Economics Private and Public Choice

Economics Private and Public Choice

1st Edition - January 1, 1976

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  • Author: James D Gwartney
  • eBook ISBN: 9781483264301

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Economics: Private and Public Choice is an aid for students and general readers to develop a sound economic reasoning. The book discusses several ways to economic thinking including six guideposts as follows: (i) scarce goods have costs; (ii) Decision-makers economize in their choices; (iii) Incentives are important; (iv) Decision-makers are dependent on information scarcity; (v) Economic actions can have secondary effects; and (vi) Economic thinking is scientific. The book explains the Keynesian view of money, employment, and inflation, as well as the monetarist view on the proper macropolicy, business cycle, and inflation. The book also discusses consumer decision making, the elasticity of demand, and how income influences demand. The text analyzes costs and producer decisions, the firm under pure competition, and how a competitive model functions. The book explains monopoly, and also considers the high barriers that prevent entry such as legal barriers, economies of scale, and control over important resources. The author also presents comparative economic systems such as capitalism and socialism. This book can prove useful for students and professors in economics, as well as general readers whose works are related to public service and planning in the area of economic development.

Table of Contents

  • Suggested Outlines for One-Semester Courses



    I The Economic Way of Thinking - An Introduction

    1 The Economic Approach

    What Is Economics About?

    Man's Losing Struggle with Scarcity

    The Economic Way of Thinking

    Normative and Positive Economics

    Looking for Action?—Try Economics

    Myths of Economics: "Economics rejects the humanitarian side of man."

    Perspectives in Economics: Do Material Goods Bring Happiness?

    2 Some Tools of the Economist

    Opportunity Cost Is the Highest Valued Opportunity Lost

    The Production Possibilities Curve

    Trade Tips and Comparative Advantage

    Dependence, Specialization, and Exchange

    Three Economizing Decisions Facing All Nations: What, How, and for Whom

    Two Methods of Making Decisions—The Market and Government Planning

    Myths of Economics: "In exchange, if someone gains, someone else must lose. Trading is a zero-sum game."

    3 Market Decisions and the Market Process

    Scarcity Necessitates Rationing

    Consumer Choice and the Law of Demand

    Producer's Choice and the Law of Supply

    Price and Market Equilibrium

    Shifts in Demand and Advice on How to Pass Your First Economics Exam

    Shifts in Supply

    Time and the Adjustment Process

    Supply and Demand in Action

    Repealing the Laws of Supply and Demand

    Rationing and Motivating, the Two Great Attributes of the Market

    Myths of Economics: "Rent controls are an effective method of assuring adequate housing at a price the poor can afford."

    4 A Bird's-Eye View of the Public Sector

    Ideal Economic Efficiency

    Why Might the Invisible Hand Fail?

    Government—A Potential Vehicle for Gain

    Redistribution—Dividing the Economic Pie

    The Market and the Public Sector—Two Methods of Economic Organization

    Conflicts between Good Economics and Good Politics

    Outstanding Economist: James Buchanan

    5 Taxes and Government Spending

    What Do Federal, State, and Local Governments Buy?

    Sources of Tax Revenues

    The Concept of Incidence

    Who Pays the Tax Bill?

    The Taxes Others Paid

    Myths of Economics: "The growth of the federal government has been the major source of government expansion."

    Controversies in Economics: Is There an Energy Crisis or a Policy Crisis?

    II Macroeconomics

    6 Taking the Nation's Economic Pulse

    The Concept of the GNP

    Two Ways of Measuring GNP

    Gross National Product or Gross National Cost?

    Five Problems with GNP as a Measuring Rod

    What the GNP Does Not Measure

    The Great Contribution of GNP

    Other Related Income Measures

    Outstanding Economist: Simon Kuznets

    7 Unemployment, Inflation, and Business Cycles

    Swings in the Economic Pendulum

    A Hypothetical Business Cycle

    Three Different Views of the Business Cycle

    The Normal Rate of Unemployment

    Cyclical Unemployment

    Actual and Potential GNP

    Questions and Answers about Inflation

    Myths of Economics: "Unemployed resources would not exist if the economy were operating efficiently."

