Markets for Managers: A Managerial Economics Primer

Praise for Markets for Managers “It could redefine how politicians and senior executives understand the reality of market processes.” —Steve Baker MP, Treasury Select Committee “Pitched at exactly the right level and covers exactly the right material to enable business executives to set themselves apart from the crowd by understanding how markets work.” —Philip Booth, Editorial and Programme Director, Institute of Economic Affairs “Full of excellent examples and a pleasure to read.” —Nicolai J. Foss, Professor of Strategy and Organization, Copenhagen Business School “An excellent overview of the key debates in economic theory and leaves the reader enlightened, rather than frustrated. Highly recommended.” —Allister Heath, Deputy Editor, The Telegraph “Students will appreciate the clear and compelling examples, effective technical exposition, and useful summaries. A very effective text!” —Peter G. Klein, University of Missouri “Evans successfully distils some of the wisdom of the wiser economists and debunks some of the more bizarre claims of other parts of the economics profession.” —Toby Baxendale, Entrepreneur “An engaging, clear, comprehensive course in economics.” —Sam Bowman, Research Director, Adam Smith Institute “I am confident this book will become a favourite read among our current students and alumni.” —Zoran Đorđević, Managing Partner, Cotrugli Business School “An enjoyable explanation of principles that are often misunderstood, denied, or buried in economic jargon.” —Bruno Prior, Managing Director, Forever Fuels Ltd “Handy at all times.” —Krunoslav Koprivnjak, Sales Representative, Oracle

Preface ix Introduction xi CHAPTER 1 Incentives Matter 1 1.1 Managerial Individualism 2 1.2 Demand Curves 5 1.3 Elasticity 12 Notes 16 CHAPTER 2 Cost and Choice 19 2.1 Opportunity Cost 20 2.2 Diminishing Marginal Returns 22 2.3 The Planning Horizon 26 2.4 Cost vs. Waste 28 Notes 29 CHAPTER 3 Market Exchange 33 3.1 Market Equilibrium 33 3.2 Comparative Statics 36 3.3 Information Economics 41 Notes 44 CHAPTER 4 Prices and Economic Calculation 47 4.1 Entrepreneurship 48 4.2 The Firm 52 4.3 Price Discrimination 54 4.4 The Knowledge Problem 58 4.5 Internal Markets 60 Notes 63 CHAPTER 5 Competition and the Market Process 67 5.1 Market Concentration 67 5.2 Collusion 69 5.3 Market Contestability 72 5.4 Monopoly Power 77 Notes 78 CHAPTER 6 Capital Theory and Recalculation 81 6.1 Microclimate 82 6.2 Unemployment 84 6.3 Recalculation 90 Notes 93 CHAPTER 7 Public Finance 97 7.1 Taxation 97 7.2 Bonds 101 7.3 Banking 104 7.4 Saving 107 7.5 Real Business Cycles 108 7.6 National Income Accounting 109 Notes 112 CHAPTER 8 Monetary Theory 117 8.1 Inflation 118 8.2 Monetary Policy 126 8.3 Monetary Regimes 133 8.4 Macroeconomic Fluctuations 135 Notes 137 CHAPTER 9 Fiscal Policy 141 9.1 The Great Depression 142 9.2 Fiscal Stimulus 144 9.3 Expansionary Fiscal Contractions 150 9.4 Confidence 153 9.5 Laissez–faire 155 9.6 The Phillips Curve 156 Notes 158 CHAPTER 10 International Economics 163 10.1 Globalisation and Trade Theory 164 10.2 Balance of Payments 168 10.3 Foreign Exchange Markets 170 10.4 Currency Regimes 175 Notes 179 CHAPTER 11 Behavioural Economics 183 11.1 Behavioural Anomalies 184 11.2 Market Efficiency 188 Notes 194 CHAPTER 12 Global Prosperity 199 12.1 Growth Theory 199 12.2 Happiness 202 12.3 Economic Freedom 206 12.4 Public Choice Theory 208 12.5 Transition Economics 215 Notes 223 Bibliography 231 Index 000

ANTHONY J. EVANS, P H D, is Associate Professor of Economics at ESCP Europe Business School. He has taught for ESCP Europe, Cotrugli Business School, Danube University, and Helsinki School of Economics, as well as designing and managing custom programmes. Anthony participated in the Global Colloquium for Participant–Centred Learning at Harvard Business School and was a Fulbright Scholar–in–Residence at San Jose State University. He is a member of the Institute of Economic Affairs’ Shadow Monetary Policy Committee. He received his MA and PhD in Economics from George Mason University, USA, and a BA (Hons) from the University of Liverpool, UK.