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Tables of Contents for Economics
Chapter/Section Title
Page #
Page Count
List of Figures
xix
List of Tables
xxii
Preface
xxiv
Part I: The Economic Environment
1
66
Introduction
3
1
What is Economics?
3
2
The Analytical Framework of Economics
5
5
Neoclassical Economics vs. New Classical Economics
10
5
Structure of the Text and Suggestions for its Use
15
8
Key Terms and Review
19
1
Further Reading
19
1
Questions
20
3
Preference and the Utility Function
23
15
The Scientific Approach to the Study of Human Behavior
23
1
Preference and the Utility Function
24
6
The Convex Preference Relation, Quasi-concave Utility Functions, Diminishing Marginal Rates of Substitution, and Desire for Diverse Consumption
30
4
Ordinal vs. Cardinal Theory of Utility and Diminishing Marginal Rate of Substitution vs. Diminishing Marginal Utility
34
4
Key Terms and Review
35
1
Further Reading
36
1
Questions
36
1
Exercises
36
2
Production Conditions
38
29
The Neoclassical Framework vs. the New Classical Framework
38
1
The Neoclassical Production Enviroment
39
4
The New Classical Production Environment
43
16
Economies of specialization
45
3
Division of labor
48
1
Exogenous comparative advantage and economies of division of labor
48
5
Endogenous absolute and comparative advantages
53
6
Endogenous cum Exogenous Comparative Advantage
59
8
Key Terms and Review
61
1
Further Reading
62
1
Questions
62
1
Exercises
63
4
Part II: The Neoclassical Framework
67
62
Neoclassical Decision Problems
69
25
Budget Constraint and Dichotomy between Pure Consumers and Firms
69
2
A Pure Consumer's Constrained Utility Maximization Problem
71
5
Comparative Statics of the Pure Consumer's Utility Maximization Problem
76
3
A Pure Consumer's Expenditure Minimization Problem
79
4
Recovering the Utility Function from a Demand System
83
1
Revealed Preference
84
1
A Producer's Decision Problem in a Walrasian Regime
85
9
Key Terms and Review
89
1
Further Reading
90
1
Questions
90
1
Exercises
91
3
General Equilibrium the Neoclassical Framework
94
35
General Equilibrium in a Walrasian Model
94
4
Neoclassical General Equilibrium Model
98
5
Comparative Statics of Neoclassical General Equilibrium
103
8
Welfare Implications of Neoclassical General Equilibrium
111
2
Equilibrium in Neoclassical Game Models
113
16
Game models
113
1
Nash equilibrium
113
3
Subgame perfect equilibrium
116
1
Bayes equilibrium
117
1
Sequential equilibrium
118
3
Key Terms and Review
121
1
Further Reading
122
1
Questions
122
1
Exercises
123
6
Part III: The New Classical Framework
129
60
Consumer-producers' Decisions to Choose the Optimum Level and Pattern of Specialization
131
18
The New Classical Framework and Transaction Costs
131
2
Configurations and Corner Solutions in the New Classical Framework
133
3
The Optimum Resource Allocation for a Given Level and Pattern of Specialization
136
5
The Optimum Level and Pattern of Specialization
141
2
Inframarginal analysis of demand and supply
141
2
Inframarginal and marginal comparative statics of decisions
143
1
Neoclassical and New Classical Laws of Supply and Elasticity of Substitution
143
6
Key Terms and Review
145
1
Further Reading
146
1
Questions
146
2
Exercises
148
1
New Classical General Equilibrium and Its Welfare Implications
149
22
Neoclassical vs. New Classical General Equilibrium
149
2
How Does the Market Coordinate the Division of Labor and Utilize Network Effects?
151
7
Struture, corner equilibrium, and resource allocation for a given structure of division of labor
152
4
General equilibrium level and structure of division of labor - How does the market coordinate division of labor to utilize network effects?
156
2
Inframarginal Comparative Statics of New Classical General Equilibrium
158
5
Inframarginal vs. marginal comparative statics of new classical general equilibrium
158
3
Comparative statics of decisions vs. comparative statics of equilibrium
161
1
The inappropriateness of marginal cost pricing and the difference between neoclassical and new classical general equilibrium
162
1
Effieiency of the Invisible Hand
163
8
The first welfare theorem in the new classical framework
163
2
Economic development and disparity between the Pareto optimum and the PPF
165
1
Interdependence and conflict between efficient resource allocation and efficient organization
165
2
Key Terms and Review
167
1
Further Reading
168
1
Questions
168
1
Exercises
169
2
Trade Pattern and Professional Middlemen
171
18
Why Can Professional Middleman Make Money? What Are the Determinants of Business Success?
