Economics in Two Lessons

Economics in Two Lessons[Read] ➪ Economics in Two Lessons By John Quiggin – A masterful introduction to the key ideas behind the successes and failures of free market economicsSince 1946 Henry Hazlitt's bestselling Economics in One Lesson has popularized the belief that econo A masterful introduction to the key ideas behind the successes and failures of free market economicsSince Henry Hazlitt's bestselling Economics in One Lesson has popularized the belief that economics can be boiled down to one simple lesson market prices represent the true cost of everything But one lesson economics tells only half the story It can explain why markets often work so well but it can't explain why they often fail Economics in PDF \ so badly or what we should do when they stumble As Nobel Prize winning economist Paul Samuelson uipped When someone preaches 'Economics in one lesson ' I advise Go back for the second lesson In Economics in Two Lessons John uiggin teaches both lessons offering a masterful introduction to the key ideas behind the successes and failures of free markets Economics in Two Lessons explains why market prices often fail to reflect the full cost of our choices to society as a whole For example every time we drive a car fly in a plane or flick a light switch we contribute to global warming But in the absence of a price on carbon emissions the costs of our actions are borne by everyone else In such cases government action is needed to achieve better outcomesTwo lesson economics means giving up the dogmatism of laissez faire as well as the reflexive assumption that any economic problem can be solved by government action since the right answer often involves a mixture of market forces and government policy But the payoff is huge understanding how markets actually work and what to do when they don'tBrilliantly accessible Economics in Two Lessons unlocks the essential issues at the heart of any economic uestion.

John uiggin born March is an Australian economist a Professor and an Australian Research Council Laureate Fellow at the University of ueensland and a member of the Board of the Climate Change Authority of the Australian Government.

Economics in Two Lessons PDF/EPUB Ë Economics in  PDF
  • Hardcover
  • 408 pages
  • Economics in Two Lessons
  • John Quiggin
  • 08 December 2014
  • 9780691154947

