Private and Public Choice

2nd Edition - January 1, 1980

Write a review

  • Authors: James D Gwartney, Richard Stroup
  • eBook ISBN: 9781483214054

Purchase options

Purchase options
DRM-free (PDF)
Sales tax will be calculated at check-out

Institutional Subscription

Free Global Shipping
No minimum order


Macroeconomics: Private and Public Choice discusses the principle of macroeconomics, particularly government expenditure, taxation, public choice theory, and labor markets. The book also covers aggregate supply, fiscal policy, inflation, unemployment, traditional Keynesian theory, low productivity, rapid inflation. The text explains international economics and comparative systems such as the export-import link, export taxes, and foreign finance. It analyzes the existence of trade barriers as being due to domestic protectionism policies, special interest nature of trade restrictions, and economic illiteracy. The book examines the economics of government failure, namely, the collective decision-making process as being both beneficial and limited of public sector economic action. Among the reasons cited for government failure are voter ignorance, inefficient public policy, existence of special interests, imprecise knowledge of consumer preferences, as well as government shortsightedness. The book also examines why government intervention in some activities can be beneficial, for example, weak market competition or monopoly, uninformed consumers, and when conditions of external benefits can be achieved. Economists, sociologists, professors in economics, or policy makers involved in economic and rural development will find the text valuable.

Table of Contents

  • Preface


    Part One: The Economic Way of Thinking—An Introduction

    Chapter 1 The Economic Approach

    What Is Economics About?

    The Economic Way of Thinking

    Positive Economics

    Normative Economics

    Pitfalls of Positive Economics

    What Do Economists Do?

    Outstanding Economist: Adam Smith (1723-1790) and the Historical Roots of Economics

    Myths of Economics: "Economic Analysis Assumes that People Act Only Out of Selfish Motives. It Rejects the Humanitarian Side of Humankind."

    Chapter 2 Some Tools of the Economist

    Opportunity Cost Is the Highest Valued Opportunity Lost

    The Production Possibilities Curve

    Trade Tips and Comparative Advantage

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

    Two Methods of Making Decisions-The Market and Government Planning

    Outstanding Economists: David Ricardo (1772-1823) and the Early Followers of Smith

    Myths of Economics: "In Exchange, when Someone Gains, Someone Else must Lose. Trading is a Zero-Sum Game."

    Chapter 3 Supply, Demand, and the Market Process

    Scarcity Necessitates Rationing

    Consumer Choice and the Law of Demand

    Producer Choice and the Law of Supply

    Markets and the Coordination of Supply and Demand

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


    Shifts in Supply

    Time and the Adjustment Process

    Repealing the Laws of Supply and Demand

    The Communicating, Coordinating, and Motivating Functions of the Market

    Outstanding Economist: Alfred Marshall (1842-1924)

    Myths of Economics: "Rent Controls are an Effective Method of Ensuring Adequate Housing at a Price the Poor can Afford."

    Chapter 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 (1919- )

    Chapter 5 Taxes and Government Spending

    What Do Federal, State, and Local Governments Buy?

    How Big Is Government?

    The Growth of Government

    Taxes to Pay for a Growing Government

    Politics, Tax Incidence, and the Structure of Taxes

    Who Pays the Tax Bill?

    The Taxes Paid in Other Countries

    Taxes and Politics—A Final Word

    Myths of Economics: "The Growth of the Federal Government has been the Major Source of Government Expansion."

    Part Two: Macroeconomics

    Chapter 6 Taking the Nation's Economic Pulse

    The Concept of the GNP

    The Circular Flow of Expenditures and Resource Costs

    Two Ways of Measuring GNP

    The Expenditure Approach

    The Resource Cost-Income Approach

    Gross National Product or Gross National Cost?

    Five Problems with GNP as a Measuring Rod

    What GNP Does Not Measure

    The Great Contribution of GNP

    Other Related Income Measures

    The Real Income-Real Output Link

    Outstanding Economist: Simon Kuznets (1901- )

    Perspectives in Economics: Beyond the GNP-Pioneering Research on the Measurement of Economic Welfare

    Chapter 7 Unemployment, Inflation, and Business Cycles

    Micro- and Macroeconomics

    Swings in the Economic Pendulum

    Three Different Views of the Business Cycle

    Employment Fluctuations in a Dynamic Economy

    What Is Full Employment?

    A Closer Look at the Employment Statistics

    The Economics of Inflation

    The Cost of Inflation

    Myths of Economics: "Unemployed Resources would not Exist if the Economy were Operating Efficiently."

    Chapter 8 Aggregate Equilibrium and a Simple Keynesian Model

    Tools of the Modern Keynesian Analysis

    Saving, Investment, and the Circular Flow Analysis

    Keynes and the Views of Classical Economists

    The Determinants of Consumption

    The Determinants of Investment

    Equilibrium and the Keynesian Model

    Leakages and Injections—Another Way of Looking at Equilibrium

    The Major Message of Keynes

    Outstanding Economist: John Maynard Keynes (1883-1946)

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

    The Multiplier Principle

    The Paradox of Thrift

    Business Pessimism—A Self-Fulfilling Prophecy

    Investment Instability and the Accelerator

    A Keynesian View of the Business Cycle

    Investment and the Cycle

    Chapter 10 Fiscal Policy

    The Birth of Real-World Keynesian Fiscal Policy

    Fiscal Policy for Dealing with a Recession

    Fiscal Policy for Dealing with Inflation

    The Balanced-Budget Multiplier-The Simple Keynesian Model

    Adding Realism to the Keynesian Multiplier Analysis

    A Simple Verbal Explanation of Why Fiscal Policy Works during Normal Times

    The Central Idea of Fiscal Policy

    The Full-Employment Budget Concept

    The Practical Limitations of Real-World Fiscal Policy

    Has Real-World Fiscal Policy Had a Stabilizing Effect?

