Browse the CEE Index

AAA (Agricultural Adjustment Act of 1933), 4, 173, 232–33

abortion, 325, 588

accidents: causes, 324; deaths, 446; rates, 327. See also job safety; tort law

accounting: internal controls, 91; sources-of-growth, 593; standards, 386

accounting firms: auditors, 91; regulation of, 91; savings and loan audits, 462

accounting scandals, 90, 98

acquisitions. See mergers; takeovers

activity analysis, 552

Adenauer, Konrad, 218

adverse selection, 282

advertising, 1–4; as barrier to entry, 2–3; competing with, 74; deceptive, 2; economic function, 1–2, 269; expenditures, 1; government, 3; history, 1; image, 2; price, 3; of quality, 82; ratios to sales, 1; regulation of, 3; relationship to profit, 3; seen as brainwashing, 59; television, 303–4; on Web sites, 303–4

AFDC (Aid to Families with Dependent Children), 408, 511. See also welfare system

affirmative action, 118–19, 216

Africa: average incomes, 146; economic freedom, 125; foreign aid, 194; government corruption, 99, 122, 194. See also individual countries

African Americans: civil rights movement, 119; effects of New Deal policies, 233, 572–73; poverty rates, 406; segregation, 118, 119, 572; strikebreakers, 321; wages, 117, 543

African National Congress Party, 18

Afrikaners, 15

Aftalion, Albert, 305

agency costs, 87–88, 89, 334, 335

Agent Orange, 327–28

aggregate demand: externalities, 379; fiscal policy influences, 183, 184, 185, 355, 483, 557; fluctuations and business cycles, 49; influences on, 316; Keynesian view, 376, 483, 550

aging. See elderly; retirement

Agricultural Adjustment Act (AAA) of 1933, 4, 173, 232–33

agricultural subsidy programs, 4–6; costs, 4, 438; criticism of, 4, 427; economic impact, 5, 166, 580; in European Union, 5, 166; forms, 4, 5; impact on international trade, 5–6; impact on prices, 166, 437; in OECD countries, 4–5, 427; parity prices, 344; reductions, 6; supporters, 4, 429, 438–39; in United States, 4, 5, 344, 437, 438–39; wool, 398

agriculture: cartels, 63; commodity futures, 207, 208, 209; in developing countries, 6, 557, 585–86; diminishing marginal returns, 599; effects of global warming, 220; employment, 102–3; in European Union, 5, 166; international trade, 5–6, 427; land rents, 580; New Deal programs, 4, 173, 232–33, 572–73; productivity growth, 102–3, 403; share of labor force, 403, 417–18; in Soviet Union, 66, 423; tenant farmers, 233; trade barriers, 5, 342, 427

Aid to Families with Dependent Children (AFDC), 408, 511. See also welfare system

aircraft: manufacturing, 326; military, 110

Air Force, U.S., 110

Airline Deregulation Act of 1978, 6

airline industry: cartel, 74; competition, 7; deregulation, 6–10, 60, 440; freight transportation, 487; growth, 7; hub-and-spoke system, 7, 8; low-cost carriers, 7, 8; mergers, 8; national ownership rules, 10; “Open Skies” agreements, 9–10; political control of grid, 8–9; profitability, 8; regulation, 6, 7–8, 9–10; subsidies, 10; yield management, 601

air pollution: controls, 170, 210, 399–400, 401–2, 441; effects of fuel efficiency standards, 153; futures, 210. See also environmental damage

airports, 9, 168–69

air traffic control, 9

Air Transport Association, 8, 9

Air Transportation Stabilization Board (ATSB), 10

Akerlof, George A., 521

Alchian, Armen A., 24, 522–23

Allais, Maurice, 523

all-volunteer forces (AVFs), 76, 77

altruism: actions based in, 34–35, 64; environmental quality and, 163; moral value, 162; among voters, 398. See also charity

aluminum: prices, 373; recycling, 162, 435

American Stock Exchange (Amex), 479

American Trucking Association, 486

Anchorage earthquake, 114

Angola, civil war, 455

antidumping duties, 426–27

antitrust, 11–14; criticism of, 11–13, 365; effects, 8, 13–14; enforcement, 12, 13–14, 62–63, 260, 366, 587, 594; exemptions, 13, 474; issues in sports, 474, 475; laws, 11, 13, 14, 58, 259; merger reviews, 260; origins, 11, 59; practices outlawed, 11; suspension of enforcement during Great Depression, 234. See also mergers; monopolies

apartheid, 14–19; colour bar, 15–17; created by white workers, 15, 16–17, 116; decline, 17–18; effects of international sanctions, 18, 452; implementation, 17; origins, 15–17

arbitrage: costs, 268; covered interest, 199; in foreign exchange, 528; locational, 469–70; price differences eliminated by, 268; in sports, 472

Arca/EX, 335

ARCH (autoregressive conditional heteroskedasticity), 530–31

Argentina: government debt default, 186; hyperinflation, 253; privatization, 414, 415

