Economic Way of Thinking, The, 13th edition

  • Paul L. Heyne, 
  • Peter J. Boettke, 
  • David L. Prychitko

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The Economic Way of Thinking goes beyond the basic principles of micro- and macroeconomic analysis by showing you how to apply principles as tools. You'll be exposed to a method of reasoning that helps you to think like an economist through example and application and also exposes errors in popular economic reasoning.

Published by Pearson (July 14th 2021) - Copyright © 2014

ISBN-13: 9780137521296

Subject: Economics

Category: Principles of Economics

Table of contents

Brief Contents

Chapter 1 The Economic Way of Thinking

  • Recognizing Order
  • The Importance of Social Cooperation
  • How Does It Happen?
  • An Apparatus of the Mind–The Skill of the Economist
  • Cooperation Through Mutual Adjustment
  • Signals
  • Rules of the Game
  • Property Rights as Rules of the Game
  • The Biases of Economic Theory: A Weakness or a Strength?
  • Biases or Conclusions?
  • The Skills of the Economist
  • Questions for Discussion

Chapter 2 Efficiency, Exchange and Comparative Advantage

  • Goods and Bads
  • The Myth of Material Wealth
  • Trade Creates Wealth
  • Is It Worth It? Efficiency and Values
  • Recognizing Trade-Offs: Comparing Opportunity Costs of Production
  • The Gains from Specialization and Exchange
  • Why Specialize?
  • From Individual Trade to International Trade, and Back Again
  • Transaction Costs
  • Incentives to Reduce Transaction Costs: Middlemen
  • Middlemen Create Information
  • Markets as Discovery Processes
  • The Big Picture: First Thoughts on Economic Growth
  • Searching for an Explanation
  • The Evolution of Rules That Encourage Specialization and Exchange
  • Questions for Discussion

Chapter 3 Substitutes Everywhere: The Concept of Demand

  • On the Notion of “Needs”
  • Marginal Values
  • Forks in the Road: Everyday Choices Are Marginal Choices
  • The Demand Curve
  • The Law of Demand
  • Demand and Quantity Demanded
  • Demand Itself Can Change
  • Everything Depends on Everything Else
  • Misperceptions Caused by Inflation
  • Time Is on Our Side
  • Price Elasticity of Demand
  • Thinking About Elasticity
  • Elasticity and Total Receipts
  • The Myth of Vertical Demand
  • What Role Should Demand Play?
  • Is Money All That Matters? Money Costs, Other Costs, and Economic Calculation
  • Questions for Discussion

Chapter 4 Cost and Choice: The Concept of Supply

  • Refresher on Opportunity Costs
  • Costs Are Tied to Actions, Not Things
  • What Do I Do Now? The Irrelevance of “Sunk Costs”
  • Producers’ Costs as Opportunity Costs
  • Marginal Opportunity Costs
  • Costs and Supply
  • The Supply Curve
  • Supply Itself Can Change
  • Marginal and Average Costs
  • The Cost of a Volunteer Military Force
  • Price Elasticity of Supply
  • Cost as Justification
  • Questions for Discussion

Chapter 5 Supply and Demand: A Process of Coordination

  • The Market Is a Process of Plan Coordination
  • The Basic Process
  • Competition, Cooperation, and Market Clearing
  • Changing Market Conditions
  • Learning from Free-Market Prices Central Planning and the Knowledge Problem
  • Property Rights and Institutions
  • Money: The General Medium of Exchange
  • Money and Interest
  • Time Preference
  • Saving Creates Credit Opportunities
  • The Risk Factor in Interest Rates
  • Real and Nominal Interest Rates
  • Questions for Discussion

Chapter 6 Unintended Consequences: More Applications of Supply and Demand

  • Catastrophe and Confusion
  • Catastrophe and Coordination
  • The Urge to Fix Prices
  • Competition When Prices Are Fixed
  • Appropriate and Inappropriate Signals
  • Looking for an Apartment in the City? Read the Obituary!
  • Strong Booze, Stronger Drugs: Criminal Incentives
  • Skim Milk, Whole Milk, and Gangster Milkmen
  • Supports and Surpluses
  • Supply, Demand, and the Minimum Wage
  • Slavery Goes Global, Again
  • High-Priced Sports, Low-Priced Poetry: Who’s to Blame?
  • Do Costs Determine Prices?
  • The Dropouts Release Their First CD
  • “There’s Gold in Them Thar Hills!” So What?
  • Even Butchers Don’t Have the Guts
  • Why Does It Cost So Much to Change Bedpans?
  • An Appendix: Framing Economic Questions Correctly
  • Beware of Wrong Questions or Misleading Specifications of the Problem
  • Beware of Data That Appear to Speak for Themselves
  • The Graphic Case of Growing and Permanent Shortages
  • Once Over Lightly
  • Questions for Discussion

Chapter 7 Profit and Loss

  • Wage, Rent, and Interest: Incomes Established in Advance by Contract
  • Profit: Income That Can Be Positive or Negative
  • Calculating Profit: What Should Be Included in Costs?
  • Comparing Economic Profit and Accounting Profit
  • Uncertainty: A Necessary Condition for Profit
  • The Entrepreneur
  • The Entrepreneur as Residual Claimant
  • Not-for-Profit Institutions
  • Entrepreneurship and the Market Process
  • Mere Luck?
  • Profit and Loss as Coordinating Signals: The Role of Monetary Calculation
  • Beware of Experts
  • An Appendix: Profiteering in Futures Markets
  • Questions for Discussion