    8 Aggregate Equilibrium and a Simple Keynesian Model

    Keynes and the Views of Classical Economists

    Tools of Modern Keynesian Analysis

    Equilibrium and the Keynesian Model

    Adding Government Demand

    Leakages and Injections—Another Way of Looking at Equilibrium

    Pulling It Together

    Outstanding Economist: John Maynard Keynes

    9 The Multiplier, Accelerator, and a Keynesian View of the Business Cycle

    The Multiplier Principle

    Business Pessimism - A Self-Fulfilling Prophecy

    Investment Instability and the Accelerator

    A Keynesian View of the Business Cycle

    Investment and the Cycle

    10 Fiscal Policy

    Public Policy to Deal with a Recession

    Fiscal Policy to Deal with Inflation

    The Central Idea of Fiscal Policy

    The Full-Employment Budget Concept

    Has Real World Fiscal Policy Been Stabilizing?

    Automatic Stabilizers

    Spending versus Taxing Alternatives

    Outstanding Economist: Walter Heller

    Perspectives in Economics: Fact and Fiction about the National Debt

    11 Money and the Banking System

    What Is Money?

    The Business of Banking

    Fractional Reserve Goldsmithing

    Fractional Reserve Banking

    The Federal Reserve System

    How the Fed Controls Our Money Supply

    The Fed and the Treasury

    Dynamics of Monetary Policy

    Outstanding Economist: Arthur Burns

    12 Money, Employment, Inflation, and a More Complete Keynesian Model

    The Demand and Supply of Money

    Interest Rates and Investment

    Expansionary and Restrictive Monetary Policy

    How Monetary Policy Works - The Keynesian View

    Combining Monetary and Fiscal Policy

    Did Macropolicy Cause the Inflation of the 1970s?

    Will Monetary Policy Always Stimulate Demand?

    Full Employment and Inflation in the Real World

    Outstanding Economist: Paul Samuelson

    Controversies in Economics: Will There Ever Be Another Great Depression?

    13 The Business Cycle and Inflation—The Monetarist View

    The Equation of Exchange

    The Classical View—Money Does Not Matter

    The Early Keynesians—Money Still Does Not Matter Much

    The Modern Monetarist—Money Matters Most

    The Impact of Money—The Monetarist View

    Money and Business Cycles

    Money, Recessions, and Inflation—The Record

    Money and Inflation in Other Countries

    Outstanding Economist: Milton Friedman

    Myths of Economics: "Inflation is caused by greedy businessmen and union leaders."

    Perspectives in Economics: Inflation: Its Cause and Cure—A Monetarist's View

    14 Proper Macropolicy—The Monetarist View

    Two Things That Monetary Policy Cannot Do—The Monetarist View

    Limited Effectiveness of Monetary Policy—The Monetarist View

    Three Things Monetary Policy Can Do—The Monetarist View

    Why Macroplanners May Do the Wrong Thing

    Constant Rate of Monetary Growth—The Monetarist View of Proper Policy

    The Monetarist View of Fiscal Policy

    Myths of Economics: "The high interest rates of the 1970s resulted because the Fed was reducing the rate of monetary expansion."

    Perspectives in Economics: Why Fiscal Policy Is Impotent - An Interview with a Monetarist

    15 Dealing with Unemployment and Inflation

    Can Wage-Price Controls Make Macro-"Solutions" More Effective?

    Public Employment

    Dealing with Youth Unemployment

    Could We Better Target Government Spending?

    Do Unemployment Compensation and Welfare Benefits Increase the Unemployment Rate?

    Indexing—Learning to Live with Inflation

    Pulling It All Together

    Controversies in Economics: Keynesians, Monetarists, and Middle-of-the-Roaders on Macroeconomics

    III Microeconomics

    16 Demand and Consumer Choice

    Consumer Decision-Making—Deciding What to Buy

    Individual Demand

    Consumer Choice and Market Demand

    What Will Cause the Demand Curve to Shift?

