textbooks

"Governments have three main economic functions in a market economy:1. Governments increase efficiency by promoting competition, curbing externalities like pollution, and providing public goods. 2. Governments promote equity by using tax and expenditure programs to redistribute income toward particular groups. 3. Governments foster macroeconomic stability and growth—reducing unemployment and inflation while encouraging economic growth—through fiscal and monetary policy."

"In many ways, governments are like parents, always saying no: Thou shalt not expose thy workers to dangerous conditions. Thou shalt not pour out poisonous smoke from thy factory chimney. Thou shalt not sell mind-altering drugs. Thou shalt not drive without wearing thy seat belt. And so forth. Finding the correct balance between free markets and government regulation is a difficult task that requires careful analysis of the costs and benefits of each approach. But few people today would argue for returning to the unregulated economic jungle where firms would be allowed to dump pollutants like plutonium wherever they wanted."

"Markets do not necessarily produce a fair distribution of income. A market economy may produce inequalities in income and consumption that are not acceptable to the electorate."

"Macroeconomic policies for stabilization and economic growth include fiscal policies (of taxing and spending) along with monetary policies (which affect interest rates and credit conditions). Since the development of macroeconomics in the 1930s, governments have succeeded in curbing the worst excesses of inflation and unemployment."

"In economic affairs, success has many parents, while failure is an orphan. The success of market economies may lead people to overlook the important contribution of collective actions. Government programs have helped reduce poverty and malnutrition and have reduced the scourge of terrible diseases like tuberculosis and polio."

"The debate about government’s successes and failures demonstrates that drawing the boundary between market and government is an enduring problem. The tools of economics are indispensable to help societies find the golden mean between an efficient market mechanism and publicly decided regulation and redistribution. The good mixed economy is, perforce, the limited mixed economy. But those who would reduce government to the constable plus a few lighthouses are living in a dream world. An efficient and humane society requires both halves of the mixed system—market and government. Operating a modern economy without both is like trying to clap with one hand."

"When the price of a commodity is raised (and other things are held constant), buyers tend to buy less of the commodity. Similarly, when the price is lowered,other things being constant, quantity demanded increases."

"When changes in factors other than a good’s own price affect the quantity supplied, we call these changes shifts in supply. Supply increases (or decreases) when the amount supplied increases (or decreases) at each market price."

"A market equilibrium comes at the price at which quantity demanded equals quantity supplied. At that equilibrium, there is no tendency for the price to rise or fall. The equilibrium price is also called the market-clearing price. This denotes that all supply and demand orders are filled, the books are “cleared” of orders, and demanders and suppliers are satisfied."

"The equilibrium price and quantity come where the amount willingly supplied equals the amount willingly demanded. In a competitive market, this equilibrium is found at the intersection of the supply and demand curves. There are no shortages or surpluses at the equilibrium price."

"Many influences lie behind the demand schedule for the market as a whole: average family incomes, population, the prices of related goods, tastes, and special influences. When these influences change, the demand curve will shift."

"Elements other than the good’s price affect its supply. The most important influence is the commodity’s production cost, determined by the state of technology and by input prices. Other elements in supply include the prices of related goods, government policies, and special influences."

"Utility is a scientific construct that economists use to understand how rational consumers make decisions."

"Until the 1970s, high inflation in the United States usually went hand in hand with economic expansions; inflation tended to increase when investment was brisk and jobs were plentiful. Periods of deflation or declining inflation [...] were times of high unemployment of labour and capital."

"The translation was terrible. It employed convoluted Hebrew terms for simple economic concepts. Nevertheless, I fell in love with the book’s content. What struck me most was the realization that one can in fact think systematically about complex social phenomena and describe them in precise language. All this was new to me, and my fascination grew with every page."

