Contents

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  1. Preface
  2. A note to instructors
  3. Producing Economy, Society, and Public Policy
  4. Praise for Economy, Society, and Public Policy
  5. List of resources
    1. Glossary
    2. Doing Economics Empirical Projects
    3. How economists learn from data
    4. When economists disagree
    5. Exercises
    6. Videos
    7. Great economists
    8. Find out more
    9. Figures
  6. 1—Capitalism and democracy: Affluence, inequality, and the environment
    1. 1.1 Introduction
    2. 1.2 Affluence and income inequality
    3. 1.3 How did we get here? The hockey stick in real incomes
    4. 1.4 Economic growth
    5. 1.5 The permanent technological revolution: Engine of growth
    6. 1.6 Another engine of growth: More machines and tools per worker
    7. 1.7 The capitalist revolution
    8. 1.8 Capitalism and growth: Cause and effect?
    9. 1.9 Varieties of capitalism: Institutions and growth
    10. 1.10 Varieties of capitalism: Growth and stagnation
    11. 1.11 Capitalism, inequality, and democracy
    12. 1.12 Capitalism, growth and environmental sustainability
    13. 1.13 Conclusion
    14. 1.14 Doing Economics: Measuring climate change
    15. 1.15 References
  7. 2—Social interactions and economic outcomes
    1. 2.1 Introduction
    2. 2.2 Two types of social interaction
    3. 2.3 Resolving social dilemmas
    4. 2.4 Social interactions as games
    5. 2.5 When self-interest works: The invisible hand
    6. 2.6 When self-interest doesn’t work: The prisoners’ dilemma
    7. 2.7 Free riding and the provision of public goods
    8. 2.8 Social preferences and the public good
    9. 2.9 Sustaining cooperation by punishing free riding
    10. 2.10 How three kinds of social preferences address social dilemmas
    11. 2.11 Predicting economic outcomes: A Nash equilibrium
    12. 2.12 Which Nash equilibrium? Conflicts of interest and bargaining
    13. 2.13 Conflicts of interest in the global climate change problem
    14. 2.14 The economy and economics
    15. 2.15 Conclusion
    16. 2.16 Doing Economics: Collecting and analysing data from experiments
    17. 2.17 References
  8. 3—Public policy for fairness and efficiency
    1. 3.1 Introduction
    2. 3.2 Goals of public policy
    3. 3.3 Fairness and efficiency in the ultimatum game
    4. 3.4 Evaluating an outcome: Is it efficient?
    5. 3.5 Adding the option of transferring payoffs between players.
    6. 3.6 Evaluating an outcome: Is it fair?
    7. 3.7 Why are (some) economic inequalities unfair? Procedural and substantive judgements
    8. 3.8 Implementing public policies
    9. 3.9 Unintended consequences of a redistributive tax
    10. 3.10 Unintended consequences: Policies affect preferences
    11. 3.11 How do we find out if a policy will work?
    12. 3.12 Conclusion
    13. 3.13 Doing Economics: Measuring the effect of a sugar tax
    14. 3.14 References
  9. 4—Work, wellbeing, and scarcity
    1. 4.1 Introduction
    2. 4.2 Economic models: How to see more by looking at less
    3. 4.3 Decision making, trade-offs, and opportunity costs
    4. 4.4 Making decisions when there are trade-offs
    5. 4.5 Preferences
    6. 4.6 The feasible set
    7. 4.7 Decision making and scarcity
    8. 4.8 Hours of work and economic growth
    9. 4.9 Applying the model: Explaining changes in working hours
    10. 4.10 Applying the model: Explaining differences between countries
    11. 4.11 Is this a good model? Does it matter that people (mostly) do not really optimize?