171
1
A Model with Trading Activities and Heterogeneous Parameters
172
1
The Decision to be a Professional Middleman
173
2
Market Structures and Corner Equilibria
175
4
Basic vs. nonbasic structures
175
2
Definitions of corner and general equilibria
177
2
The Equilibrium Size of the Network of Division of Labor
179
2
Emergence of Professional Middlemen and a Hierarchical Structure of Economic Organization
181
1
Determinants of Trade Pattern and Successful Business
182
7
Key Terms and Review
185
1
Further Reading
185
1
Questions
185
3
Exercises
188
1
Part IV: The Institution of the Firm and Pricing Through Bargaining and Contracting
189
68
The Labor Market and the Institution of the Firm
191
25
What is the Institution of the Firm
191
2
Is It Fair to have an Asymmetric Relationship between Boss and Employees? - The Story behind the Model
193
3
Emergence of the Firm from the Division of Labor
196
10
Economies of roundabout production
196
1
The corner equilibria in four structures
197
5
The general equilibrium structure of transactions and residual rights
202
4
The Distinction between ex ante and ex post Production Functions and the New Classical Analysis of Demand and Supply
206
1
Economies of Division of Labor and the Firm, and the Coase Theorem
207
9
Key Terms and Review
210
1
Further Reading
210
1
Questions
211
2
Exercises
213
3
Pricing Mechanisms Based on Bargaining
216
18
Bargaining Games, Strategic Behavior, Opportunistic Behavior
216
1
Nash Bargaining Games
217
4
Endogenous Transaction Costs caused by Information Asymmetry
221
2
Alternating-offer Bargaining Games
223
2
Dynamic Bargaining Games and the Division of Labor
225
2
How Does Competition for a Greater Share of Gains from the Division of Labor Generate Endogenous Transaction Costs?
227
3
How Can Endogenous Transaction Costs be Eliminated by Consideration of Reputation?
230
4
Key Terms and Review
231
1
Further Reading
231
1
Questions
232
1
Exercises
233
1
Endogenous Transaction Costs and Theory of Contract, Ownership, and Residual Rights
234
23
Endogenous Transaction Costs and Moral Hazard
234
2
Neoclssical Principal-Agent Models
236
4
A New Classical General Equilibrium Principal-Agent Model
240
5
The Trade-off between Endogenous Transaction Costs caused by Moral Hazard and Monitoring Cost
245
2
The Grossman-Hart-Moore Model of Optimal Ownership Structure
247
4
Noncredible Commitment and Soft Budget Constraint
251
6
Key Terms and Review
252
1
References
253
1
Questions
253
1
Exercises
254
3
Part V: Trade Theory and More General New Classical Models
257
98
The Emergence of International Trade from Domestic Trade and Emergence of New Products
259
35
Endogenous Trade Theory and Endogenous Number of Consumer Goods
259
3
A New Classical Trade Model with Fixed Learning Costs
262
1
How are Demand and Supply Functions Determined by Individuals' Levels of Specialization?
262
4
Inframarginal Comparative Statics of Optimum Decisions
266
1
How is the Level of Division of Labor in Society Determined in the Market?
267
3
Inframarginal Comparative Statics of General Equilibrium and Many Concurrent Economic Phenomena
270
4
Emergence of International Trade from Domestic Trade
274
1
Co-movement of Division of Labor and Consumption Variety
275
3
Trade-off between Economies of Specialization and Coordination Costs
278
2
A Neoclassical Model Endogenizing the Number of Consumption Goods on the Basis of the Trade-off between Economies of Scale and Consumption Variety
280
5
An Extended Murphy-Shleifer-Vishny Model with Compatibility between Economies of Scale and Competitive Markets
285
9
Key Terms and Review
288
1
Further Reading
289
1
Questions
289
3
Exercises
292
2
Exogenous Comparative Advantages in Technology and Endowment, Division of Labor, and Trade
294
32
Endogenous vs. Exogenous Comparative Advantage
294
2
A Ricardian Model with Exogenous Comparative Technological Advantage and Transaction Costs
296
5
Analysis of Decisions vs. Analysis of Equilibrium
301
4
Economic Development and Trade Policy
305
7
Comparative Endowment Advantage and Trading Efficieny
312
14
Key Terms and Review
320
1
Further Reading
320
1
Questions
321
3
Exercises
324
2
More General New Classical Models
326
29
The Theoretical Foundation of New Classical Economics
326
2
A General New Classical Model with ex ante Different Consumer-producers
328
2
The Existence of a Competitive Equilibrium
330
5
An Equilibrium Organism and the Efficiency of the Invisible Hand in Coordinating Division of Labor
335
2
A New Classical Model with both Endogenous and Exogenous Comparative Advantages
337
3
Trade Pattern and Income Distribution
340
15
Key Terms and Review
346
1
Further Reading
347
1
Questions
347
3
Exercises
350
5
Part VI: Urbanization, Population, and the Trade-Off Between Working and Leisure
355
46
Urbanization, the Dual Structure between Urban and Rural Areas, and the Division of Labor
357
28
Why and How Cities Emerge from the Division of Labor
357
2
The emergence of Cities and of the Dual Structure between Urban and Rural Areas
359
4
Why Geographical Concentration of Transactions Can Improve Transaction Efficiency
363
6
Simultaneous Endogenization of Level of Division of Labor, Location Pattern of Residences, Geographical Pattern of Transactions, and Land Prices
369
10
The Fujita-Krugman Model of Urbanization
379
6
Key Terms and Review
382
1
Further Reading
382
1
Questions
383
1
Exercises
384
1
The Trade-off between Working and Leisure, and the Effects of Resource Scarcity and Population Size on the Division of Labor
385
16
Why Can Division of Labor Enlarge the Scope for the Efficient Trade-off between Working and Leisure?