Chapter 8 Price Searching

  • The Popular Theory of Price Setting
  • Introducing Ed Sike
  • The Basic Rule for Maximizing Net Revenue
  • The Concept of Marginal Revenue
  • Why Marginal Revenue Is Less Than Price
  • Setting Marginal Revenue to Equal Marginal Cost
  • What About Those Empty Seats?
  • The Price Discriminator’s Dilemma
  • The College as Price Searcher
  • Some Strategies for Price Discrimination
  • Ed Sike Finds a Way
  • Resentment and Rationale
  • Lunch and Dinner Prices
  • Cost-Plus-Markup Reconsidered
  • Questions for Discussion

Chapter 9 Competition and Government Policy

  • Competition as a Process
  • The Pressures of Competition
  • Controlling Competition
  • Restrictions on Competition
  • Competition for the Key Resource: The $1,000,000 Taxi License
  • Competition and Property Rights
  • The Ambivalence of Government Policies
  • Selling Below Cost
  • What Is the Appropriate Cost?
  • “Predators” and Competition
  • Regulating Prices
  • “Antitrust” Policy
  • Interpretations and Applications
  • Vertical Restraints: Competitive or Anticompetitive
  • The Range of Opinion
  • Toward Evaluation
  • Once Over Lightly
  • Questions for Discussion

Chapter 10 Externalities and Conflicting Rights

  • Externalities, Negative and Positive
  • Perfection Is Unattainable
  • Negotiation
  • Reducing Externalities Through Adjudication
  • The Case of the Complaining Homeowner
  • The Importance of Precedents
  • The Problem of Radical Change
  • Reducing Externalities Through Legislation
  • Minimizing Costs
  • Another Approach: Taxing Emissions
  • Licenses to Pollute?
  • Efficiency and Fairness
  • The Bubble Concept
  • Rights and the Social Problem of Pollution
  • Traffic Congestion as an Externality
  • Once Over Lightly
  • Questions for Discussion

Chapter 11 Markets and Government

  • Private Versus Public?
  • Competition and Individualism
  • Economic Theory and Government Action
  • The Right to Use Coercion
  • Is Government Necessary?
  • Excluding Nonpayers
  • The Free-Rider Problem
  • Positive Externalities and Free Riders
  • Law and Order
  • National Defense
  • Roads and Schools
  • Income Redistribution
  • The Regulation of Voluntary Exchange
  • Government and the Public Interest
  • Information and Democratic Governments
  • The Interests of Elected Officials
  • Concentrated Benefits, Dispersed Costs
  • Positive Externalities and Government Policies
  • How Do People Identify the Public Interest?
  • The Prisoners’ Dilemma
  • The Limits of Political Institutions
  • Once Over Lightly
  • Questions for Discussion

Chapter 12 the Distribution of Income

  • Suppliers and Demanders
  • Capital and Human Resources
  • Human Capital and Investment
  • Property Rights and Income
  • Actual, Legal, and Moral Rights
  • Expectations and Investment
  • People or Machines?
  • The Derived Demand for Productive Services
  • Who Competes Against Whom?
  • Unions and Competition
  • Poverty and Inequality
  • Why Inequality Is Increasing
  • Are the Rich Getting Richer and the Poor Getting Poorer?
  • Redistributing Income
  • Changing Rules and Social Cooperation
  • Once Over Lightly

Chapter 13 Measuring the Overall Performance of Economic Systems

  • Gross Domestic Product
  • GDP or GNP?
  • GDP as Total Income Created in the Domestic Economy
  • GDP Is Not a Measure of All Purchases in the Economy
  • GDP as Total Value Added
  • Is Value Added Always Positive?
  • Loose Ends: Unsold Inventories and Used Goods
  • Aggregate Fluctuations
  • Unemployment and Nonemployment
  • Employed, Not Employed, and Unemployed
  • Labor-Market Decisions
  • Unemployment and Recessions
  • Inflation
  • Recession and Inflation Since 1960
  • What Causes Aggregate Fluctuations?

Chapter 14 Money

  • The Evolution of Money
  • The Myth of Fiat Money
  • The Nature of Money Today
  • So How Much Money Is Out There?
  • Credibility and Confidence
  • Banks Under Regulation: Legal Reserve Requirements
  • Deposit Expansion and the Creation of Money
  • The Fed as Monitor and Rule Enforcer
  • The Tools Used by the Fed
  • The Discount Rate
  • Open Market Operations
  • Monetary Equilibrium
  • But Who Is Really in Charge?
  • An Appendix: What About Gold?
  • Once Over Lightly

Chapter 15 Economic Performance and Real-World Politics

  • The Great Depression
  • What Really Happens in a Recession?
  • A Cluster of Errors
  • Credit and Coordination: Savings and Investment in the Free Market
  • Credit and Discoordination: The Unsustainable Boom
  • The Recession is the Correction
  • When Is Monetary Policy Effective?
  • The Case for Fiscal Policy
  • The Necessity of Good Timing
  • The Federal Budget as a Policy Tool
  • Time Horizons and Politics
  • Deficits Unlimited
  • Why Not Government at All Levels?
  • Who Is at the Controls?
  • Understanding Recent Experience
  • Once Over Lightly

Chapter 16 The Wealth of Nations: Globalization and Economic Growth

  • Who Is Rich, Who Is Poor?
  • The Historical Record
  • Sources of Economic Growth
  • Foreign Investment
  • Human Capital
  • Oil Comes from Our Minds
  • Economic Freedom Index
  • The Developmental Power of Private Property Rights
  • The Asian Record
  • Outside of Asia
  • The Difficulties of International GDP Comparisons
  • Globalization and Its Discontents
  • The Power of Popular Opinion
  • The Power of Special Interests
  • The Outsourcing Controversy: Soundbytes vs. Analysis
  • Once Over Lightly

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