Contents

  1. Preface
  2. A note to instructors
  3. Producing Economy, Society, and Public Policy
  4. List of resources
    1. Doing Economics Empirical Projects
    2. How economists learn from data
    3. When economists disagree
    4. Videos
    5. Great economists
    6. Find out more
    7. Figures
  5. 1—Capitalism: affluence, inequality, and the environment
    1. Introduction
    2. 1.1 Affluence and income inequality
    3. 1.2 Economic growth
    4. 1.3 The permanent technological revolution: Engine of growth
    5. 1.4 The capitalist revolution
    6. 1.5 Capitalism and growth: Cause and effect?
    7. 1.6 Varieties of capitalism: Institutions and growth
    8. 1.7 Varieties of capitalism: Growth and stagnation
    9. 1.8 Capitalism, inequality, and democracy
    10. 1.9 Capitalism, growth and environmental sustainability
    11. 1.10 Conclusion
    12. 1.11 Doing Economics: Measuring climate change
    13. 1.12 References
  6. 2—Social interactions and economic outcomes
    1. Introduction
    2. 2.1 Self-interest and social dilemmas
    3. 2.2 Social interactions and public policy
    4. 2.3 When self-interest works: The invisible hand
    5. 2.4 When self-interest doesn’t work: The prisoners’ dilemma
    6. 2.5 Beyond self-interest: Caring about others
    7. 2.6 Free riding and altruism
    8. 2.7 Sustaining contributions to the public good by punishing free riding
    9. 2.8 Predicting economic outcomes: A Nash equilibrium
    10. 2.9 Which Nash equilibrium? Conflicts of interest and bargaining
    11. 2.10 Conflicts of interest in the global climate change problem
    12. 2.11 The economy and economics
    13. 2.12 Conclusion
    14. 2.13 Doing Economics: Collecting and analysing data from experiments
    15. 2.14 References
  7. 3—Public policy for fairness and efficiency
    1. Introduction
    2. 3.1 Goals of public policy
    3. 3.2 Fairness and efficiency in the ultimatum game
    4. 3.3 Evaluating institutions and outcomes: Is it efficient?
    5. 3.4 Evaluating institutions and outcomes: Is it fair?
    6. 3.5 What’s wrong with inequality? Procedural and substantive judgements of fairness
    7. 3.6 Implementing public policies
    8. 3.7 Unintended consequences: Policies affect preferences
    9. 3.8 Unintended consequences of a redistributive tax
    10. 3.9 How do we find out if a policy will work?
    11. 3.10 Economic models: How to see more by looking at less
    12. 3.11 Conclusion
    13. 3.12 Doing Economics: Measuring the effect of a sugar tax
    14. 3.13 References
  8. 4—Work, wellbeing, and scarcity
    1. Introduction
    2. 4.1 Basic concepts: Prices, costs, and incentives
    3. 4.2 Making decisions when there are trade-offs
    4. 4.3 Preferences
    5. 4.4 Decision making, trade-offs, and opportunity costs
    6. 4.5 The feasible set
    7. 4.6 Decision making and scarcity
    8. 4.7 Hours of work and economic growth
    9. 4.8 Explaining our working hours: Changes over time
    10. 4.9 Explaining our working hours: Differences between countries
    11. 4.10 Is this a good model?
    12. 4.11 Work, free time, and wellbeing: A social dilemma
    13. 4.12 Conclusion
    14. 4.13 Doing Economics: Measuring wellbeing
    15. 4.14 References
  9. 5—Institutions, power, and inequality
    1. Introduction
    2. 5.1 Institutions: The rules of the game
    3. 5.2 Production and distribution: Using a model
    4. 5.3 The rule of force: Bruno appears and has unlimited power over Angela
    5. 5.4 Property rights and the rule of law
    6. 5.5 Efficiency and conflicts over the distribution of the surplus
    7. 5.6 Property rights, the rule of law, and the right to vote
    8. 5.7 The lessons from Angela and Bruno’s story
    9. 5.8 Measuring economic inequality
    10. 5.9 Comparing inequality across the world
    11. 5.10 Conclusion
    12. 5.11 Doing Economics: Measuring inequality: Lorenz curves and Gini coefficients
    13. 5.12 References
  10. 6—The firm: Employees, managers, and owners
    1. Introduction
    2. 6.1 Firms, markets, and the division of labour
    3. 6.2 Power relations within the firm
    4. 6.3 Other people’s money: The separation of ownership and control
    5. 6.4 Other people’s labour
    6. 6.5 Why do a good day’s work? Employment rents
    7. 6.6 Work and wages: The labour discipline model
    8. 6.7 Wages, effort, and profits in the labour discipline model
    9. 6.8 Why there is always involuntary unemployment
    10. 6.9 Putting the model to work: Owners, employees, and public policy
    11. 6.10 Why do employers pay employment rents to their workers?
