Economics The User’s Guide (Ha-Joon Chang, 2014)

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  • Only supplier (monopoly), few suppliers (oligopoly), sole buy (monopsony), few buyers (oligopsony)
  • History
    • 1500-1820 dawn of capitalism: capitalism is born, new science emerges, colonial expansion starts and leave a big scar
    • 1820-1870 industrial revolution: long working hours, anti-capitalist movement, Britain starts protectionism, US champion protectionism, free trade spreads
    • 1870-1913 high noon: rise of mass production, new institution emerges, liberal golden age
    • 1914-1945 the turmoil: first world war, liberal golden age ended, rise of socialism, great depression 1939, US and Sweden reform, socialism outperforms capitalism
    • 1945-1973 golden age of capitalism: growth employment and stability, pro-work policies, government regulations, developing countries emerges
    • 1973-1979 the interregnum
    • 1980-today the rise and fall of neoliberalism: end of British post-war compromise, remarking of US economy, debt crisis, the collapse of socialism, globalisation, asian financial crisis, the dot.com boom, the great moderation, 2008 global financial crisis, free-market orthodoxy
  • Quantitative easing: creating money out of thin air and releasing to the economy mainly by government bond
  • Economics type
    • Classical: the market keeps all producers alert through competition, so leave it alone
      • Economy: classes, individual: selfish and rational, world: certain, important: production, change: investment, policy: free market
    • Neoclassical: individuals know what they are doing, so leave them alone - except when market malfunction
      • Economy: individual, individual: selfish and rational, world: certain with risk, important: exchange and consumption, change: individual choices, policy: free market or interventionism
    • Marxist: capitalism is a powerful vehicle for economic progress, but it will collapse, as private property ownership becomes an obstacle to further process
      • Economy: classes, individual: selfish and rational, world: certain, important: production, change: class struggle, policy: socialist revolution
    • Developmentalist: backward economies can’t develop if they leave things entirely to the market
      • Economy: no strong view, individual: no strong view, world: uncertain, important: production, change: developments in product capabilities, policy: temporary government protection
    • Austrian: no one knows enough, so leave everyone alone
      • Economy: individual, individual: selfish but layered, world: complex and uncertain, important: exchange, change: individual choice, policy: free market
    • Schumpeterian: capitalism is a powerful vehicle of economic progress but it will atrophy, as firms become larger and more bureaucratic
      • Economy: no particular view, individual: no strong view, world: complex, important: production, change: technological innovation, policy: ambiguous
    • Keynesian: what is good for individuals may not be good for the whole economy
      • Economy: classes, individual: irrational, world: uncertain, important: ambiguous, change: ambiguous, policy: active fiscal policy
    • Institutionalist: individuals are products of their own society, even though they may change its rules
      • Economy: individuals and institutional, individual: layered, world: complex and uncertain, important: no strong view, change: interactions, policy: free ambiguous
    • Behaviourist: we are not smart enough, so we need to deliberately constrain our own freedom of choice through rules
      • Economy: individual organisation and institution, individual: boundedly rational, world: complex and uncertain, important: no strong view, change: no strong view, policy: no strong view
  • Taylorism: the principles or practice of scientific management and work efficiency as practised in a system known as the Taylor System
  • Investment ratio = gross fixed capital formation (GFCF) / gross domestic product (GDP)
  • Poverty: “the peasant Ivan is jealous of his neighbour Boris, because Boris has a goat. A fairy comes along and offers Ivan a single wish. What does he wish for? That Boris’s goat should drop dead”
  • The Kuznets hypothesis: as an economy develops, market forces first increase and then decrease economic inequality
  • Gini coefficient: a measure of statistical dispersion intended to represent the income or wealth distribution of a nation's residents, and is the most commonly used measure of inequality
  • Contractarianism: a general ethical theory that individuals make the right choices under a hypothetical social contract
  • Frictional unemployment: unemployment which exists in any economy due to people being in the process of moving from one job to another
  • Technological unemployment, structural unemployment, political unemployment, cyclical unemployment, systemic unemployment
  • Brain drain: good people leaving, brain gain: good people come back with new skills
  • Cui bono? (who benefits?), audite et alteram partem (listen even to the other side)


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