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Index
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
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