    12. 4.12 Extending the model: The influence of culture and politics
    13. 4.13 Extending the model: Women, men, and the gender division of labour
    14. 4.14 Work and wellbeing as a social dilemma
    15. 4.15 Conclusion
    16. 4.16 Doing Economics: Measuring wellbeing
    17. 4.17 References
  10. 5—Institutions, power, and inequality
    1. 5.1 Introduction
    2. 5.2 Institutions: The rules of the game
    3. 5.3 Production and distribution: Using a model
    4. 5.4 The rule of force: Bruno appears and has unlimited power over Angela
    5. 5.5 Property rights and the rule of law
    6. 5.6 Efficiency and conflicts over the distribution of the surplus
    7. 5.7 Property rights, the rule of law, and the right to vote
    8. 5.8 The lessons from Angela and Bruno’s story
    9. 5.9 Measuring economic inequality
    10. 5.10 Comparing inequality across the world
    11. 5.11 Conclusion
    12. 5.12 Doing Economics: Measuring inequality: Lorenz curves and Gini coefficients
    13. 5.13 References
  11. 6—The firm: Employees, managers, and owners
    1. 6.1 Introduction
    2. 6.2 Firms, markets, and the division of labour
    3. 6.3 Power relations within the firm
    4. 6.4 Other people’s money: The separation of ownership and control
    5. 6.5 Other people’s labour: The employment relationship
    6. 6.6 Why do a good day’s work? Consider the alternative!
    7. 6.7 Employment rents
    8. 6.8 Work effort and wages: The labour discipline model
    9. 6.9 The employer sets the wage to minimize the cost per unit of effort
    10. 6.10 Why there is always involuntary unemployment
    11. 6.11 Putting the model to work: Owners, employees, and public policy
    12. 6.12 Why do employers pay employment rents to their workers?
    13. 6.13 Another kind of business organization: Cooperative firms
    14. 6.14 Another kind of business organization: The gig economy
    15. 6.15 Principals and agents: Interactions under incomplete contracts
    16. 6.16 Conclusion
    17. 6.17 Doing Economics: Measuring management practices
    18. 6.18 References
  12. 7—Firms and markets for goods and services
    1. 7.1 Introduction
    2. 7.2 Economies of scale and the cost advantages of large-scale production
    3. 7.3 The demand curve and willingness to pay
    4. 7.4 Profits, costs, and the isoprofit curve
    5. 7.5 The isoprofit curves and the demand curve
    6. 7.6 Gains from trade
    7. 7.7 Price-setting, market power, and public policy
    8. 7.8 Product selection, innovation, and advertising
    9. 7.9 Buying and selling: Demand and supply in a competitive market
    10. 7.10 Demand and supply in a competitive market: Bakeries
    11. 7.11 Competitive equilibrium: Gains from trade, allocation, and distribution
    12. 7.12 Changes in supply and demand
    13. 7.13 The world oil market
    14. 7.14 Conclusion
    15. 7.15 Doing Economics: Supply and demand
    16. 7.16 References
  13. 8—The labour market and the product market: Unemployment and inequality
    1. 8.1 Introduction
    2. 8.2 Measuring the economy: Employment and unemployment
    3. 8.3 The labour market, the product market and the aggregate economy: The WS/PS model
    4. 8.4 The labour market and the wage-setting curve (firms and workers)
    5. 8.5 The product market and the price-setting curve (firms and customers)
    6. 8.6 Wages, profits, and unemployment in the aggregate economy
    7. 8.7 Unemployment as a characteristic of equilibrium
    8. 8.8 Why was unemployment higher in Spain than in Germany?