Army, U.S., 110

Army Corps of Engineers, 487

Arrow, Kenneth: biography, 523–24; impossibility theorem, 428, 523, 588

arts, 19–21; donations to nonprofit organizations, 19, 64; economic principles and, 19–21; innovations, 21; international trade in, 20; subsidies, 20

asbestos, 311, 326–28

Asia: average incomes, 147; male-female ratio, 588–89. See also individual countries

asset prices: based on present value of future cash flows, 138, 478; relationship to replacement costs, 598. See also efficient markets theory; stock prices

asymmetric information: incentives under, 568, 600; in insurance market, 596; in markets, 88, 96, 268, 282, 521, 596–97; about stock values, 88, 96; on worker productivity, 594

AT&T, 366

athletes, behavior of, 471–73. See also sports

ATSB (Air Transportation Stabilization Board), 10

auctions, 21–23; of airport landing and takeoff rights, 168–69; definition, 21; Dutch, 21, 22, 168, 593; economic experiments, 168, 592–93; English, 21, 22, 168, 592–93; sealed-bid, 21–22, 592–93, 601; types, 21–22, 592–93, 601; Vickrey (second-price), 21–22, 601; of wireless bandwidth, 22–23

auditors, regulation of, 91

Audubon Society, 204

Australia: immigration, 256; minimum wages, 346, 347; trade embargo on France, 453

Austrian School of Economics, 23–27; business cycle theory, 26, 569; contemporary economists, 24; history, 23–24; leading figures, 23, 24, 526–27, 565, 569; propositions, 24–27; view of information and markets, 269. See also Hayek, Friedrich August; marginalism; Mises, Ludwig von

automatic stabilizers, 184

automobiles: accident rates, 327; electric, 150; emissions standards, 400; fuel efficiency, 153, 374; insurance, 281, 283; Japanese industry, 309, 426; safety regulation, 440; voluntary export restrictions, 426; warranties, 521

autoregressive conditional heteroskedasticity (ARCH), 530–31

AVFs (all-volunteer forces), 76, 77

baby boomers: in labor market, 403; retirements, 240, 458–59, 464

Bachelier, Louis, 138

balance-of-payments accounts, 27–29; capital account, 28–29, 290–91, 293, 297; current account, 28, 29, 290–91, 292–93, 297; deficits, 27; definitions, 27–28; discrepancies, 291, 292; money supply and, 547, 571; offsetting balances, 291; surpluses, 27; trade balance, 27, 28, 183, 297, 340; of United States, 27, 28, 29, 292

Bangladesh, effects of corruption, 98

Banking Act of 1935, 176

Bank of England: anti-inflation policies, 318; bullion controversy, 580; founding, 179; operation of gold standard, 223

bank runs, 29–31; in Great Depression, 232; illiquidity, 180; relationship to bank failures, 30; spillover effects, 29–30; as warning sign, 180

bankruptcy, 31–34; corporate, 31, 32–33, 181; costs, 33, 87, 89; enforcement of laws, 89; filing rates, 31, 32, 33; government, 185–86; history, 31; law, 31–33; pension plans and, 181; personal, 31, 32, 33

banks: antidiscrimination laws, 181; capital requirements, 179, 440, 531; checkable deposits, 71, 355, 356–57, 360, 361; crises in Great Depression, 175–76, 180, 232; currency issued by, 71; failures, 30, 180, 232, 310; free banking systems, 71–73; international, 181; national, 174; regulation, 174, 178–82, 440, 460; reserve requirements, 176, 177, 233, 351, 355, 357, 361; reserves, 356–57; runs on, 29–31, 180, 232; state charters, 174; too-big-to-fail, 180–81. See also financial institutions; investment banks

Bank Secrecy Act, 181–82

barriers to entry, 13, 258, 365

barriers to trade. See trade barriers

Barro, Robert, 318, 379, 435

barter, 200, 217, 252, 565

baseball, 472–73, 474

Basel capital standards, 179, 531

basketball, 472

Bastiat, Frédéric, 163–64, 505, 524–25

BCA. See benefit-cost analysis

Beane, Billy, 473

Bear Stearns and Company, 314

Becker, Gary Stanley, 323, 429, 525, 586

behavioral economics, 34–38; bounded rationality, 34, 35, 590; bounded selfishness, 34–35; decision making, 547–48; differences from traditional economic view of human behavior, 34–35; finance, 35–36, 140; loss aversion, 34, 548; mental accounting, 34; saving behavior, 36–37

benefit-cost analysis (BCA), 38–40; of environmental policies, 38–39, 441–42; estimation of benefits and costs, 38–39; issues, 39; use by governments, 39–40; value framework, 161

