but powerful framework for making even the most mundane decisions (Walk or drive? Cook or takeout?). We then return to them throughout the book, to show students how these basic tools can be scaled up to larger decisions, with higher stakes (Spend or save? Make or buy? Work or school?). These ideas recur in every chapter of the book, showing students the unity and power of the economic approach. In our experience, students have a much easier time understanding new concepts when they see them built from the same core principles. Along the way, they develop vital “muscle memory,” learning to apply these core ideas to any new economic question they face. Over time, they’ll naturally come to “think like an economist.”
Economic Intuition Begins with the Basics
What happens to the demand and supply of lifeguards in the summertime? See Chapter 4.
The concepts of supply and demand are the foundational framework for much of economics, which is why it’s essential that students master this material. We walk students patiently through these topics, dedicating a full chapter to demand, then supply, and finally equilibrium. This breakdown of topics aligns with the way most instructors already teach, taking several lectures to work through this foundational material even as most textbooks rush through it all in a single chapter. Our deliberate approach supports students with clear, familiar examples and plenty of opportunities to practice drawing and shifting curves, helping them build a deeper and more intuitive understanding of the ideas behind the curves. By the time they’re through the first few chapters, the urge to find an equilibrium is practically a reflex. This sets them up for success in later chapters, where they’ll apply the supply and demand framework to new problems and adapt it to the markets for labor, capital, foreign currency, imports, and exports.
From Fundamentals to “One Economics”
Which social app will you use? See Chapter 2.
By mastering the four core principles and the basics of supply and demand, students learn to apply the tools of economics to just about any decision they face. We leverage this foundation as later chapters delve into more advanced topics. In each case, we follow a recipe that students will find familiar, initially focusing on individual choices, then aggregating them to yield demand and supply curves, and ultimately market outcomes. We work through the principles to discover a series of “rational rules”—such as producing until marginal revenue equals marginal cost, hiring until wages equal the marginal revenue product of labor, or consuming until the marginal benefit of a dollar of spending today is equal to the marginal benefit of spending a dollar-plus-interest tomorrow. This approach also sets students up for a thoroughly modern treatment of macroeconomics, which is built from these microeconomic foundations. The payoff is that our students study “one economics,” which they can apply to whatever new issues interest them.
Useful Economics for the Real World
How can a nonprofit use market forces to better feed America’s hungry? See Chapter 8.
While most students won’t become professional economists, they are all economic actors who will manage their careers, their finances, and their families, play active roles in their communities, and perhaps run their own businesses. We show students that economics gives them a valuable toolkit that will make them more effective decision makers in almost any role they choose. For example, we introduce comparative advantage as a framework for efficiently allocating household tasks, and then move on to show how it can be used to organize teams, businesses, and other organizations before finally discussing it as a driver of international trade. Our analysis of the relative efficiency of markets concludes with case studies of how managers and nonprofits use internal markets to harness market forces. A broader framing of externalities makes the policies used to solve them relevant not only to governments looking to reduce environmental harm, but also to managers looking to fix misaligned incentives in the workplace. In analyzing private information, we show that you should be wary of sellers who know something you don’t, and what you can do to avoid getting ripped off. And when buyers know something you don’t, we show that often you won’t get the customers you want, and what you can do about it. The macroeconomic framework we introduce to forecast consumption yields concrete advice about when to save, how to form a saving plan, and how to stick to it. Our study of labor markets reveals how employers can tweak wages and incentives to get the most out of their employees, and how workers can leverage their comparative advantage to be more efficient (and better compensated). The material on uncertainty and finance applies as much to managing your household portfolio as it does to managing your business assets. This broad reach makes economics more inviting to a more diverse group of students from a range of backgrounds, each with different plans for the future.