The Economics Book

Table of contents

1. INTRODUCTION
2. LET THE TRADING BEGIN 400 BCE–1770 CE
   1. Property should be private • Property rights
   2. What is a just price? • Markets and morality
   3. You don’t need to barter when you have coins • The function of money
   4. Make money from money • Financial services
   5. Money causes inflation • The quantity theory of money
   6. Protect us from foreign goods • Protectionism and trade
   7. The economy can be counted • Measuring wealth
   8. Let firms be traded • Public companies
   9. Wealth comes from the land • Agriculture in the economy
   10. Money and goods flow between producers and consumers • The circular flow of the economy
   11. Private individuals never pay for street lights • Provision of public goods and services
3. THE AGE OF REASON 1770–1820
   1. Man is a cold, rational calculator • Economic man
   2. The invisible hand of the market brings order • Free market economics
   3. The last worker adds less to output than the first • Diminishing returns
   4. Why do diamonds cost more than water? • The paradox of value
   5. Make taxes fair and efficient • The tax burden
   6. Divide up pin production, and you get more pins • The division of labor
   7. Population growth keeps us poor • Demographics and economics
   8. Meetings of merchants end in conspiracies to raise prices • Cartels and collusion
   9. Supply creates its own demand • Gluts in markets
   10. Borrow now, tax later • Borrowing and debt
   11. The economy is a yo-yo • Boom and bust
   12. Trade is beneficial for all • Comparative advantage
4. INDUSTRIAL AND ECONOMIC REVOLUTIONS 1820–1929
   1. How much should I produce, given the competition? • Effects of limited competition
   2. Phone calls cost more without competition • Monopolies
   3. Crowds breed collective insanity • Economic bubbles
   4. Let the ruling classes tremble at a communist revolution • Marxist economics
   5. The value of a product comes from the effort needed to make it • The labor theory of value
   6. Prices come from supply and demand • Supply and demand
   7. You enjoy the last chocolate less than the first • Utility and satisfaction
   8. When the price goes up, some people buy more • Spending paradoxes
   9. A system of free markets is stable • Economic equilibrium
   10. If you get a pay raise, buy caviar not bread • Elasticity of demand
   11. Companies are price takers not price makers • The competitive market
   12. Make one person better off without hurting the others • Efficiency and fairness
   13. The bigger the factory, the lower the cost • Economies of scale
   14. The cost of going to the movies is the fun you’d have had at an ice rink • Opportunity cost
   15. Workers must improve their lot together • Collective bargaining
   16. People consume to be noticed • Conspicuous consumption
   17. Make the polluter pay • External costs
   18. Protestantism has made us rich • Religion and the economy
   19. The poor are unlucky, not bad • The poverty problem
   20. Socialism is the abolition of rational economy • Central planning
   21. Capitalism destroys the old and creates the new • Creative destruction
5. WAR AND DEPRESSIONS 1929–1945
   1. Unemployment is not a choice • Depressions and unemployment
   2. Some people love risk, others avoid it • Risk and uncertainty
   3. Government spending boosts the economy by more than what is spent • The Keynesian multiplier
   4. Economies are embedded in culture • Economics and tradition
   5. Managers go for perks, not their company’s profits • Corporate governance
   6. The economy is a predictable machine • Testing economic theories
   7. Economics is the science of scarce resources • Definitions of economics
   8. We wish to preserve a free society • Economic liberalism
   9. Industrialization creates sustained growth • The emergence of modern economies
   10. Different prices to different people • Price discrimination
6. POST-WAR ECONOMICS 1945–1970
   1. In the wake of war and depression, nations must cooperate • International trade and Bretton Woods
   2. All poor countries need is a big push • Development economics
   3. People are influenced by irrelevant alternatives • Irrational decision making
   4. Governments should do nothing but control the money supply • Monetarist policy
   5. The more people at work, the higher their bills • Inflation and unemployment
   6. People smooth consumption over their life spans • Saving to spend
   7. Institutions matter • Institutions in economics
   8. People will avoid work if they can • Market information and incentives
   9. Theories about market efficiency require many assumptions • Markets and social outcomes
   10. There is no perfect voting system • Social choice theory
   11. The aim is to maximize happiness, not income • The economics of happiness
   12. Policies to correct markets can make things worse • The theory of the second best
   13. Make markets fair • The social market economy
   14. Over time, all countries will be rich • Economic growth theories
   15. Globalization is not inevitable • Market integration
   16. Socialism leads to empty shops • Shortages in planned economies
   17. What does the other man think I am going to do? • Game theory
   18. Rich countries impoverish the poor • Dependency theory
   19. You can’t fool the people • Rational expectations
   20. People don’t care about probability when they choose • Paradoxes in decision making
   21. Similar economies can benefit from a single currency • Exchange rates and currencies
   22. Famine can happen in good harvests • Entitlement theory
7. CONTEMPORARY ECONOMICS 1970–PRESENT
   1. It is possible to invest without risk • Financial engineering
   2. People are not 100 percent rational • Behavioral economics
   3. Tax cuts can increase the tax take • Taxation and economic incentives
   4. Prices tell you everything • Efficient markets
   5. Over time, even the selfish cooperate with others • Competition and cooperation
   6. Most cars traded will be lemons • Market uncertainty
   7. The government’s promises are incredible • Independent central banks
   8. The economy is chaotic even when individuals are not • Complexity and chaos
   9. Social networks are a kind of capital • Social capital
   10. Education is only a signal of ability • Signaling and screening
   11. The East Asian state governs the market • Asian Tiger economies
   12. Beliefs can trigger currency crises • Speculation and currency devaluation
   13. Auction winners pay over the odds • The winner’s curse
   14. Stable economies contain the seeds of instability • Financial crises
   15. Businesses pay more than the market wage • Incentives and wages
   16. Real wages rise during a recession • Sticky wages
   17. Finding a job is like finding a partner or a house • Searching and matching
   18. The biggest challenge for collective action is climate change • Economics and the environment
   19. GDP ignores women • Gender and economics
   20. Comparative advantage is an accident • Trade and geography
   21. Like steam, computers have revolutionized economies • Technological leaps
   22. We can kick-start poor economies by writing off debt • International debt relief
   23. Pessimism can destroy healthy banks • Bank runs
   24. Savings gluts abroad fuel speculation at home • Global savings imbalances
   25. More equal societies grow faster • Inequality and growth
   26. Even beneficial economic reforms can fail • Resisting economic change
   27. The housing market mirrors boom and bust • Housing and the economic cycle
8. DIRECTORY
9. GLOSSARY
10. CONTRIBUTORS
11. ACKNOWLEDGMENTS
12. COPYRIGHT