Basic Economics: A Citizen's Guide to the Economy

By Thomas Sowell | Go to book overview

Chapter I
What Is Economics?

To know what economics is, we must first know what an economy is. Perhaps most of us think of an economy as a system for [the production and distribution of the goods and services we use in everyday life. That is true as far as it goes, but it does not go far enough. The Garden of Eden was a system for the production and distribution of goods and services, but it was not an economy, because everything was available in unlimited abundance. Without scarcity, there is no need to economize -- and therefore no economics. A distinguished British economist named Lionel Robbins gave the classic definition of economics:

Economics is the study of the use of scarce resources which have alternative uses.

What does "scarce" mean? It means that people want more than there is. This may seem like a simple thing, but its implications are often grossly misunderstood, even by highly educated people. For example, a feature article in the New York Times of August 1, 1999 laid out the economic woes and worries of middleclass Americans -- one of the most affluent groups of human beings ever to inhabit this planet. Although the story includes a picture of a middle-class family in their own swimming pool, the main headline says: "The American Middle, Just Getting By." Other headings in the article include:

Wishes Deferred and Plans Unmet Goals That Remain Just Out of Sight Dogged Saving and Some Luxuries

-1-

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Basic Economics: A Citizen's Guide to the Economy
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Preface ix
  • Acknowledgements xi
  • Chapter I - What Is Economics? 1
  • Part I - Prices 5
  • Chapter 2 - The Role of Prices 7
  • Chapter 3 - Price Controls 21
  • Chapter 4 - An Overview 39
  • Part II - Industry and Commerce 57
  • Chapter 5 - The Rise and Fall of Businesses 59
  • Chapter 6 - The Role of Profits -- and Losses 73
  • Chapter 7 - Big Business and Government 89
  • Chapter 8 - An Overview 105
  • Part III - Work and Pay 125
  • Chapter 9 - Productivity and Pay 127
  • Chapter 10 - Controlled Labor Markets 149
  • Chapter 11 - An Overview 167
  • Part IV - Time and Risk 173
  • Chapter 12 - Investment and Speculation 175
  • Chapter 13 - Risks and Insurance 193
  • Chapter 14 - An Overview 207
  • Part V - The National Economy 213
  • Chapter 15 - National Output 215
  • Chapter 16 - Money and the Banking System 223
  • Chapter 17 - The Role of Government 237
  • Part VI - The International Economy 267
  • Chapter 19 - International Trade 269
  • Chapter 20 - International Transfers of Wealth 283
  • Chapter 21 - An Overview 297
  • Part VII - Popular Economic Fallacies 303
  • Chapter 22 - Non-Economic Values 305
  • Chapter 23 - Prices and Purchasing Power 315
  • Chapter 24 - Business and Labor 329
  • Chapter 25 - An Overview 343
  • Sources 347
  • Index 359
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