Surfing Economics Essays for the Inquiring

Surfing Economics is a collection of essays by one of Europe's leading young economists. These essays are written to bring to life in a non-technical manner some of the fundamental ideas and concepts in contemporary economics. While this book was primarily written for the undergraduate student, these essays will entertain and enlighten economists of all ages. Above all, the essays convey the enthusiasm and excitement of Huw Dixon for economics along with his valuable insights into the subject. Sometimes provocative, the essays are never boring.

Huw David Dixon is Professor of Economics at the University of York.

Preface

xi

Acknowledgements

xiii

Introduction

xv

PART I ECONOMICS AND THE MEANING OF LIFE

The Joy of Economics

3

(18)

Introduction

3

(1)

Infinity in a pencil

3

(2)

How we understand the economy: the principles that guide economists

5

(2)

What do economists argue about?

7

(5)

The limits of economics: are economists stupid?

12

(3)

The economy is intelligent

15

(5)

Conclusion

20

(1)

Equilibrium and Explanation

21

(36)

The three crosses

23

(15)

Disequilibrium and equilibrium

38

(3)

Information and equilibrium

41

(7)

Time and equilibrium

48

(4)

Conclusion

52

(5)

PART II MAINLY MACRO

Of Coconuts, Decomposition and a Jackass: The Genealogy of the Natural Rate

57

(17)

Introduction

57

(1)

The Classical dichotomy

57

(2)

Patinkin and full employment

59

(4)

Friedman and the natural rate hypothesis

63

(2)

Lucas-Rapping and the Lucas archipelago

65

(2)

Real business cycles

67

(1)

The NAIRU: unions and imperfect competition

67

(2)

An evaluation of the natural rate hypothesis

69

(3)

Conclusion

72

(2)

The Role of Imperfect Competition in New Keynesian Economics

74

(35)

Introduction

74

(1)

What's new pussycat?

74

(1)

Imperfect competition for beginners: a microeconomic interlude

75

(3)

Of Keynes and the Keynesians

78

(1)

Little and large: micro and macro

79

(1)

Walrasian microeconomics and macroeconomics

80

(1)

Non-Walrasian microeconomics: neo-Keynesian macroeconomics

81

(9)

Nominal rigidity

90

(1)

Envelopes, menu costs and nominal rigidity

91

(6)

Imperfect competition and the multiplier with flexible prices

97

(8)

The Cambridge soap: what might have been

105

(1)

Conclusion

106

(3)

New Keynesian Economics, Nominal Rigidities and Involuntary Unemployment

109

(16)

Introduction

109

(1)

The New Keynesian idea

110

(1)

Nominal rigidities before the New Keynesians

110

(2)

Nominal rigidities in New Keynesian models

112

(1)

Involuntary unemployment

113

(6)

New macroeconomics, new consensus

119

(1)

Conclusion: the lessons for methodology

120

(5)

PART III MAINLY MICRO

Oligopoly Theory Made Simple

125

(36)

Introduction

125

(1)

Non-cooperative equilibrium

126

(3)

Cournot and Bertrand equilibria with homogeneous products

129

(5)

Cournot and Bertrand equilibria with differentiated commodities

134

(9)

Precommitment: strategic investment and delegation

143

(10)

Competition over time

153

(6)

Conclusions

159

(2)

Some Thoughts on Economic Theory and Artificial Intelligence

161

(16)

Introduction

161

(1)

Orthodox economic rationality: rationality without reasoning

162

(4)

Complexity and artificial intelligence

166

(7)

Reasoning as precommitment: an example

173

(2)

Conclusion

175

(2)

Donut World and the Duopoly Archipelago: Social Learning and the Evolution of Competition

177

(31)

Introduction

177

(2)

Social learning: from Antoine Augustin Cournot to John Maynard Smith

179

(6)

Social learning in human societies: Gabriel Tarde

185

(8)

Economic natural selection: keeping up with the Joneses

193

(11)

Conclusion: how economists can get smarter by making agents dumber?

204

(4)

References

208

(9)

Index

217

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Surfing Economics Essays for the Inquiring Economist

Summary

Author Biography

Table of Contents

Supplemental Materials