385
3
Why Leisure Time and Per Capita Consumption of Goods Increase as Division of Labor Develops
388
3
Why Can a Resource Shortage Crisis Promote Evolution in Division of Labor and Productivity?
391
3
Implications of High Population Density for Evolution in Division of Labor through Its Effect on the Per Capita Investment Cost of Infrastructure
394
7
Key Terms and Review
398
1
Further Reading
398
1
Questions
398
1
Exercises
399
2
Part VII: The Trade-Off Between Economies of Division of Labor and the Coordination Reliability of the Network of Division of Labor
401
46
The Economics of Property Rights and the Division of Labor
403
27
Uncertainties in Transaction and the Economics of Property Rights
403
4
Trade-offs among Economies of Division of Labor, Coordination Reliability, and the Benefits of Competition
407
4
Endogenization of Coordination Reliability in Each Transaction
411
8
The Yang-Wills model endogenizing risk of coordination failure for each transaction
412
1
The efficient extent of externalities
413
1
Perfect competition is inefficient
414
1
Risk of mass unemployment
414
2
The economics of property rights and the soft budget constraint
416
3
Substitution between Precise Enforcement of Property Rights and Competition
419
11
Key Terms and Review
424
1
Further Reading
425
1
Questions
425
2
Exercises
427
3
Insurance and Risk of Coordination Failure of the Network of Division of Labor
430
17
Uncertainty and Risk Aversion
430
2
A Model with Insurance and Endogenous Specialization in the Absence of Moral Hazard
432
4
The Division of Labor and Endogenous Transaction Costs caused by Complete Insurance
436
11
Key Terms and Review
444
1
Further Reading
444
1
Questions
444
1
Exercises
445
2
Part VIII: The Hierarchical Structure of Division of Labor
447
74
The Division of Labor in Roundabout Production and Emergence of New Machines and Related New Technology
449
23
New Classical vs. Neoclassical Views on the Emergence of New Producer Goods and Related New Technology
449
2
A Model with Endogenous Technical Progress, an Endogenous Number of Producer Goods, and Endogenous Specialization
451
2
The Efficient Number of Producer Goods and Level of Specialization
453
1
The Corner Equilibria in Nine Structures
454
4
Concurrent Changes in the Level of Division of Labor, Productivity, and Input Diversity
458
1
Ex post Production Functions, Emergence of New Machines, and Endogenous Technical Progress
459
1
Changes in the Economic Structure and Topological Properties of Economic Organisms
460
2
Evolution in the Number of Producer Goods and Economic Development
462
10
Key Terms and Review
467
1
Further Reading
468
1
Questions
468
2
Exercises
470
2
Industrialization and the Division of Labor in Roundabout Production
472
21
The Features of Industrialization
472
4
A General Equilibrium Model Endogenizing Production Roundaboutness
476
1
Corner Equilibria and the Emergence of New Industry
477
3
General Equilibrium and Industrialization
480
3
Changes in the Income Shares of the Industrial and Agricultural Sectors
483
1
The Number of Possible Structures of Transactions Increases More Than Proportionally as Division of Labor Evolves in Roundabout Production
484
9
Key Terms and Review
487
1
Further Reading
487
1
Questions
487
4
Exercises
491
2
The Hierarchical Structure of the Network of Division of Labor and Related Transactions
493
28
The Theory of Hierarchy
493
3
One-way Centralized Hierarchy
496
2
A Decentralized Hierarchy of Transactions and the Division of Labor
498
4
Configurations and Market Structures
502
7
The General Equilibrium and its Inframarginal Comparative Statics
509
1
The Network Hierarchy of Cities and Division of Labor
510
11
Consumer-producers, cities, and layers of a hierarchy of cities
511
1
Two types of transaction cost
512
3
The optimal number of layers in a hierarchical structure
515
2
Key Terms and Review
517
1
Further Reading
517
1
Questions
517
1
Exercises
518
3
Part IX: Economic Development and Economic Growth
521
100
Neoclassical Models of Economic Growth
523
21
Exogenous vs. Endogenous Growth
523
3
The Ramsey and AK Models
526
7
R&D-based Endogenous Growth Models
533
11