"What sex is to the biology classroom, stocks and investment riskiness is to the sophomore economics lecture hall. That chapter on personal finance, put there to keep hard-boiled MIT electrical engineers awake, helped make introductory economics the largest elective course at hundreds of colleges. My great predecessors—John Stuart Mill, Alfred Marshall, Frank Taussig and Irving Fisher—were writing for their times. I was writing for the last half of the 20th century-an epoch that surpassed even my youthful optimism. Those classic authors had dealt with essentially pure capitalism. I had to grapple with the tradeoffs and opportunities inherent in the mixed economy, a social pattern that by now spreads across the continents of the Americas, Europe, Asia, and Africa."

"Samuelson's textbook has delivered a great deal of economic wisdom. For many economists, the positive side of the balance sheet has outweighed the negative. Indeed, his defenders might ask: Might the United States and the West have suffered another Great Depression if Samuelson had not emphasized the need for "automatic stabilizers"? Did not Samuelson's heralding of the "mixed" economy curb the appetite of third world countries for national socialism? We will never know, of course, but it is humbling to speculate on whether alterations in principles textbooks might have led to a different U.S. economy."

"The competitive price system uses supply-demand markets to solve the trio of economic problems — What How, and For Whom All demand relations are shown in blue. all the supply relations, in black."

"In the long run the facts win out. The fanatical simplicities perish in the Darwinian struggle for survival of useful principle. To illustrate this, listen to what I used to say to one of my generation's leading economists (a warm friend with a strong ideology that differed considerably from my own eclectic value judgments and methodology): You are a brilliant scholar, dazzlingly creative, with clear-cut economic convictions. But for you, things are either simply absurd or absurdly simple. Indeed the good fairies gave you every gift save one—the invaluable gift of "maybe.""

"Economics is not merely a game, not merely a neat puzzle to test your powers of logic, arithmetic, and mathematical virtuosity."

"Starting a baby is easy. Bringing it to full term involves labor and travail."

"Linus Pauling, so great a scholar and humanist that he was to win two Nobel Prizes, had already written a leading chemistry text—just as the great Richard Feynman was later to publish classic physics lectures. William James had long since published his great Principles of Psychology. Richard Courant, top dog at Gottingen in Germany, had not been to proud to author an accurate textbook on calculus. Who was Paul Samuelson to throw stones at scholars like these? And, working the other side of the street, I thought it was high time that we got the leaders in economics back in the trenches of general education."

"What good does it do a black youth to know that an employer must pay him $2 an hour if the fact that he must be paid that amount is what keeps him from getting a job?"

"An increased desire to consume — which is another way of looking at a decreased desire to save — is likely to boost business sales and increase investment. On the other hand, a decreased desire to consume — i.e., an increase thriftness — is likely to reduce inflationary pressure in times of booming incomes; but in time of depression, it could make the depression worse and reduce the amount of actual net capital formation in the community. High consumption and high investment are then hand in hand rather than opposed to each other."

"Figure 12-6 pulls together in a simplified way the main elements of income determination. Without saving and investment, there would be a circular flow of income between business and the public: above, business pays out wages, interest, rents, and profits to the public in return for the services of labor and property; and below, the public pays consumption dollars to business in return for goods and services. Realistically, we must recognize that the public will wish to save some of its income, as shown at the spigot Z. Hence, businesses cannot expect their consumption sales to be as large as the total of wages, interest, rents, and profits."

"Where the stimulus to investment is concerned, the system is somewhat in the lap of the Gods. We may be lucky or unlucky; and one of the few things you can say about luck is, "It's going to change." Fortunately, things need not be left to luck. We shall see that perfectly sensible public and private policies can be followed that have greatly enhanced the stability and productive growth of the mixed economy."

"Unless proper macroeconomic policies are pursued, a laissez faire economy cannot guarantee that there will be exactly the required amount of investment to ensure full employment: not too little so as to cause unemployment, nor too much so as to cause inflation. As far as total investment. ..is concemed, the laissez faire system is without a good thermostat."

"How do we measure the net national product, NNP? The general idea is simple. Figure 10-1 shows the circular flow of dollar spending in an economy with no government and no accumulation of capital or net saving going on."