Word cloud made using the text from University of Chicago students’ economic questions, Autumn Quarter 2023.

Big questions, life-changing trends

This course answers economy-wide or 'macroeconomic' questions. Each week we pose a puzzle and delve into economics to solve it. We learn economics by doing it: by writing about economies, students become an expert on a country of their choosing. If you want to grasp the big trends that will shape the future, this is the course for you.

What is economics for?

What is the point of economics? Our course starts with motivation, as we hear from founding economists, including Frank Knight, who believed that better economic decision-making could improve people’s lives. To understand how well the economy is working, we need to measure it. This takes us to the market economy, and how it relates to GDP, economists’ favourite yardstick. We encounter some perplexing questions: should the illegal drug trade be part of GDP? What about tasks, like volunteering, that are done for free?


With a grounding in economic data, we move on to a big problem—one that Economics for Everyone participants can help solve. Data is richer, more detailed and more freely available than ever before. Yet much of the economic analysis we encounter is either confusing, or deliberately obscuring, the truth. So we jump back in time to revisit the work William Playfair and Florence Nightingale who teach us how to make a great chart, before learning about modern techniques that can help us set out our own economic stories clearly.

What makes economies grow or shrink?

Pick up any newspaper and it is easy to get the impression that economists are obsessed by growth: but why? This week we learn that growth was the most important economic trend of the 21st century as we track the incredible rise of living standards across the world. We ask where growth really comes from, seeking its underlying sources. We learn of the fears that sources of growth might be running out and take on the criticism that growth should be avoided for environmental reasons.


Things can go wrong in economies. In the second half of this module, we look at recessions and—worse—depressions. We seek to understand the poverty traps that have plagued countries that, on paper, should be some of the world’s most promising. As a reminder of why we need growth this century we hear from the inhabitants of the world’s poorest megacity—Kinshasa—about what life is like there.

Why are 75 million young people unemployed?

Our third module is all about the world of work. We start with a puzzle related to missing jobs: why, when economies have grown so much, we still see so much unemployment? With an understanding of the devastating costs of unemployment answering this question is vital for any economist. We learn how traditional metrics such as unemployment are defined, and debate whether the modern labor market is undermining them. William Beveridge and a famous curve named in his honour provides us with a framework to think about types of unemployment, and how we might make finding suitable jobs a more efficient process.


With a job in hand all workers are interested in their pay packet—but how is pay set? We discuss the market for work, encountering economics’ most famous graph, the supply and demand curve (and discovering that it was actually invented by a philosopher). We debate the role of unions and the fight for higher minimum wages: if unions are successful will they make more people unemployed?

Where does money get its value?

We all use money every day, but what is it, really? Our fourth module turns to currency. We learn about the origins of money, including the earliest commodity currencies. We play a trading game that clarifies the problems faced by barter economies and help us understand why informal currencies can be found everywhere from prisons, to naval ships. We discuss the properties that make a good money, and debate whether Bitcoin or other crypto assets are good currencies.


Turning to official state currencies such as the dollar we learn how central banks seek to protect the value of money by targeting inflation. We delve into the CPI basket to examine how inflation is measured and track the evolution of prices in Chicago, the wider US and across the world. We learn that inflation targeting is still a relatively new idea and debate its success. Elsewhere in the world central banks have other targets—such as the exchange rate—by the end of this module we understand the pros and cons of each.

Why do banks collapse?

Continuing with our study of money, we turn to the vital roles that financial markets and banks play in the modern economy. The concept of leverage is both villain and hero in our story: a financial tool that is brilliant when things go right, and catastrophic when they go wrong. Starting with market slumps we learn about two key crises in US and UK history, learning how Alexander Hamilton rescued Wall Street during its first crash, and how the first global bond crisis almost wiped out Britain’s banks, leading to a modern form of bank that still exists today.


Now that we understand market gyration and how banks are set up to withstand them, we look in detail at bank runs. We examine the 1929 crash, and the rolling runs of the 1930s that led to the Great Depression. How and why the global meltdown of 2008 happened, and the lessons we need to take for now. We conclude by drawing up our own tips for running a bank safely, and debate whether financial conditions today look frothy, or safe.

Why is there so much debt?

The global debt burden is massive—almost 350% of GDP—with almost a third of it owed by governments. Is this public debt a drag, or not? This module focuses on the finances of governments to answer these questions. We start by studying what Treasuries (finance ministries) spend money one, and how these has evolved over time. We learn that sustained deficits lie behind piles of debt and learn how we can assess the sustainability of a governments plans. We look at some of the most violent debt crises of recent years and ask whether such an event could strike an advanced nation in coming years.


We turn next to tax, and ask how taxation can influence our decisions to spend or save. We encounter an idea conjured by a mathematician, Leonhard Euler, that has become the foundation for thinking like an economist. We interrogate the latest evidence on how economies respond to stimulus. Taking a principled approach to taxation, we ask what makes a good tax, and whether we can find any currently used. We encounter taxes with odd names including ‘sin’ taxes like those on smoking or sugar. We grapple with the idea of a ‘negative’ tax and discover the power of this idea, championed by Milton Friedman, has had in shaping the modern income tax system.

Where do our clothes and phones come from?

We all own smartphones, and we all wear clothes produced by the ‘fast fashion’ industry. But where does the stuff we buy come from? We turn now to global trade and ask why it is that only a small fraction of the consumer goods that are produced in countries like America and Britain are made there. We dive back in time to interrogate the ideas of David Ricardo, and then zoom forward to understand how modern trade works today. We discover the ideas of comparative advantage, and the gains from trade and learn how trade has boosted living standards.


Yet the trade news is not all good. Previous globalisations have faltered and failed—we discuss why. Today, the trade system is at risk of fragmenting with the main umpire for global trade, the WTO, receiving heavy criticism. We investigate how tariffs and subsidies work, why countries use them so much, and what needs to be done to make trade freer. We conclude with the darker side of trade, learning that some markets, often in raw materials, create devastating working conditions in the poorest nations on the planet.

What will the economy look like in 2050?

We end with the big question: can economics tell us what the future be like? To answer it we focus on four trends that are certain to shape the next 30 years. We travel to Japan, a learn how demographic change is causing one of the worlds most advanced nations to fragment, and to heal. And we learn about technological advance, and the role that AI may be playing in labor markets: should we be worried or excited about the arrival of ChatGPT? As we encounter each trend, we use the frameworks and principles we have built during the course to ask about the implications employment, prices and wages, firms and governments.


Our final two trends are inequality and the environment. We discuss concepts of equality, and the measures that can be used to track inequality, learning that it is stable in many western countries. Rather, we discover that the frontier for high and rising inequality is high-growth economies like Chile, Nigeria, and South Africa, and debate whether inequality is a risk to political stability in these places. Turning to the environment we discuss both public sector taxes and subsidies alongside private market solutions and innovation, asking which is the best way to ensure we deliver a stable environment to the next generation.