10 thoughts on “Economics in Two Lessons

  1. Arjun Pathy says:

    In short this is a deeply inadeuate economics primer that the uninitiated should probably not read least those who already sympathise with uiggin's policy prescriptions If you want a balanced economics primer you'd be better off starting any of the many better options suggestions down the bottomIn discussions I have with well meaning friends who have not formally studied economics I often find myself coming to a point where I'll say something like But obviously a firm will not employ a worker if the hourly revenues generated by that worker are exceeded by the wage of that worker the friend will give me a blank look and I will promptly remember that I have no good economics primer to lend to them To remedy this situation I purchased uiggin's Economics in Two Lessons and its predecessor Henry Hazlitt's Economics in One Lesson since I was concerned that even though Hazlitt is the classic and substantially shorter than uiggin Economics in One Lesson might be unbalanced On that basis I wanted a back up albeit one with less renown or conciseness After having read both I am astounded to say the dead opposite despite my broadly centre left policy views I found Hazlitt to do exactly what an economics primer should do dispel common economic falsehoods that echo around the mediascape and introduce its readers to the economic way of thinking with minimum bias and uiggin to do exactly what an economics primer shouldn't do heavily reinforce a specific policy prescription without giving a sufficient grounding to enable readers to discern for themselves which economic statements in the mediascape are still euivocal and which are assuredly falseuiggin isn't entirely accurate in what kind of book he's trying to write and he doesn't portray his opponents with any degree of fairness and the combination of those two would lead someone with no economic background deeply astrayWhat do I mean by “he isn’t accurate in what kind of book he’s trying to write” Well to explain by way of contrast Hazlitt is very clear about what his book will accomplish This book is an analysis of economic fallacies that are at last so prevalent that they have almost become a new orthodoxy When analyzing fallacies I have thought it still less advisable to mention particular names than in giving credit To do so would have reuired special justice to each writer criticized with exact uotations account taken of the particular emphasis he places on this point or that the ualifications he makes his personal ambiguities inconsistencies and so on I hope therefore that no one will be too disappointed at the absence of such names as Karl Max Thorstein Veblen Major Douglas Lord Keynes Professor Alvin Hansen and others in these pages The object of this book is not to expose the special errors of particular writers but economic errors in their most freuent widespread or influential form Fallacies when they have reached the popular stage become anonymous anyway The subtleties or obscurities to be found in the authors most responsible for propagating them are washed off A doctrine becomes simplified; the sophism that may have been buried in a network of ualifications ambiguities or mathematical euations stands clear I hope I shall not be accused of injustice on the ground therefore that a fashionable doctrine in the form in which I have presented it is not precisely the doctrine as it has been formulated by Lord Keynes or some other special author It is the beliefs which politically influential groups hold and which governments act upon that we are interested in here not he historical origins of those beliefs p7 11 emphasis mine This last sentence is especially salient as it means that Hazlitt is free to criticise economics as it is crudely discussed in the press and in politics without necessarily arguing that such crudeness is endemic to an entire school and without attacking specific individuals where Hazlitt believes such an attack is unwarranted uiggin makes no such ualification and in attacking “One Lesson” economists his term for “laissez faire” or “free market” he tars with the same brush everyone from corporate lobbyists through to well meaning academics economists who are simply sceptical of government power As a result uiggin jumps between views that almost all laissez faire economists would genuinely hold eg “governments will generally be less efficient than private enterprise in implementing the same project” and views that virtually none of them would hold eg “all people are literally Homo economicus” He spends most of the book therefore attacking a straw man and therefore pleasantly avoiding having to respond to the best criticisms of the laissez faire group An example of the ridiculousness this leads him to is best exemplified in his repeated claims that “One Lesson” economists have apparently failed to study what would constitute basic components of any undergraduate economics majorThe difference between One Lesson and Two Lesson economists is neatly reflected in the theory of welfare economics One Lesson economists read the theory as far as the First Fundamental Theorem of Welfare Economics and then close the book satisfied that they have discovered everything they need to know They ignore the important and interesting Second Theorem and fail to recognise that the allocation of property rights is the critical factor in determining which of the infinite range of possible market euilibrium outcomes is realised p148What Like by all means I’m sure some poorly read conservative politicians genuinely think that “free markets always without exception lead to efficient prices” but anyone who actually knows what the First Fundamental Theorem of Welfare Economics is would absolutely know what the Second Fundamental Theorem is They’re generally presented in the same lecture in a second or third year microeconomics courseAgain Hazlitt can get away with his polemical style because he’s clear in predominantly attacking lobbyists and he’s very clear when he’s attacking a specific economist whose specific view he doesn’t like uiggin just seems to genuinely believe that everyone to the right of Elizabeth Warren is genuinely motivated by cartoonish stupidity and selfishnessOn that point this book contains a simply astonishing amount of ad hominem Economists like Hayek are respected by modern laissez faire economists but they’re not held as infallible prophets whose works are scripture — the only people who act like that are politicians and lobbyists again this is the danger of attacking all your intellectual opponents with the same brush In spite of this uiggin devotes an astounding amount of time irrelevantly attacking historical economists as people A few choice selectionsThe idea of opportunity cost was brought into the mainstream of economics by Austrian and Austrian influenced economists most notably FA Hayek Ludwig von Mises and Lionel Robbins Unfortunately all three were dogmatic One Lesson economists who stripped von Wieser’s idea of its egalitarian implications p27Before explaining this Pareto efficiency it’s important to understand Pareto’s broader body of thought one that led him in the end to support the fascist regime of Benito Mussolini p145Over time however the view that many perhaps most labor markets are monopolistic has gained ground at least among those economists open to empirical evidence p186 emphasis mineAgain to those who know nothing about economists maybe these seem like relevant points but if you do know anything they clearly aren’t If you don’t know anything about Hayek maybe it seems reasonable to decry him as an dogmatic “amoral free marketeer” as opposed to someone who certainly saw a substantial role for government though in certain circumscribed spheres and someone who cared deeply about the welfare of all If you don’t really know what Pareto optimality is maybe the fascist connections of Vilfredo Pareto seem relevant even though they’re clearly not since Pareto optimality can be introduced as a bland technical definition and in the first instance is introduced in virtually all economics courses in the context of “you want to exhaust all possible Pareto optimal options first since nobody is worse off though clearly the distribution of wealth matters a lot too” If you don’t know the literature maybe it seems like there is an overwhelming empirical consensus that labor markets are all monopolistic meaning minimum wages can be introduced without penalty even though this isn’t uneuivocal as is demonstrated by the Seattle minimum wage study This is a big problem with uiggin’s book because this is an introductory text most readers won’t know enough to differentiate between his genuine argument and his polemic These ad hominem attacks are virtually all presented in advance of the dissection of the authors’ key ideas if the key ideas are presented at all which reinforces uiggin’s contention that “One Lesson” economists are all evil corporatist trolls but hardly helps a reader to know truthIn addition to all of this uiggin seems keenly motivated in some sections by self aggrandisement than by a desire to educate which makes his already polemical and scattered work even polemical and scattered For instance he has a bad habit of needlessly giving etymologies or original language euivalents even when it adds nothingThe same cannot be said of Friedrich von Wieser the Austrian economist who coined the term “opportunity cost” Opportunitätskosten in German p26 A similar mix of private and common property is found in an apartment complex organized as a condominium the term is derived from the Latin for “shared property” p104The term “monopoly” means “one seller” from Greek p177 He spends a large section of the book poorly outlining the science of climate change even though a this will clearly convince nobody who was not already convinced b it substantially lengthens an already lengthy section on negative externalities where the simple acid rain example would have served perfectly adeuately and c it seems to be there mostly so that he can accuse One Lesson economists of being climate deniers which is clearly not universally or even mostly true there are obviously many economists who are merely sceptical of the capacity of the government to remedy the problem rather than being sceptical of the underlying science Even outside the self aggrandisement his polemic results in his giving sloppy definitions that would certainly confuse an uninformed reader for instance he defines a public good as something that “must be supplied eually to the entire population” which a confuses the normative and descriptive uses of “must” for someone who doesn’t know he’s speaking descriptively b would confuse a reader new to economics since “public education” appears by this definition to be a public goodIn short I don’t know whom this book would actually help Hazlitt provides a good defence against really bad lobbyist arguments if that’s what you want out of an economics primer Something like Economics Rules by Dani Rodrik provides a relatively accessible introduction to how academic economics could be better hint he doesn’t just accuse them all of being “One Lesson” Someone like Tim Harford in The Undercover Economist does as good a job of explaining economic intuition and opportunity cost without diverting into ideological and misrepresentative tirades If you want a good critical introduction go for John Kay’s “The Truth About Markets” Put this book down Get something better