benefits, 347. See also health insurance; pensions

Bentham, Jeremy, 525–26

Berle, Adolf A., 60, 89, 97

Bernanke, Ben, 266

beta, 589

Bewley, Truman, 434

Black, Duncan, 428

Black, Fischer, 210–11, 566, 584–85

black markets, 410

Black-Scholes option pricing model, 210–11, 566, 584–85

Blinder, Alan, 54, 492

block booking of movies, 594

BLS (Bureau of Labor Statistics), 78, 79, 80, 262, 418, 503

Blue Cross, 241

Blue Shield, 241

boards of directors. See directors

Boers, 15

Boesky, Ivan, 315

Böhm-Bawerk, Eugen von, 23, 24, 526–27, 551, 587, 603

Bolivia, dollarization, 253

Bond Market Association, 86

bonds, 40–42; definition, 40; government, 224–27; interest payments, 289–90; issuers, 40; market values, 225; municipal, 42, 224; prices, 40, 289; ratings, 41, 313. See also corporate bonds; debt; government debt

booms. See expansions

Boserup, Ester, 404

Boulware, Lemuel, 319

Boulwarism, 319

bounded rationality, 34, 35, 590

brand names, 42–44; advertising, 1–2; economic function, 43–44; price premium, 42–43, 44; quality assurance function, 2, 43–44, 81

Bretton Woods system, 198, 222, 549. See also World Bank

bribery, 98, 99. See also corruption

Bridgestone, 43–44

brinkmanship strategy, 213

Britain. See United Kingdom

British Empire, 15, 591

Brock, William A., 434

brokerages: functions, 179; investor protection, 181; regulators, 179

Brunner, Karl, 350

bubbles, 44–47; debate on, 47; definition, 45; Internet stocks, 44–45, 140, 141, 301; irrational, 45, 47; Mississippi, 46–47; perpetuation, 45; rational, 45, 47; South Sea, 46–47; speculative, 198; tulip, 45–46

Buchanan, James M., 24, 332, 527

budget deficits: definition, 224; of European Union members, 186; fiscal policies, 182–83, 226–27, 355, 557; future taxes implied by, 226, 318, 378; as indicator of fiscal sustainability, 186; of United States, 40, 186

budget surpluses, of United States, 183

building industry. See construction industry

Bundesbank, 354

bureaucracies, 399, 429–30, 468, 603

Bureau of Engraving and Printing, 361

Bureau of Labor Statistics (BLS), 78, 79, 80, 262, 418, 503

Burma, international sanctions on, 452

Burns, Arthur Frank, 177, 528

Bush administration (1989–1993), 453

Bush administration (2001–2009): outsourcing of federal jobs, 416; Social Security reform proposals, 465; tax cuts, 83, 85, 355; tax proposals, 85–86; war on terrorism, 182; withdrawal from Kyoto protocol, 219–20

business cycles, 47–51; Austrian School view, 26, 569; causes, 48–49; consensus explanations, 381; countercyclical fiscal policy, 184, 550; dating, 48; econometric models, 598; effects of shocks, 578; forecast errors and, 434; historical record, 49–50, 528; Keynesian stabilization policies, 317, 318, 341–42; Keynesian view, 49, 432–33; moderation, 50; new classical view, 49, 318, 319, 376–77; peaks, 48; persistence, 377; role of expectations, 432–33; role of monetary policy, 48–49; troughs, 48; unemployment, 504; in United States, 48. See also recessions

CAB (Civil Aeronautics Board), 6, 7–8

cable television, 495

cabotage laws, 342

CAFE (Corporate Average Fuel Efficiency standards), 153

California: electricity markets, 144, 169; gold rush, 223; minimum wages, 349

California Contract Cities Association, 416

California Power Exchange, 144

California Public Utilities Commission (CPUC), 144

campaign finance, 51–53; corporate employee contributions, 52; expenditures, 53; free-speech issues, 51; individual contributions, 52, 53; reforms, 53; regulation, 51, 52, 53; relationship to actions of elected officials, 52, 75; relationship to electoral results, 51–52; wealthy candidates, 51

Canada: floating exchange rate, 571; immigration, 256; inflation indexing of tax brackets, 572; natural gas exports, 370, 371; North American Free Trade Agreement, 299–300, 427; oil exports, 382; protectionism, 547

CAP (Common Agricultural Policy), 166

capital: definition, 53, 532; incentives to accumulate, 554; mobility, 199; physical, 26, 304–8; ratio to labor, 53–54, 418; role in economic growth, 593, 599. See also human capital

capital account, 28–29, 290–91, 293, 297. See also balance-of-payments accounts; international capital flows

capital asset pricing model, 566, 589

capital controls, 199

capital flows, international. See international capital flows

capital gains: definition, 54; on stock investments, 479

capital gains taxes, 53–57; avoidance, 54, 55; debates on, 83–84; definition, 54; effects of inflation, 265; eliminating, 83–84, 560; impact of changes, 55–57; inefficiency, 54–55; rate cuts, 56–57, 83, 85, 492; relationship of rates to stock prices, 55; relationship to new business creation, 55–56; revenues, 54, 55; unique features, 54

