Foundations of Real-World Economics

The course discusses complex economic processes in straightforward terms so that they can be understood without the use of mathematics and without prior knowledge of economics. The focus is on understanding the way the economy works in the real world without relying excessively on assumptions, math, or abstract models of the economy. We use the inductive method, which means that we consider the evidence first and then infer from the data how people actually behave in real markets where asymmetric information, bounded rationality, transaction costs, and uneven distribution of power dominates. We apply the concepts we learn to contemporary controversial topics such as minimum wage legislation, the function of unions, and why the free market overcharges for health care. We explore why Noble Prize-winning economists such as Paul Krugman and Joe Stiglitz are so critical of the current economic situation for its dizzying inequality, its endemic underemployment, the humongous trade and government deficits, stagnating wages, the lack of inclusive growth, and its inability to provide a dignified life for dozens of millions of its citizens. Most economists do not have the answers to the challenges of globalization, inequality, and technological unemployment because they are unable to think creatively about new institutional structures that would enable us to transition to a full-employment economy in which the focus is not on production and consumption as much as on the achievement of a high quality of life in capitalism with a human face. In contrast, this course weaves ideas from history, psychology, sociology, and political science into a common-sense economic perspective in order to explore these issues. We also discuss the achievements of Nobel Prize-winning behavioral economists and the impact of the financial crisis of 2008, the economic roots of the rise of populism, and ends by outlining the main impact of the COVID-19 pandemic.