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Reasonably Simple Economics: Why the World Works the Way It Does

Book Description

The goal of Reasonably Simple Economics is, not surprisingly, simple: to help us think like economists. When we do, so much of the world that seemed mysterious or baffling becomes more clear and understandable—improving our lives and providing new tools to succeed in business and career.

In a chatty style, economist Evan Osborne explains the economic foundations behind the things we read about or see in the news everyday:

  • Why prices for goods and services are what they are

  • How government spending, regulation, and taxation can both hinder and help the economy

  • Why and how some people get fabulously rich

  • How entrepreneurs reorganize society beneficially

  • Why markets sometimes fail and when or if governments should intervene when they do

  • How economics and statistics can explain such things as discrimination in hiring and providing services (and why discriminators are shooting themselves in the foot), why we're smarter than we've ever been, and how technology makes the idea of Earth's "carrying capacity" meaningless

Along the way, you will learn the basic concepts of economics that well-educated citizens in democratic countries should know, like scarcity, opportunity cost, supply and demand, all the different ways economies are "managed," and more.

In the manner of The Armchair Economist, The Undercover Economist, or Naked Economics, Osborne uses current examples to illustrate the principles that underlie tragedies like the Greek economy or the global market meltdown of 2008, and triumphs like the continuing dominance of Silicon Valley in the tech world or why New York City markets are stuffed with goods despite the difficulty in getting them there.

As Osborne points out, the future, in economic terms, has always been better than the past, and he shows you how to use that knowledge to improve your life both intellectually and materially.

What you'll learn

  • How to think like an economist and better understand the world and your place in it

  • Basic economic concepts like supply and demand and marginal costs and benefits

  • How and why people "respond to incentives," and why this is a life-changing idea

  • Why "the crowd" is invariably wise and what to learn from it

  • Why speculators and "middlemen" improve life not just for themselves but for the rest of us

  • Why living standards have risen dramatically in the last century and why they will continue to as time marches on

  • Why taking advantage of "decentralized knowledge" to pounce on opportunity is critical for your success

Who this book is for

The audience for this book is anyone who wants to know answers to such questions as why the price of gasoline rises and falls dramatically, whether we are in fact "mortgaging our children's future" through deficit spending, what the economic principles behind every great fortune are, and anything else governed by the principles of economics (which is most things).

Table of Contents

  1. Title Page
  2. Apress Business: The Unbiased Source of Business Information
  3. Dedication
  4. Contents
  5. About the Author
  6. Acknowledgments
  7. Preface
  8. Chapter 1: Introduction
    1. The Foundation of Modern Economics: The Idea of Scarcity
    2. Rules and Freedom
    3. Rules amid the Chaos
    4. Answers to In-Text Questions
    5. Economics Out There12
  9. Chapter 2: Supply and Demand, Considered Separately
    1. Opportunity Cost
    2. Sunk vs. Marginal Costs
    3. Costs and Supply
    4. Demand
    5. Elasticity of Demand
    6. Answers to In-Text Questions
    7. Economics Out There
  10. Chapter 3: Supply and Demand, Considered Together
    1. Equilibrium
    2. Changes in Supply and Demand
    3. Price Controls
  11. Chapter 4: The Economics of Information or Knowledge
    1. Decentralized Knowledge and the Spontaneous Order
    2. The Importance of Learning from Mistakes
    3. Competition
    4. Profit as Markup
    5. The Market as What We Know Together
    6. Monopoly and Its Meaning, or Lack Thereof
    7. Speculation
    8. Economics Out There
  12. Chapter 5: Public and Private Decision Making
    1. Who Is the Government, and What Does It Want?
    2. Problem 1: Government as Subject to Special-Interest Capture
    3. Problem 2: The Incentive to Accumulate Knowledge in the Private Sector and in the Government
    4. Problem 3: The Democracy Problem
    5. Problem 4: The Abuse-of-Power Problem
  13. Chapter 6: Who Makes How Much, and Why
    1. The Market for Compensation
    2. Power in the Employer-Employee Relationship
    3. The Distribution of Income
    4. The Economics of Taste-Based Discrimination
    5. Statistical Discrimination
    6. Who Makes What, by Ethnicity and Sex
  14. Chapter 7: The Middleman and the Entrepreneur
    1. The Middleman
    2. Financial Middlemen
    3. The Middleman in Society
    4. The Entrepreneur More Generally
    5. The Entrepreneur as Residual Claimant
    6. The Entrepreneur as Social Reorganizer
    7. Answers to In-Text Questions
    8. Economics Out There
  15. Chapter 8: Time and Risk
    1. Investment
    2. Interest Rates
    3. Risk and Risk Trading
    4. Answers to In-Text Questions
    5. Economics Out There
  16. Chapter 9: The Entrepreneur and Some Economics of the Future
    1. Pessimism Amidst Miracles
    2. The Way Things Used to Be
    3. How Intellectuals and Politicians Have Seen the Future in the Past—a Brief History
    4. Why We Think Things Keep Getting Worse
    5. How Things Got Better
  17. Chapter 10: T he Things Only Government Can Do
    1. Setting the Table for the Entrepreneur and the Market
    2. When Prices Are Wrong
    3. Positive Externalities
    4. What to Do
    5. The “Market Failure” of Nonexcludability and Nonrivalry
    6. Excludability Is the Key Issue
    7. The Creation of Scientific Knowledge
    8. Crowding
    9. The Taxonomy of “Market Failure” and its Absence
    10. Conclusion
  18. Chapter 11: Macroeconomics: The Big, Often Blurry Picture
    1. The Concept of Gross Domestic Product
    2. The Broader Significance of GDP
    3. Unemployment
    4. Money
    5. Inflation
  19. Chapter 12: Macroeconomics: Stabilizing the Economy, or Not
    1. The Goals of Economic Policy
    2. The “Business Cycle”
    3. Economic Stabilization—Monetary Policy
    4. Economic Stabilization—Fiscal Policy
    5. Lost in Translation—How the Economics of Keynes Became Keynesian Economics
  20. Chapter 13: Macroeconomics: The Short and the Long Runs
    1. What Are We Aggregating?
    2. In the Long Run, the Short-Run Bill Comes Due
    3. Is Stabilization, in the End, the Primary Economic Objective?
    4. Economic Policy for the Long Term
    5. On Government Budget Deficits and Your Children
  21. Index