Economics for the Common Good summary

What exactly is it that economists do? Lots of things in fact, but two roles stand out.

Because they’re often ensconced in the ivory towers of academia, one of economists’ most important tasks is contributing to our knowledge of the world. But they also have another, less theoretical, role: economists try to make the world a better place by providing insights that policymakers can act upon.

Economic theory begins with a fairy tale. Once upon a time, it says, there was the homo economicus. This fabled character from economics 101 textbooks is the self-interested and rationally calculating decision maker. But as anyone who’s ever felt the lure of unhealthy junk food knows all too well, humans just aren’t perfectly rational creatures.

What else drives us then? One place economists can look for answers is in the social and human sciences.

The market and the state are frequently depicted as belonging to entirely separate spheres. But contrary to what is often said about them, they don’t compete with each other; in fact, each needs the other to work properly.

That’s because they do different things. Take markets. Without them, there’d be little competition or innovation. Yet without the state and the rule of law, markets would descend into anarchy. After all, businesses need protecting and contracts have to be enforced for a market to work at all. And, as we’ve seen, it’s the state that provides a regulatory oversight that protects the common good when markets fail.

From rising sea levels to extreme weather events and more frequent droughts, the effects of global climate change are likely to be catastrophic unless we take action soon.

But policies like reducing greenhouse gas emissions that would help to counteract global warming are extremely difficult to implement – and economists can help us understand why.

Millions of Europeans are worried about their economic future – and it’s no wonder. The continent’s economy faces a number of serious challenges, especially in southern European countries.

Unemployment in countries like Greece, Spain and France is sky-high when compared to the countries of northern Europe, the United States and Canada. It’s especially bad for two distinct age groups: young people aged between 15 and 24 at the start of their careers, and older people between 55 and 65 at the end of their careers. Worse still, many of these people are experiencing long-term unemployment.

Few topics in economics are as fiercely and emotionally contested as finance. That’s partly a legacy of the financial crisis of 2008, and the resulting widespread view of bankers as reckless speculators who crashed the global economy.

But finance is one of those things we just can’t do without – if we could, we’d have already gotten rid of it and spared ourselves the expensive and tricky public bailouts of recent years!

We’ve already seen how the state and the market are like the yin and yang of economic life, two interdependent and complementary forces in a larger system. In this blink, we’ll take a closer look at their relationship.

Paradoxical as it may seem, the state is the at the heart of economic life in every market economy, because it plays three distinctive and important roles within the market.

We’re already living in the digital economy. We shop and bank online, catch up on news and gossip on our smartphones and stay in touch with friends on Facebook.

What the platforms of the new digital economy all have in common is that they’re examples of two-sided markets, markets in which buyers and sellers interact via an intermediary.

Innovation is the motor that keeps the economy humming and the wheels of economic growth spinning.

But safeguarding innovation requires intellectual property rights.