Key Terms and Review
539
1
Further Reading
540
1
Questions
540
1
Exercises
541
3
Economic Growth Generated by Endogenous Evolution in Division of Labor
544
29
Economies of Specialized Learning by Doing and Endogenous Evolution in Division of Labor
544
3
A New Classical Dynamic Model with Learning by Doing
547
2
Optimum Speed of Learning by Doing and Evolution of Endogenous Comparative Advantage
549
11
The function of contracts
549
1
An individual's dynamic decision problem
550
1
Dynamic equilibrium
551
9
Endogenous Evolution of the Extent of the Market, Trade Dependence, Endogenous Comparative Advantages, and Economic Structure
560
3
Empirical Evidence and Rethinking Development Economics and Endogenous Growth Theory
563
10
Appendix 22.1: The Relationship between the Control Theory and Calculus of Variations
568
1
Key Terms and Review
569
1
Further Reading
570
1
Questions
570
1
Exercises
571
2
Concurrent Endogenous Evolution in Division of Labor, in the Number of Goods, and in the Institution of the Firm
573
22
How Can We Simultaneously Endogenize Evolution in Division of Labor and in the Number of Producer Goods?
573
2
A Dynamic Equilibrium Model with Learning by Doing and an Endogenous Number of Producer Goods
575
1
Dynamic Equilibrium Level of Specialization and Input Variety
576
7
Concurrent Evolution of Specialization, Variety of Producer Goods, and the Institution of the Firm
583
12
Appendix 23.1: Proof of Lemma 23.1
587
1
Appendix 23.2: Proof of Proposition 23.1
588
2
Appendix 23.3: Proof of Proposition 23.2
590
1
Key Terms and Review
591
1
Further Reading
592
1
Questions
592
1
Exercises
593
2
Experiments with Structures of Division of Labor and Evolution in Organization Information Acquired by Society
595
26
How Does Organization Knowledge Acquired by Society Determine Economic Development?
595
5
A Static Model with an Endogenous Length of Roundabout Production Chain and an Endogenous Division of Labor
600
2
Interactions between Dynamic Decisions and Evolution in Organization Information
602
4
Walrasian Sequential Equilibrium and Concurrent Evolution in Organization Information and Division of Labor
606
15
Key Terms and Review
616
1
Further Reading
617
1
Questions
617
2
Exercises
619
2
Part X: Macroeconomic Phenomena and the Endogenous Size of the Network of Division of Labor
621
78
Investment and Saving Theory
623
26
Neoclassical Investment and Saving Theory
623
3
Neoclassical Models of Self-saving and Interpersonal Loans
626
5
New Classical Theory of Investment and Savings
631
6
The model
631
1
Configuration sequences and structure sequences
632
3
Dynamic corner equilibria in 16 structure sequences
635
2
Investment, Capital, and Division of Labor in Roundabout Production
637
12
Dynamic general equilibrium
638
4
Nontopological properties of economic growth and sudden decline of interest rates
642
2
The endogenous decision horizon and the effect of liberalization reforms on opportunities for lucrative investment
644
1
Key Terms and Review
645
1
Further Reading
645
1
Questions
646
1
Exercises
647
2
Money and Division of Labor
649
16
Neoclassical vs. New Classical Theories of Money
649
4
A New Classical Model of an Endogenous Monetary Regime
653
2
Possible Structures and Monetary Regimes
655
10
Key Terms and Review
662
1
Further Reading
662
1
Questions
663
1
Exercises
663
2
New Classical Theory of Business Cycles and Unemployment
665
34
Rethinking Macroeconomics
665
7
Long-run Regular Efficient Business Cycles, Cyclical Unemployment, Long-run Economic Growth, and Division of Labor in Producing Durable Goods
672
4
A New Classical Dynamic Equilibrium Model of Business Cycles and Unemployment
676
2
Cyclical vs. Noncyclical Corner Equilibria
678
8
Regime specification, configurations, and market structures
678
1
The dynamic corner equilibrium in autarky
679
2
Market structure C
681
2
Market structure P
683
2
Welfare and policy implications of the model
685
1
General Price Level, Business Cycles, and Unemployment Rate
686
3
Emergence of Firms and Fiat Money from the Division of Labor
689
10
Key Terms and Review
691
1
Further Reading
692
1
Questions
692
2
Exercises
694
5
References
699
25
Index
724