Things to Note:
Preface * An account of how economists reason * Examples of how that reasoning can be applied to (some of) the most urgent problems Humanity faces today * The lives of Becky--the daughter of a Chicago lawyer--and Desta--the daughter of an Ethiopian farmer couple
Prologue
- Becky's household income $150K/year as the daughter of a Chicago lawyer (and stay-at-home mom)
- Desta the daughter of an Ethiopian corn-growing farmer couple with a household income of $5K/year
- Desta's household's income subject to much greater risks
- Economists look at things from the bottom up: resources, institutions, choices, histories, destinies
- Economists use models and quantitative models
Macroeconomic history
- Annual GDP per capita as a measuring rod:
- GDP per capita in the world today: $7K/year
- GDP per capita in the year 1: $500/year
- GDP per capita in 1800: $1500/year in western Europe; $500/year in Africa; $750/year global average
- Rule of 72
- The world today:
- 1B people with an average per capita income of $20K/year at the top
- 3.5B people in the middle
- 2.5B people with an average per capita income of $2.1K/year at the bottom
- Agriculture 25% of GDP in poor countries, 5% of GDP in rich countries
- Causes:
- Proximate causes of the difference: (physical) capital, (human capital) education, gender equality, public health, technologies? markets? division of labor?
- Deeper causes: institutions (corruption), institutions (markets), institutions (incentives), the application of ideas (technological and organizational), natural resources vs. population growth
- Virtuous and vicious circles
Discussion Questions
Preface
- How different do you think the lives of Becky and Desta are?
- How would you go about explaining why the lives of Becky and Desta are different?
- How would an economist go about explaining why the lives of Becky and Desta are different?
- What are the costs and benefits of thinking like an economist?
- What kind of person would start an analysis by asking: "What are the costs and benefits of thinking like an economist?"
Prologue
- Why does Becky's household live outside of Chicago and earn money by having the father work all day outside of the house doing transactions processing rather than, say, living 100 miles further west and growing corn in DeKalb County?
- How different would Becky's life be if her father (and mother) were corn-growing farmers in DeKalb County?
- Why did they choose to become suburban Chicago yuppies?
- Why doe Desta's household live in rural Ethiopia and grow their own corn rather than, say, living in Addis Ababa and earn money by having the father work all day outside of the house doing transactions processing?
- How different would Desta's life be if her father were an Addis Ababa lawyer?
- Why did they choose to become rural Ethiopian subsistence farmers?
Macroeconomic history
- In the long sweep of human history, is Becky very lucky, lucky, unlucky, or very unlucky?
- In the long sweep of human history, is Desta very lucky, lucky, unlucky, or very unlucky?
- How much richer is the world today than it was in the long centuries from 5000 BC to 1800?
- How much richer are the world's rich today than the world's poor today?
- What would count as an explanation of this divergence across space and time--that is, what kinds of things would count as "causes" and make you happy that you understood what was going on?
- How many useful "hierarchies of causation" can you imagine here?
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