Economics and Contemporary Issues with Economics Applications Card

by Edgmand, Michael R.; Moomaw, Ronald L.; Olson, Kent W.

• ISBN13: 9780324171938
• ISBN10: 0324171935
• Edition: 6th
• Format: Paperback
• Copyright: 2003-04-02
• Publisher: South-Western College Pub

Summary

This text examines major issues pertaining to education, health care, Social Security, unemployment, inflation, and international trade. It also examines social and political phenomena, such as the collapse of communism and central planning, the role of government in a modern economy, crime and drugs, poverty, and the failure of some economies to grow. The book maximizes the advantages of the issues approach by examining issues that interest students, while developing core economic principles, providing insights and challenges, and an analytical framework - all of which emphasize critical thinking. Students who study this textbook will develop an increased interest in economics, seeing it as important in understanding issues that affect them personally, as well as in understanding today's headlines. This book develops principles and applications to issues more thoroughly and provides much more of an international perspective than most of the others like it on the market.

Table of Contents

Preface	xiii
To the Student	xxiii
Economic Growth: An Introduction to Scarcity and Choice	1	(26)
International Perspective: China: Economic Growth and Poverty	3	(13)
Recent Growth Experiences	3	(3)
Sources of Economic Growth	6	(1)
Production Possibilities for the Economy	7	(3)
The Best Combination of Goods and Services: Consumption Versus Growth	10	(2)
Resource Accumulation, Technological Improvements, and Efficiency Improvement	12	(2)
The Importance of Productivity Growth	14	(1)
Productivity Growth: What Can We Expect in the ``New Economy''?	15	(1)
Insights: Were the Good Old Days Really Better?	16	(7)
The Contribution of Capital Intensity Growth: The New Economy?	18	(1)
The Contribution of Technical Change: The New Economy?	18	(2)
Economic and Productivity Growth in Various Parts of the World	20	(1)
Growth in Europe and Japan: Catching Up	20	(2)
Developing Countries after 1950: Some Grow, Some Don't	22	(1)
International Perspective: Economic Freedom and Economic Growth in Developing Countries	23	(4)
Summary	24	(3)
An Introduction to Economic Systems and the Workings of the Price System	27	(38)
Market Economic Systems: An Introductory Look	29	(3)
What Does an Economic System Do? It Coordinates	32	(1)
International Perspective: What Happened in China?	33	(17)
The Division and Specialization of Labor	34	(2)
Economic Coordination and the Market System	36	(1)
The Price System as Coordinator	36	(1)
Demand	36	(3)
Supply	39	(2)
Putting the Pieces Together: Demand and Supply	41	(3)
Comparative Systems: An Introductory Sketch	44	(1)
The Price System	44	(1)
Information, Rationing, and Motivation in a Market Economy	45	(3)
Information, Rationing, and Motivation in a Command Economy	48	(1)
Systems and Coordination	49	(1)
Insights: Can Socialism Use the Price System?	50	(9)
Transitions to a Market Economy: Some Experiences	51	(1)
Stable Prices and the Monetary System	51	(3)
Other Economic Reforms	54	(5)
International Perspective: Cowboy Capitalism in Russia?	59	(6)
Additional Thoughts on Transition Economics	61	(1)
Summary	62	(3)
Inefficiency: The Pervasive Economic Problem	65	(28)
Introduction	65	(1)
Rules for Achieving Efficiency in Resource Allocation	66	(1)