capital goods, heterogeneity, 26

capitalism, 57–60; benefits, 59; creative destruction, 101–4, 155, 272, 586; critics of, 58–60; division of labor (specialization), 60, 115, 200, 603; emergence, 57–58; entrepreneurship in, 156–57; Marxist view, 58, 59, 338–39; profits, 419–20; role of competition, 75. See also economic freedom; free markets

capital losses: deduction for, 54; disposition effect, 36

capital markets: efficiency, 138–42; excess returns, 589; regulation, 90; risk, 589. See also asset prices; efficient markets theory; stock markets

capital punishment, 106, 325

capture theory, 426, 427, 595

carbon emissions, 219–20, 221

Carfax, 521

Carlson, Chester, 272

Carnegie, Andrew, 58

cartels, 61–63; agricultural, 63; airline, 74; antitrust prosecutions, 62–63; cheating by members, 61, 62, 74–75, 383; conditions discouraging, 62–63; consensus in, 62; failures, 62; in fascist economies, 172, 173; government facilitation, 13, 63, 75, 233, 234, 578; rarity, 63; restraint of trade, 11; sports leagues, 474; successful, 61–62. See also antitrust; OPEC

Carter, Jimmy, 177, 454, 486

cash-flow tax. See consumption tax

Cassel, Gustav, 528

Castro, Fidel, 256

catallactics, 24

CBOE (Chicago Board Options Exchange), 210, 585

CBOT (Chicago Board of Trade), 207, 209, 210

CEA (Council of Economic Advisers), 544, 576, 596, 598–99, 607

cell phones, 495–96

Census Bureau, 136; Current Population Survey, 119–20, 122

central banks: abolition of, 71–72; anti-inflation policies, 318–19, 554; Bank of England, 179, 223, 318, 580; Bundesbank, 354; foreign exchange reserves, 197; foreign exchange trading, 197; operation of gold standard, 223; power, 353; sterilization operations, 197, 223; in transition economies, 500; U.S. government securities held by, 293. See also European Central Bank; Federal Reserve

central planning: advocates of, 75, 124, 466–68, 554–55; allocation of resources, 549; by Defense Department, 110; drawbacks, 201, 390; information problems, 269; New Deal programs, 173; problems with, 110, 466–68, 499, 541; in Soviet Union, 466–67, 468. See also socialism

CFCs (chlorofluorocarbons), 402

Chamberlin, Edward H., 581–82

Champernowne, David, 597

charity, 63–66; arts funding, 19, 64; donations to, 34; foreign aid, 194–95; giving as proportion of GDP, 64; during Great Depression, 64–65; history, 64–65; motives for, 64; recipients, 64, 65; Smith on, 590–91; volunteer work, 34–35, 64. See also nonprofit organizations

charter schools, 134

chartists, 139

checkable deposits, 71, 355, 356–57, 360, 361

Chicago Board of Trade (CBOT), 207, 209, 210

Chicago Board Options Exchange (CBOE), 210, 585

Chicago Mercantile Exchange, 207, 209

Chicago school, 217, 351, 376, 551

child labor, 58

children: Medicaid coverage, 514; poverty rates, 406, 408; property rights to toys, 424; unmarried mothers, 407, 408. See also education

Chile: economic freedom, 125; hyperinflation, 253; incomes, 146; privatization, 414

China: communism, 67; economic freedom, 68, 125–26; economic policies, 68, 130; one-child policy, 588; productivity, 206; state-owned enterprises, 415; trade surplus with United States, 206; wages, 206

chlorofluorocarbons (CFCs), 402

Church of England, 57

cigarettes: advertising, 3; excise taxes, 328. See also tobacco industry

CIO (Congress of Industrial Organizations), 233

cities. See local governments; urban areas

Civil Aeronautics Board (CAB), 6, 7–8

Civil Rights Act of 1964, Title VII, 216

civil rights movement, 119

classes: class struggle, 339, 563; mercantile, 340

classical economics, 23, 376, 403, 545. See also Ricardo, David; Smith, Adam

Clay, Henry, 75

Clay, Lucius D., 217, 218

Clayton Act of 1914, 11, 13, 14, 259

Clean Air Act, 399–400, 401

climate change. See global warming

Clinton administration: Council of Economic Advisers, 596; Kyoto protocol, 219; welfare reform, 438, 511–12; World Trade Organization meetings, 300

cliometrics, 575

closed-end mutual funds, 35

coal: mines, 546; use in electricity generation, 143, 399

Coase, Ronald H., 24, 171, 323, 528–30, 577, 593

Coase theorem, 171, 323, 529

coercion, 201, 424

cognitive psychology, 450

Colbert, Jean-Baptiste, 341, 579

cold war, 194

collateral trust bonds, 42

collective bargaining, 319. See also labor unions

collective goods. See public goods

colleges and universities: costs, 249; enrollments, 249; female students, 249; financial aid, 134; general education requirements, 134; government funding, 130, 134–36; loans, 135; private, 135; public, 135; racial preferences in admissions, 118; rate of return to education, 136, 248; sports teams, 320; tuition charges, 135. See also education

commodity futures: energy, 151, 210, 371; as insurance, 151, 209; markets, 207, 209; orange juice, 210; trading, 208

