The economics book

Description

6 Contents 10 INTRODUCTION 20 Property should be private Property rights 22 What is a just price? Markets and morality 24 You don’t need to barter when you have coins The function of money 26 Make money from money Financial services 30 Money causes inflation The quantity theory of money 34 Protect us from foreign goods Protectionism and trade 36 The economy can be counted Measuring wealth 38 Let firms be traded Public companies 39 Wealth comes from the land Agriculture in the economy 40 Money and goods flow between producers and consumers The circular flow of the economy 46 Private individuals never pay for street lights Provision of public goods and services 52 Man is a cold, rational calculator Economic man 54 The invisible hand of the market brings order Free market economics 62 The last worker adds less to output than the first Diminishing returns 63 Why do diamonds cost more than water? The paradox of value 64 Make taxes fair and efficient The tax burden 66 Divide up pin production, and you get more pins 68 Population growth keeps us poor Demographics and economics 70 Meetings of merchants end in conspiracies to raise prices Cartels and collusion 74 Supply creates its own demand Gluts in markets 76 Borrow now, tax later Borrowing and debt 78 The economy is a yo-yo Boom and bust 80 Trade is beneficial for all Comparative advantage 90 How much should I produce, given the competition? Effects of limited competition 92 Phone calls cost more without competition Monopolies 98 Crowds breed collective insanity Economic bubbles 100 Let the ruling classes tremble at a communist revolution Marxist economics 106 The value of a product comes from the effort needed to make it The labor theory of value 108 Prices come from supply and demand Supply and demand 114 You enjoy the last chocolate less than the first Utility and satisfaction 116 When the price goes up, some people buy more Spending paradoxes 118 A system of free markets is stable Economic equilibrium 124 If you get a pay raise, buy caviar not bread Elasticity of demand 126 Companies are price takers not price makers The competitive market 130 Make one person better off without hurting the others Efficiency and fairness 132 The bigger the factory, the lower the cost Economies of scale 133 The cost of going to the movies is the fun you’d have had at an ice rink Opportunity cost 134 Workers must improve their lot together Collective bargaining 136 People consume to be noticed Conspicuous consumption 137 Make the polluter pay External costs 138 Protestantism has made us rich Religion and the economy 140 The poor are unlucky, not bad The poverty problem 142 Socialism is the abolition of rational economy Central planning 148 Capitalism destroys the old and creates the new Creative destruction 154 Unemployment is not a choice Depressions and unemployment 162 Some people love risk, others avoid it Risk and uncertainty 164 Government spending boosts the economy by more than what is spent The Keynesian multiplier 166 Economies are embedded in culture Economics and tradition 168 Managers go for perks, not their company’s profits Corporate governance 170 The economy is a predictable machine Testing economic theories 171 Economics is the science of scarce resources Definitions of economics 172 We wish to preserve a free society Economic liberalism 178 Industrialization creates sustained growth The emergence of modern economies 180 Different prices to different people Price discrimination 186 In the wake of war and depression, nations must cooperate International trade and Bretton Woods 188 All poor countries need is a big push Development economics 194 People are influenced by irrelevant alternatives Irrational decision making 196 Governments should do nothing but control the money supply Monetarist policy 202 The more people at work, the higher their bills Inflation and unemployment 204 People smooth consumption over their life spans Saving to spend 206 Institutions matter Institutions in economics 208 People will avoid work if they can Market information and incentives 210 Theories about market efficiency require many assumptions Markets and social outcomes 214 There is no perfect voting system Social choice theory 216 The aim is to maximize happiness, not income The economics of happiness 220 Policies to correct markets can make things worse The theory of the second best 222 Make markets fair The social market economy 224 Over time, all countries will be rich Economic growth theories 226 Globalization is not inevitable Market integration 232 Socialism leads to empty shops Shortages in planned economies 234 What does the other man think I am going to do? Game theory 242 Rich countries impoverish the poor Dependency theory 244 You can’t fool the people Rational expectations 248 People don’t care about probability when they choose Paradoxes in decision making 250 Similar economies can benefit from a single currency Exchange rates and currencies 256 Famine can happen in good harvests Entitlement theory 262 It is possible to invest without risk Financial engineering 266 People are not 100 percent rational Behavioral economics 270 Tax cuts can increase the tax take Taxation and economic incentives 272 Prices tell you everything Efficient markets 273 Over time, even the selfish cooperate with others Competition and cooperation 274 Most cars traded will be lemons Market uncertainty 276 The government’s promises are incredible Independent central banks 278 The economy is chaotic even when individuals are not Complexity and chaos 280 Social networks are a kind of capital Social capital 281 Education is only a signal of ability Signaling and screening 282 The East Asian state governs the market Asian Tiger economies 288 Beliefs can trigger currency crises Speculation and currency devaluation 294 Auction winners pay over the odds The winner’s curse 296 Stable economies contain the seeds of instability Financial crises 302 Businesses pay more than the market wage Incentives and wages 303 Real wages rise during a recession Sticky wages 304 Finding a job is like finding a partner or a house Searching and matching 306 The biggest challenge for collective action is climate change Economics and the environment 310 GDP ignores women Gender and economics 312 Comparative advantage is an accident Trade and geography 313 Like steam, computers have revolutionized economies Technological leaps 314 We can kick-start poor economies by writing off debt International debt relief 316 Pessimism can destroy healthy banks Bank runs 322 Savings gluts abroad fuel speculation at home Global savings imbalances 326 More equal societies grow faster Inequality and growth 328 Even beneficial economic reforms can fail Resisting economic change 330 The housing market mirrors boom and bust Housing and the economic cycle 332 DIRECTORY 340 GLOSSARY 344 INDEX 351 ACKNOWLEDGMENTS