The Competitive Market: An Example of Efficiency in Resource Allocation	66	(2)
Market Failure: Inefficiency in the Private Sector	68	(1)
Monopoly	68	(2)
External Benefits	70	(2)
Public Goods	72	(1)
External Costs	72	(2)
Nonexistent Markets	74	(1)
Incomplete Markets	74	(1)
Government Failure: Inefficiency in the Public Sector	75	(1)
Rent Controls	75	(1)
Agricultural Price Supports	76	(1)
Government-Subsidized Medical Care	76	(2)
Minimum Wage	78	(1)
Taxes	78	(7)
Insights: What Does Government Really Cost? The Practical Significance of the Efficiency Losses from Taxation	85	(2)
How Much Efficiency Do We Want?	85	(1)
Efficiency Versus Equity: Tax Trade-Offs	85	(1)
Efficiency Versus Innovation	86	(1)
International Perspective: Does More Government Mean Less Growth?	87	(6)
Efficiency and Equity	87	(1)
Efficiency Offsets to Inefficiency	88	(1)
Summary	88	(5)
Competitive Markets and Agriculture	93	(34)
Demand and Supply Analysis	96	(1)
International Perspective: OECD Farm Policy: New Zealand Breaks the Mold	97	(16)
Other Demand Factors	98	(3)
Other Supply Factors	101	(2)
How Changes in Demand and Supply Affect Equilibrium Price and Quantity	103	(1)
Changes in Demand	104	(1)
Changes in Supply	105	(1)
Changes in Demand and Supply	105	(1)
U.S. Agriculture	106	(1)
Economic and Historical Characteristics	106	(3)
Competitive Markets and Economic Profits	109	(4)
Insights: What Does It Mean for a Farmer to Break Even?	113	(5)
U.S. Farm Policy	114	(1)
Price Floor	114	(2)
Output Constraints	116	(1)
Target Prices and Deficiency Payments	117	(1)
Insights: The Sugar Program: How Sweet It Is	118	(5)
Rent Seeking	119	(1)
Summary	120	(3)
Appendix: The Price Elasticity of Demand	123	(4)
Market Power: Does It Help or Hurt the Economy?	127	(26)
Monopoly Analysis	128	(2)
Marginal Revenue	130	(1)
The Marginal Principle	131	(1)
Monopoly and Competition Compared	132	(3)
Market Power and Economic Efficiency	135	(1)
The Trend in Market Power	135	(1)
Barriers to Entry	136	(1)
International Perspective: The Battle Between American and Japanese Automobile Firms	137	(12)
OPEC: A Few Sellers Acting Like a Monopoly	138	(1)
Cartel Formation	139	(1)
The Determinants of Cartel Success	140	(1)
Problems of the OPEC Cartel	141	(4)
Do a Few Firms That Dominate a Market Have Market Power?	145	(1)
Market Power and Economic Growth	145	(3)
Government and Market Power	148	(1)
Insights: Qwerty Versus DSK: Can the Market Choose the Right Technology?	149	(4)
Summary	150	(3)
Air Pollution: Balancing Benefits and Costs	153	(22)
The Principal Air Pollution Problems	154	(1)
Urban Air Quality	154	(1)
Acid Rain	155	(1)
Global Warming	155	(1)
Stratospheric Ozone Depletion	155	(1)
Hazardous Air Pollutants	156	(1)
The Economic Perspective	156	(2)
International Perspective: The Total Social Cost of the Automobile: Pollution and Much More	158	(13)
Market Failure: Is Government Action Necessary?	158	(3)
Air Pollution Regulation: The Clean Air Act	161	(1)
National Ambient Air Quality Standards (NAAQS)	161	(1)
Emissions Limits	161	(1)
Restricted Technology	161	(1)
New Source Performance Standards	161	(1)
Prescribed Fuels	162	(1)
Offset Requirements	162	(1)
Emissions Trading	162	(1)
Prevention of Significant Deterioration	162	(1)
Monitoring and Compliance	162	(1)
Effects of the Clean Air Act on Air Quality	162	(1)
The Economics of the Clean Air Act: Have We Gone Too Far?	163	(1)
Benefits and Costs of the Clean Air Act, 1970 to 1990	164	(1)
Benefits and Costs of the Clean Air Act, 1990 to 2010	165	(1)