    Time Cost and Consumer Choice

    Elasticity of Demand

    How Does Income Influence Demand?

    Why Do Consumers Buy That?

    Outstanding Economist: John Kenneth Galbraith

    Controversies in Economics: Advertising—The Views of Its Critics and Defenders

    17 Costs and Producer Decisions

    The Business Firm

    Calculating Economic Costs and Profits

    Total Costs, Average Costs, and Marginal Costs

    Rate of Output and the Firm's Cost in the Short Run

    Costs in the Long Run

    What Factors Will Cause the Firm's Cost Curves to Shift?

    Costs and the Economic Way of Thinking

    Myths of Economics: "A good business decision-maker will never sell a product for less than its production cost."

    18 The Firm under Pure Competition

    Two Meanings of Competition

    The Assumptions of the Purely Competitive Model

    Why Is Pure Competition Important?

    The Workings of the Competitive Model

    The Firm and Competitive Markets

    The Role of Profits in the Competitive Model

    Supply Elasticity and the Role of Time

    Market Adjustments to Changing Production Costs

    Efficiency and the Competitive Model

    19 Monopolistic Competition, Product Differentiation, and Low Barriers to Entry

    Product Differentiation

    The Hypothetical Model of Monopolistic Competition

    Price and Output under Monopolistic Competition

    Real World Monopolistic Competitors

    Price Discrimination

    Competition and the Economic Way of Thinking

    Contrasting Pure and Monopolistic Competition

    Outstanding Economist: Joan Robinson

    Controversies in Economics: Is Monopolistic Competition Inefficient?

    Perspectives in Economics: Is Planned Obsolescence Good Business?

    20 Monopoly and High Barriers to Entry

    Competition is Great, But

    What Is a Monopoly?

    The Hypothetical Model of Monopoly

    Why Monopoly Is Bad

    When Can a Monopolized Industry Be Competitive?

    Economies of Scale and Natural Monopoly

    Regulating the Monopolist

    The Government Operated Firm

    There Are No Ideal Solutions

    Perspectives in Economics: How the Regulators Promote Inefficiency and Protect You from Low Prices—The Case of Transportation

    21 Oligopoly and the World of Big Business

    Characteristics of Oligopoly

    Price and Output Determination

    It Pays to Collude . . . and to Cheat

    The Kinked Demand Curve

    Monopoly Power and Profit—The Early Bird Gets the Worm

    Real World Oligopolists

    Outstanding Economist: George Stigler

    Perspectives in Economics: Profits and Other Four-Letter Words

    22 Business Structure, Competition, and Public Policy

    The Two Faces of Business Power

    How Much of Our Economy Is Competitive?

    Does Big Business Dominate the U.S. Economy?

    Antitrust Legislation—The Policy Objectives

    Major Antitrust Legislation

    Alternative Views on Antitrust Policy

    Perspectives in Economics: A Program to Promote Competitive Markets

    Perspectives in Economics: A Galbraithian View of a Modern Industrial Economy

    IV Factor Markets and Income Distribution

    23 The Supply and Demand of Productive Resources

    Human and Nonhuman Resources

    The Demand for Resources

    The Firm's Hiring Decision

    The Supply of Resources in the Short Run

    The Supply of Resources in the Long Run

    Supply, Demand, and Resource Prices

    Outstanding Economist: Gary Becker

    24 Earnings and the Job Market

    Why Do Earnings Differ?

    Productivity and the General Level of Wages

    How Is the Economic Pie Divided between Physical and Human Capital?

    Can Higher Wages Be Legislated?

    Myths of Economics: "Automation is the major cause of unemployment."

    25 Union Power—A Shield or a Threat?

    What Is a Collective Bargaining Contract?

    The Strike—A "Big Stick" of the Union

    The Strike and Serious BargainingHow Does the "Big Stick" Affect the Public?