Common Agricultural Policy (CAP), 166

common currency areas. See monetary unions

common markets, 164, 299. See also European Union

common-pool problems, 31–32

commons. See tragedy of the commons

common stock. See stock

communications. See telecommunications

communism, 66–69; central planning, 124; in China, 67; collapse, 67–68, 337, 340, 499; in Eastern Europe, 67, 146, 337, 555; economics of, 66; fascist opposition to, 172–73; fear of during cold war, 194; Marx’s conception, 563; in Soviet Union, 66–68, 114, 115, 466–67. See also Marxism; socialism; transition economies

Compagnie des Indes, 46–47

comparative advantage, 69–71, 206, 295–96, 580

compensation, fringe benefits, 347. See also wages; workers’ compensation system

compensation test, 544

competing money supplies, 71–73

competition, 73–76; activity of, 25; assumption of perfect information, 267; costs, 74; creative destruction and, 102; functions, 75; global, 469, 470–71; information needed, 74; monopolistic, 581–82; nonprice, 74; perfect, 58, 75, 586; real, 58; regulation inhibiting, 75. See also antitrust

compound interest, 288

Comptroller of the Currency, U.S., 176, 179

computer industry: effects of trade barriers, 207; innovation, 275. See also Internet; software companies

concentration. See industrial concentration

concentration ratio, 257

Condorcet’s paradox, 523, 588

congestion pricing, 507–8, 601

Congress of Industrial Organizations (CIO), 233

conscription, 76–77; effects on military wages, 76; inequities, 76–77; negative effects, 76–77; opponents, 534; supporters, 76; as tax on military service, 76; in United States, 76, 234

conservation, private choices, 203–4

Constitution, U.S.: Bankruptcy Clause, 31; intellectual property protection, 284; Second Amendment, 111

construction industry, effects of minimum wages, 347

consumed-income tax. See consumption tax

consumer-driven health care, 240, 242–43

Consumer Price Index (CPI), 78–80, 262

consumer price indexes, 77–81

Consumer Product Safety Commission, 82

consumer protection, 81–83; regulation, 82–83; role of middlemen, 81–82

consumer sovereignty, 556

consumer spending. See consumption

consumer surplus, 562–63

consumption: conspicuous, 535, 600; deferred, 456; effects of tax cuts, 434; foregone, 304–5, 307, 419–20; habit persistence, 434; influence of monetary policy, 356; life-cycle model, 36, 569–70; permanent income theory, 433–34; relationship to income, 36; share of GDP, 368

consumption tax, 83–86; arguments for, 83–84, 492, 532, 568; implementation, 85; opposition to, 85

contingent valuation method, 38

contraceptives, 327

contract law, 82, 324

convergence behavior, 114

convertible bonds, 42

Coolidge, Calvin, 477, 483

copper prices, 373, 404

copyrights: duration, 284, 286, 287–88; fair use, 287; file-sharing issues, 287; law, 284, 287; monopoly conferred by, 285–86. See also intellectual property rights protection

Corporate Average Fuel Efficiency (CAFE) standards, 153

corporate bonds, 41–42; compared to government bonds, 225; default risk, 41; factors in use of, 86–89, 267; investment-grade, 313; junk bonds, 41, 313–16, 462; legal factors, 89; outstanding amounts, 86, 94; private placements, 313; ratings, 41; types, 41–42

corporate financial structure, 86–89; debt/equity ratios, 86–87; determinants of, 86–89; influences of taxes, 93–94; M&M theorem, 86, 567, 570; “pecking order” model, 88. See also corporate bonds; stock

Corporate Fraud Task Force, 91

corporate governance, 89–92; agency problem, 87–88, 89, 334, 335; equity ownership by managers, 90; exchange listing requirements, 90; internal controls, 91; legal environment, 90–91; management accountability, 91; market forces, 90; questioning of, 90; reforms, 90–92; separation of ownership and management, 60, 87, 89, 95, 96–97, 334. See also market for corporate control

corporate scandals. See accounting scandals

corporate taxation, 92–95; deductibility of interest payments, 94; distinction from individual taxation, 92; double, 84, 87, 492; economic effects, 93–94; history, 93; incidence, 92–93, 94, 491; income tax, 92–93, 490, 492; of multinational companies, 94; proportion of federal revenues, 93; rates, 92; by states, 93

corporations, 95–98; agency costs, 87–88, 89, 334, 335; bankruptcies, 31, 32–33, 181; campaign contributions by employees, 52; comparison to partnerships, 95; creating, 95; criticism of, 60, 97; definitions, 95; democratic analogy, 97; labor conflicts, 320; limited liability, 96; multinational, 94, 99; private, 334; public, 333, 334; reputations, 43, 44, 58, 81, 82, 268–69; separation of ownership and management, 60, 87, 89, 95, 96–97, 334; state charters, 94, 95; Subchapter S status, 94. See also market for corporate control

corporatism, 172

corruption, 98–101; in Africa, 99, 122, 194; business-to-business, 98; country rankings, 99; economic effects, 98–99; facilitation payments, 98, 99; government, 98–99; legal penalties, 99; in rationing schemes, 410; reducing, 100; relationship to poverty, 98; in transition economies, 502; in United States, 99