Cost-Reducing Measures	166	(1)
Emissions Taxes	166	(1)
Marketable Pollution Permits	167	(2)
Limiting Global Warming: Emissions Permits in an International Context	169	(2)
Insights: Carbon Taxes	171	(4)
Summary	171	(4)
Medical Care: Costs Out of Control?	175	(22)
The Rising Cost of Medical Care	176	(1)
Why Health Expenditures Have Increased Relative to GDP	176	(1)
The Cost Disease of the Services Sector	177	(1)
Population Aging	178	(1)
Income Elasticity of Demand for Health Care	179	(1)
Increases in Insurance Coverage	179	(1)
Technological Change	180	(1)
Insights: The Medically Uninsured	181	(6)
Is Technological Change in Medical Care Worth It?	181	(3)
Does the Medical System Provide the Right Amount of Medical Care?	184	(1)
Third-Party Payments	184	(2)
Physician-Induced Demand	186	(1)
International Perspective: Another Hidden Cost of Third-Party Payments	187	(10)
Defensive Medicine	189	(1)
Federal Tax Exemption for Health Insurance	189	(1)
Approaches to Reducing Wasteful Expenditures	190	(1)
Managed Care	190	(2)
Eliminating the Federal Tax Exemption for Health Insurance	192	(1)
Health Care Vouchers	193	(1)
Summary	193	(4)
Crime and Drugs: A Modern Dilemma	197	(30)
Public Goods	200	(1)
Government Enforcement of Property Rights	200	(1)
Crime and Crime Control	201	(1)
An Economic Approach to Crime and Crime Control	202	(3)
Insights: Police, Guns, and Crime	205	(5)
A Comparison of Crime Trends in the United States and England	206	(4)
Insights: An Introduction to the Scientific Method in Economics	210	(10)
Drug Legalization: Competing Views	210	(1)
Liberty: An Argument for Legalization	210	(1)
Paternalism: An Argument Against Legalization	211	(1)
Morality: An Argument Against Legalization	211	(1)
The Final Analysis	212	(1)
A Positive Analysis of Drug Policy	212	(3)
Does Increased Enforcement Work?	215	(1)
Unintended But Inevitable Consequences of Drug Prohibition	216	(2)
Unintended But Perhaps Avoidable Consequences of Drug Prohibition	218	(1)
Unintended Consequences of Drug Legalization	219	(1)
Evaluation: Hawks, Doves, and Owls	219	(1)
Competing Views in Practice	219	(1)
International Perspective: Dutch Drug Policy	220	(4)
Current Policy	221	(1)
Owlish Criticism	222	(2)
Insights: Alternatives for the United States	224	(3)
Summary	224	(3)
College Education: Is It Worth the Cost?	227	(20)
Analyzing the Investment Decision	228	(1)
Step One	228	(1)
Step Two	229	(1)
Step Three	229	(1)
Investing in a College Education: Monetary Benefits and Costs	230	(2)
Student PVNB and ROR	232	(2)
Social PVNB and ROR	234	(1)
Insights: Does Where You Go to School Matter?	235	(1)
International Perspective: Education and Economic Growth	236	(2)
Investing in a College Education: Nonmonetary Benefits and Costs	236	(1)
Nonmonetary Student Benefits	236	(1)
Nonmonetary Student Costs	237	(1)
Nonmonetary External Benefits	237	(1)
International Perspective: Rates of Return Around the World	238	(4)
Nonmonetary External Costs	238	(1)
Is Government Support Necessary?	238	(1)
Ensuring That Society Invests Enough in College Education	239	(1)
Ensuring That Student Borrowing Reflects the Social Risk of Default	240	(2)
Insights: The Demand for Education	242	(5)
Increasing Enrollment of Lower-Income Students	242	(1)
Summary	243	(4)
Educational Reform: The Role of Incentives and Choice	247	(26)
The Nature of the Problem	248	(3)
Arguments for Public Support of Schools	251	(2)
Insights: Jefferson, Smith, and Public Schools: Standards and Local Control	253	(4)
