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Time English (United States) Language 2 Action
00:00
The first step to understanding economics is understanding where the hell it came from in
00:04
the first place. When it comes to comprehending complex human systems, a little context is key.
00:10
You may have heard of this guy Adam Smith. Beyond having one of the most generic names in the book,
00:15
he’s actually a pretty important guy. Some even consider him the father of economics.
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But it’s pretty hard to boil down millenia of economic thought and pin it on one guy,
00:25
no matter how fancy his hairdo may be. So, much like young Sophie from
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the jukebox musical Mamma Mia!, we’re gonna do some daddy-sleuthing.
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Because when we find out where something came from, we can better understand where we are now.
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When we say “economics,” we’re talking about the study of the production,
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distribution, and consumption of stuff. We have tons of economic
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laws and systems in place today to help the world run more smoothly...hopefully.
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Our economic system here in the US is a regular dancing queen, a complicated tango of free market
00:59
forces –but, not too many free market forces– and government interventions –but not too many
01:06
government interventions– creating some sticky social, political, and philosophical questions.
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There have been lots of different thoughts about economics over time,
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because it’s so hard to answer that central economic question: in a world of scarcity,
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where there’s never enough time, money, or stuff for everyone, who gets what, when?
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And while our systems are really complicated,
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they aren’t exactly perfect, and not everyone agrees on how they should work.
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Like a good therapy patient, or anyone who’s ever sent anonymous
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letters to their three possible dads on the eve of their wedding,
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our modern economy can push off at least some of its hang ups onto its parents– in this case,
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its father, because the history of economics is a whole lot like the rest of mainstream
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history (and the host of this series, for that matter)-- very white and very male.
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So to get to the why of our current system, it’s time for an economic paternity test.
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Structured economies have been around for thousands of years. Pretty much as soon
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as written language was a thing it was used to record important economic rules and guidelines.
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In Babylonia, the code of Hammurabi included laws about taxes and trade, showing that people
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as early as 1750 BCE seemed to think big societies needed formal economic structures in order to run.
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And people weren’t just thinking about the practical rules for a functioning economy.
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The idea of living a virtuous life was really on trend in ancient Greece, and in about 300 BCE,
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Aristotle wrote about economics not just as a practical framework for exchange,
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but a system loaded with the moral, political,
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and philosophical implications we understand today– stuff like the relationship between
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wealth and power or private property as a source of both progress and corruption.
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Now, like many questionable father figures, Aristotle was a raging misogynist,
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and also really problematically pro-slavery. But the guy did write a whole book called,
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succinctly, Economics, so understanding potential-papa
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Aristotle’s contexts and ideas helps us understand that today’s economic system
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isn’t just about rules and math everyone’s two favorite things but philosophy, too.
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Another candidate for economic paternity is a 14th
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century North African philosopher and politician named Ibn Khaldun.
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Because Khaldun had spent time in the political sphere in an era when dynasties were turning
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over right and left, he believed that economic guidelines weren’t just useful for individuals,
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but that the right policies were tied to political success. In other words,
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strong economic policies made strong kingdoms.
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Khaldun stressed the importance of labor via population growth,
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as well as a little thing known as the market force of supply and demand,
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which did a whole lot to influence our boy Adam Smith– and our modern economic system.
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Arriving on the scene about 400 years later, the Scottish Smith was all about the free market,
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or the idea that economic markets can pretty much run themselves without government
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intervention. This built on the ideas of supply and demand Khaldun was all about,
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but it was also a reaction to the not-so-hot economic circumstances of his time.
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When Smith was starting out, the UK’s economy was dominated by the government-backed monopoly
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the East India Company, leading to tons of wealth inequality and pretty
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much no options for entrepreneurs who wanted to get into business themselves.
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Smith said if the government would just butt out, market forces like scarcity and competition would
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form an invisible hand to guide the economy to orderliness, progress, and equality.
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Today, we call this laissez-faire capitalism, and it’s where we get a whole lot of our
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modern-day systems. But he only got there thanks to generations of economic thinkers before him.
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Two other pretty important father figures in the econ family tree came along about 100 years
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later. In response to rapid industrialization and widening wealth gaps thanks to Ye Olde
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Industrial Revolution, Karl Marx and Friedrich Engels pushed back against Smith’s ideas.
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Like Aristotle, these guys had some thoughts about private property, too. Namely that the means of
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production (like that factory belching smoke in the distance) should be owned by the workers
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providing the labor, rather than the upper-class cigar-smoking fat cat in the corner office.
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Marx and Engels published The Communist Manifesto in 1848,
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outlining their vision for the best answer to the scarcity question and a more effective economy.
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Through The Communist Manifesto, Marx and Engels became the fathers
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of two other babies of economic theory– communism and socialism.
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And while there are no pure communist or socialist economies today, these systems
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really influence some systems that do exist– like Canada’s government-funded healthcare,
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or France’s state-owned airline. Even in the US, where for many people both communism and socialism
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are dirty words, residents benefit from government programs like social security and public schools.
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And then there’s Papa John– John Maynard Keynes, that is, who focused on macroeconomics,
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or the study of the economy overall and where this course is really gonna spend some time.
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By looking at large-scale economic fluctuations,
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like the Great Depression of the 1930s, Keynes believed big-picture
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economic patterns could help set policies that would make life better for everyone.
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When it comes right down to it,
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none of our current economic thinking would exist without any of these guys.
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But we also wouldn’t be here without William Darity Jr.,
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who said economics needs to account for social factors like race, class, and gender.
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Or Abhijit Banerjee and Esther Duflo, who studied the economics of universal basic income.
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Or Swedish Europop band ABBA, who famously said, and I quote, “money,
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money, money, always sunny in a rich man’s world.” If that’s not a treatise on the
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accumulation of capital and the power that comes with it I don’t know what is.
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Or me, Matt Sopha, ASU professor, runner,
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certified Trekkie, and host of Study Hall Macroeconomics.
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Or even you, good YouTube viewer!
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That’s because, in the real world, economies are influenced by each and every human choice.
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Every past economic theory came directly from the context of the times, and today’s system
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is no different. We all make our economic system what it is today, and our actions
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today lead to real life consequences that don’t always line up with previous economic models.
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For the purposes of this course, the macroeconomic system we’ll be looking at is market economics,
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which comes from Smith’s ideas about market forces like supply,
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demand, and scarcity. You might have also heard it called capitalism.
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But, like we literally just established, there’s no one person responsible for how
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today’s economy runs. While we think of the U.S. economy as capitalist,
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the government still makes a lot of economic choices, like setting minimum wage, and some
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public ownership definitely exists– take your local library or your city’s mass transit system.
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So, as it turns out, economics is actually a whole lot like the fictional Sophie. It’s
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made up by people, it doesn't know who its real father is, and the choices it
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makes aren’t always perfect. Although, unlike Sophie, it’s not much of a belter.
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In the end, we care about family trees because they give us context and understanding for who
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we are today and also hints about potentially life-threatening heritable diseases. Understanding
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the systems the fathers, mothers, and nonbinary parental icons before us built
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up helps us know today’s economic systems and its intricacies, eccentricities, and imperfections.
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If you’re enjoying this series and are interested in taking the
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full Study Hall Macroeconomics course and earning college credit from ASU,
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check out gostudyhall.com or click on the button to learn more.
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And if you want to help us out, give this video a like, comment,, and smash that subscribe button!
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Thanks for watching, see you next time!