Evan Osborne - Reasonably Simple Economics: Why the World Works the Way It Does

About the Author

Evan Osborne is professor of economics at Wright State University. He has taught principles of economics for 20 years and has used economics to write about a wide array of topics. His current research interests involve the economics of sports and of ancient and contemporary China, and the history of individual liberty. But he is interested in everything.

Acknowledgments

First and foremost, I owe a great deal of gratitude to those students who ask the most interesting questions and challenge me to back up what I claim. Much of what I have learned about how to teach is due to learning from them. In addition, teaching and learning do not end at the classroom door, and so I have also been very lucky to have two demanding children, the evercurious Weymar and the ever-skeptical Victoria, neither of whom will ever settle for a lazy answer. I am blessed every day to be able to watch and help you grow and to prepare to direct the grand journey of your lives.

Writing a book is a pleasure, but the writers ego is far too powerful a force to allow him to properly scrutinize his own writing. I thus also owe a lot to Jeff Olson and Corbin Collins, whose meticulous attention to every word made all those words taken together easier on the reader.

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CHAPTER

Introduction

The Value of Economics in Daily Life

You may be reading this because you have enrolled in an economic principles class, or you may be simply curious about basic economics. In buying it, you probably thought you were signing up for a discussion of inflation, unemployment, interest rates, whether the standard of living is going up or down, outsourcing, the gyrations of the stock market, and other topics that seem somehow to be related to economics and often find their way into the news.

All in good time. But before gaining any further understanding on these matters, we have to start from the foundation of the economic way of thinking. For that is what economics isnot a list of specific topics, but a systematic way of thinking about all topics. The list of concepts to which the economic way of thinking can be applied vastly exceeds the short list just mentioned. To tackle those things without mastering the economic way of thinking about them is to put the cart before the horse. This way of thinking has taken several centuries to develop and has proven its usefulness in addressing one social problem after another. But it is not the only way to think about society and how it works. As you read this, try to fit what you learn about economics into what else you have learned about the world and how to think about ithistory, philosophy, psychology, and even literature all have useful things to say about human decision making and the society that results from it.

The Foundation of Modern Economics: The Idea of Scarcity

Consider the following questions, which might seem far removed from the seemingly core economic topics in the first paragraph:

• Q1.1 Look at a photograph of a public sceneon a street, in a baseball stadiumor a private one like were much thinner then. Why have people in the United States gotten so much heavier over the years? Before you answer, realize that this is a phenomenon that is occurring not just in the U.S. but in countries all over the world.
• Q1.2 Much commentary in recent years has focused on rising inequality of income in the U.S. Despite that, a phenomenon associated with previous centuries of inequality has almost disappeared: the personal servant for a few suggestions.)
• Q1.3 Why are people in small towns generally friendlier than people in big cities?
• Q1.4 The last 50 years have seen the introduction of an incredible wave of time-saving machinery, plus an increase in wealth that allows almost everyone in prosperous countries such as the U.S. to obtain what used to be considered the basic necessities of life. And yet, according to survey data, people report that they are pressed for time and money. (You may feel the same way, despite having much more disposable income than your grandparents did.) Why?