Modern specialization is so extensive that only a minorityof people in a modern economy directly provide goodsand services for immediate consumption, such as food ormedical care. Instead, many of us work in industries thatsupply intermediate inputs, meaning materials, machines,information, or logistical support for businesses that offergoods and services for direct consumption. And evenamong those who work in businesses that provide imme-diate consumer satisfaction, many of us perform admin-istrative tasks to manage or support those workers whoactually serve customers

Increased wealth accompanies specialization. Our ances-tors were much less specialized than we are. As recentlyas the 18th century, many households still sewed theirown clothes, built their own homes, and grew much oftheir own food. As of 1700, nearly everyone in the worldlived in economic misery by today’s standards. Even in theUnited Kingdom, the most advanced economy at the time,the average income per person was only about $2,500 intoday’s dollars.4 Today, in the United States, a householdwould need twice that average income to even reach th

Economics and politics have always gone hand-in-hand. Indeed, the firsteconomists called their discipline “political economy.” The connections betweeneconomics and politics reflect, in part, the importance of economic conditions topolitical conditions. The well-being of the economy can influence the rise and fallof politicians and governments, even entire social systems.But here, too, the influence goes both ways. Politics also affects the economy– and economics itself. The economy is a realm of competing, often conflictinginterests. Determining whose interests prevail, and how conflicts are managed,is a deeply political process. (Neoclassical economists claim that anonymous“market forces” determine all these outcomes, but don’t be fooled: what theycall the “market” is itself a social institution in which some people’s interests areenhanced at the expense of others’.) Different economic actors use their politicalinfluence and power to advance their respective economic interests. The extent towhich groups of people tolerate economic outcomes (even unfavourable ones) alsodepends on political factors: such as whether or not they believe those outcomesare “natural” or “inevitable,” and whether or not they feel they have any power tobring about change.Finally, the social science which aims to interpret and explain all this scrabbling,teeming behaviour – economics – has its own political assumptions and biases.In Chapter 4 we’ll review how most economic theories over the years have beenmotivated by political considerations. Modern economics (including this book!) isno different: economics is always a deeply political subject.

he economy must be a very complicated, volatile thing. At least that’s how it seemsin the business pages of the newspaper. Mind-boggling stock market tables. Chartsand graphs. GDP statistics. Foreign exchange rates. It’s little wonder the media turnto economists, the high priests of this mysterious world, to tell us what it means,and why it’s important.

Economics encompasses several sub-disciplines. Economic history; moneyand finance; household economics; labour studies and labour relations; businesseconomics and management; international economics; environmental economics;and others. A broad (and rather artificial) division is often made betweenmicroeconomics (the study of the economic behaviour of individual consumers,workers, and companies) and macroeconomics (the study of how the economyfunctions at the aggregate level)

Economics is the study of human economic behaviour: the production anddistribution of the goods and services we need and want. Hence, economicsis a social science, not a physical science.

of specialization and trade depend on the public’s trust infinancial intermediaries. At times, intermediaries may enjoymore trust than they deserve, enabling them to finance anunsustainable boom. Once the fragility of the intermediariesis exposed, the level of trust falls, and there can be significantadverse consequences for economic activity.

There are in a pound upwards offour thousand pins of a middling size. Those ten per-sons, therefore, could make among them upwardsof forty-eight thousand pins in a day. Each person,therefore, making a tenth part of forty-eight thou-sand pins, might be considered as making four thou-sand eight hundred pins in a day. But if they had allwrought separately and independently, and withoutany of them having been educated to this peculiarbusiness, they certainly could not each of them havemade twenty, perhaps not one pin in a day; that is,certainly, not the two hundred and fortieth, perhapsnot the four thousand eight hundredth part of whatthey are at present capable of performing, in conse-quence of a proper division and combination of theirdifferent operations.55 Adam Smith, The Wealth of Nations, book 1, chapter 1, section 3.

These are the building blocks from which the most complicated economictheories are constructed: work, consumption, capital (or “tools”), finance, and theenvironment. And they are all visible, right there in your neighbourhood. As wego through this book, we will build a simple but informative economic “map” thatincludes all of these elements

My main goal with this book, and throughout my career as an economist, hasbeen to encourage non-experts – workers, union members, activists, consumers,neighbours – to develop their natural, grass-roots interest in economics, by:• Studying the economy, and learning more about how it functions.• Thinking concretely about their personal role and stake in the economy(rather than abstract indicators like gross domestic product, stock markets,or foreign exchange).• Recognizing that the economy embodies distinct groups of people withdistinct and often conflicting interests, and that economics itself reflects thosedistinctions and conflicts. Economics is not a neutral, technical discipline.• Being ready to challenge, when necessary, the way “expert” economistsexplain the economy and (even more dangerously) tell us how to change it