Will someone teach me the basics of economics?

[136or142]

I am very eager to take a Macro course which will probably be next year.

Re: Will someone teach me the basics of economics?

First lesson: if you pay for it. 

[136or142]

People have limited resources. (supply)
People have unlimited wants. (demand)
This is the problem of Scarcity.
It means we must make Choices.
The social science of Economics is dedicated to how we make choices under these conditions.

A few other basics: the smaller the supply of something, the more scarce something is, and that usually makes it more valuable.

Economic policy is divided into 3 parts
 1. Fiscal policy (the budget, controlled by Congress)
 2. Monetary policy (the currency, controlled by the Federal Reserve)
 3. Trade policy (controlled by Congress, free trade versus tariffs)

There are two main schools of economic thought in the United States:
1. Classical economic theory
2. Keynesian economic theory

A brief history of economic theories:
I. Mercantilism (1492-1776)
II. Classical Economic Theory (1776-1929)
III. The Fall of Classical Economic Theory, the Rise of Communism, and the Rise of Keynesian Economic Theory to rescue Capitalism (1929-1971)
IV. The Fall of the Keynesians (1971-1980)
V. Supply-side Economics, aka the return of Classical Economic Theory (1980-2008)
VI. The Present Crisis (2008-now)

I'd also recommend reading about Bretton Woods and what came out of it: the International Monetary Fund, the World Bank, and the World Trade Organization.

I'd also recommend reading about the old gold versus silver debate, and how Nixon upended the monetary system (also around the same time as the Oil Shocks) and how that changed things.

Macro classical economic theory and Keynesian theory were both altered  by Milton Friedman and his (and some others) Monetarism. 

This has resulted in the new term Neo Classical Economics.  I personally would have gone with Neo Keynesianism but, it's all good.

[136or142]

Macro tends to heavily focus on gdp which is good, because it involves real numbers unlike micro.

The formula for GDP is: GDP = C + I + G + (Ex - Im), where “C” equals spending by consumers, “I” equals investment by businesses, “G” equals government spending and “(Ex - Im)” equals net exports, that is, the value of exports minus imports.

Transfer payments like welfare are not factored in at this stage.

I find a lot of people focus on doing the calculations and don't really understand the concepts behind them.

Both quantitative and qualitative data are important.

[136or142]

I am very eager to take a Macro course which will probably be next year.

Micro-economics focuses on the aggregate supply and demand curves.

The aggregate supply curve is based on 'the theory of the film.'  (not my favorite term)
The aggregate demand curve is based on utility theory.

These aggregate curves are the aggregation of every individual curve.

Macro economics also focuses on price in the four types of markets: perfect competition, monopolistic competition, oligopoly and monopoly.

Only with perfect competition is the price point where the aggregate supply curve meets the aggregate demand curve.

Second level micro economics largely goes over the same concepts but with calculus.

Macro economics is about fiscal and monetary policy.

Fiscal policy is the role of elected politicians, monetary policy is the role of the Federal Reserve.

Monetary policy focuses on such things as the velocity of money (probably the worst term in economics as it makes a very simple concept sound very complicated) and the money creation process.

Fiscal policy is, of course, government spending and taxation as well as regulations and maybe even trade policy can be included in that.  Ricardo's comparative advantage is also covered in macro economics.

Edit: Blue3 above wrote trade policy is separate from fiscal or monetary policy, so I'll go with that and state my above comment is wrong.

Fiscal and monetary policy are both covered with a discussion on Keynesian economics vs. Monetarism and the debate over whether or not the multiplier effect is zero in the long run.

The multiplier effect is also a simple concept of the basic idea that if an already existing dollar is spent by the government, that dollar will be re-spent and result in higher aggregate spending (aggregate demand.)  Most mainstream economic teaching states that, unless the economy is in a recession, that dollar spent by the government as it recirculates and is spent over and over again (which is all the 'velocity of money is' except, that the velocity of money is the number of times the dollar is spent over a given period of time) will either result in inflation or simply displaces money that would have been spent by some other economic actor anyway.  So, mainstream economics mostly teaches that, except during recessions, the long run multiplier is zero.

This debate was a major part of the downfall of Keynesianism that Blue3 outlined above.  However, I disagree that Keynesianism is no longer followed or that Monetarism is a complete return to classical economics.  Keynes himself only argued for government deficit stimulus spending during times of recession.  It wasn't really his fault that politicians altered his theories to call for deficit spending at all times (he died before deficit spending really took off) and stimulus spending is still largely advocated during recessions.

Also, I disagree that the role of the Federal Reserve proposed by Monetarists is the same as that advocated by classical economics.  For instance, as far as I know, classical economists advocate for the Gold Standard while most Monetarists don't.

