Economics in Two Lessons: Draft TOC

At the suggestion of reader Newtownian, I’m posting a draft Table of Contents for Economics in Two Lessons<em. It's over the fold, with a better formatted version here

I. Introductory
Preface
Outline of the book
Further reading
II. Lesson 1
Chapter 1 What is opportunity cost?
Production cost and opportunity cost
Fixed cost, variable cost marginal cost and sunk cost
Labour and wages
Households, prices and opportunity costs
The intellectual history of opportunity cost*
Further reading Chapter 1
A. Chapter 2 Markets, opportunity cost and equilibrium
TISATAAFL
Gains from exchange
Trade and comparative advantage
Competitive equilibrium
Adam Smith and the division of labor*
Further reading Chapter 2
Chapter 3 Time, information and uncertainty
3.1 Interest and the opportunity cost of (not) waiting
3.1.1 The production side
3.1.2 The consumer side
3.1.3 Which rate of interest?
3.2 Information
3.2.1 Information economics and Robinson Crusoe
3.3 Uncertainty
Further reading Chapter 3
B. Optional section
Applying Lesson 1
Chapter 4 Market applications of Lesson 1
Tricks and traps
Airfares
The cost of (not) going to college
Optional extra
TANSTAAFL: What about “free” TV, radio and Internet content? j
Further reading Chapter 4
Chapter 4 Policy applications of Lesson 1
To help poor people, give them money
Road pricing
Fish and tradeable quota
5.4.1 The creation of property rights
A license to print money: property rights and telecommunications spectrum
Further reading Chapter 5
Lesson 2
A. Chapter 7 Property rights and income distribution
7.1 What Lesson 2 tells us about property rights and income distribution
7.2 Welfare theorems
7.3 The starting point
7.4 Property rights and natural law
7.5 Conclusion
7.6 Pareto and inequality*
Further reading Chapter 7
B. Chapter 8 Unemployment
Chapter 8 Intro
8.1 Macroeconomics and microeconomics
8.2 The business cycle
8.3 The experience of the Great and Lesser Depressions
8.4 Are recessions abnormal?
8.5 Unemployment and opportunity cost
8.6 The macro foundations of micro
8.7 Hazlitt and the glazier’s fallacy
Further reading Chapter 8
C. Chapter 9 Market failure: non-competitive markets
Chapter 9 Intro
9.1 Economies of size
9.2 Monopoly
Natural monopoly
Unnatural monopoly
One Lesson defenses of monopoly
9.3 Oligopoly
9.4 Monopsony and labor markets
9.5 Bargaining
9.6 Monopoly and inequality
Further reading Chapter 9
Chapter10: Market failure: Externalities and pollution
10.1 Externalities
10.2 Public goods
10. 3 Pollution
10.4 Climate Change
One Lesson Economists and Climate Change
Infrastructure: possibly to be added later
10.5 The origins of externality (optional)
Further reading
Chapter 11: Market failure: Information, uncertainty and financial markets
10.1 Market prices, information and public goods
10.2 Speculation
10.3 Risk and insurance
10.4 Financial markets, bubbles and busts
10.7 (Optional) Bitcoin
Further reading
IV. 4. Applying Lesson 2: What can governments do?
Chapter 11: Income distribution
Chapter 12 Macro policy
Fiscal policy
The multiplier
Automatic stabilisers and destabilisers
Monetary policy
Zero lower bound
Labor market policies
Chapter 12 Financial markets
Chapter 13 Environment and externalities
Chapter 14 Market failure
Monopoly, monopsony and regulation
Public ownership, nationalisation and privatisation
Further reading
Chapter 15 Knowledge and information
Chapter 16 Public Goods
Chapter 17 Conclusion

11 thoughts on “Economics in Two Lessons: Draft TOC

  1. Thanks John

    This looks very interesting and wide ranging outside of the usual focus of other progressive economics article such as the RER material. In my opinion it does justice to your new book’s title substantially more than the introduction you provided earlier.

    Much appreciated.

  2. Nice. I hope somewhere in there you can smuggle in your earlier suggestion of some government socialist banking. Because this is a patriotic matter, I shall start putting forward reasons why I think you have been spectacularly vindicated on this early suggestion. And I will try and convince you that you were really understating your case. No doubt anything I say will be a mere reminder and that you will have pondered these things before. But even a reminder can wind up a late entry. So I don’t want any credit since we have a country to save.

  3. “9.4 Monopsony and labor markets” I think this topic is more relevant than ever and yet worker bargaining position has been bitch-slapped around so much we have no real snap any more. I don’t see a time that we ever got this side of things right. We wanted to give management immense decision-making flexibility, so their decisions could bake a bigger pie, but still we have the power to grab a bigger part of that pie … in the context of a sort of diffused monopsony power, where some of the technical conclusions still held more or less for practical purposes. I was there when we had the power to grab a bigger part of the pie. But the union really cramped management flexibility. Now the union doesn’t cramp management flexibility very much, but we have no power to make these guys really work for a living.