    9. 8.9 Declining competition and increasing inequality in the US
    10. 8.10 The labour and product market model and inequality: Using the Lorenz curve and Gini coefficient
    11. 8.11 Labour unions: Bargained wages and the union voice effect
    12. 8.12 Rising markups and profit share, weaker trade unions, and rising inequality
    13. 8.13 Labour market policies to address unemployment and inequality
    14. 8.14 Labour market policies: Shifting the Nash equilibrium
    15. 8.15 Looking backward: Baristas and bread markets
    16. 8.16 Structural and cyclical unemployment: The role of demand
    17. 8.17 Conclusion
    18. 8.18 Doing Economics: Measuring the non-monetary cost of unemployment
    19. 8.19 References
  14. 9—The credit market: Borrowers, lenders, and the rate of interest
    1. 9.1 Introduction
    2. 9.2 Income, consumption, and wealth
    3. 9.3 Borrowing: Bringing consumption forward in time
    4. 9.4 Reasons to borrow: Smoothing and impatience
    5. 9.5 Borrowing allows smoothing by bringing consumption to the present
    6. 9.6 Storing or lending allows smoothing and moving consumption to the future
    7. 9.7 Mutual gains and conflicts over their distribution in the credit market
    8. 9.8 Borrowing may allow investing: Julia’s best hope
    9. 9.9 Balance sheets: Assets and liabilities
    10. 9.10 Credit market constraints: Another principal–agent problem
    11. 9.11 Inequality: Lenders, borrowers, and those excluded from credit markets
    12. 9.12 The credit market and the labour market
    13. 9.13 Conclusion
    14. 9.14 Doing Economics: Credit-excluded households in a developing country
    15. 9.15 References
  15. 10—Banks, money, housing, and financial assets
    1. 10.1 Introduction
    2. 10.2 Assets, money, banks, and the financial system
    3. 10.3 Money and banks
    4. 10.4 Banks, profits, and the creation of money
    5. 10.5 The central bank, banks, and interest rates
    6. 10.6 The business of banking and bank balance sheets
    7. 10.7 How key economic actors use and create money: A summary so far
    8. 10.8 The value of an asset: Expected return and risk
    9. 10.9 Changing supply and demand for a financial asset
    10. 10.10 Asset market bubbles
    11. 10.11 Housing as an asset, collateral, and house price bubbles
    12. 10.12 Banks, housing, and the global financial crisis
    13. 10.13 The role of banks in the crisis
    14. 10.14 Banking, markets, and morals
    15. 10.15 Conclusion
    16. 10.16 Doing Economics: Characteristics of banking systems around the world
    17. 10.17 References
  16. 11—Market successes and failures
    1. 11.1 Introduction
    2. 11.2 The market and other institutions
    3. 11.3 Markets, specialization, and the division of labour
    4. 11.4 The ‘magic of the market’: Prices are messages plus motivation
    5. 11.5 Prices as messages
    6. 11.6 Putting motivation behind the price message
    7. 11.7 Market failure: External effects of pollution
    8. 11.8 External effects and private bargaining
    9. 11.9 External effects: Government policies and income distribution
    10. 11.10 Property rights, contracts, and market failures
    11. 11.11 Public goods, common pool resources, and market failure
    12. 11.12 Missing markets: Insurance and lemons
    13. 11.13 Market failure and government policy
    14. 11.14 Conclusion
    15. 11.15 Doing Economics: Measuring willingness to pay for climate change mitigation
    16. 11.16 References
  17. 12—Governments and markets in a democratic society
    1. 12.1 Introduction
    2. 12.2 The limits of markets: Repugnant markets and merit goods
    3. 12.3 The government as an economic actor
    4. 12.4 The government as a rent-seeking monopolist
    5. 12.5 Competition can limit political rent-seeking
    6. 12.6 Political monopoly and competition compared.
    7. 12.7 Spending by democratic governments: Priorities of a nation
    8. 12.8 The feasibility of economic policies
    9. 12.9 Administrative feasibility: Information and capacities
    10. 12.10 Political feasibility
    11. 12.11 Policy matters
    12. 12.12 The distributional impact of public policies: Early childhood education
    13. 12.13 Free tuition in higher education: Can it be fair to non-students?
    14. 12.14 The distributional impact of public policies: Rent control
    15. 12.15 Conclusion
    16. 12.16 Doing Economics: Government policies and popularity: Hong Kong cash handout
    17. 12.17 References
  18. Bibliography
  19. Copyright acknowledgements
  20. Index