The Economics of Student Achievement	254	(2)
High-Stakes Testing	256	(1)
Insights: Setting Standards for Mathematics Achievement	257	(4)
The Economics of Investing in High-Stakes Testing	259	(2)
International Perspective: High-Stakes Testing in Japan	261	(12)
Investing in More Required Courses	261	(1)
The Economic Organization of Public-Education	262	(1)
Decision Making and Markets	263	(2)
Decision Making and State-Owned Enterprises	265	(1)
Decision Making and Public Schools	266	(2)
Alternatives to the Current System of Public Education	268	(2)
Summary	270	(3)
Social Security: Where Are We? Where Are We Going?	273	(20)
Principal Features of Social Security	274	(2)
Who Pays the Social Security Tax?	276	(2)
Social Security and Early Retirement	278	(1)
Social Security and Household Savings	278	(1)
Individual Rates of Return	279	(3)
Is That All There Is to It?	282	(1)
The Long-Run Deficit	283	(1)
What Social Security Analysts Say	283	(1)
Are the Analysts Right?	284	(1)
International Perspective: Public Pension Plans in Trouble: The United States Is Not Unique	285	(8)
What Can Be Done About the Deficit?	286	(1)
Benefit Reductions	286	(1)
Revenue Increases	287	(2)
The Trade-Off for Individuals: Lower Deficits Mean Lower Rates of Return	289	(1)
Summary	290	(3)
Poverty: Old and New Approaches to a Persistent Problem	293	(28)
The Scope of the Problem	294	(3)
Antipoverty Effectiveness of Government Transfers	297	(4)
Insights: The Tide Has Risen, But Most Boats Have Not	301	(3)
Means-Tested Transfers and Income from Work	302	(1)
Food Stamps	302	(1)
Earned Income Tax Credit (EITC)	303	(1)
Insights: Welfare Reform: Then and Now	304	(17)
Temporary Assistance for Needy Families (TANF)	305	(1)
TANF + Food Stamps + EITC	306	(1)
Making Work Pay	307	(1)
Unemployment Policy	308	(1)
Childcare Assistance	309	(2)
Medical Protection	311	(1)
Minimum Wage	311	(1)
Wage Subsidies	311	(1)
Labor Market Discrimination Policy	312	(3)
Making Fathers Pay	315	(1)
Child Support Assistance	316	(1)
Child Support Assurance	317	(1)
Summary	317	(4)
Tracking the Macroeconomy	321	(24)
Gross Domestic Product (GDP)	322	(1)
Insights: Measured GDP and the Underground Economy	323	(9)
GDP's Components	324	(1)
Consumption	324	(1)
Gross Investment	324	(2)
Government Purchases	326	(1)
Net Exports	326	(1)
Nominal GDP, Real GDP, and the GDP Deflator	326	(4)
The Nation's Economic Performance	330	(2)
Insights: Real GDP and Social Welfare	332	(8)
Determining the Nation's Output and Price Level	333	(1)
Aggregate Demand	333	(4)
Aggregate Supply	337	(1)
Aggregate Demand and Supply Interaction	338	(2)
Insights: The Long Boom	340	(5)
Summary	342	(3)
Unemployment: A Recurring Problem	345	(20)
Costs of Unemployment	346	(1)
Economic Costs	346	(1)
Noneconomic Costs	346	(1)
Counting the Unemployed	347	(2)
Insights: Job Opportunities and Discrimination	349	(6)
Types of Unemployment	349	(1)
Frictional Unemployment	349	(1)
Structural Unemployment	350	(1)
Cyclical Unemployment	350	(1)
Full Employment	351	(1)
Policies to Reduce Unemployment	352	(1)
Reducing Cyclical Unemployment	352	(3)
International Perspective: Unemployment in Japan	355	(6)
Reducing Structural Unemployment	355	(1)
Reducing Frictional Unemployment	356	(1)
Unemployment and the Minimum Wage	357	(2)
Unemployment in Europe	359	(1)
Impediments to Hiring	360	(1)
International Perspective: More on European Labor Markets	361	(4)
Impediments to Accepting Employment	361	(1)
Conclusion	362	(1)
