Invitation to Economics: Understanding Argument and Policy

Preface.

1. Introduction.

1.1 What This Book Provides.

1.2 Looking around Corners.

1.3 Ideological Stance.

1.4 Economics Embedded in Philosophy and Sociology.

1.5 My Own Biases.

1.6 What Is to Come?.

Part I: The Subject of Economics:.

2. What Economists Do.

2.1 What Economics Encompasses.

2.2 How Economists Work.

2.3 Some Characteristics of Economics.

Appendix 2.1: Unrealistic Assumptions Can a Good Theory Make.

Appendix 2.2: Is the Stock Market Efficient?.

3. How Well Do They Do It?.

3.1 Forecasting.

3.2 Choosing the Right Policies: The Problem of Value Judgments.

3.3 Implementing Economic Policies.

3.4 Biases.

3.5 Disagreement among Economists.

Appendix 3.1: A Survey of American Academic Economists’ Opinions.

Part II: Some Infrastructure:.

4. Beguiling Words.

4.1 Some Widely Used Terms and Phrases.

4.2 Some Terms and Phrases Relating to Economics and Politics.

5. Important Economic Ideas: Often Misunderstood.

5.1 Levels versus Rates of Change.

5.2 Stocks versus Flows.

5.3 Real versus Nominal.

5.4 Future versus Current Dollars.

5.5 The Price Level versus Relative Prices.

5.6 Stable Prices versus Low Prices.

5.7 Gross versus Net and Single versus Double Counting.

5.8 Opportunity Costs versus Monetary Costs.

5.9 Cost--Benefit Analysis.

5.10 Wage Rates versus Labor Costs.

5.11 Capital Goods versus Human Capital.

5.12 Marginal versus Average Utility.

5.13 Marginal versus Average Costs.

5.14 Big Business versus Market Power.

5.15 Pro-market versus Pro-business.

6.16 "Should" and "Can" versus "Will".

5.17 Comparative versus Absolute Advantage.

Part III: Economic Theory and Policy:.

6. The Crown Jewel of Economics: The Price Mechanism.

6.1 An Overview of the Price Mechanism.

6.2 Equilibrium.

6.3 Shortages.

6.4 A Digression: The Equilibrium of the Firm.

6.5 What Happens in the Absence of a Price Mechanism?.

6.6 The Dark Side of the Price Mechanism.

6.7 The Upshot.

Appendix 6.1: More on Supply and Demand.

7. Risk Taking and Incentives.

7.1 Risk Bearing and Entrepreneurship.

7.2 Incentives.

8. Looking around Corners.

8.1 Do Easier Bankruptcy Laws Help the Poor?.

8.2 Should Artists Receive a Share of the Capital Gain When Their Work Is Resold?.

8.3 Do We Want Fewer People Exploiting the Poor?.

8.4 Cut the Gas Tax to Slow the Rise of Soaring Gas Prices?.

8.5 A Costless Way to Alleviate Destitution in Third World Countries?.

8.6 Ban or Fine All Speculators?.

8.7 Is Limiting Tobacco Advertising an Effective Policy?.

8.8 Would Importing Pharmaceuticals from Canada Substantially Lower Drug Prices?.

8.9 An Efficient and Humane Way to Reduce Cocaine Production?.

8.10 Protecting Lives by Requiring Use of Seatbelts?.

8.11 Do You Really Want Your Bid to Win?.

8.12 Is Fast Chinese Growth Bad for the United States?.

8.13 In Emergencies Should Prices Ration Supply, Thus Letting the Rich Outbid the Poor?.

8.14 Is Gaining from Someone’s Misfortune a Moral Wrong?.

8.15 Should Those Close at Hand Have a Special Responsibility to Alleviate Misery?.

8.16 Seven Short Ones.

8.17 On the Other Hand.

9. Natural Resources and Environmental Economics.

9.1 Running Out of Privately Owned Natural Resources.

9.2 The Tragedy of the Commons.

9.3 Pollution Permits and Taxes on Pollutants.

9.4 Tail-pipe Pollution.

9.5 Protecting Endangered Species.

Part IV: Looking at Data:.

10. Empirical Economics.

10.1 Role of Empirical Work in Economics.

10.2 Types of Empirical Evidence.

10.3 What to Watch Out for in Statistics: Some General Problems.

Appendix 10.1: Survey Data.

Appendix 10.2: Measuring GDP, Savings Rates, Price Indexes, Employment, and Poverty.

11. Some Simple (?) Ways of Presenting Data: Percentages, Figures, and Graphs.

11.1 Percentages.

11.2 Figures and graphs.

12. Samples and Their Problems.

12.1 Selecting a Representative Sample.

12.2 Watching for Inappropriate Samples.

12.3 The Regression Fallacy: Building a Bias into the Sample.

12.4 Sample Size and Coincidence.

12.5 Sampling Error, Confidence Intervals, and Significance.

12.6 Some Warnings about Significance Tests.

Appendix 12.1: The Normal Distribution.

13. Regressions: The Workhorse of Empirical Economics.

13.1 The Regression Coefficient.

13.2 How Well Does the Regression Fit the Data?.

13.3 What Should You Look at in a Regression?.

13.4 A Summing Up.

13.5 Looking the Workhorse in the Mouth.

13.6 In Conclusion.

14. The Workhorse in Action: Some Examples of Empirical Economics.

14.1 Consumption and Saving.

14.2 Should You Choose a Large Mutual Fund?.

14.3 The Slave Trade and African Economic Development.

14.4 The Effect of Tax Changes on Real GDP.

Epilogue.

Index