economic theories assignment

Introduction

Chapter objectives.

In this chapter, you will learn about:

• What Is Economics, and Why Is It Important?
• Microeconomics and Macroeconomics
• How Economists Use Theories and Models to Understand Economic Issues
• How Economies Can Be Organized: An Overview of Economic Systems

Bring It Home

Information overload in the information age.

To post or not to post? Every day we are faced with a myriad of decisions, from what to have for breakfast, to which show to stream, to the more complex—“Should I double major and add possibly another semester of study to my education?” Our response to these choices depends on the information we have available at any given moment. Economists call this “imperfect” because we rarely have all the data we need to make perfect decisions. Despite the lack of perfect information, we still make hundreds of decisions a day.

Streams, sponsors, and social media are altering the process by which we make choices, how we spend our time, which movies we see, which products we buy, and more. Whether they read the reviews or just check the ratings, it's unlikely for Americans to make many significant decisions without these information streams.

As you will see in this course, what happens in economics is affected by how well and how fast information disseminates through a society, such as how quickly information travels through Facebook. “Economists love nothing better than when deep and liquid markets operate under conditions of perfect information,” says Jessica Irvine, National Economics Editor for News Corp Australia.

This leads us to the topic of this chapter, an introduction to the world of making decisions, processing information, and understanding behavior in markets —the world of economics. Each chapter in this book will start with a discussion about current (or sometimes past) events and revisit it at chapter’s end—to “bring home” the concepts in play.

What is economics and why should you spend your time learning it? After all, there are other disciplines you could be studying, and other ways you could be spending your time. As the Bring it Home feature just mentioned, making choices is at the heart of what economists study, and your decision to take this course is as much as economic decision as anything else.

Economics is probably not what you think. It is not primarily about money or finance. It is not primarily about business. It is not mathematics. What is it then? It is both a subject area and a way of viewing the world.

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Access for free at https://openstax.org/books/principles-economics-3e/pages/1-introduction

• Authors: Steven A. Greenlaw, David Shapiro, Daniel MacDonald
• Publisher/website: OpenStax
• Book title: Principles of Economics 3e
• Publication date: Dec 14, 2022
• Location: Houston, Texas
• Book URL: https://openstax.org/books/principles-economics-3e/pages/1-introduction
• Section URL: https://openstax.org/books/principles-economics-3e/pages/1-introduction

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Explaining Theories of Economic Growth

Different models of economic growth stress alternative causes of economic growth. The principal theories of economic growth include:

• Mercantilism – Wealth of a nation determined by the accumulation of gold and running trade surplus
• Classical theory – Adam Smith placed emphasis on the role of increasing returns to scale (economies of scale/specialisation)
• Neo-classical-theory – Growth based on supply-side factors such as labour productivity, size of the workforce, factor inputs.
• Endogenous growth theories – Rate of economic growth strongly influenced by human capital and rate of technological innovation.
• Keynesian demand-side – Keynes argued that aggregate demand could play a role in influencing economic growth in the short and medium-term. Though most growth theories ignore the role of aggregate demand, some economists argue recessions can cause hysteresis effects and lower long-term economic growth.
• Limits to growth – From an environmental perspective, some argue in the very long-term economic growth will be constrained by resource degradation and global warming. This means that economic growth may come to an end – reminiscent of Malthus theories.

Theories in more detail

Mercantilism

Popular at the start of the industrial revolution, Mercantilism isn’t really a theory of economic growth but argued that a country could be made better off by seeking to accumulate gold and increasing exports.

Classical model

Developed by Adam Smith in Wealth of Nations (1776), Smith argued there are several factors which enable increased economic growth

• Role of markets in determining supply and demand
• The productivity of labour. Smith argued income per capita was determined by “ the state of the skill, dexterity, and judgment with which labour is applied in any nation” (Wealth of Nations I.6)
• Role of trade in enabling greater specialisation.
• Increasing returns to scale – e.g. specialisation we see in modern factories and the economies of scale of increased production

Ricardo and Malthus developed the classical model. This model assumed technological change was constant and increasing inputs could lead to diminishing returns. This led to the gloomy predictions of Malthus – that the population would grow faster than the world’s capacity to feed itself. Malthus under-predicted the capacity of technological improvements to increase food yields.

Neo-Classical model of Solow/Swan

The neo-classical theory of economic growth suggests that increasing capital or labour leads to diminishing returns. Therefore, increasing capital has only a temporary and limited impact on increasing the economic growth. As capital increases, the economy maintains its steady-state rate of economic growth.

To increase the rate of economic growth in the Solow/Swan model we need:

• An increase in proportion of GDP that is invested – however, this is limited as higher proportion of investment leads to diminishing returns and convergence on the steady-state of growth
• Technological progress which increases productivity of capital/labour

It suggests poor countries who invest more should see their economic growth converge with richer countries.

Criticisms of this neo-classical (Exogenous model)

• It doesn’t explain why countries have different levels of investment as % of GDP
• Some developing countries don’t attract higher levels of investment because of structural problems such as corruption, lack of infrastructure.
• It doesn’t explain how to improve rates of technological progress.

Harrod Domar model – Savings Ratio and Investment

The Harrod-Domar model is a type of neo-classical model. It states growth rate depends on a function of the savings rate.

Some growth theories place a large emphasis on increasing domestic savings. Savings provide the necessary funds to finance investment. It is this investment which creates further growth. This has been an important factor behind the economic growth in Asia.

However, it depends on how efficient the investment is. If savings is too high it leads to lower growth because people cannot afford to consume.

New Economic Growth Theories (Endogenous growth)

Endogenous growth models, developed by Paul Romer and Robert Lucas placed greater emphasis on the concept of human capital . How workers with greater knowledge, education and training can help to increase rates of technological advancement.