Corzine, Jon, 51

cost-benefit analysis. See benefit-cost analysis

cost of living, 78

costs: as competitive advantage, 74; marginal, 331; opportunity, 25, 385, 525; subjectivity, 24–25. See also transactions costs

Council of Economic Advisers (CEA), 544, 576, 596, 598–99, 607

countervailing duties, 426–27

courts, efficiency, 323. See also legal systems; Supreme Court

covered interest arbitrage, 199

covered interest parity, 199

CPI (Consumer Price Index), 78–80, 262

CPUC (California Public Utilities Commission), 144

creative destruction, 101–4; effects on employment, 102–4, 272; innovation by entrepreneurs, 586; introduction of new products, 101–2, 104, 155; productivity growth and, 102–3; technological change, 272; in transportation, 101–2

creditors, protections in bankruptcy law, 31. See also debt

credit unions: functions, 178–79; share insurance, 180. See also financial institutions

creeping inflation, 545

crime, 104–7; costs and benefits, 525; deterrent effect of punishment, 106, 325; economic analysis, 104–7; organized, 105; rights of accused, 325; theft, 106. See also corruption; law enforcement

criminal law, 106–7, 323, 325

Cuba: Mariel boatlift, 256; trade sanctions on, 454

culture. See arts

currencies: coins and notes, 361; competition, 71; fiat, 71, 72, 73, 172, 351, 360; foreign exchange market, 197–200, 210, 528; German, 217–18; introduction to end hyperinflation, 252; in money supply, 355, 360, 361; vehicle, 197. See also euro; exchange rates; U.S. dollar

currency futures, 207, 209

currency options, 197, 210

currency unions. See European Monetary Union; monetary unions

current account, 28, 29, 290–91, 292–93; deficits of developing countries, 342–43; surpluses, 343; U.S. deficit, 292, 293, 297, 342–43, 456. See also balance-of-payments accounts

customs unions: definition, 299; exceptions for in WTO rules, 164; trade creation and trade diversion, 166, 300, 601–2. See also European Economic Community

Dalkon Shield, 327

Danish Competition Council, 63

Davis-Bacon Act, 321, 347

DB (defined benefit) plans, 386–87. See also pensions

DC (defined contribution) plans, 386

deaths: causes, 446–47; mortality rates, 476

debentures, 42

Debreu, Gerard, 530

debt: household, 225; neutrality, 318. See also bankruptcy; bonds; corporate bonds; government debt

debt/equity ratios, 86–87

decision making: biases, 547–48; bounded rationality, 34, 35, 590; risk estimation errors, 450, 548; under uncertainty, 547–48. See also behavioral economics; public choice

defense, 107–11; central planning, 110; civil liberties issues, 111; demand for, 108–9, 398; expenditures, 107, 108, 499, 501; foreign procurement, 109; free-rider problem, 107–8, 431; international alliances, 109; optimal amount, 108; private benefits from spending, 108; production of goods, 109–10. See also military

Defense Department. See U.S. Department of Defense

deficits. See budget deficits

defined benefit (DB) plans, 386–87. See also pensions

defined contribution (DC) plans, 386

demand, 111–13; curves, 481, 561–62; derived, 565; elasticity, 112, 562; income levels and, 112–13; law of, 111–12; microeconomic theory, 343–44. See also aggregate demand

democracy: in corporations, 97; in Eastern Europe, 502; expansion, 229; legislatures, 429; majority rule, 108, 396, 430; provision of public goods, 108; voting rights, 229. See also elections; political behavior

demographics. See immigration; population

Demsetz, Harold, 24

deposit insurance, 180–81, 459–60, 462, 498

depository institutions, 178–79, 355, 361. See also banks; financial institutions; savings and loans

depreciation, accelerated, 306

depressions, 47. See also business cycles; Great Depression; recessions

deregulation: airline, 6–10, 60, 440; benefits, 488; corruption reduced by, 100; of financial industry, 177; of savings and loans, 460–61; of surface freight transportation, 60, 440, 485–89; of telecommunications, 494; in United States, 6–7, 440. See also regulation

derivative securities: trading volume, 197; uses, 584. See also futures; options

destruction, creative. See creative destruction

developing countries: agriculture, 6, 557, 585–86; artists from, 20; capital controls, 199; capital flight, 293; current account deficits, 342–43; dual economies, 557; economic growth, 557–58; foreign aid, 194–97; foreign direct investment in, 293–94; foreign exchange gap, 195; international capital flows, 291, 293; international trade, 6, 296–97, 558; life expectancies, 129, 402; population growth, 402; rural poverty, 405, 585–86; savings gap, 195; World Bank loans, 194, 195–96

