Introduction to Economics
J. Patrick Gunning
September 8, 2004 (Under Construction)
Copyright © 2004 by James Patrick Gunning
Contents
Preface xi
Chapter 1: The Market Economy
Chapter 2: Wants, Goods, and Cost
Chapter 3: Resources
Chapter 4: The Market Economy, Opportunity Costs and the Production of Economic Knowledge
Chapter 5: What Causes Economic Growth?
Chapter 6: Unemployment
Chapter 7: Money
Chapter 9: Money and the Business Cycle: A Deeper Analysis
Chapter 10: International Trade
Detailed Contents
Preface
Chapter 1: The Market Economy
1. The Conditions of the Market Economy
a. The Private Property System
(1) The Two Characteristics
(2) A Complete Property System
(3) Evolution of Private Property Rights
(4) The Right of First Possession
(5) The Right to Exchange and Equality Under the Law
b. Specialization
c. Money
(1) Money as a Medium of Exchange
(2) Money as a Store of Value
(3) Money as a Unit of Accounting
(4) Learning to Use Money
d. Free Enterprise
e. Remarks
2. Roles in the Market Economy
3. The Pure Market Economy
4. Impossibility of a Pure Market Economy
a. Incomplete Property System
b. Restrictions on Completely Free Enterprise
5. Why Study Economics
6. Plan of This Book
Chapter 2: Wants, Goods and Costs
1. Wants
a. The Special Meaning of Wants in Economics
b. Wants vs. Needs
2. Goods
a. Wants and Goods
(1) Generalized Wants and Specific Goods
(2) Wants Change Over Time
(3) Time Preference
(4) Wants for Specific Goods are Always Relative: "Everything Has a Price"
(5) No Free Goods in Economics
(6) Preference Structure
b. Choices Express Wants for Marginal Units
(1) Inframarginal Units
(2) The Water-Diamond Paradox
(3) Marginal Characteristics or Qualities
c. Durable and Perishable Goods
(1) Depreciation and Appreciation
d. Differences Among Goods
e. Complementarity and Substitutability Among Goods
f. Goods That Satisfy Joint Wants
g. How Do we Know That X is a Good?
(1) Different Goods for Different People
(2) The Definition of a Good and Personal Value Judgments
3. Cost
a. Opportunity Cost
b. Opportunities to Use Time
Appendix: The Assumption That Wants Are Given
Chapter 3: Resources
1. Types of Resources
a. Labor
b. Land
c. Capital Goods
d. Human Capital
e. Resources, Planning and Costs: the Definition of a Resource
f. Specialized and Non-Specific Resources
2. Human Capital to the Solitary Actor
a. The Breadth and Depth of Human Capital in a Market Economy
b. Types of Human Capital to the Solitary Actor
(1) Knowledge of Wants
(2) Technical Knowledge
(3) Knowledge of Knowledge
(4) Knowledge of How to Acquire Knowledge
c. The Complementary and Transformation Character of Human Capital
(1) The Complementary Character
(2) The Transformation Character
d. The Structure of Technical Knowledge
(1) Orders of Technical Knowledge
(2) Structure of Technical Knowledge Instead of Orders
e. The Structure of Production
3. Human Capital and Entrepreneurship
a. Human Capital, Planning, and Want Satisfaction in Barter
(1) How Trade and Specialization Economize on the Acquisition and Use of Human Capital
(2) Coordination and Synchronization
b. Human Capital, Planning, and Want Satisfaction in a Market Economy
(1) Trade and the Incentive to Produce Human Capital
c. Entrepreneurship
(1) Entrepreneurs as Producers and Financiers
(2) Entrepreneurship and Human Capital
Chapter 4: The Private Property System, Opportunity Costs,
and the Production of Economic Knowledge
1. Adam Smith and the Wealth of Nations
a. The Division of Labor by an Employer
b. Division of Labor in Small Business and the Trades
c. Division of Labor vs. Diversity of Human Capital
2. Specialization According to the Principle of Lowest Opportunity Cost
a. The Potential Benefit of Exchanging Legal Rights to Use Resources
b. The Principle of Lowest Opportunity Cost
3. Specialization in Single-stage Production
a. Specialization Under Three Initial Ownership Situations
b. Creation of Rights
c. Apparent Exceptions
(1) Begrudging
(2) Satisfaction from the Work
d. Shared Specialization
e. Lowest Opportunity Cost vs. Highest Benefit
4. Specialization in Two-Stage Production
a. The Example
b. The Right to Exchange
5. Issues Related to Specialization
a. Trade, Comparative Advantage, and the Production of Human Capital
(1) Absolute Advantage and Comparative Advantage
(2) Comparative Advantage and Opportunity Cost
(3) Comparative Advantage and Gains from Trade
(4) The Theory of International Trade Based on Comparative Advantage
(5) The Production of Comparative Advantage
b. Intellectual Property Rights
c. Harm Due to Specialization
6. Conclusion
Chapter 5: What Causes Economic Growth?