They place greater importance on the need for governments to actively encourage technological innovation. They argue in the free market classical view, firms may have no incentive to invest in new technologies because they will struggle to benefit in competitive markets. The model

• Places emphasis on increasing both capital and labour productivity.
• States that increasing labour productivity does not have diminishing returns, but, may have increasing returns
• They argue that increasing capital does not necessarily lead to diminishing returns as Solow predicts. They say it is more complicated; it depends on the type of capital investment.
• Increased importance of spillover benefits from a knowledge-based economy.
• Emphasis is placed on free-markets, reducing regulation and subsidies. The argument is that we need to keep economies open to the forces of change.

Joseph Schumpeter argued that an inherent feature of capitalism was the ‘creative destruction’ – allowing inefficient firms to fail was essential for allowing resources to flow to more efficient channels.

Unified growth theory

Developed by Oded Galor, unified growth theory tries to combine many different elements of economic growth

• Economic stagnation that characterized most of human history until the eighteenth century
• First industrial revolution and the beginning of economic growth
• The role of human capital formation in economic growth
• Explaining divergence in economic growth across countries.

Economic Growth for Developing Countries

Other theories have been suggested for developing countries. Amartya Sen and Joseph Stiglitz.

The Malthus Predictions

It is argued that economic growth may have limitations caused by lack of raw materials, climate change and overcrowding. Given the failure of T.Malthus predictions to come true, these theories are often rubbished. Nevertheless, there may come a time when growth is constrained by environmental factors.

Readers Question: undertake an evaluation of what governments can learn from economic theory about raising their economies long-term growth rate?

The long-term growth rate depends upon the underlying trend rate of economic growth rate. This underlying trend rate of growth depends primarily on the growth of aggregate supply and productivity.

To increase the long-term growth rate, Aggregate Demand plays a very limited role. In the Classical model of economic growth, an increase in AD would only cause inflation. However, you could argue that AD does have a role to play.

If an economy experiences a recession for a long time, the average long-run growth rate will be lower. This is related to the theory of hysteresis. What has happened in the past is likely to happen in the future. Thus, if governments can manage aggregate demand, they can prevent recessions and help increase the average growth rate.

Apart from that – different theories of economic growth stress

• Role of saving ( Harrod-Domar )
• Role of capital investment (classical model)
• Rate of technological improvement (Endogenous growth and others)
• Human Capital (Endogenous growth and unified growth)
• Institutional factors
• The openness of markets (Endogenous growth and classical models)

40 thoughts on “Explaining Theories of Economic Growth”

Hi I am writing research paper on economic analysis of smart city mission which economic theories are suitable for this please inform me.

Which development theory are suitable for economic growth of Bangladesh?

modernization theory

The case of Pacific Islands, especially Kiribati. Which theory/model could relate to their economic development?

Explain the following Theories of Economic development; sociological theory Colonial background theory Climatic development theory Puritanical ethnic theory

Which growth theories can I use to explain the impact ofnonoil exports in Nigeria

Greetings to you, am writing on the Economic/Medicinal importance of water hyacinth, relating it to the Economic Growth of my state. please which Economics theory will be appropriate for this research work.

Hi, my Dear friend. I am Dr. Prof .. from Iraq. ( K UFA UNIVERSITY ).. please I want a mathematical Economic growth rate model.

thank you very much

Comments are closed.

Principles of Economics

(7 reviews)

Copyright Year: 2016

ISBN 13: 9781946135162

Publisher: University of Minnesota Libraries Publishing

Language: English

Formats Available

Conditions of use.

Learn more about reviews.

Reviewed by Joyce Burnette, Professor of Economics, Wabash College on 8/12/19

This book covers everything I do in Principles, plus some things I would like to include if I had time. read more

Comprehensiveness rating: 5 see less

This book covers everything I do in Principles, plus some things I would like to include if I had time.

Content Accuracy rating: 5

Standard economics. Does a good job with the GDP measurement problems.

Relevance/Longevity rating: 4

Includes specific examples from the news. Examples are a couple years old. Most won't go out of date, but for a few you notice their age.

Clarity rating: 5

I particularly like the "Heads Up" section, which accurately points out the most common mistakes that undergraduates make.

Consistency rating: 5

AS/AD is introduced early in the macroeconomic section and is used in later chapters.

Modularity rating: 4

Arranged usefully into relatively short chapters. Inevitably, some chapters assume that you learned the previous material (S&D, or AS/AD).

Organization/Structure/Flow rating: 5

The typical organization. Micro and then macro.

Interface rating: 4

Some of the equations did not show up in the program I was using to read it. In chapter 5 the sections are in the wrong order.

Grammatical Errors rating: 5

No problems.

Cultural Relevance rating: 4

Most examples are from the US, but there are some examples from elsewhere in the world.

I found this book to follow quite closely the way I like to teach principles.

Reviewed by Marek Kolar, Associate Professor, Trine University on 5/30/19

The scope of the book is impressive, it even includes a chapter on the recent history of macroeconomic thought, with a great discussion of the macroeconomic policy during Great Depression, and since, doing a good job integrating the tools... read more

Comprehensiveness rating: 4 see less

The scope of the book is impressive, it even includes a chapter on the recent history of macroeconomic thought, with a great discussion of the macroeconomic policy during Great Depression, and since, doing a good job integrating the tools developed in earlier chapters. I don't recall seeing anything close to this in other intro to economics textbooks that I have seen. Individual topics are developed in sufficient depth, for instance the discussion of marginal benefit and marginal cost in chapter 6 is more detailed than in most of the other textbooks that I have seen. While the scope of the coverage is great, I couldn't find an index or a glossary of terms. Important terms are highlighted in the text, but I couldn't find a list of definitions to these.

