Preface
‘The Economy 2.0 covers all the economics that matters today for the economists of tomorrow. From inequality to climate change, from game theory to empirical techniques, state of the art topics and methods intertwine and flow seamlessly, making this a wonderful book for instructors and students everywhere.’ — Oriana Bandiera, London School of Economics
‘CORE Econ’s The Economy is a novel combination of analytical rigour and highly motivating applications that engages students in learning how economic models work, and why they are essential for understanding the trajectory of human history and the world around us today.’ — Leah Boustan, Princeton University
‘The best innovation in economic education that I have seen in my career. A smorgasbord of ideas that refresh our old concepts, moving our standard discourse from dismal to light, from a dehumanized science to a spirited vision of the world.’ — Christian Gollier, Toulouse School of Economics
‘This is quite simply the best economics textbook on the market. Unlike most others, The Economy teaches both the tools of the discipline and the way real economies work, making it useful and fun at the same time.’ — Dani Rodrik, Harvard University
‘A brilliant way to introduce students to economics: it combines state-of-the-art economic theory with a big-picture perspective on modern development.’ — Nikolaus Wolf, Humboldt University of Berlin
Used at colleges and universities in over 65 countries, The Economy is a modern teaching resource that addresses today’s most pressing economic problems, such as inequality, climate change, financial instability, the future of work, and innovation.
The first edition of CORE Econ’s The Economy was published in 2017. The Economy 2.0: Microeconomics and The Economy 2.0: Macroeconomics have been reorganized and substantially rewritten to streamline the teaching and learning experience in response to what we have learned in our classrooms and those of other instructors and students.
In 2014, when we published the first beta of The Economy online, Camila Cea provided a preface. At the time, she was a recent economics graduate, but already a veteran of a successful protest movement in Chile that was advocating policies to advance economic justice. She and her fellow students at the University of Chile had been shocked to discover their economics courses addressed none of their concerns about the problems of Chile’s economy. They demanded changes in the curriculum. The director of the School of Economics and Business at the time, Oscar Landerretche, responded to their demands.
Camila Cea
Camila Cea’s perspective on CORE Econ at the beginning of our journey captures the motivation that continues to inspire us. She wrote:
We want to change the way economics is taught. Students and teachers tell us this is long overdue. When the Financial Times in the UK wrote about CORE in November 2013, it sparked an online debate about teaching and learning economics that attracted 1,214 posts in 48 hours. Students in economics all over the world were asking, just as I had asked a few years previously: ‘Why has the subject of economics become detached from our experience of real life?’
Nataly Grisales, like me an economics student from Latin America, recently wrote about learning economics on her blog: ‘Before I chose economics a professor mentioned that economics would give me a way to describe and predict human behaviour through mathematical tools. That possibility still seems fantastic to me. However, after semesters of study I had many mathematical tools, but all the people whose behaviour I wanted to study had disappeared from the scene.’
Like Nataly, I remember asking myself if my economics classes would ever get around to addressing the questions that motivated me to take up economics in the first place.
Camila Cea and Nataly Grisales did not get the best that economics has to offer. CORE Econ’s mission is to introduce students to what economists do now, and what we know. Today, economics is an empirical subject that uses models to make sense of data. These models guide government, business, and many other organizations on the trade-offs they face in designing policies.
The most pressing problems of our time
In the ten years that CORE Econ has been running, we have tried an experiment in classrooms around the world. On the first day of their introductory class, we ask students: ‘What is the most pressing problem that economists should address?’
The word clouds below show the responses that students at four universities gave us in 2021 and 2022. The size of the font is proportional to the frequency with which they mentioned the word or phrase.
The most pressing problems that economists should address, according to students at four universities, 2023 and 2024
These word clouds demonstrate global themes—with inequality and environmental issues occurring consistently. There is also variation across countries, which highlights local social problems such as the use of natural resources. The most recent ones signal the emergence of inflation and the cost-of-living crisis as pressing problems in the wake of the Ukraine war that followed the end of the COVID-19 pandemic.