1. Adam Smith's Theory of Economic Growth
a. The Private Property System
b. Free Enterprise
(1) The Notion of the Invisible Hand
c. Smith as a Defender of the Wealthy
(1) Ill-gotten Wealth
(2) Gains for the Poor Even in the Worst Case Scenario
d. Other Factors Influencing Economic Growth
(1) The Physical Environment
(2) Abundance of Natural Resources
e. Laws that Limit Growth
(1) Trade Associations
(2) Public Welfare
2. Critics of Smith and Classical Economics
a. Natural Human Limitations: Malthus' Principle of Population
(1) Reply to Malthus
b. Political, Psychological, and Social Limitations: Marx's Theory of Revolution
(1) Over-production Crisis
(2) Alienation
(3) Revolution and Class Conflict
(4) Reply to Marx
3. Carl Menger Briefly
4. Frank Knight: Economic Growth and Business Success
5. A Modern View
a. The Desire to Avoid a Reduction in One's Standard of Living
b. Competition
c. Economic Growth
Chapter 6: Unemployment
1. The Meaning of Unemployment
a. Labor and Work
b. The Production of Work
c. Unemployment Defined
(1) Unemployed vs. Not in the Work Force
(2) Two Immediate Causes of Ordinary Unemployment
2. Changes in Market Conditions as Causes of Unemployment
a. How Producers Adjusts to Offsetting Changes in Demand
(1) The Concept of Offsetting Changes in Demand
(2) Effects on Producers of Oranges
(3) Effects on the Producers of Apples
(4) Unemployment
b. How Producers Adjust to Changes in Supply Conditions
(1) Changes in Prices of Complementary Resources
(2) Work-Saving and Work-Using Technological Advances
(3) There Must Be at Least Some Unemployment
c. Unemployment in the Market Economy
d. Can Unemployment be Caused by a Lack of Demand for Consumer Goods in General?
3. Government Policies to Deal with Unemployment
a. Prohibition of Unemployment
(1) Layoffs Prohibited Unless the Employer Shuts Down the Business
(2) A Law the Completely Prohibits Layoffs
b. Unemployment Compensation
c. Prohibiting the Use of New Technology
Chapter 7: Money
1. The Types of Money
a. Commodity Money
(1) Why Commodity Money: the Theory of Barter Exchange
(2) Gold as a Medium of Exchange
b. Representative Money
c. Credit Money and Banks
d. Government Money
e. Commodity Money and Security
2. Money in Modern Times
a. Three types of Transferrable Deposits
b. Money in International Exchange
Chapter 8: Introduction to Money and the Business Cycle
1. Introduction to the Quantity Theory of Money
a. Observations Made by Classical Economists
b. Money's Services Do Not depend on Its Quantity
2. The Mathematical Form of the Quantity Theory of Money
a. Two Simple Uses
(1) Example One
(2) Example Two
b. The Artificial Nature of the Examples
3. An Introductory Monetary Theory of the Business Cycle
a. The Nature of a Business Cycle
b. The Monetary Theory
(1) The Expansionary Phase
(2) Transition to the Contractionary Phase
(3) The Contractionary Phase
(4) And After the Cycle?
(5) Recession, Depression, and Other Business Cycle Terms
4. An Innovation Theory of the Business Cycle
Chapter 9: Money and the Business Cycle: A Deeper Analysis (1)
1. Money Prices, Communication, and Planning
a. Communication Between Producer-retailers and Consumers
b. Communication from Resource Suppliers
c. Importance of Price Communication
d. Communication of Consumer Wants
(1) Communication of Wants for Specific Goods
(2) Communication of Time Preference
2. Money and Work
a. How an Increase in Money Could Cause an Increase in Work
b. But the Increase Would Be Temporary
c. Real Income and Money Income
3. How the Central Bank Can Increase the Quantity of Money
4. Entrepreneurial Errors
a. The Assumption that Pure Entrepreneur Do Not Expect Future Prices to Rise
5. Effects on the Distribution of Purchasing Power
a. RecoChanges in Money Affect Deliberation and Planning
b. Adjustment to an Accidental Treasure Find
c. Adjustment to a Central Bank's Increase in Money
6. Anticipation of a Change in the Quantity of Money
7. The Production of Money and Money Seeking
8. Business Cycles
Chapter 10: International Trade
1. Concepts in International Trade
2. Gains and Losses from Joining the International Trading Community: The Single Currency Case
3. International Trade with National Currencies Money and Exchange RateEntrepreneurial Errors
a. The Assumption that Pure Entrepreneur Do Not Expect Future Prices to Rise
4. Effects on the Distribution of Purchasing Power
a. RecoChanges in Money Affect Deliberation and Planning
b. Money and Work
(1) Too Much Money Chasing Too Few Goods
(2) Real Income and Money Income
c. Adjustment to an Accidental Treasure Find
d. Adjustment to a Central Bank's Increase in Money
5. Anticipation of a Change in the Quantity of Money
6. The Production of Money and Money Seeking
7. Business Cycles
Gunning’s Address
J. Patrick Gunning
Professor of Economics/ College of Business
Feng Chia University
100 Wenhwa Rd, Taichung
Taiwan, R.O.C.
Please send feedback
Email: gunning@fcu.edu.tw