Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly
408
Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly
408Paperback
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Overview
Since 1946, Henry Hazlitt’s bestselling Economics in One Lesson has popularized the belief that economics can be boiled down to one simple lesson: market prices represent the true cost of everything. But one-lesson economics tells only half the story. It can explain why markets often work so well, but it can’t explain why they often fail so badly—or what we should do when they stumble. As Nobel Prize–winning economist Paul Samuelson quipped, “When someone preaches ‘Economics in one lesson,’ I advise: Go back for the second lesson.” In Economics in Two Lessons, John Quiggin teaches both lessons, offering a masterly introduction to the key ideas behind the successes—and failures—of free markets. Brilliantly accessible, this book unlocks the essential issues at the heart of any economic question.
Product Details
| ISBN-13: | 9780691217420 |
|---|---|
| Publisher: | Princeton University Press |
| Publication date: | 04/13/2021 |
| Pages: | 408 |
| Sales rank: | 1,112,279 |
| Product dimensions: | 5.40(w) x 8.30(h) x 1.30(d) |
About the Author
Table of Contents
Acknowledgments xi
Introduction 1
Outline of the Book 8
Further Reading 9
Lesson 1, Part I The Lesson 11
Chapter 1 Market Prices and Opportunity Costs 13
1.1 What Is Opportunity Cost? 14
1.2 Production Cost and Opportunity Cost 17
1.3 Households, Prices, and Opportunity Costs 22
1.4 Lesson One 24
1.5 The Intellectual History of Opportunity Cost 25
Further Reading 27
Chapter 2 Markets, Opportunity Cost, and Equilibrium 30
2.1 Tisataafl (There Is Such A Thing As A Free Lunch) 32
2.2 Gains from Exchange 35
2.3 Trade and Comparative Advantage 37
2.4 Competitive Equilibrium 40
2.5 Free Lunches and Rents 44
2.6 Adam Smith and the Division of Labor 45
Further Reading 48
Chapter 3 Time, Information, and Uncertainty 50
3.1 Interest and the Opportunity Cost of (Not) Waiting 51
3.2 Information 59
3.3 Uncertainty 62
Further Reading 64
Lesson 1, Part II Applications 67
Chapter 4 Lesson One: How Opportunity Cost Works in Markets 69
4.1 Tricks and Traps 69
4.2 Airfares 71
4.3 The Cost of (Not) Going to College 75
4.4 An Exception That Proves the Rule: The Boom and Bust in Law Schools 77
4.5 Tanstaafl: What about "Free" TV, Radio, and Internet Content? 79
Further Reading 83
Chapter 5 Lesson One and Economic Policy 85
5.1 "Why Price Control Doesn't (Usually) Work 85
5.2 To Help Poor People, Give Them Money 89
5.3 Road Pricing 96
5.4 Fish and Tradable Quota 100
5.5 A License to Print Money: Property Rights and Telecommunications Spectrum 108
5.6 Concluding Comments 111
Further Reading 111
Chapter 6 The Opportunity Cost of Destruction 114
6.1 The Glazier's Fallacy 115
6.2 The Economics of Natural Disasters 118
6.3 The Opportunity Cost of War 119
6.4 Technological Benefits of War? 125
Further Reading 128
Lesson 2, Part I Social Opportunity Costs 131
Chapter 7 Property Rights and Income Distribution 134
7.1 What Lesson Two Tells Us about Property Rights and Income Distribution 135
7.2 Property Rights and Market Equilibrium 136
7.3 The Starting Point 138
7.4 Property Rights and Natural Law 142
7.5 Pareto and Inequality 145
7.6 Conclusion 148
Further Reading 149
Chapter 8 Unemployment 150
8.1 Macroeconomics and Microeconomics 151
8.2 The Business Cycle 153
8.3 The Experience of the Great and Lesser Depressions 155
8.4 Are Recessions Abnormal? 159
8.5 Unemployment and Opportunity Cost 162
8.6 The Macro Foundations of Micro 165
8.7 Hazlitt and the Glazier's Fallacy 167
Further Reading 169
Chapter 9 Monopoly and Market Failure 171
9.1 The Idea of Market Failure 171
9.2 Economies of Size 173
9.3 Monopoly 177
9.4 Oligopoly 184
9.5 Monopsony and Labor Markets 185
9.6 Bargaining 187
9.7 Monopoly and Inequality 191
Further Reading 193
Chapter 10 Market Failure: Externalities and Pollution 196
10.1 Externalities 197
10.2 Pollution 200
10.3 Climate Change 203
10.4 Public Goods 208
10.5 The Origins of Externality 210
Further Reading 212
Chapter 11 Market Failure: Information, Uncertainty, and Financial Markets 214
11.1 Market Prices, Information, and Public Goods 215
11.2 The Efficient Markets Hypothesis 218
11.3 Financial Markets, Bubbles, and Busts 221
11.4 Financial Markets and Speculation 223
11.5 Risk and Insurance 226
11.6 Bounded Rationality 228
11.7 What Bitcoin Reveals about Financial Markets 232
Further Reading 235
Lesson 2, Part II Public Policy 237
Chapter 12 Income Distribution: Predistribution 239
12.1 Income Distribution and Opportunity Cost 240
12.2 Predistribution: Unions 242
12.3 Predistribution: Minimum Wages 249
12.4 Predistribution: Intellectual Property 254
12.5 Predistribution: Bankruptcy, Limited Liability, and Business Risk 262
Further Reading 267
Chapter 13 Income Distribution: Redistribution 270
13.1 The Effective Marginal Tax Rate 272
13.2 Opportunity Cost of Redistribution: Example 275
13.3 Weighing Opportunity Costs and Benefits 278
13.4 How Much Should the Top 1 Percent Be Taxed? 282
13.5 Policies for the Present and the Future 285
13.6 Geometric Mean 286
Further Reading 286
Chapter 14 Policy for Full Employment 288
14.1 What Can Governments Do about Recessions? 289
14.2 Fiscal Policy 290
14.3 Monetary Policy 297
14.4 Labor Market Programs and the Job Guarantee 299
14.5 One Lesson Economics and Unemployment 301
14.6 Summary 306
Further Reading 306
Chapter 15 Monopoly and the Mixed Economy 308
15.1 Monopoly and Monopsony 309
15.2 Antitrust 311
15.3 Regulation and Its Limits 314
15.4 Public Enterprise 315
15.5 The Mixed Economy 319
15.6 I, Pencil 322
Further Reading 326
Chapter 16 Environmental Policy 328
16.1 Regulation 330
16.2 Environmental Taxes 332
16.3 Tradeable Emissions Permits 334
16.4 Global Pollution Problems 335
16.5 Climate Change 336
16.6 Summary 341
Further Reading 342
Conclusion 343
Bibliography 345
Index 371
What People are Saying About This
"The best book to introduce you to economics."—Ross Gittins, Sydney Morning Herald"Anyone who wants to understand the real workings and real limits of real markets should read this book.”—Ingrid Robeyns, author of Wellbeing, Freedom, and Social Justice"With apologies to Isaiah Berlin, Quiggin is a foxy hedgehog: He knows two big things, and these twin lessons—about the virtues and limits of markets—sustain a pioneering, persuasive, and even passionate case for democracy and the mixed economy. Make room for two lessons in your mind, and on your bookshelf.”—Jacob S. Hacker, coauthor of American Amnesia: How the War on Government Led Us to Forget What Made America Prosper