If you have a good teacher and are interested, you should ask that teacher to provide some material on the back and forth arguments between John Kenneth Galbraith and Milton Friedman during the 1960s and 1970s. 
http://economistsview.typepad.com/economistsview/2006/12/friedman_and_ga.html

Both of them had PBS programs in the late 1970s, probably the last time academic economists of the day were household names.

Galbraith, as the first article points, out was regarded more as a social commentator or economic historian though than as a respected economist by his peers.

As far as I know, there really isn't a second level macro economics course, but most of the higher level macro economics courses are focused on a specific topic that are largely based on macro economics (labor economics, money, banking and financial institutions, environmental economics...)

Behavioral economics is likely largely a followup to micro economics as many of the concepts in behavioral economics challenge many of the assumptions in micro economics (economic actors make rational decisions.)

[136or142]

1. Don't go to a politics forum to ask this question.

We have several very economically literate posters here, but I don't know how someone with no background would distinguish them from the charlatans.

If you want to ignore my first point of advice, I think it's good to start reading from a variety of perspectives without venturing too far from the field's mainstream.

Maybe books or lectures are closer to your learning style, but for me it was easiest to start by reading a few econ-heavy blogs, e.g. something like Marginal Revolution on the libertarian-right or Jared Bernstein on the center-left. Follow the sources and debates that they reference and eventually you will have a solid grounding in the field to supplement what you are learning in class.

Avoid econ commentators that are critical of the mainstream without really engaging with it (e.g. "Austrians," most Marxists, anyone who recommends reading Henry Hazlitt) and avoid anyone who tends to be too overtly partisan in how they pitch economic arguments toward non-academic audiences (e.g. Ezra Klein, Paul Krugman, Matthew Yglesias, that guy who advised Bernie Sanders, Bryan Caplan, anyone who was overly defensive of Mitt Romney).

1.Micro economics is mostly common sense (and the counter intuitive things can be explained) so a person with common sense should be able to follow the logic and see if what a person claims makes sense or not.  But, yes, macro economics does require some study to understand things like the money creation process.

2.Not that I'm an economist myself, but I find that if you explain economic concepts point by point, most people understand them.  I read an article by one economics professor about his first level class.  He taught economics in the standard academic way for a number of years, then when he did a test of their general comprehension of the concepts at the end of the semester (as opposed to the Final that asked based on the standard teaching) he found they hadn't learned a thing (they were just able to regurgitate what he had said to them for the test.)  I believe that article said that a surprising number of PhD economists also failed tests that asked about the general concepts rather than about specific number crunching or what have you.

So, like the best teachers, he started teaching by asking concrete questions based on real world scenarios. The example given in the article was 'why don't movie theaters charge higher ticket prices for the more popular movies?'  Anybody who goes to the movies or understands a bit about the film industry should be able to come up with logical answers for that whether they've studied (micro) economics or not.

3.There certainly is a lot of nonsense when it comes to macro economics.  Pretty much all conspiracies theories are based on the false belief that the Federal Reserve is really a 'private bank that prints up money any time it wants for the benefit of its members' and a great deal of supply side economics  also rests on nonsense ('tax cuts pay for themselves'...)

4.There are also several twitter feeds worth reading.  Mark Thoma and Economy World are worth following.

[136or142]

4.There are also several twitter feeds worth reading.  Mark Thoma and Economy World are worth following.

^I like Mark Thoma a lot.

I would like to think that you're right about micro. I remember a lot of people having more trouble with interpreting graphs than they did understanding the core concepts.

Among students in majors that don't involve much math, a large chunk of them will struggle with anything quantitative. This makes it particularly difficult to understand anything involving change and multiple relationships - I remember elasticity confusing a lot of students.

Not that I can pretend to have too much perspective on this - I only took a handful of econ courses as an undergraduate and a couple more in grad school.

What did you think of my summary?

I'm not the best person to ask. We could discuss some of your definitions, but the biggest problem that I see originates in the original post - i.e. he's apparently jumping straight into macro. I know that some departments allow you to do this but I'm not sure why. I imagine that studying macroeconomics without doing micro first would be a lot like taking a course in theology.

I don't know.  If everybody had common sense then behavioral economics wouldn't keep showing ways that people behave irrationally.   Economic concepts can be applied to pretty much everything in daily life, not just the economy so you'd like to think that people would understand these concepts intuitively, but clearly quite a lot of people don't.

However, even though many people don't seem to understand them intuitively, I'm not sure they can't be taught effectively and the same goes for math.  I think, again, the problem there in high schools is the focus is on 'academic math' and treating mathematics as a technical 'number crunching' exercise rather than explaining the core concepts and patterns that underlie mathematics.

Just to add: I went to high school about 30 years ago now and I understand that in same places mathematics is being taught quite differently than the essentially technically process I learnt.  I don't know if that's helped improve understanding of mathematics or not. 

Given how important doing rough calculations of probabilities is, you'd think that people would be hard wired to understand basic mathematics concepts if not precise calculations.