  2. Kingsborough Library says:

    A real corker of an economics book I especially liked the further reading suggested at the end of each chapter

  3. Brendan Shea says:

    I listened to this on Audible and really enjoyed it though I think I would have liked to see some of the charts in the physical volume A few thoughts1 The book presents many of the same issues that are covered in standard principles of economics courses or intro macromicro courses but it links these together by use of the concept of opportunity cost and in particular of the total social opportunity cost of various interventions While this concept is usually presented in intro courses uiggin does a much better job in showing its centrality in understanding things like price signals distributions of property rights notions of efficiency and Pareto optimality and so on I think this book would be an excellent companion to any standard textbook as well as being a great stand alone intro for those with some basic background knowledge in econ2 uiggin's two lessons are presented as a correction to Hazlitt's famous Economics in One Lesson the lesson apparently being that the cost of government interventions in markets always ends up outweighing the costs once everything has been taken into account While this is obviously nonsense something like this still seems to inform the viewpoint of both large schools of professional economists of the Austrian and Freshwater variety and many armchair economists mostly libertarian and big business conservatives uiggin's book is a good antidote to this and I particularly thought his presentation of the role of property rights as dependent upon a certain choice which can be evaluated in terms of opportunity cost was well done3 For the curious uiggin's two lessons are 1 Market prices reflect and determine opportunity costs faced by consumers and producers and 2 Market prices don’t reflect all the opportunitycosts we face as a society One lesson economists as uiggin calls them are happy with lesson one as it emphasizes the importance of a well functioning price mechanism of the type allowed by markets in providing information about opportunity costs to individuals However lesson 1 is radically incomplete both because it ignores extra market decisions such as how to allocate the property rights necessary to make markets function in the first place and what to do about market failures Wrt market failures uiggin discusses both climate change unsurprisingly and unemployment since in conditions of high unemployment workers willing to work at the market wage can't find a job He also discusses the euity premium as a market failure which I'd never thought of but I am now convinced byMy guess is that the targets of this book ie One lesson economists will complain that uiggin ignores the flaws of governments or something of the sort This is both incorrect he recognizes this as an issue in standard cases such as rent control and clearly beside the point After all the point here is most certainly NOT that government action is always preferable to free markets Rather it is that the conceptual arguments given by One Lesson economists in favor of markets and against governments don't actually hold any water And so if the One lesson economists want to oppose government in any specific instance and they might have good reasons to they'll need to provide a much different sort of argument ie one much closely tied to empirical evidence and less beholden to DSGE models etc than the ones they have customarily favored In any case there's a lot here than I have mentioned including a section on IP laws which I liked I highly recommend the book

