Microeconomics (11th Edition)

Book Preface

The future is always uncertain. But at some times, and now is one such time, the range of possible near-future events is enormous. The major source of this great uncertainty is economic policy. There is uncertainty about the way in which international trade policy will evolve as protectionism is returning to the political agenda. There is uncertainty about exchange rate policy as competitive devaluation rears its head. There is extraordinary uncertainty about monetary policy with the Fed having tripled the quantity of bank reserves and continuing to create more money in an attempt to stimulate a flagging economy but providing no guidance about its eventual exit strategy from stimulus. And there is uncertainty about fiscal policy as a one trillion dollar deficit approaches a fiscal cliff and interacts with an aging population and rising health-care costs to create a national debt time bomb.

In the five years since the subprime mortgage crisis of August 2007 moved economics from the business report to the front page, justified fear has gripped producers, consumers, financial institutions, and governments.

Even the idea that the market is an efficient mecha- nism for allocating scarce resources came into question. Many thoughtful people worried about rising income inequality and some political leaders called for the end of capitalism and the dawn of a new economic order in which tighter regulation reigned in unfettered greed.

Rarely do teachers of economics have such a rich feast on which to draw. And rarely are the principles of economics more surely needed to provide the solid foundation on which to think about economic events and navigate the turbulence of economic life.

Although thinking like an economist can bring a clearer perspective to and deeper understanding of today’s events, students don’t find the economic way of thinking easy or natural. Microeconomics seeks to put clarity and understanding in the grasp of the student through its careful and vivid exploration of the tension between self-interest and the social interest, the role and power of incentives—of opportunity cost and marginal benefit—and demonstrating the possibility that markets supplemented by other mechanisms might allocate resources efficiently.

Parkin students begin to think about issues the way real economists do and learn how to explore difficult policy problems and make more informed decisions in their own economic lives.