Economist Yoram Bauman likes to paraphrase P.J. O’Rourke when you ask him the difference between microeconomics and macroeconomics: “Microeconomists are wrong about specific things, and macroeconomists are wrong about things in general.” He likes that take so much, it’s right there on page nine of his book, The Cartoon Introduction to Economics.
He elaborates, though, if you continue to stare quizzically at him.
“Microeconomics deals generally with small scale things, individual markets, while macroeconomics deals with big-picture issues: unemployment, inflation, the business cycle, economic growth.” An environmental economist, Bauman teaches at the UW’s interdisciplinary-oriented Program on the Environment, at the sustainability-oriented Bainbridge Graduate Institute, and at wealthy-parent-oriented Lakeside High School.
When you read, for example, that climate change may cost the state of Washington almost $4 billion by 2020, you’re in Bauman’s wheelhouse. To him, the public’s struggle to get our heads around environmental economics follows from a long and storied tradition of ideological tension between free-marketeers and regulatory pressures. “A lot of what you see on TV are the extremes, you have the Heritage Foundation, who are like, ‘We just need freer markets!’ or the other side, who say, ‘We need government involvement in lots of things.'”
And then there’s the tension between people who can’t imagine things being possible, and those who can. Privatize the post office, you say? It’s too large and complicated. To which the economist replies with Leonard Read’s story about how the pencil is made. In the decades it has been impossible to privatize the post office, FedEx, DHL, and UPS have all revolutionized the logistics of delivery, while the post office has catered to bulk mailers (where almost 40 percent of its revenue comes).
Microeconomics, in its case-by-case study, is the antidote to ideological rigidity. “It turns out that there are some cases where free markets work great, and some where free markets don’t, and the job of the economist is to find out which is which.” Health care, for instance, is a problematic area. So is the environment. But Bauman argues that economic study can set us free–carbon taxes or cap-and-trade options force markets out of beds of indolence or ignorance, and let us make a true accounting of environmental costs.
But none of this is possible if no one really understands economics besides economists. That’s where The Cartoon Introduction to Economics comes in. (Volume 1, on microeconomics, has just come out. Volume 2, on macroeconomics, should be out by late 2011.) It’s smartly illustrated by Grady Klein, who fell back on cartoons after his philosophy degree didn’t pan out. (Klein’s Lost Colony graphic novel was summed up as “De Toqueville Meets The Simpsons, so this isn’t all that far off.)
Bauman begins by refocusing you, since you likely think that economics is all about money. It’s not. It’s about the interactions between people–more specifically, between optimizing individuals. It’s a key article of economic faith that people have preferences and try to satisfy them, and that that, in a nutshell, is enough to explain our economic behavior. (Behavioral economics gets a mention later on, but it’s probably a good idea to work the fundamentals before diving into all the ways we’re not “economically” rational.)
From there the concepts come fast and furious, though in such a wonderfully told way that you don’t notice. There are a few algebraic equations for the curious (calculus is studiously avoided), but it’s not about doing the math. It’s about how to cut a cake fairly, or make a good bid at an auction, or how to judge the best price for a cup of coffee. There are, of course, lots of pirates and people with shopping carts.
Nor is it, in that hip new Freakonomics-style, just an assemblage of quirky views on datasets you don’t have access to. In the best sense of textbook, everything in it relates conceptually to everything else, so that you put to use your new understanding of game theory and the prisoner’s dilemma in succeeding pages–while putting professional athletes’ steroid use in an economical light.
Which is why I say if you buy only one cartoon guide to microeconomics this year, The Cartoon Introduction to Economics should be it.
