[2010-01-10] “Economics: Private And Public Choice”

If you are looking for a comprehensive and accessible introduction to economics, “Economics: Private and Public Choice” by James D. Gwartney, Richard L. Stroup, Russell S. Sobel and David Macpherson is the book for you. It covers both microeconomics and macroeconomics in addition to the core principles of economics. Though it is a textbook meant for an undergraduate course in economics, it is also suitable as a gentle introduction to the dismal science for the lay person. I read the tenth edition of this book that was published in 2003.

This is a “modern” textbook in every sense. It is quite colourful and is richly illustrated with several pictures, graphs and icons. The chapters are not too big and are written in a simple language. They begin with an overview of the chapter and end with a summary of the key points learned in the chapter, a sneak preview of what is in store in the next chapter and several critical analysis questions for testing your comprehension (only some of which are answered in an appendix). Several boxes sprinkled throughout the text either talk about applications of economics or introduce a noted economist. Teaching aids for the book like presentation slides, instructor's manual, etc. can be separately obtained from the publisher. The book comes with a ridiculous CD-ROM containing a single HTML file that in turn redirects you to the “Gwartney Xtra!” web-site containing supplementary material for the book. I cannot help but wonder why the publishers could not just provide the URL for the web-site in the book.

The book is divided into six parts, each containing closely-related chapters that progressively expand upon the respective subject of the part. These parts are:

  1. The Economic Way of Thinking
  2. Markets and Governments
  3. Core Macroeconomics
  4. International Economics
  5. Core Microeconomics
  6. Beyond Basics

I was surprised to see macroeconomics presented before microeconomics - I would have expected it to be the other way round. The last part is a collection of 14 special topics on subjects like the burden of social-security, rising healthcare costs, increasing national debt, etc. that still seem quite relevant. The focus of the book is on the United States, but international readers will not feel lost while reading the book as the core issues that are discussed remain universally relevant. The thrust of the book might be termed right-wing or republican as it argues for a reduction in taxes, smaller role of the government, etc.

Unlike some other textbooks on economics, this book is not math-heavy. Like some other textbooks however, there is a lot of hand-waving and the reader is expected to just believe the authors. For example, at least in the beginning the authors could have shown how supply curves are derived from empirical data and how they shift under changed conditions. This book also seems to be revised every couple of years like other college-level textbooks - this is a very expensive textbook and these superfluous revisions can be seen as an underhanded attempt by the publisher to kill the used-books market.

The book presents a strong case for capitalism, but does not explore why communism or socialism became more popular in other countries. It does provide excellent insights into why the democratic process does not quite work the way people expect it to work. It shows how people are forced to choose among candidates who might not represent their stand on all the relevant issues, only some. It explores the rent-seeking behaviour of special-interest groups who use campaign financing and intensive lobbying to get politicians to pass laws that strongly benefit them but weakly harm the general public, sometimes in not-so-obvious ways. It explains how politicians have a strong incentive to take decisions that have short-term benefits but long-term hazards.

I felt that the book did not cover the very basics of economics and finance in much detail. For example, the origin of money or the evolution of the banking system could have been expanded upon. While the book presents almost all the fundamental concepts, it does not put it all together to illustrate how the student can perform economic analysis on their own in a given situation. For example, how can you arrive at the value of a house or a stock and decide whether an offered price is cheap or dear? Concepts like opportunity cost, interest rate, present value of money, inflation, etc. could have been used in the analysis for such a case.

It is my firm belief that everyone should be familiar with the basics of economics since it is so important in our times. If you have never been introduced to the subject before, this is a good textbook to get started provided you can afford the price.

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