    Automatic Stabilizers

    Outstanding Economist: Charles L. Schultze (1924- )

    Perspectives in Economics: Fact and Fiction about the National Debt

    Chapter 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

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

    The Demand for and Supply of Money

    Interest Rates and Investment

    Expansionary and Restrictive Monetary Policy

    How Monetary Policy Works-The Keynesian View

    The Evolution of Keynesian Thought

    The Basic Propositions of the Modern Keynesian View

    Did Macropolicy Cause the Inflation of the 1970s?

    Outstanding Economist: Paul Samuelson (1915- )

    Perspectives in Economics: Will There Ever Be Another Great Depression? Yes

    Will There Ever Be Another Great Depression? No

    Addendum: Tax Cuts, Supply-Side Fiscal Policy, and the Work-Leisure Substitution Effect

    Chapter 13 The Monetarist Challenge to the Keynesian View

    Historical Background on the Importance of Money

    The Modern Monetarist View-Money Matters Most

    The Impact of Money-The Monetarist View

    The Basic Propositions of Monetarism

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

    Monetarists—Past and Future

    Outstanding Economist: Milton Friedman (1912- )

    Chapter 14 Unemployment, Inflation, and the Limits of Macropolicy

    Monetary and Fiscal Policies—A Consensus View

    The Phillips Curve—The Dream and the Reality

    The Shifting of the Real-World Phillips Curve

    The Long-Run Phillips Curve

    The Economics of Inflation

    The Economics of Cost-Push Inflation

    The Great Inflation (1967-Present)-A Closer Look

    Stop—Go Policy and the Racheting Upward of the Rate of Inflation

    Myths of Economics: Two Popular Myths of Inflation

    Chapter 15 Instability, Stagflation, and the Direction of Macroeconomics

    The Economics of Discretionary Macropolicy

    The Failure of Macroeconomists

    Stabilization Policy and Macropolicy Rules

    Putting the Rates of Unemployment and Growth of the 1970s into Perspective

    The Natural Rate of Unemployment during the 1980s

    The New Microapproach to Macroeconomic Problems

    Macroeconomics in the 1980s

    Outstanding Economist: Martin Feldstein (1939- )

    Perspectives in Economics: The Economics of Constitutional Amendments Limiting Spending and Mandating a Balanced Budget

    Part Three: International Economics and Comparative Systems

    Chapter 16 Gaining from International Trade

    The Composition of the International Sector

    Why Is There Trade between Nations?

    The Export-Import Link

    Supply, Demand, and International Trade

    Tariffs and Quotas

    Why Industries Are on the Dole

    International Trade, Export Taxes, and the OPEC 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."

    Chapter 17 International Finance and the Foreign Exchange Market

    Exchange Rates and the Price of Foreign Goods

    Balance of Payments and International Exchanges

    The Determination of Exchange Rates

    Changing Market Conditions and Exchange Rates

    The Evolution of International Monetary Arrangements

    The Current System—A Flexible Rate with Selective Intervention

    Chapter 18 Economic Development and the Growth of Income

    Characteristics of Less Developed Countries

    How Wide Is the Economic Gap between the Developed and Less Developed Nations?

    Are Growth and Development the Same Thing?

    The Importance of Small Differences in Rates of Growth

    Sources of Economic Growth

    Why Poor Nations Remain Poor

    Perspectives in Economics: Rich and Poor Nations—Are They Two Worlds Drifting Apart?

    Chapter 19 Comparative Economic Systems

    Comparing Capitalism and Socialism

    Classifying Real-World Economies

    Common Constraints and the Universality of Economic Tools

    The Soviet Economy

    Yugoslavia—Socialism or the Market?

    The Japanese "Miracle"

    Outstanding Economist: Karl Marx (1818-1883)

    Part Four: Public Choice

    Chapter 20 Problem Areas for the Market

    External Effects and the Market

    Market Failure: External Costs

    External Costs and Property Rights

    Market Failure: External Benefits and Missed Opportunities

    Alternative Public Sector Responses to Externalities

    Should the Government Always Try to Control Externalities?

    Market Failure: Public Goods

    Market Failure: Poor Information

    Outstanding Economist: Allen Kneese (1930- )

    Chapter 21 Public Choice and Gaining from Government

    Voters and the Demand for Political Action

    Supply, Profits, and the Political Entrepreneur

    The Opportunity Cost of Government

    Market Failure and Gaining from Government

    Gaining from Government Provision of Public Goods

    Income Redistribution and Public Policy

    Outstanding Economist: Kenneth Arrow (1921- )

    Chapter 22 The Economics of Government Failure

    Government Failure: Voter Ignorance and Inefficient Public Policy

    Government Failure: The Special Interest Effect

    Government Failure: Imprecise Reflection of Consumer Preferences

    Government Failure: The Shortsightedness Effect

    Government Failure: Little Entrepreneurial Incentive for Internal Efficiency

    Is the Economic Analysis of the Public Sector Cynical?

    Perspectives in Economics: Bureaucracy, Competition, and Improving the Efficiency of Government

    Perspectives in Economics: Dealing with Special Interests

    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

    Appendix D: Quarterly Economic Indicators, 1965-1979

    Suggestions for Additional Reading

    Hints for Answering Discussion Questions


Product details

  • No. of pages: 567
  • Language: English
  • Copyright: © Academic Press 1980
  • Published: January 1, 1980
  • Imprint: Academic Press
  • eBook ISBN: 9781483214054

About the Authors

James D Gwartney

Richard Stroup

Ratings and Reviews

Write a review

There are currently no reviews for "Macroeconomics"