Diamond, Peter, 568

digital rights management (DRM), 287

diminishing marginal returns, law of, 580, 599

Director, Aaron, 529, 587

directors: elections, 97; independence, 90; insiders, 97; insider trading by, 276, 277; relations with managers, 90; replacing, 333; role, 95, 334; stock owned by, 90; of takeover targets, 336

disability insurance, Social Security, 463, 464, 513

disaster recovery, 113–16; antisocial and prosocial behavior, 114; convergence behavior, 114; factors in recovery, 114–15; population movements, 115; preparations, 115; role of government, 115; safety nets, 113; speed of recovery, 113

disasters: community-wide, 113–14, 115; society-wide, 113, 115

discount rate, 175, 176, 231, 232, 355, 361, 362

discrete choices, 564

discrimination, 116–19; in bank lending, 181; bases, 117; causes of different outcomes, 116–17; costs, 116, 522–23, 525; gender-based, 215, 273; government intervention and, 116, 119; by labor unions, 321; laws prohibiting, 181, 216; officially sanctioned, 118–19; statistical, 117; wage disparities and, 543. See also apartheid

disinflation, 266, 354, 361, 412

disposition effect, 36

distribution of income, 119–23

dividends, 479; increases, 478; taxes on, 83, 87, 94, 492; uncertainty, 478

division of labor: in bureaucracies, 429; in capitalism, 60, 115, 200, 603; role of telecommunications and information technology, 469, 494; Smith on, 19, 494, 591; Turgot on, 599. See also specialization

divorce, economic analysis of, 529–30

Dixit, Avinash, 426

doctors. See physicians

DoD. See U.S. Department of Defense

DoJ. See U.S. Department of Justice

dollar, Canadian, 571

dollar, U.S. See U.S. dollar

dollarization, 253

Domar, Evsey, 539, 556

Dorfman, Robert, 583

Dornbusch, Rudiger, 198

DoT. See U.S. Department of Transportation

dot-com stocks. See Internet stocks

Dow Chemical Company, 328

Dow Jones Industrial Average, 139, 479, 480. See also stock prices

Downs, Anthony, 429, 527

draft. See conscription

Drexel Burnham, 314, 315

Drèze, Jean, 588

DRM (digital rights management), 287

drugs. See pharmaceutical industry

dual economies, 557

DuBois, W. E. B., 321

dumping, antidumping duties, 426–27

Dutch auctions, 21, 22, 168, 593

Dvorak, August, 303

dynamic equation of exchange, 263–64

dynamists, 273–74

Earned Income Tax Credit (EITC), 122, 408, 438, 510, 513–14

earnings, gender gap, 117–18, 214–16. See also incomes; wages

earthquakes, 113–14. See also disasters

Eastern Europe: communist regimes, 67, 146, 337, 555; conscription, 77; democratic governments, 502; economic freedom, 126, 159–60; economic growth, 502; environmental damage, 202; EU members, 164, 165, 499, 502; free-market reforms, 68; government debt defaults, 186; NATO members, 77; transitions from communism, 115, 484, 499–502

East Germany, 145, 146. See also Eastern Europe; Germany

eBay, 302

Eccles, Marriner, 176

e-commerce, 82, 302, 303. See also Internet

econometric models, 188–94; autoregressive conditional heteroskedasticity (ARCH), 530–31; cointegrated time series, 537–38; complete, 190; errors in, 190; Lucas critique, 559; multiequation, 598, 602; policy analysis, 193; predictions based on, 190; probability theory and, 538; structural, 191–93; of U.S. economy, 598

economic analysis of law. See law and economics

economic freedom, 124–27; benefits, 75; in China, 68; contrasted with central planning, 124; country rankings, 68, 125–26, 308; in former Soviet bloc, 68; increases in, 124, 125; indexes, 124–25, 126, 156; key ingredients, 124; measuring, 124–25; promotion by governments, 124; relationship to economic results, 126–27, 146, 148, 156–57; relationship to entrepreneurial activity, 156–57, 201; relationship to environmental quality, 159–60; relationship to political freedom, 125, 545; relationship to social outcomes, 126; relationship to standards of living, 124

Economic Freedom of the World (EFW), 68, 124–25, 308

economic growth, 128–31; compound rates, 128; convergence rates, 147–48; determinants, 145, 147–48; effects on income distribution, 553; empirics, 145–49; forecasting, 191; future, 130–31; Harrod-Domar model, 539, 593; importance of higher rates, 147; income per capita, 128, 476, 557–58; meta-ideas and, 130; natural rate, 539; neoclassical model, 147, 149; Okun’s law, 576; policies promoting, 148; population growth and, 403–5; product innovation and, 128–29, 130; relationship to economic freedom, 126–27, 146, 148, 156–57; relationship to entrepreneurial activity, 155; relationship to environmental quality, 158, 300; relationship to marginal tax rates, 329–30, 482, 484; relationship to per capita income, 557–58; role of education, 129, 131; role of investment, 304–5; rule of law and, 145, 148, 159–60; Solow’s work on, 147, 593; sources-of-growth accounting, 593; standard of living and, 475–78, 515; trade liberalization and, 148; warranted, 539

