Economics has many definitions. One is that economics is the "worldly philosophy," which is to say a philosophy about the world of things and our human ways of getting along, materially speaking. Philosophy is usually thought of as being about impractical things, the metaphysical stuff, things so far out of this world it's a wonder that the philosophy major living down the hall can pay his bills. But philosophy can also address practical concerns such as work, consumption, profit, and poverty. And then it is called economics. As our late friend the economist Robert Heilbroner points out in a book The Worldly Philosophers which has influenced some of your teachers, the leading economists can hold their own in the company of pure philosophers. In fact, some of them are pure philosophers.
Economics has also been defined as "social engineering." Page through our book and you'll see numbers and charts in abundance, certainly in more abundance than in typical books of philosophy or history. Economics is quantitative, as is engineering, and in its higher reaches is heavily mathematical and statistical, as is engineering. It has the problem—solving, let's-build-that-bridge attitude of engineering, too. The difference is that the economic "bridges" are cigarette taxes, the Federal Reserve policy, or ideas for increasing the prosperity of poor countries. Hence "social" engineering—though the "social" means that the economy is not easily mechanized or made into something with a simple on/off switch, even if you want it so.
Economists who favor the social engineering definition are taking their cue partly from a philosopher of economics, Lionel Robbins, who said in the 1930s that economists should focus on the "means"—the how-to-of economic questions, allowing citizens, politicians, or philosophers to determine what the "ends" of the economy should be. Figuring the best way to do a job is an engineer's approach; but the job itself, Robbins was saying, is typically defined by someone else. "Just tell us the ends you have in mind," economists after Robbins have said to a Bush or Blair or Berlusconi, "and we'll tell you the efficient means to achieve them."
Not all economists are thrilled with the "means vs. ends" definition of economics. Some prefer a definition of economics that focuses more on the social systems or circumstances in which economic decisions are made—or forced. For example, Samuel Bowles, Richard Edwards, and Frank Roosevelt (the economist-grandson of President Franklin D. Roosevelt) define economics as "the study of how people interact with one another and with their natural surroundings to produce their livelihoods." Such economists want to understand how socio-cultural systems like power, class, kinship, religion, ethnicity, and gender affect the production and distribution of goods, and vice versa. They do not entirely reject the methods used in engineering or philosophical approaches. But they believe that economics ought to have a wider historical and sociological focus.
And economics, finally, has been defined as "the study of humankind in the ordinary business of life." It's then like a human biology, a social physics, or a current history, a factual account of how people earn their living and a mathematical or experimental interpretation of why it matters. It answers great historical questions, such as "Has capitalism been good for us?" and "What caused the Industrial Revolution?" Or great current questions, such as "Why are South Asians at present poorer than the Japanese?" and "Why is the welfare state being dismantled?" Or little puzzles about the ordinary business of life, such as "Why are cable companies large and pizza places small?"
The difference between economics and, say, history is that economics is also philosophical and quantitative. And like biology and especially physics, it uses "models" to explain behavior and data to estimate relationships. In short, you see, economics reflects all of the above—it is speculative like philosophy, quantitative like engineering, model-oriented like biology and physics, factual like history.
Unless you had economics in high school you'll probably find economics a little weird. And your economics in high school was probably different from what you are about to experience. Each of us—the three authors—were stunned by our first economics courses, at the University of Amsterdam, at Harvard, and at Indiana University. No wonder: in some ways a course in economics is like an English or math course, in others like a science course, in still others like a history or journalism course.
Considering that it's about the ordinary business of life, economic theory is unexpectedly foreign. For example, economists use diagrams and mathematical equations to talk about the decision to buy a house or attend graduate school. Did you use equations or diagrams to decide where to go to college? Math may not be your cup of tea. We keep the math to a minimum, and try to make the diagrams as lively as possible. But you can't do economics entirely without math and diagrams. In 1946 the famous American economist Alvin Hansen taught advanced-level economics to the father of one of the authors. Because the eager grad student was hopeless at mathematical thinking, he skipped all the diagrams and every equation. By focusing on just the words and meanings he got an A+ in the course. So it was in 1946 economics, your great grandmother's time, when clocks had hands and radios had legs. Today the techie stuff is not entirely skippable. Since the 1940s economists have spotted more and more ways of picturing the economy in diagrams. Be thankful. Diagramming is one of their efficient languages, math another. So get ready. But remember: you can get a lot from a close study of the words, too, as that student did in 1946.
The economic way of inquiring about the facts of the world is also unexpectedly foreign. You live in an economy, so you'd think the economists would talk about what you know in straightforward ways. Nope. Economics has been since its invention in the 1700s strangely, well, ironic. The irony emerges from an economic phenomenon called "unintended consequences," which you'll see a lot of in this book. "If Jamaica is so hot, why can't you find any ice?" Or: "Why do government welfare programs produce more poor people?" Or: "Why does the drive-through ATM put Braille on the keyboard?" As you can imagine, the irony of economics does not always entail humor or consensus, though it sometimes achieves both. Economists have developed a special language with terms that may sound familiar but turn out to have special, even highly technical meanings. "Investment" may make you think of the stock market but economists use the word investment to think about the effect, for example, of a new robot on new automobile production. Even the word production has a technical meaning in economics, different from ordinary language. Think of economics as a foreign language with an ironic accent and you will get the main point. The Economic Conversation will introduce you to the peculiar and often powerful ways in which economists talk.