    12. 6.11 Another kind of business organization: Cooperative firms
    13. 6.12 Another kind of business organization: The gig economy
    14. 6.13 Principals and agents: Interactions under incomplete contracts
    15. 6.14 Conclusion
    16. 6.15 Doing Economics: Measuring management practices
    17. 6.16 References
  11. 7—Firms and markets for goods and services
    1. Introduction
    2. 7.1 Economies of scale and the cost advantages of large-scale production
    3. 7.2 The demand curve and willingness to pay to learn a language
    4. 7.3 Choosing the price that results in the greatest profits
    5. 7.4 Gains from trade
    6. 7.5 Price-setting, market power, and public policy
    7. 7.6 Product selection, innovation, and advertising
    8. 7.7 Buying and selling: Demand and supply in a competitive market
    9. 7.8 Demand and supply in a competitive market: Bakeries
    10. 7.9 Competitive equilibrium: Gains from trade, allocation, and distribution
    11. 7.10 Changes in supply and demand
    12. 7.11 The world oil market
    13. 7.12 Conclusion
    14. 7.13 Doing Economics: Supply and demand
    15. 7.14 References
  12. 8—The labour market: Wages, profits, and unemployment
    1. Introduction
    2. 8.1 Measuring the economy: Employment and unemployment
    3. 8.2 The wage-setting curve: Employment and real wages
    4. 8.3 The price-setting curve: Wages and profits in the whole economy
    5. 8.4 Wages, profits, and unemployment in the whole economy
    6. 8.5 Unemployment as a characteristic of labour market equilibrium
    7. 8.6 Why was unemployment higher in Spain than in Germany?
    8. 8.7 Structural and cyclical unemployment: The role of demand
    9. 8.8 Labour market equilibrium and the distribution of income
    10. 8.9 Labour unions: Bargained wages and the union voice effect
    11. 8.10 Labour market policies to address unemployment and inequality
    12. 8.11 Labour market policies: Shifting the Nash equilibrium
    13. 8.12 Looking backward: Baristas and bread markets
    14. 8.13 Conclusion
    15. 8.14 Doing Economics: Measuring the non-monetary cost of unemployment
    16. 8.15 References
  13. 9—The credit market: Borrowers, lenders, and the rate of interest
    1. Introduction
    2. 9.1 Income, consumption, and wealth
    3. 9.2 Borrowing: Bringing consumption forward in time
    4. 9.3 Reasons to borrow: Smoothing and impatience
    5. 9.4 Borrowing allows smoothing by bringing consumption to the present
    6. 9.5 Storing or lending allows smoothing and moving consumption to the future
    7. 9.6 Mutual gains and conflicts over their distribution in the credit market
    8. 9.7 Borrowing may allow investing: Julia’s best hope
    9. 9.8 Credit market constraints: Another principal–agent problem
    10. 9.9 Inequality: Lenders, borrowers, and those excluded from credit markets
    11. 9.10 The credit market and the labour market
    12. 9.11 Conclusion
    13. 9.12 Doing Economics: Credit-excluded households in a developing country
    14. 9.13 References
  14. 10—Banks, money, housing, and financial assets
    1. Introduction
    2. 10.1 Assets, money, banks, and the financial system
    3. 10.2 Money and banks
    4. 10.3 Balance sheets: Assets and liabilities
    5. 10.4 Banks, profits, and the creation of money
    6. 10.5 The central bank, banks, and interest rates
    7. 10.6 The business of banking and bank balance sheets
    8. 10.7 How key economic actors use and create money: A summary so far
    9. 10.8 The value of an asset: Expected return and risk
    10. 10.9 Changing supply and demand for a financial asset
    11. 10.10 Asset market bubbles
    12. 10.11 Housing as an asset, collateral, and house price bubbles
    13. 10.12 Banks, housing, and the global financial crisis
    14. 10.13 The role of banks in the crisis
    15. 10.14 Banking, markets, and morals
    16. 10.15 Conclusion
    17. 10.16 Doing Economics: Characteristics of banking systems around the world
    18. 10.17 References
  15. 11—Market failures and government policy
    1. Introduction
    2. 11.1 Market failure: External effects of pollution
    3. 11.2 External effects and bargaining
    4. 11.3 External effects: Government policies and income distribution
    5. 11.4 Property rights, contracts, and market failures
    6. 11.5 Public goods and market failure
    7. 11.6 Missing markets: Insurance and lemons
    8. 11.7 Market failure and government policy
    9. 11.8 Conclusion
    10. 11.9 Doing Economics: Measuring willingness to pay for climate change mitigation
    11. 11.10 References
  16. 12—Governments and markets in a democratic society
    1. Introduction
    2. 12.1 The market and other institutions
    3. 12.2 Markets, specialization, and the division of labour
    4. 12.3 Prices are messages plus motivation: The magic of the market
    5. 12.4 Prices as messages
    6. 12.5 Putting motivation behind the message
    7. 12.6 The limits of markets: Repugnant markets and merit goods
    8. 12.7 The government as an economic actor
    9. 12.8 Political rents and democratic political competition
    10. 12.9 Government spending priorities of a nation
    11. 12.10 Economic feasibility
    12. 12.11 Administrative feasibility: Information and capacities
    13. 12.12 Political feasibility
    14. 12.13 Policy matters and economics works
    15. 12.14 Conclusion
    16. 12.15 Doing Economics: Government policies and popularity: Hong Kong cash handout
    17. 12.16 References
  17. Glossary
  18. Bibliography
  19. Copyright acknowledgements