  4. I very much look forward to reading this John.

    Apologies for this aside, but I see that Aaron Patrick of the AFR is fingering you as a Marxist:

    ‘Alberici’s arguments attracted some support. Among them was anti-business blogger Michael West (although he was miffed Alberici got all the attention), former Labor minister Craig Emerson (who makes a living out of his political connections) and left-wing academic John Quiggin (who cites Marx and Engels in the introduction to his new economics textbook).’

    http://www.afr.com/opinion/why-emma-alberici-poses-a-danger-to-the-abcs-impartiality-20180220-h0wcwn#ixzz57hROwhN0

  5. @Tim Dymond

    As I no longer read the AFR, I rely on friendly alerts. I’ve tweeted back at him, and also Helen Razer, who attacked me from the opposite direction.

  6. As I read your TOC, you intend to discuss quotas in fish before a broader treatment of property rights. If that is using the modern fishery example to remind readers why property rights emerged in our much earlier human development, then I understand the progression in your manuscript. Recent attempts at formal management of wild stock marine fisheries offer useful illustrations of the difficulties of merging economic theory with practice. I say ‘formal’ because there have long been informal arrangements in some fisheries that probably replay early stages towards property rights in/on land. When mullet schools were netted off beaches on the east coast of Australia, stretches of beach were the ‘territory’ of different fishing crews. Sawn-off sections of oars helped to maintain those ‘rights’.

    Fish are one of the ‘capture’ resources. Provided the appropriate agency has kept some simple statistics from the early exploitation of a stock of fish, the Gordon-Schaefer relationship will show the point of most efficient commercial operation – maximum economic yield. If access to the stock remains open, externalities will drive the fishery past that optimum point, and on to nigh-certain failure. Classic theory shows two common ways to handle externalities – taxes and property rights. As it happens, in South Australia, there are some fisheries which have been brought closer to that optimum yield than in most other places in the world. The fundamental tool has been rigorous limits on entry. An earlier administration did try to use fees to refine management, and suffered the onslaught of the then Adelaide ‘News’. This restricted subsequent tools of management to the simple property right; a rigorously fixed number of licences in each fishery, and the power of the government agency to set a limit on the total catch for those licence holders. About the only other refinement possible in those circumstances was to allow the licence holders to trade amongst themselves for their share of that catch – the tradeable quota. In South Australia, this process has brought the rock lobster fishery pleasingly close to best economic yield. The prawn fisheries, which are less able to trade quota, are still relatively inefficient overall – although doing much better than open-access stocks elsewhere in the world. The prawn fishery in Spencer Gulf probably could retire two-thirds of the fleet but continue to take much the same catch. It seems that such potential gains in revenue to each licensee are not sufficient to persuade licensees to give up what they see as their independence, to form a true co-operative.

    Alternatively, you may be considering tradeable quotas as a special case in managing capture resources. My reading of the experiment with commercial abalone capture in Tasmania is that ensuring the necessary confidence in compliance could be quite expensive – and that defining the ‘right’ to take fish has taken up a lot of (no doubt expensive) time in the courts.

  7. @Ian Kirkegaard

    Turns out that when it comes to massively increasing the productivity of the ocean what you really need is sex hotels for sea life. In that the ocean has all the energy, and the critters exist in a mineral bath. But there is nowhere for the sea creatures to run and hide and breed in peace.

    Once you provide artificial reefs the critters start breeding to such an extent that their offspring spill out of their hiding places and an ecology is established. What this means is the best model is probably hunter-gatherer, but with socialism providing the artificial reefs.

    Of course there is a place for the “animal husbandry” model which would be where we would slot aquaculture. But the real productivity boost ought to be where socialist reef-building is combined with old-time hunter-gathering.

  8. I must give credit to the loveable Barry Brook for putting me onto the importance of artificial reefs. He’s a well-meaning fellow with a good eye for excellent solutions.

  9. @Graeme Bird
    Graeme – I had been thinking over Prof Quiggin’s focus on ‘opportunity costs’. In wild stock fisheries, opportunity costs are foregone because remarkably few fisheries are managed at their best economic yield. Part of the problem there might be that governments find it difficult to comprehend just how ‘profitable’ a fishery might be if they leave it to nature to generate the resource, but manage fishing methods to maximise the economic rent. Where those few fisheries that have been kept somewhere near that point can run into further trouble is that those outside the licensed group make strong representations to governments to spread the wealth by issuing more licences. The current catchphrase is ‘jobs and growth’.

    By comparison, fish farming sets out to do the work that nature does for free, and incurs extra costs for alienating parts of the inshore waters, enclosures, spawning and nursery facilities, veterinary services (a big growth industry in this case) and food. In too many cases it simply converts a large quantity of unfashionable fish into a much less quantity of more fashionable fish, but the media continue to present this as the future way to feed the world.

    There are many interesting stories in fisheries management – I was trying to keep the focus on those ‘opportunity costs’.

  10. @10 (and earlier) Thanks for these useful comments, Ian. I think I will cover most of this ground, certainly with respect to informal common property arrangements. But please, keep following the series and comment when this chapter comes up.

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