    Getting More for Union Members

    What Gives the Union Muscle?

    How Much More Do Union Members Get?

    Unions and Inflation

    The Power of Big Labor

    Myths of Economics: "Unions have increased the share of income going to labor."

    Perspectives in Economics: What Can We Expect from the Rapid Growth of Public Sector Unionism?

    26 Inequality, Income Mobility, and Poverty

    Income Inequality in the United States

    Income Inequality in Other Countries

    Inequality and Income Inequality

    Intergenerational Income Mobility

    Poverty in the United States

    Three Approaches to Poverty

    Controversies in Economics: The Cases for and against the Negative Income Tax

    27 Employment Discrimination and the Earnings of Blacks and Women

    What Is Employment Discrimination?

    How Does Discrimination Influence Earnings?

    Does It Pay to Discriminate?

    The Cost of Discrimination—The Case of Baseball

    Employment Discrimination and the Earnings of Blacks

    Are Things Improving?

    Everything You Always Wanted to Know about Female Earnings—But Were Afraid to Ask

    The Future Status of Minorities and Women

    Outstanding Economist: Juanita Kreps

    V Public Choice

    28 Problem Areas for the Market

    Market Failure: External Cost

    Market Failure: External Benefits and Opportunities Missed

    Market Failure: Public Goods

    Market Failure: Poor Information

    Outstanding Economist: Allen Kneese

    Perspectives in Economics: An Emissions Charge Strategy to Control Pollution

    29 Public Choice and Gaining from Government

    Voters and the Demand for Political Action

    Supply, Profits, and the Political Entrepreneur

    Money, Political Advertising, and the Successful Politician

    The Opportunity Cost of Government

    Market Failure and Gaining from Government

    Can Income Redistribution Promote Social Gain?

    Actual Income Redistribution—Winners and Losers

    Perspectives in Economics: Externalities, No-Fault Insurance, and Government Action to Improve on the Market

    30 The Economics of Government Failure

    Government Failure: Voter Ignorance and Inefficient Public Policy

    Government Failure: The Special Interest Effect

    Government Failure: The Shortsightedness Effect

    Government Failure: Little Entrepreneurial Incentive for Internal Efficiency

    Government Failure: Imprecise Reflection of Consumer Preferences

    Is an Economic Analysis of the Public Sector Too Cynical?

    Public Sector and the Market—Revisited

    Outstanding Economist: Kenneth Arrow

    Perspectives in Economics: Dealing with Special Interests

    VI International Economics

    31 Gaining from International Trade

    The Size of the International Sector

    Why Do Nations Trade?

    Supply, Demand, and International Trade

    Tariffs and Quotas

    Why Industries Are on the Dole

    International Trade and the Great Oil Cartel

    Myths of Economics: "Free trade with low-wage countries such as China and India would cause the wages of U.S. workers to fall."

    32 International Finance and Balance of Payments

    Foreign Exchange Markets

    Balance of Payments and Exchange Markets

    Deficits, Surpluses, and Balance of Payments

    Trading with Flexible Exchange Rates

    Trading with Fixed Exchange Rates

    Fixed versus Flexible Exchange Rates

    33 Comparative Economic Systems

    Comparing Capitalism and Socialism

    Common Constraints and the Universality of Economic Tools

    The Soviet Economy

    Yugoslavia—Socialism or the Market?

    Socialism or Capitalism?

    Outstanding Economist: Wassily Leontief

    Appendix A A Graphic Look at Economics

    Appendix B Analyzing the Equilibrium Level of Income with Equations

    Appendix C Analyzing Aggregate Equilibrium with the IS-LM Model

    Suggestions for Additional Reading

    Hints for Answering Discussion Questions


Product details

  • No. of pages: 678
  • Language: English
  • Copyright: © Academic Press 1976
  • Published: January 1, 1976
  • Imprint: Academic Press
  • eBook ISBN: 9781483264301

About the Author

James D Gwartney

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