The textbook seems to be accurate, without errors, and I think the author does a good job providing a balanced view, at least judging by the standards set by other principles of economics textbooks. The inclusion of topics is very standard and the discussion seems objective. I would personally like to see inclusion of the Austrian View of the Business Cycle, and of a more critical perspective on inflation, debt, and the role of government in general.

Relevance/Longevity rating: 3

The lack of recent updates is in my opinion the main weakness of the textbook. In most chapters it doesn't matter much, but for the discussion of monetary and fiscal policy it is important to point out that the discussion in the textbook ends with the immediate aftermath of the 2008 recession, thus is missing the more recent changes in the Fed's policy and recent developments. The book lacks a discussion of negative interest rates, Fed's growing balance sheet, and the recent increases in government debt and budget deficits. This seems not to have been updated since 2010.

For an economics textbook, the writing is easy to understand, which makes it accessible to a wide range of students, but may not be an ideal choice for a more advanced student who may prefer a more demanding text. I found many of the examples interesting and engaging, for instance the example of smokers being on net a positive externality in chapter 11, or the example of hockey teams maximizing profits in chapter 10.

The book is consistent throughout.

Modularity rating: 5

Each chapter is organized in a few sections, each with its own learning objectives, examples, and a few questions to be answered. It seems easy to either pick a section from a chapter, or skip a section, without losing continuity. It seems effort was put into chapters being able to stand alone on their own, for instance there is a separate chapter (23) on economic growth, investment (29), and interest rate - loanable funds market (13).

Organization/Structure/Flow rating: 3

As mentioned under Modularity, the book does a good job including many stand-alone chapters, but this creates a problem in organization. For instance it is difficult to make the connection among interest rates, investment, saving, consumption, and economic growth, as the coverage is spread across chapters 13, 23, and 29. There is a small sub-section (a little over a page) in section 29.1 explaining the relationships, but overall I had difficulties finding the main points among the detailed discussion. I could see students getting a bit lost in the detail presented, and not being able to clearly see the bigger picture.

Interface rating: 5

I found the charts easy to read, and the use of colors is user-friendly. There are clickable links to figures within the text (if read online). The format is pretty easy to follow.

No grammatical errors encountered.

Cultural Relevance rating: 5

The pictures in the text feature people of various races, and examples feature a variety of countries from different continents.

This is a great textbook, likely to please anyone looking for a standard introductory economics text done well and freely available. The only significant downside is that it hasn't been updated since about 2010, which I find problematic for the monetary and fiscal policy discussions.

Reviewed by Joanna Short, Associate Professor, Augustana College on 6/19/18

This book includes all the usual principles topics, and then some. Want to talk about the effect of third-party payers in health care markets? Farm policy? Economies in transition? There's a chapter for each of these topics. Throughout, there... read more

This book includes all the usual principles topics, and then some. Want to talk about the effect of third-party payers in health care markets? Farm policy? Economies in transition? There's a chapter for each of these topics. Throughout, there are references to important historical events, which I appreciate. The Great Depression, for example, is mentioned several times. Some depth is sacrificed, through, to hit on all of these topics. I did not see a glossary, which is a glaring omission for an introductory textbook. In-text problems, with solutions, and end-of-chapter problems are included.

I did not notice any inaccuracies. Perhaps this is more of an interface issue, but I did notice a problem with the formula for elasticity. At least in the online version I was reading from, equation 5.1 "did not parse." This could be a big issue for students trying to understand the elasticity chapter. However, students would also probably be better than I am at finding a format that works

This text does a nice job of including a lot of environmental examples, which I think students usually find interesting and relevant. Chapter 1, for example, refers to oil extraction and water use, as well as careers and salaries in economics (another topic that should be of interest). Most case-in-point articles are at least 10 years old, though. I would like to see these updated.

Clarity rating: 4

In addition to the lack of depth, I find the writing style a little choppy. Reading this text is a little like reading a small-town newspaper. I frequently wanted more investigative reporting instead of just-the-facts. I am currently using the Krugman and Wells text (for Micro Principles), largely because it reads in many parts like a story.

I did not find many spots where I felt students would be confused, other than one spot in chapter 1, where a good is defined as "scarce" if it has alternative uses, such as air which we can either breathe or pollute. In other words, a good is scarce if it is limited. In contrast, a free good is not limited, like gravity. I find these examples (air and gravity, illustrating opposites) a little confusing particularly for chapter 1. If I were the author, I would avoid mention of free goods to emphasize that virtually everything is scarce. This is a minor issue, but I hate to see any issues so early in the book that might discourage later reading. In contrast, the section in this chapter on careers in economics is clear and engaging.

I did not notice any issues with consistency in the text.

This is a strength of the book. There are many chapters, instructors can pick and choose and rearrange as they see fit.

Organization/Structure/Flow rating: 4

Generally speaking, the text follows the usual order, micro then macro. Personally, I would have rearranged the chapters a little. For example, I would probably use chapter 6 (consumer surplus, and deadweight loss) before chapter 4 (applications of supply and demand) so we can analyze deadweight loss from price controls. Also, the Keynesian Cross from chapter 28 goes before Aggregate Demand and Supply (chapter 22). But you can always cover in any order you want. The flow suffers a little from the choppy writing style and lack of depth I mentioned under Clarity. Perhaps students appreciate this more than I do, however.

This is a real strength of the text. New terms are highlighted in blue. The graphs and charts are colorful and easy-to-read. I only found a few issues from the online version that I read from. First the elasticity formula didn't come through, and one of the TryIt! problems in chapter 2 appears to be missing part of the table. There is reference to the production possibilities for Plant R and Plant S, and I only see a table for Plant R.

I did not notice any grammatical errors.

I think the text does a good job of including some international examples, as well as frequent reference to environmental issues that some texts ignore.

