Contents

  1. Preface
  2. Producing The Economy: A South Asian Perspective
  3. Endorsements for The Economy: A South Asian Perspective
  4. List of resources
    1. Related articles
    2. Einsteins
    3. Great economists
    4. How economists learn from facts
    5. When economists disagree
    6. Videos
    7. Figures
  5. 1—The capitalist revolution
    1. Introduction
    2. 1.1 Income inequality
    3. 1.2 Measuring income and living standards
    4. 1.3 History’s hockey stick: Growth in income
    5. 1.4 The permanent technological revolution
    6. 1.5 The economy and the environment
    7. 1.6 Capitalism defined: Private property, markets, and firms
    8. 1.7 Capitalism as an economic system
    9. 1.8 Capitalism, causation and history’s hockey stick
    10. 1.9 Varieties of capitalism: Institutions, government, and the economy
    11. 1.10 Colonialism
    12. 1.11 Economics and the economy
    13. 1.12 Conclusion
    14. 1.13 References
  6. 2—Technology, population, and growth
    1. Introduction
    2. 2.1 Economists, historians, and the Industrial Revolution
    3. 2.2 Economic models: How to see more by looking at less
    4. 2.3 Basic concepts: Prices, costs, and innovation rents
    5. 2.4 Modelling a dynamic economy: Technology and costs
    6. 2.5 Modelling a dynamic economy: Innovation and profit
    7. 2.6 The British Industrial Revolution and incentives for new technologies
    8. 2.7 Malthusian Economics: Modelling output growth
    9. 2.8 Malthus and technology
    10. 2.9 Evidence for The Malthusian trap and long-term economic stagnation
    11. 2.10 Escaping from Malthusian stagnation
    12. 2.11 Conclusion
    13. 2.12 References
  7. 3—Work, scarcity, and choice
    1. Introduction
    2. 3.1 Work and its forms
    3. 3.2 Labour and production
    4. 3.3 Preferences
    5. 3.4 Opportunity costs
    6. 3.5 The feasible set
    7. 3.6 Decision making and scarcity
    8. 3.7 Hours of work and economic growth
    9. 3.8 Income and substitution effects on hours of work and free time
    10. 3.9 Is this a good model?
    11. 3.10 Explaining our working hours: Changes over time
    12. 3.11 Explaining Women’s Labour Force Participation
    13. 3.12 Conclusion
    14. 3.13 References
  8. 4—Social interactions
    1. Introduction
    2. 4.1 Social interactions: Game theory
    3. 4.2 Equilibrium in the invisible hand game
    4. 4.3 The prisoners’ dilemma
    5. 4.4 Social preferences: Altruism
    6. 4.5 Altruistic preferences in the prisoners’ dilemma
    7. 4.6 Public goods, free riding, and repeated interaction
    8. 4.7 Public good contributions and peer punishment
    9. 4.8 Behavioural experiments in the lab and in the field
    10. 4.9 Cooperation, negotiation, conflicts of interest, and social norms
    11. 4.10 Dividing a pie (or leaving it on the table)
    12. 4.11 Fair farmers, self-interested students?
