The Economics Book: The Big Ideas Simply Explained PDF by DK Publishing


The Economics Book: The Big Ideas Simply Explained

by DK Publishing

The Economics Book: The Big Ideas Simply Explained




20 Property should be private Property rights

22 What is a just price? Markets and morality

24 You don’t need to barter when you have coins The function of money

26 Make money from money Financial services

30 Money causes inflation The quantity theory of money

34 Protect us from foreign goods

Protectionism and trade

36 The economy can be counted Measuring wealth

38 Let firms be traded

Public companies

39 Wealth comes from the land

Agriculture in the economy

40 Money and goods flow between producers and consumers The circular flow of the economy

46 Private individuals never pay for street lights

Provision of public goods and services


52 Man is a cold, rational calculator

Economic man

54 The invisible hand of the market brings order

Free market economics

62 The last worker adds less to output than the first

Diminishing returns

63 Why do diamonds cost more than water?

The paradox of value

64 Make taxes fair and efficient

The tax burden

66 Divide up pin production, and you get more pins

The division of labor

68 Population growth keeps us poor

Demographics and economics

70 Meetings of merchants end in conspiracies to raise prices

Cartels and collusion

74 Supply creates its own demand

Gluts in markets

76 Borrow now, tax later

Borrowing and debt

78 The economy is a yo-yo

Boom and bust

80 Trade is beneficial for all

Comparative advantage


90 How much should I produce, given the competition?

Effects of limited competition

92 Phone calls cost more without competition


98 Crowds breed collective insanity

Economic bubbles

100 Let the ruling classes tremble at a communist revolution

Marxist economics

106 The value of a product comes from the effort needed to make it

The labor theory of value

108 Prices come from supply and demand

Supply and demand

114 You enjoy the last chocolate less than the first

Utility and satisfaction

116 When the price goes up, some people buy more

Spending paradoxes

118 A system of free markets is stable

Economic equilibrium

124 If you get a pay raise, buy caviar not bread

Elasticity of demand

126 Companies are price takers not price makers

The competitive market

130 Make one person better off without hurting the others

Efficiency and fairness

132 The bigger the factory, the lower the cost

Economies of scale

133 The cost of going to the movies is the fun you’dhave had at an ice rink

Opportunity cost

134 Workers must improve their lot together

Collective bargaining

136 People consume to be noticed

Conspicuous consumption

137 Make the polluter pay

External costs

138 Protestantism has made us rich

Religion and the economy

140 The poor are unlucky, not bad The poverty problem

142 Socialism is the abolition of rational economy

Central planning

148 Capitalism destroys the old and creates the new

Creative destruction


154 Unemployment is not a choice Depressions and unemployment

162 Some people love risk, others avoid it

Risk and uncertainty

164 Government spending boosts the economy by more than what is spent

The Keynesian multiplier

166 Economies are embedded in culture

Economics and tradition

168 Managers go for perks, not their company’s profits

Corporate governance

170 The economy is a predictable machine

Testing economic theories

171 Economics is the science of scarce resources

Definitions of economics

172 We wish to preserve a free society

Economic liberalism

178 Industrialization creates sustained growth

The emergence of modern economies

180 Different prices to different

people Price discrimination


186 In the wake of war and depression, nations must cooperate

International trade and

Bretton Woods

188 All poor countries need

is a big push

Development economics

194 People are influenced by

irrelevant alternatives

Irrational decision making

196 Governments should do

nothing but control the

money supply

Monetarist policy

202 The more people at work,

the higher their bills

Inflation and unemployment

204 People smooth

consumption over their

life spans Saving to spend

206 Institutions matter

Institutions in economics

208 People will avoid work if

they can Market information

and incentives

210 Theories about market

efficiency require many


Markets and social outcomes

214 There is no perfect voting

system Social choice theory

216 The aim is to maximize

happiness, not income

The economics of


220 Policies to correct markets

can make things worse

The theory of the second best

222 Make markets fair

The social market economy

224 Over time, all countries

will be rich

Economic growth theories

226 Globalization is not

inevitable Market integration

232 Socialism leads to

empty shops Shortages in

planned economies

234 What does the other man

think I am going to do?

Game theory

242 Rich countries impoverish

the poor Dependency theory

244 You can’t fool the people

Rational expectations

248 People don’t care

about probability

when they choose

Paradoxes in decision making

250 Similar economies can

benefit from a single

currency Exchange rates

and currencies

256 Famine can happen

in good harvests

Entitlement theory




262 It is possible to invest

without risk

Financial engineering

266 People are not

100 percent rational

Behavioral economics

270 Tax cuts can increase

the tax take

Taxation and

economic incentives

272 Prices tell you everything

Efficient markets

273 Over time, even the

selfish cooperate with

others Competition

and cooperation

274 Most cars traded will

be lemons

Market uncertainty

276 The government’s

promises are incredible

Independent central banks

278 The economy is chaotic

even when individuals

are not

Complexity and chaos

280 Social networks are

a kind of capital

Social capital

281 Education is only a

signal of ability

Signaling and screening

282 The East Asian state

governs the market

Asian Tiger economies

288 Beliefs can trigger

currency crises

Speculation and

currency devaluation

294 Auction winners pay

over the odds

The winner’s curse

296 Stable economies contain

the seeds of instability

Financial crises

302 Businesses pay more

than the market wage

Incentives and wages

303 Real wages rise during

a recession

Sticky wages

304 Finding a job is like

finding a partner or a

house Searching and


306 The biggest challenge

for collective action is

climate change

Economics and

the environment

310 GDP ignores women

Gender and economics

312 Comparative advantage

is an accident

Trade and geography

313 Like steam, computers

have revolutionized


Technological leaps

314 We can kick-start poor

economies by writing

off debt

International debt relief

316 Pessimism can destroy

healthy banks

Bank runs

322 Savings gluts abroad fuel speculation at home

Global savings imbalances

326 More equal societies grow faster

Inequality and growth

328 Even beneficial economic reforms can fail

Resisting economic change

330 The housing market mirrors boom and bust

Housing and the economic cycle





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