Action and Choice: An Introduction to Economics (Springer Texts in Business and Economics)

This textbook is based upon a philosophical method of logical deduction from basic principles such as scarcity, individual choice and subjectivism. This textbook attempts to show that all complex phenomena of economic theory such as prices of consumer goods and factors of production, saving and consumption, interest and profit, can be explained by the same primitive psychological principles of scarcity and substitution on the margin that could be used to describe economizing Robinson Crusoe on a desert island or two cavemen catching fish or exchanging apples for oranges. This textbook distils the essence of economic science prevailing in price theory before the 1930s, which the authors’ argue is superior to currently popular mainstream theory into a readable and student-friendly textbook format. This is an introductory textbook written in the tradition of Menger, Bohm-Bawerk, Mises and Hayek, instead in the tradition of Alfred Marshall and John Maynard Keynes, as almost all modern textbooks are. The authors offer a text not predicated on physics envy; on an attempt to liken economics to the physical sciences, on the basis of “empirical evidence”, statistics and verification. Acknowledgments Contents 1: What Is Economics? 1.1 Beginning of Economic Analysis: Action, Choice and Opportunity Cost 1.2 Economic Goods, Consumption and Production 1.3 Method of Economics 2: Exchange and Demand 2.1 Interpersonal Exchange – Barter 2.2 Indirect Exchange – Monetary Economy 2.3 Demand and Marginal Utility 2.4 Elasticity 3: Price Determination 3.1 How the Equilibrium Price Is Determined 3.2 Market Disequilibria 3.3 Speculative Price Determination 4: Capital and Interest 4.1 Interest Rate Determination 4.2 The Concept of Present Discounted Value 5: Production Theory: Factor Prices 5.1 Marginal Productivity and Interest 5.2 Malthus’ Error and Mises’ Butler Theorem 5.3 Pricing 5.4 Interest and Rent 6: The Business Cycle 6.1 The Functioning of the Time Market 6.2 Insufficient Aggregate Demand and Excessive Saving 7: Competition and Entrepreneurship 7.1 Static Models – Price Taker and Price Searcher 7.1.1 Price Searcher 7.2 Dynamic Theories of Competition 8: Monopoly and Anti trust 8.1 Special Privilege 8.2 Concentration Ratios 8.3 Monopoly Price 8.3.1 Refusal to Deal and Exclusive Dealing 8.3.2 Tying and Product Bundling 8.3.3 Price Discrimination 8.3.4 Predatory Pricing or Undercutting 8.3.5 Cartels 8.3.6 Merger Control 9: Theory of the Firm 9.1 Takeovers 9.2 Insider Trading 9.3 “Corporate Social Responsibility” 10: International Trade 10.1 Absolute Advantage 10.2 Comparative Advantage 10.2.1 The Effects of Tariffs 10.3 Unilateral Free Trade 11: Price Controls 11.1 Price Ceilings 11.2 Rent Control 11.3 Minimum Wage Law 11.3.1 Monopsony 12: Market Failure Theories 12.1 Public Goods 12.2 Externalities 13: Public Choice 13.1 Public Choice 13.2 Model 13.3 Why Do the Worst Tend to Get on Top? 13.4 Rational Ignorance of Voters 13.5 Bureaucracy 13.6 Rent Seeking 13.7 Conceptual Unanimity 13.8 Individualism and Collectivism 13.9 Ruling Class References 14: Economics of Labor Markets and Distribution 14.1 The Distribution of Income 14.2 Social Justice 14.3 The Economics of Discrimination 14.4 Prejudices References 15: Political Economy of Risk Control 15.1 Peltzman Effect