    13. 4.12 Competition in the ultimatum game
    14. 4.13 Social interactions: Conflicts in the choice among Nash equilibria
    15. 4.14 Conflicts of interest in the global climate change problem
    16. 4.15 Conclusion
    17. 4.16 References
  9. 5—Property and power: Mutual gains and conflict
    1. Introduction
    2. 5.1 Institutions and power
    3. 5.2 Evaluating institutions and outcomes: The Pareto criterion
    4. 5.3 Evaluating institutions and outcomes: Fairness
    5. 5.4 A model of choice and conflict
    6. 5.5 Technically feasible allocations
    7. 5.6 Allocations imposed by force
    8. 5.7 Economically feasible allocations and the surplus
    9. 5.8 The Pareto efficiency curve and the distribution of the surplus
    10. 5.9 Politics: Sharing the surplus
    11. 5.10 Bargaining to a Pareto-efficient sharing of the surplus
    12. 5.11 Angela and Bruno: The moral of the story
    13. 5.12 Measuring economic inequality
    14. 5.13 A policy to redistribute the surplus and raise efficiency
    15. 5.14 Conclusion
    16. 5.15 References
  10. 6—The firm: Owners, managers, and employees
    1. Introduction
    2. 6.1 Firms, markets, and the division of labour
    3. 6.2 Other people’s money: The separation of ownership and control
    4. 6.3 Other people’s labour
    5. 6.4 Employment rents
    6. 6.5 Determinants of the employment rent
    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 Putting the model to work: Owners, employees, and the economy
    10. 6.9 The dual economy
    11. 6.10 Principals and agents: Interactions under incomplete contracts
    12. 6.11 Conclusion
    13. 6.12 References
  11. 7—The firm and its customers
    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
    4. 7.3 Profits, costs, and the isoprofit curve
    5. 7.4 The isoprofit curves and the demand curve
    6. 7.5 Looking at profit maximization through marginal revenue and marginal cost
    7. 7.6 Gains from trade
    8. 7.7 The elasticity of demand
    9. 7.8 Costs and Output
    10. 7.9 Price-setting, market power, and public policy
    11. 7.10 Using demand elasticities in government policy
    12. 7.11 Prices, costs, and market failure
    13. 7.12 Conclusion
    14. 7.13 References
  12. 8—Supply and demand: Price-taking and competitive markets
    1. Introduction
    2. 8.1 Buying and selling: Demand and supply in a competitive market
    3. 8.2 The market and the equilibrium price
    4. 8.3 Demand and supply in a competitive market: Bakeries
    5. 8.4 Competitive equilibrium: Gains from trade, allocation, and distribution
    6. 8.5 Changes in supply and demand
    7. 8.6 The world oil market
    8. 8.7 The effects of taxes
    9. 8.8 Price-setting and price-taking firms
    10. 8.9 Prices and quantities with an increase in demand
    11. 8.10 Conclusion
    12. 8.11 References
  13. 9—The labour market: Wages, profits, and unemployment
    1. Introduction
    2. 9.1 The wage-setting curve, the price-setting curve, and the labour market
    3. 9.2 Measuring the economy: Employment and unemployment
    4. 9.3 The wage-setting curve: Employment and real wages
    5. 9.4. The firm’s hiring decision
    6. 9.5. The price-setting curve: Wages and profits in the whole economy
    7. 9.6 Wages, profits, and unemployment in the whole economy
    8. 9.7 How changes in demand for goods and services affect unemployment
    9. 9.8. Labour market equilibrium and the distribution of income
    10. 9.9. Labour supply, labour demand, and bargaining power
    11. 9.10. Labour unions: Bargained wages and the union voice effect
    12. 9.11 Labour market policies to address unemployment and inequality
    13. 9.12. Looking backward: Baristas and bread markets
    14. 9.13 Conclusion
    15. 9.14 References
  14. 10—Banks, money, and the credit market
    1. Introduction
    2. 10.1 Money and wealth
    3. 10.2 Borrowing: Bringing consumption forward in time
    4. 10.3 Impatience and the diminishing marginal returns to consumption
    5. 10.4 Borrowing allows smoothing by bringing consumption to the present
    6. 10.5 Lending and storing: Smoothing and moving consumption to the future
    7. 10.6 Investing: Another way to move consumption to the future
    8. 10.7 Assets, liabilities, and net worth
    9. 10.8 Banks, money, and the central bank
    10. 10.9 The central bank, the money market, and interest rates
    11. 10.10 The business of banking and bank balance sheets
    12. 10.11 The central bank’s policy rate can affect spending
    13. 10.12 Credit market constraints: A principal–agent problem
    14. 10.13 Inequality: Lenders, borrowers, and those excluded from credit markets
    15. 10.14 Conclusion
    16. 10.15 References
  15. 11—Rent-seeking, price-setting, and market dynamics
    1. Introduction
    2. 11.1 How people changing prices to gain rents can lead to a market equilibrium
    3. 11.2 How market organization can influence prices
    4. 11.3 Short-run and long-run equilibria
    5. 11.4 The value of an asset: Basics
    6. 11.5 Changing supply and demand for financial assets
    7. 11.6 Asset market bubbles
    8. 11.7 Modelling bubbles and crashes
    9. 11.8 Non-clearing markets: Rationing, queuing, and secondary markets
    10. 11.9 Markets with controlled prices
    11. 11.10 The role of economic rents
    12. 11.11 Conclusion
    13. 11.12 References
  16. 12—Markets, efficiency, and public policy
    1. Introduction
    2. 12.1 Market failure: External effects of pollution
    3. 12.2 External effects and bargaining
    4. 12.3 External effects: Policies and income distribution
    5. 12.4 Property rights, contracts, and market failures
    6. 12.5 Public goods
    7. 12.6 Missing markets: Insurance and lemons
    8. 12.7 Incomplete contracts and external effects in credit markets
    9. 12.8 The limits of markets
    10. 12.9 Market failure and government policy
    11. 12.10 Conclusion
    12. 12.11 References
  17. 13—Economic fluctuations and unemployment
    1. Introduction
    2. 13.1 Growth and fluctuations
    3. 13.2 Output growth and changes in unemployment
    4. 13.3 Measuring the aggregate economy
    5. 13.4 Measuring the aggregate economy: The components of GDP
    6. 13.5 How households cope with fluctuations
    7. 13.6 Why is consumption smooth?