Summary	362	(3)
Inflation: A Monetary Phenomenon	365	(36)
Defining Inflation	366	(1)
Measuring Inflation	366	(1)
The GDP Deflator	366	(1)
The Consumer Price Index	366	(1)
Calculating the Inflation Rate	367	(1)
Recent Experience	368	(1)
Effects of Inflation	368	(1)
The Redistribution of Income and Wealth	368	(4)
Inflation and Government	372	(1)
Inflation and Net Exports	372	(1)
Other Effects	373	(1)
Money and the Money Supply	374	(1)
Money's Function	374	(1)
The Money Supply	374	(1)
Insights: Currency Holdings and the Underground Economy	375	(3)
The Federal Reserve	376	(1)
Causes of Inflation	376	(1)
The Quantity Theory of Money	376	(2)
International Perspective: Deflation in Japan: The Reemergence of an Old Issue	378	(6)
Inflation Is a Monetary Phenomenon	379	(1)
Inflation as a Monetary Phenomenon: Two Qualifications	380	(2)
Labor Unions, Monopolies, and Inflation	382	(1)
Inflation and Policy	383	(1)
Monetary Policy	383	(1)
Insights: The Fed as Inflation Fighter	384	(7)
Fiscal Policy	385	(1)
Supply-Side Policies	385	(1)
Incomes Policy	386	(2)
Summary	388	(3)
Appendix: Money Creation and Monetary Policy	391	(10)
Deficits, Surpluses, and Debt: Past, Present, and Future	401	(26)
Budgets and Budget Concepts	402	(1)
Historical Budget Perspective	403	(1)
Insights: From Deficit to Surplus	404	(2)
The Public Debt	405	(1)
International Perspective: The Relative Importance of Budget Deficits and Surpluses for Various Countries: 1998	406	(21)
Long-Run Budget and Debt Projections	408	(1)
The Incredible Shrinking Surplus	408	(2)
The Deficit and Debt in the Coming Decade	410	(2)
The Really Long Run	412	(1)
Measurement Issues	412	(1)
Inflation	413	(1)
Business Cycles	414	(1)
Government Investment	415	(1)
State and Local Government Deficits and Surpluses	416	(1)
Economic Effects of a Deficit	416	(1)
The Keynesian View: A Deficit Can Help to Cure a Recession	416	(1)
The Modern View: The Strength of the Cure Depends on How the Deficit Is Financed	417	(3)
The Burden of Debt	420	(2)
Taking Stock	422	(1)
Summary	423	(4)
The Global Economy: Trade	427	(16)
U.S. Participation in World Trade	428	(1)
Comparative Advantage and International Trade	429	(3)
Net Gains from International Trade	432	(2)
Insights: The Cost of Saving U.S. Jobs	434	(5)
Barriers to International Trade	434	(1)
Tariffs	434	(1)
Quotas	435	(1)
Voluntary Export Restraints	435	(1)
The Case for Free Trade	436	(1)
Decreasing Costs	436	(1)
Increased Competition	436	(1)
Diversity of Products	436	(1)
The Case for Protection	437	(1)
Infant Industry	437	(1)
National Defense	437	(1)
Save American Jobs	437	(1)
Cheap Foreign Labor	438	(1)
Reducing Trade Barriers	438	(1)
The Global Approach	438	(1)
International Perspective: The WTO: An International Conspiracy?	439	(1)
Insights: Trade Negotiations, Labor, and the Environment	440	(3)
The Regional Approach	440	(1)
Summary	441	(2)
The Global Economy: Finance	443	(18)
The Balance of Payments	444	(1)
Insights: The United States: The World's Largest Debtor	445	(8)
Exchange Rates and Their Determination	447	(1)
Flexible Exchange Rates	447	(3)
Fixed Exchange Rates	450	(2)
The Current International Financial System	452	(1)
The Case for Flexible Exchange Rates	452	(1)
International Perspective: The Euro	453	(2)
The Case for Fixed Exchange Rates	454	(1)
Should Capital Flows Be Controlled?	454	(1)
International Perspective: The Mexican Peso Crisis	455	(6)
The Asian Financial Crisis	457	(1)
Summary	457	(4)
Glossary	461	(8)
Index	469