The fact that you’re holding this book in your hands puts you in a
special position. For a start, you (or whoever gave you this book)
had the money to buy it. If you were from a poor country, your
family would probably be scraping by on a few dollars a day. Most
of your money would go on food and there wouldn’t be any left to
buy a book. Even if you did get hold of a copy, chances are that
it would be useless to you because you wouldn’t be able to read it.
In Burkina Faso, a poor country in West Africa, less then half of
young people can read; only a third of girls can. Instead of learning
algebra or languages, a 12- year- old girl there might have spent the
day heaving buckets of water to her family’s hut. You might not
think of you and your family as being especially rich, but to many
people around the world spending money on a book and being
able to read it would seem as likely as a trip to the moon.
People who burn with curiosity – and perhaps with anger – about
this vast difference often turn to economics. Economics is the study
of how societies use their resources – the land, coal, people and
machines that are involved in making useful goods like bread and
shoes. Economics shows why it’s quite wrong to say that people
in Burkina Faso are poor because they’re lazy, as some do. Many
of them work very hard, but they were born into an economy which
as a whole isn’t very good at producing things. Why does Britain
have the buildings, books and teachers needed to educate its chil-
dren when Burkina Faso doesn’t? This is an incredibly difficult
question and no one has quite got to the bottom of it. Economics
tries to.
Here’s a stronger reason to be fascinated by economics, and
perhaps to come up with your own ideas about it. Economics is a
matter of life and death. A baby born today in a rich country has a
tiny chance of dying before the age of five. The death of a young
child is a rare and shocking event when it happens. In the poorest
countries of the world, though, more than 10 per cent of children
never make it to the age of five because of a lack of food and medi-
cine. Teenagers in those countries could count themselves lucky to
have survived.
The word ‘economics’ might sound a bit dry, and make you
think of a load of boring statistics. But all it’s really about is how to
help people to survive and to be healthy and educated. It’s about
how people get what they need to live full, happy lives – and why
some people don’t. If we can solve basic economic questions,
maybe we can help everyone to live better lives.
Economists have a particular way of thinking about resources –
that is, the bricks to build a school, the drugs to cure diseases and
the books people want. They talk about these things being ‘scarce’.
The British economist Lionel Robbins once defined economics as
the study of scarcity. Rare things like diamonds and white peacocks
are scarce, but to economists pens and books are scarce too, even
though you can easily find them at home or in your local shop. By
scarcity they mean that there’s a limited amount, and people’s
desires are potentially unlimited. If we could, we might go on
buying new pens and books forever – but we can’t have it all because
everything has a cost. This means that we have to make choices.
Economics, then, is about how we use scarce resources to satisfy
needs. But it’s more than this. How do the choices facing people
change? Those in poor societies face stark ones: a meal for the
children or antibiotics for a sick grandmother. In rich countries
like America or Sweden they rarely do. They might have to choose
between a new watch and the latest iPad. Rich countries face
serious economic problems – sometimes firms go bust, workers
lose their jobs and struggle to buy clothes for their children – but
they’re less often matters of life and death. A central question of
economics, then, is how societies overcome the worst effects of
scarcity – and why some don’t do it nearly as rapidly. An attempt at
a good answer needs more than a mastery of opportunity cost –
being good at working out whether we should have a new hospital
or football pitch or whether to buy an iPad or a watch. Your answer
would need to draw on all sorts of theories of economics, and a
deep knowledge of how different economies actually work in the
real world. Meeting history’s economic thinkers in this book is a
great starting point; their ideas show how wonderfully varied
economists’ attempts have been.
If you’re thinking that there must be more to economics than
this, you’re absolutely right. Think of the African children who
don’t survive their infancy. Is it enough to describe the situation
and leave it at that? Surely not! If economists didn’t make a judge-
ment, they’d be rather heartless. Another branch of economics is
‘normative economics’, which says whether an economic situation
is good or bad. When you see a supermarket throwing away good
food you might judge it bad because it’s wasteful. And when you
think of the difference between the rich and the poor, you might
judge it bad because it’s unfair.
When accurate observation and wise judgement come together,
economics can be a force for change, for creating richer, fairer
societies in which more of us are able to live well. As the British
economist Alfred Marshall once said, economists need ‘cool heads,
but warm hearts’. Yes, describe the world like a scientist, but make
sure that you do it with compassion for the human suffering
around you – then try to change things.
Today’s economics, the kind people study at university, emerged
only relatively recently in the thousands of years of human civilisa-
tion. It appeared a few centuries ago, when capitalism, the type of
economy now found in most countries, was born. Under capi-
talism, most resources – food, land and people’s labour – are
bought and sold for money. This buying and selling is called ‘the
market’. Also, there’s a group of people, the capitalists, who own the
capital: the money, machines and factories needed to make goods.
Another group, the workers, are employed in the capitalists’ firms.
It’s hard now to imagine it any other way. But before capitalism,
things were different. People grew their own food instead of
buying it. Ordinary people didn’t work for firms, but for the lord
who controlled the land that they lived on.