I like that instructors can easily pick and choose chapters, and the graphs and charts are colorful and engaging. Each chapter has TryIt! problems with answers, as well as end-of-chapter problems (both conceptual problems and numerical problems). The case-in-point articles are relevant but a bit dated. Will they be updated? Also, I just find it strange that the authors are "unnamed" or "anonymous." Is this common with OER textbooks? I just feel obligated to give credit where credit is due--I'm not sure I can put anonymous on my syllabus.

Reviewed by Robert Berman, Adjunct Instructor, American University on 2/1/18

Comprehensive in overall coverage; yet many on the sections leave out important discussions. For example, the table of contents covers everything that would be discussed in a two semester principles course -- micro & macro separately. However,... read more

Comprehensiveness rating: 3 see less

Comprehensive in overall coverage; yet many on the sections leave out important discussions. For example, the table of contents covers everything that would be discussed in a two semester principles course -- micro & macro separately. However, the discussions are insufficient, sometimes to the extent of misleading the reader. For example, discussion of the long-run average cost curve shows an area on economies OF scale (associated with multiple sizes of plot) flowed my a range of constant returns TO scale (TO which scale? Still talking about several scales), then an range of economies OF scale. Confusion is (1) reader never told that economies and discommodes BOTH exist over the entire range. Downward sloping and upward sloping reflect the NET economies. Beginning students wonder if the economies disappear, or if diseconomies only appear with very large sizes. It would be helpful to distinguish between technological and pecuniary, and between internal and external. Finally. Mixing discussion of returns OF and TO scale confuses with short-run diminishing returns TO scale with economies and diseconomies OF different scale alternatives.

Content Accuracy rating: 3

There are some problems in accuracy owing to attempts to simplify or "dumb down" for beginning students. This is the problem of principles texts generally, and the inaccuracies here are on a par with those in other published works. See above discussion on comprehensiveness. Also, no distinction between simple inventory / style fluctuations and surplus and shortage problems. Explanations do not adequately distinguish between WILLINGNESS to buy and sell and quantities bought and sold.

Relevance/Longevity rating: 5

Text is on par with most text in the field. Not likely to become obsolete. NB: I am no one who insists on most recent data or topical issues -- articles can easily supplement in this area. Theory and logic evolve over time. Updates should be relatively easy to implement. Most importantly in this area, organization and structure of presentation is classical and consistent with how I and many others structure a course.

Jargon is not a problem and text is not overly technical. As stated earlier, lucidity problems stem from inadequate discussion in attempt to simplify. Similar to published texts in this area.

Consistency rating: 3

Consistency is somewhat problematic, as discussed above, for example switching back and forth between quantity (actually) supplied/demanded and willingness to supply/demand such quantities; also economies OF scale and returns TO scale are used interchangeably

Modularity is good; similar to other published principles texts.

Organization/structure/flow is easy to work with.

No problems with interface. Electronic version (e.g., .PDF) takes advance of hyperlinks to reference charts and other sections.

No grammatical errors noted.

Did not review with an eye to cultural relevance or political correctness. Nothing stood out as being problematic.

I will seriously consider the text. It is on par with commercially published principles texts -- none of which I have been completely happy with. One potentially negative factor is the lack of an electronic homework capability. Need to confer with students about how useful this is to their learning (as opposed to my teaching); and perhaps experiment with using the electronic homework / quizzes/tests developed for a different text with this one.

Reviewed by Maxwell Eseonu, Professor of Economics, Virginia State University on 6/20/17

The text's coverage is comprehensive. The writing approach is a very good one; that is, giving the reader a heads-up in concept coverages, real world applications of concepts and giving the reader an opportunity to apply learned concepts into... read more

The text's coverage is comprehensive. The writing approach is a very good one; that is, giving the reader a heads-up in concept coverages, real world applications of concepts and giving the reader an opportunity to apply learned concepts into real world applications (Learning By Doing).

The chapter flows is very good. I am suggesting that Chapter 11: The World of Imperfect Competition should be spelled-out clearly: Monopolistic Competition and Oligopoly.

Chapter 16: Anti-trust Policy and Business Regulation should be brought forward and should read: Anti-trust Policy and Regulation - It is an Economics Text and not a Business Text. The normal flow in the Microeconomic Section is that once the Market Structure chapters are covered, the chapter on Anti-trust Policy and Regulation should follow.

On the Macroeconomics side, the flow between chapters 20 - 23 is a good one but I would suggest a re-arranging of the chapters so that Fiscal Policy Issues are addressed before the Monetary Policy Chapters. Therefore, the proposed re-arranging should be as follows: 1. Chapters 20 - 23 2. Chapter 31 3. Chapters 28, 29 and 27 4. Chapters 24,25, 26 and remaining chapters can then follow.

It is OKAY for an introductory text. The relevant concepts coverage are in place.

It is a GOOD text and considering the high cost of textbooks, I will strongly consider using it in my Principles of Economics courses. Thank you to whomever envisioned such a worthwhile venture!

It is very clear and concise. It will be easily readable and understood by students.

The text is relevant, good coverage of concepts and will be easily understood by students.

It is easily readable but I have also made some suggestions in re-arranging the flow of chapters.

See suggestions above.

For a text made available to Community of Learners, without any cost, it achieves the purpose like other high-priced textbooks. All I can say is THANK YOU!

Grammatical Errors rating: 4

It is in line with other high-priced texts. Being first edition, the second edition will be better.

It is a balanced text. Instead of extolling the vices, I commend the writer(s) for a splendid job and should continue the GOODWORK!

I very much like the text and will consider it highly for adoption in my Principles of Economics Courses. One of the problems I encounter with my students is that majority of them do not buy the prescribed textbook and this will be a great solution to this problem - THANK YOU VERY MUCH!

