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Introduction to the economics of Arts and Culture (What is economics?…
Introduction to the economics of Arts and Culture
What is economics? (Criteria)
A different language
Supply
Demand
Equilibrium
Price
Choice
A different mode of analysis
Models and graphs
Economic way of thinking
Self - interest
Microeconomics and Macroeconomics
Variety of economic shools and methods
:!?: Academic pecking order
Two views about economics
Economics as way of thinking
(Principles view)
Economic principles
Law of supply and demand
Rational choice (costs and benefits)
The costs of the alternative (oppertunity costs)
Individuals respond to incentives
Gains from trade: trade is beneficial for both parties
:!?: The "miracle of the market" + externalities
It's all about choice
Scarcity is everywhere
Quotes defining economics as economic principles
Ha-Joon Chang
(2014) quotes the
Neoclassical
definition
“Economics is a study of rational choice, that is, choice made on the basis of deliberate,
systematic calculation of the maximum extent to which the ends can be met by using the
inevitably scarce means. The subject matter of the calculation can be anything…”
Mark Blaug
(1976)
“The intellectual imperialism of economists is one of the phenomena of our time: recent
years have seen economists analyzing problems of national defense, health, education
and sports, crime and even marriage – ‘economics in unwonted places’ is how one writer
described it”
Object of study
Stick to domain, so domains of common interest
Economics as domain
(Study view)
Examples of economics as the study of the economy
The study of economic crises
The analysis of economic growth/
The alleviation of poverty and unemployment
The study of markets
Body of knowledge
Imperialist
Attempts at integration of principles from different disciplines (psychology, sociology)
Three approaches to studying economics
Positive economics
Claim about what is the case
"unemployment is 3%"
"The income tax revenue is 300 million"
DESCRIPTION
Normative economics
Claim about what should be the case
"Unemployment should be reduced to 3%"
"The income tax revenues should increase"
PRESCRIPTION
Theoretical statements
Economic models
DEFINITION: "A simplified representation of economic reality that allows us to understand a variety of economic issues" (Krugman & Wells)
Circular flow model example
:!?: Common complaints against models
Heuristic tools
Discovering the essential mechanism
Abstraction and simplification is essential to any scientific description
What are economic models?
Is it a mirror of the world?
Truthful
Exact
Often associated with providing good predictions
Or is it an eye-opener? Does it allow us to see things we cannot see
Demand and supply
Equilibrium
Markets
Criterion is that it gives new insights, but what is their validity, how do we test a model?
Or does it construct/shape the world?
Critical questions
What has been left out?
IS there too much simplification?
What is the purpose of the model?
When is this map, or this principle useful?
Ideals of modern economics
Objectivity
Purely what is it is about, not what it should be (positive economics)
Correct
The economic models are a good description of the world
Explanatory power
Economic models explain the world
As simple as possible
Doing a lot with a little