    8. 13.7 Why is investment volatile?
    9. 13.8 Measuring the economy: Inflation
    10. 13.9 Conclusion
    11. 13.10 References
  18. 14—Unemployment and fiscal policy
    1. Introduction
    2. 14.1 The transmission of shocks: The multiplier process
    3. 14.2 The multiplier model
    4. 14.3 Household target wealth, collateral, and consumption spending
    5. 14.4 Investment spending
    6. 14.5 The multiplier model: Including the government and net exports
    7. 14.6 Fiscal policy: How governments can dampen and amplify fluctuations
    8. 14.7 The multiplier and economic policymaking
    9. 14.8 The government’s finances
    10. 14.9 Fiscal policy and the rest of the world
    11. 14.10 Aggregate demand and unemployment
    12. 14.11 Conclusion
    13. 14.12 References
  19. 15—Inflation, unemployment, and monetary policy
    1. Introduction
    2. 15.1 What’s wrong with inflation?
    3. 15.2 Inflation results from conflicting and inconsistent claims on output
    4. 15.3 Inflation, the business cycle, and the Phillips curve
    5. 15.4 Inflation and unemployment: Constraints and preferences
    6. 15.5 What happened to the Phillips curve?
    7. 15.6 Expected inflation and the Phillips curve
    8. 15.7 Supply shocks and inflation
    9. 15.8 Monetary policy
    10. 15.9 The exchange rate channel of monetary policy
    11. 15.10 Demand shocks and demand-side policies
    12. 15.11 Macroeconomic policy before the global financial crisis: Inflation-targeting policy
    13. 15.12 Another reason for rising inflation at low unemployment
    14. 15.13 Conclusion
    15. 15.14 References
  20. Glossary
  21. Bibliography
  22. Leibnizes
    1. 2.2.1 Introducing the Leibnizes
    2. 2.7.1 The production function
    3. 3.1.1 Average and marginal productivity
    4. 3.1.2 Diminishing marginal productivity
    5. 3.1.3 Concave and convex functions
    6. 3.2.1 Indifference curves and the marginal rate of substitution
    7. 3.4.1 Marginal rate of transformation
    8. 3.5.1 Optimal allocation of free time: MRT meets MRS
    9. 3.6.1 Modelling technological change
    10. 3.7.1 Mathematics of income and substitution effects
    11. 4.4.1 Altruistic preferences: Finding the optimal distribution
    12. 5.4.1 Quasi-linear preferences
    13. 5.4.2 Angela’s choice of working hours
    14. 5.7.1 Angela’s choice of working hours when she pays rent
    15. 5.8.1 The Pareto efficiency curve
    16. 6.6.1 The worker’s best response function
    17. 6.7.1 Profit, wages, and effort
    18. 7.3.1 Average and marginal cost functions
    19. 7.4.1 Isoprofit curves and their slopes
    20. 7.5.1 The profit-maximizing price
    21. 7.6.1 Marginal revenue and marginal cost
    22. 7.8.1 The elasticity of demand
    23. 8.4.1 The firm and market supply curves
    24. 8.4.2 Market equilibrium
    25. 8.5.1 Gains from trade
    26. 8.6.1 Shifts in demand and supply
    27. 11.8.1 Price bubbles
    28. 12.1.1 External effects of pollution
    29. 12.3.1 Pigouvian taxes
  23. Copyright acknowledgements