Reviewed by Choikam Yip, Adjunct Instructor, Portland Community College on 1/7/16

This textbook is very comprehensiveness. It covers almost all the major topics in mainstream micro and macroeconomic studies. The examples and data used are very current and up-to-date. read more

This textbook is very comprehensiveness. It covers almost all the major topics in mainstream micro and macroeconomic studies. The examples and data used are very current and up-to-date.

The book is accurate in terminology, concept, model, graphing, and wording.

The authors are using "big" and on-going economic issues in the illustration, explanation, and case in point. This makes the study of the concept very relevant to real world experience. Since those are important on-going economic issues in our economy, the longevity of the content will last and is easy to update with relevant information and data.

Terminologies are defined in easy understandable language/wording. Concepts are explained with examples and illustrations. Graphs are using grid-lines and arrows to show the effect of it and are easy to follow and understand. Overall, the book is very clear and precise.

All chapters are using the same format. Terminologies, concepts, and graphs are consistently applied and moved on from one chapter to another chapter.

1. I found that the display in HTML version is a bit different from the PDF file. HTML has more space between paragraphs and sections whilst PDF file does not have space. The HTML format is better and easy to read. 2. Inside each chapter, it has the section numbers which are missing in the Table of Contents. For example, in chapter 1, "Defining Economics" is section 1.1. It would be better to put back the section number 1.1 in the Table of Content as well. Other than the above, the text in each chapter has good sections and sub-units.

The topics in the text are presented in a logical and clear fashion. The organization/structure/flow are consistent and coherent. All chapters are organized in the same format by using colored text box, heading and sub-heading, highlighted text, and bullet point. Easy to read and follow.

Interface rating: 3

1. As I have mentioned in 6 above, the PDF file does not space out appropriately and makes it hard to navigate through the text and go back to find text. 2. The Table of Contents should include section number for each chapter. 3. The Table of Contents should be divided into Microeconomics and Macroeconomics. 4. There is no glossary and index list at the end of the book.

I can't any grammatical error.

The authors are cultural sensitive and relevance. They are using lots of different quotes to back up their points without prejudice or bias. Different countries' cultural and economic issues are discussed and included in its content.

More Try It Problems would be better. For example, provide more Try It calculation on Elasticities, Costs of Production, etc., and provide answers and explanations. I wonder if the book comes with test bank and quiz/exam paper generation tool for the instructor? That would be great!

Reviewed by Bill Burrows, Economics Instructor, Lane Community College, Eugene,OR on 1/7/16

Being a product of the Pleistocene epoch, I sometimes don't trust my online navigation skills. That said, after repeated attempts, I was unable to locate a glossary or index for this otherwise fine text. Assuming they don't exist, their absence... read more

Being a product of the Pleistocene epoch, I sometimes don't trust my online navigation skills. That said, after repeated attempts, I was unable to locate a glossary or index for this otherwise fine text. Assuming they don't exist, their absence is certainly not a deal-breaker. In my long and labored experience, nearly all college principles of economics texts really are pretty much interchangeable in terms of providing basic content. They are obligated to cover these basics if they intend to be even moderately useful. This text provides solid, competent, confident coverage of all the rudiments in a clear, useful, and even fun manner: Scarcity, Choice, Supply and Demand, Elasticity, Costs of Production, Market Structures, Aggregate Supply & Demand, Money & Banking, Blah, Blah, Blah. You get the idea. The chapter on Socialist Economies in Transition was an interesting and welcome addition to the usual list of topics. Another absolutely wonderful thing the text did was to address the students with respect. Specifically, the authors recognized and acknowledged that the vast majority of students in college are there to gain knowledge and/or a degree that will help them provide for themselves and their families (present or future). Few texts in any discipline make even vague reference to what should be an obvious reality of their end customers' worlds. Most college texts authors ignore such tawdry issues out of a misplaced concern for sullying the purity of their disciplines with such pedestrian and base concerns. Also, I suspect, many of them are annoyed by the realization that what they teach (or how they teach) is of little practical value. Whoa! Where-the-heck did all THAT come from?!? Apparently someone's little "soapbox" button got pushed. Meanwhile, back to the topic at hand: Libby Rittenberg & Timothy Tregarthen are rare and refreshing exceptions to the norm. They go on at length about Careers in Economics, Application of Economics to Other Fields, LSAT Scores and Undergraduate Majors (Economics majors rank quite well), and Starting Salaries of Economists vs other Professionals (again, not-so-bad). If they had been in the room as I read these sections, I would have kissed them squarely on the lips.

Okay, I'll try to curb myself a bit and not run on quite so much with this response. As I read through the text (no, I didn't read every page, but I did read quite a bit; samplings from nearly every chapter), I wasn't once struck by an obvious inaccuracy or biased presentation of concepts and material. I haven't always had that impression when reading texts, economics or otherwise. Krugman's springs to mind. These folks did an admirable job of fairly and evenhandedly compelling students to understand far reaching ramifications and consequences of topics such as the unavoidable reality (sometimes unpleasant) of having limited choices, how not "black-and-white" antitrust policies can be in a complex world of international economies, the economics of environmentalism, causes and remedies for income inequality, poverty, and discrimination, and other hot-button issues.

References are made to relatively current topics such as the great recession and its ongoing and potent relevance to the future of the economies of the U.S. and the world in general. Events of this magnitude and scope will certainly remain relevant for some time to come even as they transition from a current event to an important historic lesson (think, "The Great Depression"). Likewise, investigations into the inner goings on of present-day socialist economies will likely be of interest as they continue their unprecedented morphication (?) into Lord knows what. I could be wrong (often am, ask the wife), but the authors of this text leave me with the impression that they will be responsible stewards of their OER text. The phrase, "labor of love" springs to mind. I see ongoing updates in this book's future. I am rating the text as a 4 rather than 5 only because, as economists are painfully aware, the future is a shimmering, unfocused phenomenon.