Currently, economics has a reputation among the public, the media, and potential students as an abstract subject that is about making money, but is otherwise not engaged with the real world. But for most of its history, economics has been about understanding and changing the way the world works, and CORE Econ continues that tradition. Early economists—the mercantilists in the sixteenth and seventeenth centuries, for example, or the physiocrats in the years leading up to the French Revolution—were advisers to the rulers of their time. The same is true of scholars such as the North African scholar, Ibn Khaldun, in the fourteenth century.
Today, macroeconomic policymakers, private-sector economists who create platforms for the online economy, economic development advisers, and think-tank experts can contribute to making the world a place in which people might flourish in a sustainable environment. This is both the most inspiring calling and the greatest challenge of the discipline.
Updating the introductory paradigm
The economics discipline has made great strides in developing tools that can help us understand, explain, and address the challenges currently facing our world. In this text, you will be introduced to tools and concepts such as strategic interaction (game theory), limited information, principal–agent models, human behaviours and preferences including not only self interest and risk aversion but also altruism, as well as dynamic processes of change such as creative destruction and instability.
These tools and concepts are used daily by policymakers, business economists, and academic economists, and have become mainstream in the discipline. They are widely taught in PhD programmes, but have only slowly made their way into first-year undergraduate textbooks. Unfortunately, this has often meant that for many students, the theoretical constructs encountered in a first economics course are both divorced from the world and are remote from how most practising economists actually think. The Economy provides a new benchmark model that is engaging and coherent and, as a result, accessible to first-year students.
An emphasis on real-world data concerning real-world problems
Our focus on real-world problems explains why we called this book The Economy rather than Economics, which is the standard title for introductory texts. The Economy makes extensive use of data and cutting-edge empirical research:
- Many of the figures in The Economy have links to the website of our partner Our World in Data (OWiD). You can click on the button below each figure to access the latest data in an interactive format.
- ‘How economists learn from facts’ boxes introduce you to empirical methods in economics and show how those methods can be used to uncover whether a policy had its intended effect.
- The text is also linked to Doing Economics, where you can build data-analysis and presentation techniques by working with real data in either Excel or R.
A global commitment: The cooperative production of free knowledge
CORE Econ is a truly global project in two ways: its development spans the world, and it is open to anyone, anywhere, who wants to use it.
Much of our design and interactive features were initiated in Bangalore, India. The open-source platform for our text and online materials was produced in Cape Town, South Africa. Material has been contributed, edited, and reviewed by literally hundreds of scholars. Major authors of our units—contributing their expertise and intellectual property for free—are from 15 countries. Translations of The Economy 1.0 are available in Spanish, French, Finnish, Italian, Portuguese, and German. An adaptation which introduces topics and features specific to South Asian and developing economies—The Economy: A South Asian Perspective—is also available.
CORE Econ makes all of its ebooks and related resources available online through a Creative Commons licence that allows for non-commercial, free use throughout the world. We are a cooperative of knowledge producers committed to free digital access to CORE Econ’s library of resources to help build a global citizenry empowered by the language, facts, and concepts of economics. We want as many people as possible to be able to reason about, and act to address, the challenges of the twenty-first century economy, society, and biosphere. Our hope is that the best of economics can become part of how all citizens understand and seek to address the problems that we confront.
Join the movement
If you are a student or an instructor, and you are curious about our approach to economics and its inspiration in recent developments in the discipline, you can find more in the article called ‘Looking forward to economics after The Economy 2.0’ at the end of the book.
While the launch of our second edition is a satisfying milestone for us, we are still at the beginning. CORE Econ is not just a book or a course. It is a growing global community of teachers and learners, and we welcome your curiosity, comments, suggestions, and improvements at www.core-econ.org. Join us!
The CORE Econ team
November 2024