  4. Mark says:

    John uiggin a progressive Australian economist the Krugman of the antipodes writes a response to Economics in One Lesson The Shortest Surest Way to Understand Basic Economics a classic of the laissez faire crowd This isn't an anti market screed I'd say it's in opposition to unfettered markets but his main theme is that there is no such thing He's very good at dissecting a lot of the human inventions such as what gets defined as property that will determine economic outcomes I did find a lot of the early stuff is fairly rote but really liked it as it got into greater depth

  5. Bryan says:

    I am mixed on this book Parts of it are great and parts seem to really miss the mark As a fan of the book Economics in One Lesson that this book is based on and a response to I expected some reference to the work I also listened to it on audiobook so did not look at any chartsgraphs The field of economics will continue to develop so it is not a surprise over the 70 years since Hazlitt put out his well known book that there has been criticism and response to it With one lesson economists uiggin argues would focus too much only on the time when the economy is working optimally and does not account enough for the economic downturns that represent a significant minority of overall times It also criticizes one lesson economists for not having an adeuate response to issues like pollution especially as that impacts people in other countries than the ones creating it Many of the Austrian economists of the 19th and early 20th century were living in a different world than the one uiggin is now responding from I would be interested into seeing what response would now be given from that school of thought as those seem like valid points In response to the environmental concerns with one lesson economists however uiggin seems to want a strong governmental role Some of the worst polluters in history have been in this sort of position I am thinking of the USSR in general and the Aral Sea in particular as just one exampleOn a whole he attempts to continue the discussion and although i don't agree with all his reasoning or conclusions it is generally a rational response to a differing economic viewpoint which should hopefully spur further discussion

  6. John Igo says:

    455Hazlitt taught Economics in one lesson 1 Leave markets alone and things will work out If you have a friend who claims to be an economist or understand economics who doesn't have an economics degree they are likely a libertarian And they stopped their economics education after Lesson 1 When you point out Lesson 1 failures they wave their hands and blame the government I this book is a pretty good refutation of that belief True under fairly strict conditions Lesson 1 works however if the underlying assumptions are wrong this lesson uickly failsgreat depression great recession unemployment Half of this book is uiggin looking at lesson one and pointing out it's successes and failures The other half is uiggin illustrating a second lesson2 Market prices don't reflect all the opportunity cost we face as a society The book is 16 chapters of using opportunity cost as a lens to explain failures in lesson 1 Why do Keynesian multipliers exist during a recession but not a boom A very fascinating book that I highly recommend PS Tyler Cowen half of the excellent Marginal Revolution points out The third lesson however is government failure This book doesn't address that In a recession before being hired by the government the worker is doing nothing in a boom the worker must be taken from some other job In the first case the opportunity cost is minimal in the second it is substantial

  7. Eric Dowdle says:

    Well written and lucid approach to economics and many of the pitfalls of basic micro 101 knowledge most peoplemediapoliticians rely on Would recommend to anyone as a fantastic casual econ 102 book Found myself surprised at how well complex ideas were explained on several occasions I also really liked the endnotes that gave lots of material for further reading

  8. Elf says:

    easy read economics great summary of hips of original economic books and papers plus fantastic add in to all the earlier literature the world is not as simple as theory suggests and the free markets cannot be tottally free as the theoretics would love to see it

  9. MadPierre says:

    Excellent clear explanation of macro economics and it affects our lives

  10. Adrian Hindes says:

    Lucid and contemporary overview of economics its pitfalls and straightforward ways of reconceptualizing phenomena which is absurd to the layman but commonplace to the traditional economist

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