Let's face it, when preparing for a relaxed evening in front of a warm, crackling fire, hot Belgian cocoa in hand, and trusty canine underfoot, few would pull a love-worn economics text off the carved mahogany bookshelf (I'm painting a picture here) as an appealing choice for the evening's read. It is a sad reality that no viable college economics text (including this one) will ever be described on course evaluations with words such as, "lilting prose" or "Like the vampires in 'Twilight' this economics text made marginal cost curves spring to life; flying off the pages and into my heart..." However, Libby Rittenberg & Timothy Tregarthen truly do do (good thing my 13-year-old boy isn't in the room) a marvelous job of keeping the (captive) reader's interest and attention. From the references to Heraclitis in the preface to the effect of cancelled games on pro-basketball players' earnings in a later chapter, the reading is peppered with references and examples designed to clarify potentially (and actually) complex social, political, economic, and mathematical concepts. They rank, "well above the norm" among econ texts. Once again, I'm choosing a rank of 4 rather than 5. I do this for two reasons: 1) I am a bitter old man who grades way to hard (I've been told), and 2) I'm saving the ultimate-highest-rank of 5 for when they finally make a digital text that plugs directly into the higher learning centers of our students' cortices (directly bi-passing the sizable portions of their brains dedicated to Netflix and pizza).

As I sheepishly admitted somewhere above, I didn't read everysingleword of the text. However of the very many pages I did read, terminology was always consistent. I didn't find one instance where students would have been confused by the same terms being used different ways. The framework of the text was logical and consistent with the majority of economics texts available today, both OER and elsewhere. Just to be clear, that is a good thing. I'm generally unimpressed with authors that strive to distinguish their text by presenting material in an avant-garde or experimental way.

Okay, I can't help myself, is "modularity" really a word? According to the authors themselves, all the chapters are written using a “modular” format. It appears that most of the chapters are divided into major sections (three in most cases). This helps keep topics from becoming too darn unwieldy. Each section also contains learning objectives, summaries, examples, and problems. Each chapter is introduced with a nice story to motivate the material and each chapter ends with a wrap-up and additional problems. Good stuff! Plenty of useful examples and a good assortment of different types of questions (with answers). I'm seriously considering using this text in my in-class sections and perhaps my online as well. Hence, the modularity issue is an important one to me. I don't have the time or inclination to cover all the chapters of any economics text, including this one. As most of you reading this likely know, this can be a problem with some texts that have chapters so tightly linked that missing out on one or more "episodes" (let alone ten) would leave the students quite befuddled (kind of like, "Downton Abbey"). Reading through this text leaves me with the strong impression that this would not be a problem (more like, "General Hospital"). In the authors' own words, "To ensure students realize that economics is a unified discipline and not a bewildering array of seemingly unrelated topics, we develop the presentation of microeconomics and of macroeconomics around integrating themes."

Boy, this sure sounds an awful lot like #5 and to a lesser extent #6 above which reference "consistency" ,"framework", "easily realigned" and other related concepts.That said, I'll do my best to approach it as a somehow unique and separate query. And even if I am unable to do so, I will almost certainly still manage to write many many words. Why? Because I've been to graduate school! To aid the "organization/structure/flow" of the text, the authors have organized the material a manner deliberately intended to show students that economics is a cohesive body of thought and not some sort of maddening series of complex and unrelated topics. Economic concepts can be (and regularly are) divided into the two general categories of Macroeconomics and Microeconomics; "Integrating themes" are used for both the Macro and Micro topics. For Macro, the integrating theme is the notion of Aggregate Supply and Aggregate Demand (sexy stuff that). The integrating theme for microeconomics is the "marginal decision rule." This powerful (and fun!) idea is presented quite early in the text and then used throughout the remaining discussions of microeconomics.

A great job was done with the text's interface. All the graphs and charts and tables are clear and uncluttered and generally user-friendly. Understandably, you won't find the dizzying array of expensive multi-colored, 3D, flip-page gadgets that appear in some $307.59 economics texts. That stuff is spendy and lest we forget, the point of OER materials is to bring costs to students down. I can happily accept the simple, straight-forward, understandable format contained herein. Frankly, many of the "fancier" presentations often provide more distraction than edification.

Granted, I didn't have magnifying glass in hand, but in all the material I read I don't recall seeing a single grammatical faux pas.

While I can't absolutely guarantee that there's not a single humanoid on our fair planet that would find any words in this text offensive, I can with some confidence say that if we did find such a person they would likely be more than a little bit wacko. While the authors didn't shy away from potentially controversial but relevant economics related topics, they were without exception respectful and inclusive.

If you haven't figured it out by now, I'll spell it out: This is a great college level economics principles text. Before long, I intend to quite requiring the expensive text now used in my in-class courses and require students to read chapters from this OER text instead. Thanks Libby Rittenberg & Timothy Tregarthen for all your good work!

