001-004_Krugman2e_Intro - 001-004_Krugman2e_Intro.qxp...

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Introduction: The Ordinary Business of Life 1 >> ANY GIVEN SUNDAY intro: T’S SUNDAY AFTERNOON IN THE SPRING OF 2008, and Route 1 in central New Jersey is a busy place. Thousands of people crowd the shopping malls that line the road for 20 miles, all the way from Trenton to New Brunswick. Most of the shoppers are cheerful—and why not? The stores in those malls offer an extraordinary range of choice; you can buy everything from sophisticated electronic equipment to fashionable The scene along Route 1 on this spring day is, of course, perfectly ordinary—very much like the scene along hundreds of other stretches of road, all across America, that same afternoon. And the discipline of economics is mainly concerned with ordinary things. As the great nineteenth-century economist Alfred Marshall put it, economics is “a study of mankind in the ordinary business of life.” I Robert Landau/Corbis Delivering the goods: the market economy in action clothes to organic carrots. There are probably 100,000 distinct items available along that stretch of road. And most of these items are not luxury goods that only the rich can afford; they are products that millions of Americans can and do purchase every day. What can economics say about this “ordinary busi- ness”? Quite a lot, it turns out. What we’ll see in this book is that even familiar scenes of economic life pose some very important questions—questions that econom- ics can help answer. Among these questions are: 001-004_Krugman2e_Intro.qxp 4/2/08 8:55 AM Page 1
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2 PART 1 WHAT IS ECONOMICS? The Invisible Hand That ordinary scene in central New Jersey would not have looked at all ordinary to an American from colonial times—say, one of the patriots who helped George Washington win the Battle of Trenton in 1776. At the time, Trenton was a small village, and farms lined the route of Washington’s epic night march from Trenton to Princeton—a march that took him right past the future site of the giant Quakerbridge shopping mall. Imagine that you could transport an American from the colonial period forward in time to our own era. (Isn’t that the plot of a movie? Several, actually.) What would this time-traveler find amazing? Surely the most amazing thing would be the sheer prosperity of modern America— the range of goods and services that ordinary families can afford. Looking at all that wealth, our transplanted colonial would wonder, “How can I get some of that?” Or perhaps he would ask himself, “How can my society get some of that?” The answer is that to get this kind of prosperity, you need a well-functioning system for coordinating productive activities—the activities that create the goods and services people want and get them to the people who want them. That kind of system is what we mean when we talk about the economy. And economics is the social science that studies the production, distribution, and consumption of goods and services. An economy succeeds to the extent that it, literally, delivers the goods. A time-
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This note was uploaded on 04/05/2011 for the course PUBLIC ADM 204 taught by Professor Dr.m during the Spring '11 term at Kaplan University.

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001-004_Krugman2e_Intro - 001-004_Krugman2e_Intro.qxp...

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