When in the 4th century B.C. the philosopher Plato (427?-347? B.C.) claimed to be writing down the ideas of his teacher, Socrates (470?-399 B.C.), he chose to do so by way of dialogues. The implicit argument in Plato's dialogues is that knowledge—such as knowledge about beauty and love, as in his dialogue Phaedrus (FAY-drus), or knowledge about virtue and good government, as in his dialogue Gorgias (GORE-ghee-us)—comes from the give and take of conversation. We learn from conversation, even if only an internal conversation within ourselves.
That seems right, and many other great teachers have followed Plato's example. For instance, two thousand years after Plato the Italian physicist Galileo (1564—1642 A.D.), from whom most of modern physics flows, presented his scientific ideas as dialogues between imaginary characters:
Galileo Galilei, Dialogues Concerning Two New Sciences
(New York: Dover, 1638 ), p. 6,
trans. by H. Crew and A. de Salvio.
By the nineteenth century the dialogical form had fallen out of favor as a method of scientific persuasion, replaced by so-called objective and neutral "observation," "testing," and "writing up the results" in the now-standard format you learned in high-school science. The formal "method of science" now follows a rigid outline from scientific question to scientific answer.
The suppression of dialogue is most unfortunate, we think. After all, you and we — everyone — learns by means of conversations with others. Sometimes the conversation is taking place only in our heads. At this moment a stream of words may be running through your frontal lobes seemingly spoken by a parent or friend or teacher and you are silently responding to them. You will master a language such as Greek or Chinese only when you speak it in conversation with others, preferably native speakers. That is how we want you to learn economics: learning to speak economics by engaging in dialogues. Throughout the text you will encounter students and professors talking, even quarreling. They are commenting on the claims of the economic arguments and even on the form of the arguments themselves—that is, on the arguments about the arguments. Such argument about argument is called "rhetoric." By "rhetoric" we do not mean merely "deceptive speech" or "flowery language." We mean essentially the art of having a real conversation, a real argument with real human beings. Why do you believe what you believe?
The dialogues show economics, in other words, to be a controversial and conversational subject, thoroughly "rhetorical," where people disagree with one another, and quarrel over the arguments about the arguments.
Students are more attuned than most are to the communicative and social failures of blabber mouth shows and agree-to-disagree encounters. And you know better than most professors do what it's like to be forced into silence. Our book offers an alternative that students around the globe have been asking for. It makes student voices central to the classroom, a fact we hope to see more of in actual classrooms. We've named the students in the dialogues Paul, Bayla, Maria, and Rodney. They're modeled on actual students.
Paul is (as he puts it) "a middle class suburban kid," and a business major. He seeks the middle of the road for just about everything. He's pretty self-confident but he doesn't like to ruffle feathers. A Republican, he's in college strictly to further his goals in business.
Bayla comes from a modest background in Eastern Europe. She's an older student who wants after college to work in the fashion industry. She's a fervent believer in capitalism, coming from a part of the world damaged by Communism. She celebrates the entrepreneur and other go-getters in society. Radiohead dominates her iPod.
Maria is the only child of a single mother. Her mom is a Hispanic immigrant who owns an organic foods restaurant in a working-class Latino neighborhood of Chicago. Perhaps because of her upbringing she's especially troubled by the injustices of the current economic system. She repeatedly calls attention to the plight of minorities, especially of women.
Rodney is more radical in temperament than the others. A leader of the debate club in college, in love with anything British (he plays the English game of cricket, of all things: he learned it young from a doting Jamaican uncle), he's also a budding intellectual. He loves the argumentative character of economics. But according to Rodney, an African American who sees himself as a future politician, the capitalist system as a whole is wrong, and radical changes are needed to bring about economic justice.
You will see yourself, or a friend down the hall, in one or another of them. At every turn in the book we found ourselves asking, "What would Rodney say?" or "Would Bayla find this persuasive?" See if you do, too.
How to study this dialogical economics is a question. You learned how to study in high school, right? Just read the chapter, highlight the important points, memorize them, and you're finished. Clang!!! Wrong. College studying has to go beyond mere memorizing, to understanding. There's vastly too much to memorize in most college courses, and in most cases memory is not what's being tested. (We said "in most cases".) One of us tried to learn calculus in college by putting the equations on flashcards and memorizing them. Save that method, please, for Kindercare and the lunatic asylum.
Try instead to understand the argument. We introduce a formal definition of "argument" and "understanding" in Chapter 1. But intuitively speaking you can get our meaning now. We want you to get inside of an argument about free trade or the living wage; identify with it, make it the master for a moment. Let the argument run through your veins. By "argument" we do not mean shouting and kicking or giving-of-the-old-silent-treatment. We mean the opposite of all that: conversation that leads us to reveal why we believe what we believe. Like our students in this book, it's best to involve others. Try out on friends some economic ideas and see whether you have the arguments to back them up. Try using the terms and concepts you encounter in this course, even though brand-new to you. Recall that when learning a foreign language you always learn faster and better by speaking it out loud. Do the same here. Who knows, you might discover a true economist in yourself!
For the best results in studying economics:
Economics, then, is rhetoric, and rhetoric is persuasion. The word "persuasion" comes from Latin, itself from the same root word that leads by way of Old Germanic to our English "sweet." It's sweet stuff, this philosophical, engineering, model-making history of the economy, with all its persuasive conversations. Or so we hope to persuade you.