Table of Contents

• Chapter 1: Economics: The Study of Choice
• Chapter 2: Confronting Scarcity: Choices in Production
• Chapter 3: Demand and Supply
• Chapter 4: Applications of Demand and Supply
• Chapter 5: Elasticity: A Measure of Response
• Chapter 6: Markets, Maximizers, and Efficiency
• Chapter 7: The Analysis of Consumer Choice
• Chapter 8: Production and Cost
• Chapter 9: Competitive Markets for Goods and Services
• Chapter 10: Monopoly
• Chapter 11: The World of Imperfect Competition
• Chapter 12: Wages and Employment in Perfect Competition
• Chapter 13: Interest Rates and the Markets for Capital and Natural Resources
• Chapter 14: Imperfectly Competitive Markets for Factors of Production
• Chapter 15: Public Finance and Public Choice
• Chapter 16: Antitrust Policy and Business Regulation
• Chapter 17: International Trade
• Chapter 18: The Economics of the Environment
• Chapter 19: Inequality, Poverty, and Discrimination
• Chapter 20: Macroeconomics: The Big Picture
• Chapter 21: Measuring Total Output and Income
• Chapter 22: Aggregate Demand and Aggregate Supply
• Chapter 23: Economic Growth
• Chapter 24: The Nature and Creation of Money
• Chapter 25: Financial Markets and the Economy
• Chapter 26: Monetary Policy and the Fed
• Chapter 27: Government and Fiscal Policy
• Chapter 28: Consumption and the Aggregate Expenditures Model
• Chapter 29: Investment and Economic Activity
• Chapter 30: Net Exports and International Finance
• Chapter 31: Inflation and Unemployment
• Chapter 32: A Brief History of Macroeconomic Thought and Policy
• Chapter 33: Economic Development
• Chapter 34: Socialist Economies in Transition

Ancillary Material

About the book.

This book is intended for a two-semester course in Economics taught out of the social sciences or business school. Principles of Economics aims to teach considerable range and depth of Economic concepts through an approachable style and methodology. The authors take a three-pronged approach to every chapter: The concept is covered with a “Heads Up” to ward off confusion, a real-world application for that concept, and a “You Try It” section to make sure students are staying on top of the concept.

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Introduction to Economic Theories

Instructors: Irene van Staveren +2 more

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There are 8 modules in this course

Wondering why economists have not predicted serious financial crises? Shocked by economic assumptions of human behavior as self-centered and focusing only on what can be measured? Asking yourself if there are no sensible economic alternatives to free markets? Then you are at the right place to learn economics!

This is the first online course that teaches economics from a pluralist perspective. Economic pluralism means that a plurality of theoretical and methodological viewpoints is regarded as valuable in itself and is simply the best way in which economics can make progress in understanding the world. This MOOC will illustrate economic pluralism not only in substance but also in form. You will see not only me, a Professor of Economics, but also a pop-up Prof of our business school, who illustrates the actor perspective of firms, government and civil society. And you will meet an online student, based in Greece, who will help you through the tutorial videos in which I will explain key concepts, tools and techniques. I will not limit myself to the dominant theory, as almost every other course does. Instead, I will introduce you to four very different economic theories for the whole set of standard topics in microeconomics and macroeconomics. The theories are presented every time from broad and more interdisciplinary to narrow and more mathematical. The four theories that I like to introduce you to are Social Economics, Institutional Economics, Post Keynesian economics and, at the very end of each topic, Neoclassical Economics, for the special case of ideally functioning markets. But not everything is different in this course. Like every economics course, it includes numbers, diagrams, tables, equations, and some calculations. Why would you go through the effort of learning the basics of four theories instead of one? Because it will help you to see why many economists cannot predict crises, whereas others can see signals but are often not being listened to because they do not belong to the dominant school of thought. It will also enable you to see that it is just one theory claiming economic agents to be self-centered and focusing on the measurable only. Other economic theories go well beyond these limitations. And, finally, the pluralist approach will provide you with policy alternatives to neoliberalist policies promoting free markets. The objective of this course is twofold. First, to enable you to understand different economic viewpoints, linked to important traditions in economic thought, and basic economic concepts belonging to these theoretical perspectives. Second, to enable you to do some basic economic calculations that are important in economic life, such as calculating an inflation rate, and in economic policies, such as estimating the rough gains from trade for both trading partners, and in economic arguments, such as in calculating utility maximization with given prices and budgets. Please note that if you do all course elements, total course load is likely to be 4 ECT (approx. 134 hours). I hope you will enjoy the course!

Introduction to Pluralist Economics

What's included.

3 videos 1 assignment

3 videos • Total 30 minutes

• Introduction to the MOOC • 9 minutes • Preview module
• Economics as a Science • 12 minutes
• What is Meant by Utility Maximisation? • 7 minutes

1 assignment • Total 30 minutes

• Test Your Knowledge about Economics • 30 minutes

Micro Economics: Individuals, Households and Consumers

11 videos 2 assignments

11 videos • Total 91 minutes

• Concepts of Individuals and Households • 10 minutes • Preview module
• Social and Institutional Economics of Individuals and Households • 8 minutes
• Neoclassical Economics of Individuals and Households • 7 minutes
• Three Theories of Consumption • 11 minutes
• Neoclassical Theory of Consumption • 12 minutes
• How Does Household Bargaining Work in Institutional Economics? • 10 minutes
• How to Calculate the Price Elasticity of Demand? • 3 minutes
• How to Calculate Utility Maximization? • 5 minutes
• How to Derive the Individual Demand Function? • 7 minutes
• What about the Organization of Communities? • 5 minutes
• What about Gender? • 8 minutes

2 assignments • Total 60 minutes

• Graded MC Quiz about Week 1 & 2 • 30 minutes
• Test Your Knowledge about Individuals, Households and Consumers • 30 minutes

Micro Economics: Firms and Markets

13 videos 1 assignment 1 peer review

13 videos • Total 105 minutes

• General Overview of Firms • 9 minutes • Preview module
• Post Keynesian Theory of the Firm • 10 minutes
• Neoclassical Theory of the Firm • 7 minutes
• Types of Markets • 5 minutes
• Market Failures • 6 minutes
• How to Calculate the Profit Rate? • 4 minutes
• How to Calculate the Growth of the Firm in Post Keynesian Economics? • 10 minutes
• What is the Profit Rate in Post Keynesian Economics? • 4 minutes
• How many Workers should a Firm hire to Maximize Profit? • 10 minutes
• How to Calculate Profit in Neoclassical Economics? • 10 minutes
• What are the Key Differences between Types of Markets? • 11 minutes
• What about the Organization of the Market? • 5 minutes
• What about Markets, Consumption and Production? • 8 minutes
• Test Your Knowledge about Firms and Markets • 30 minutes

1 peer review • Total 600 minutes

• Essay on Micro Economics • 600 minutes

Micro Economics: The state

5 videos 2 assignments

5 videos • Total 41 minutes

• The State • 11 minutes • Preview module
• Public Goods and Commons • 8 minutes
• How Can we Find the Optimal Tax Rate? • 7 minutes
• What about the Organization of the State? • 7 minutes
• What about Water and Sanitation? • 6 minutes

2 assignments • Total 50 minutes

• Graded MC Quiz about week 3 & 4 • 20 minutes
• Test Your Knowledge about the State • 30 minutes

Micro Economics: Factor Markets

11 videos 1 assignment

11 videos • Total 115 minutes

• Labour Markets - General Concepts • 6 minutes • Preview module
• Labour Markets - Social Economics • 13 minutes
• Labour Markets - Institutional Economics • 11 minutes
• Labour Markets - Post Keynesian Economics • 9 minutes
• Labour Markets - Neoclassical Economics • 13 minutes
• Financial Markets - Key Concepts • 11 minutes
• Financial Markets - Social and Institutional Economics • 11 minutes
• Financial Markets - Post Keynesian and Neoclassical Economics • 10 minutes
• How Important is Labour Productivity for a Firm? • 7 minutes
• What Causes Unemployment in Post Keynesian Theory? • 11 minutes
• What about Decent Work and Income Inequality? • 9 minutes
• Test Your Knowledge about Factor Markets • 30 minutes

Macro Economics: Real and Monetary Economy

14 videos 2 assignments

14 videos • Total 120 minutes

• Key concepts about the Macro Economic Flow • 5 minutes • Preview module
• The Macroeconomic Flow in Social and Institutional Economics • 9 minutes
• The Macroeconomic Flow in Post Keynesian Economics • 13 minutes
• The Macroeconomic Flow in Neoclassical Economics • 6 minutes
• Social Economics of Money • 9 minutes
• Institutional Economics of Money • 11 minutes
• Post Keynesian Economics of Money • 12 minutes
• Neoclassical Economics of Money • 11 minutes
• How to Calculate Consumption and Savings at a Macro Level? • 6 minutes
• How to Calculate the Multiplier? • 4 minutes
• How to Picture the Effects of Macro Economic Shocks? • 9 minutes
• How to Calculate Inflation? • 7 minutes
• What are The Causes of Inflation? • 5 minutes
• What about the Governance Challenges for Society? • 8 minutes

2 assignments • Total 120 minutes

• Graded MC Quiz about week 5 & 6 • 90 minutes
• Test Your Knowledge about the Real and the Monetary Economy • 30 minutes

Macro Economics: Growth and Trade

16 videos 1 assignment 1 peer review

16 videos • Total 150 minutes

• Why and How of Economic Growth • 7 minutes • Preview module
• Social and Institutional Economics of Growth • 11 minutes
• Post Keynesian Economics of Growth • 13 minutes
• Neoclassical Economics of Growth • 10 minutes
• Key Concepts about International Trade • 10 minutes
• Social Economics of Trade • 7 minutes
• Institutional Economics of Trade • 6 minutes
• Post Keynesian Economics of Trade • 9 minutes
• Neoclassical Economics of Trade • 14 minutes
• What does Demand-led Growth Mean? • 9 minutes
• What is Endogenous Growth? • 4 minutes
• What is the Consumer Surplus? • 8 minutes
• What is the Leakage Effect of Trade? • 5 minutes
• What is Meant by the Comparative Advantage of Trade? • 12 minutes
• What about Partnering in a Balanced Society? • 9 minutes
• What about the Global Organization of Societies? • 8 minutes
• Test Your Knowledge about Growth and Trade • 30 minutes
• Essay on Macro Economics • 600 minutes

Macro Economics: Nature and Wellbeing & Poverty

13 videos 2 assignments

13 videos • Total 126 minutes

• Introduction and Social Economics of Nature • 11 minutes • Preview module
• Institutional Economics of Nature • 11 minutes
• Post Keynesian Economics of Nature • 8 minutes
• Neoclassical Economics of Nature • 11 minutes
• Introduction and Social Economics of Wellbeing and Poverty • 10 minutes
• Institutional Economics of Wellbeing and Poverty • 11 minutes
• Post Keynesian & Neoclassical Economics of Wellbeing and Poverty • 14 minutes
• How to Calculate Green Growth with the IPAT Equation? • 5 minutes
• How does an Ecological Stockflow Model Work? • 9 minutes
• What is Driving Wealth Inequality? • 9 minutes
• What about Public Bads and Climate Change? • 7 minutes
• What about Poverty? • 8 minutes
• Discussion Between Your Prof and Your pop-up Prof • 7 minutes
• Graded MC Quiz about week 7 & 8 • 90 minutes
• Test Your Knowledge about Poverty and Nature • 30 minutes

Erasmus University: a top-100 ranked international research university based in Rotterdam, the Netherlands. Our academic teaching and research focuses on four areas: health, wealth, culture and governance. Erasmus University Rotterdam: make it happen.

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347 reviews

Reviewed on May 7, 2018

Wonderfully compiled course. I had no interest in economics prior to this, and now I am quite happy I did this.

Reviewed on Jun 30, 2022

The curriculum of the course and the methodology of delivery is excellent.

The presenters are also very professional and knowledgeable

Reviewed on Jan 25, 2018

Excellent course on Theories on economics which has given un the insight of economics via various theory. Really useful to understand many financial aspects / issues on different prospective

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Course info, instructors.

• Prof. Arnaud Costinot
• Prof. Dave Donaldson

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• International Economics

Learning Resource Types

International economics i, lecture slides.

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