economic individualism, 57. See also capitalism

economic mobility, 123, 406

economic models: of U.S. economy, 551; use of, 188–89. See also econometric models

economic quasi-rents, 481

economics, definition of, 581

economic sanctions. See sanctions

economies of scale: industrial concentration and, 258; monopolies created by, 365, 370; in urban transportation, 507, 508

education, 131–36; achievement test scores, 131–32; charitable giving to institutions, 64; compulsory, 132; early childhood, 407; elementary, 131–33; expenditures, 131–32; family influences, 250; home schooling, 132; as investment, 147, 525, 586; opportunity costs, 385; private schools, 132–33, 134; productivity decline, 131; public schools, 132–33, 134; quality, 248; racial segregation, 572; rate of return to, 136, 248; reforms, 134; role in economic growth, 129, 131; school choice programs, 134, 592; school performance, 131, 134; secondary, 131–33, 147, 248; subsidies, 130, 134–36, 581; teachers, 133–34; voucher programs, 134, 592; of women, 216, 249. See also colleges and universities; human capital

EEC. See European Economic Community

efficiency, 136–38; assumption of perfect information, 267; critics of use in public policy decisions, 137; definition, 136; monetary valuation, 136–37; role of private ownership, 137

efficiency wage theories, 267, 381, 596

efficient capital markets, 138–42

efficient markets theory (EMT): asset prices, 35, 45, 138, 433; challenges to, 140; semistrong form, 139; stock market crash of 1987 and, 140–41; strong form, 139; usefulness, 141; violations, 35–36; weak form, 139

EFW. (Economic Freedom of the World), 68, 124–25, 308

Ehrlich, Anne, 158

Ehrlich, Paul, 158, 404

elasticity: of demand, 112, 562; of labor supply, 543, 578

elderly: family net worth, 437, 458–59; growing proportion of population, 185–88, 402–3; health care, 185, 402, 403; poverty rates, 406, 459. See also Medicare; retirement; Social Security

elections: median-voter theorem, 428–29; participation rates, 429; political futures market, 210; voter ignorance, 429; voting rights, 229. See also campaign finance; political behavior

electricity: competitive markets, 143–44; consumption, 142; deregulation, 144; distribution as natural monopoly, 365; external costs, 151–52; ownership structure, 142–43; power sources, 142, 143, 150, 151–52, 371, 399, 401–2; prices, 142, 144; regulation, 142–45, 151, 169, 595

electric vehicles, 150

Ellickson, Robert, 593

embargoes, trade, 453, 454

eminent domain, 60

emissions allowances, 170, 210, 401–2, 440

empirics of economic growth, 145–49

employment: effects of technological change, 102–4; effects of trade barriers, 437; full, 48, 317, 354, 526, 550; influence of monetary policy, 379, 526; job safety, 311–12; offshoring, 342, 469; protectionist efforts to save jobs, 206–7, 342. See also labor market; occupations; unemployment; women’s employment

Employment Act of 1946, 50, 176, 228

EMT. See efficient markets theory

EMU. See European Monetary Union

energy, 150–54; conservation, 152; consumer responses to price increases, 150–51; costs, 150; crises, 374, 382; efficiency, 150; expenditures, 151; external costs, 151–52; government intervention in markets, 153–54; natural gas, 370–72; renewable, 150; research and development, 152–53; sources, 150, 151; subsidies, 151, 153–54; trading, 169. See also electricity; fossil fuels; natural resources; oil

energy futures, 151, 210, 371

energy intensity, 374

energy options, 210

Energy Policy Act of 1992 (EPAct), 143

Engels, Friedrich, 563

England. See United Kingdom

Engle, Robert F., 530–31

English auctions, 21, 22, 168, 592–93

Enron, 90

entrepreneurs: definition, 154–55; examples, 54; “gazelle,” 155; innovations, 25, 155, 274, 586; “lifestyle,” 155; in rural areas, 155–56

entrepreneurship, 154–57; academic understanding, 154–57; creative destruction and, 102; definition, 154; government promotion of, 155, 156, 157; measuring, 155; profits, 420; relationship to economic freedom, 156–57, 201; relationship to economic growth, 155

environmental damage: air pollution, 153, 170, 210, 399, 401–2; costs, 152, 404–5; effects of resource consumption, 151–52, 375; externalities, 170; as market failure, 202; property rights issues, 202–3; toxic waste, 203, 400–401, 436; water pollution, 400. See also environmental quality; global warming

environmentalism, free-market, 202–5

environmental organizations, 64, 300

Environmental Protection Agency (EPA): costs of pollution, 152; emissions-trading programs, 210, 440; establishment, 399; regulations, 441, 442, 447; Superfund program, 400–401; toxic waste cleanup, 203, 400–401, 436

environmental quality, 158–60; ethical issues, 162–63; improvements, 158–59; local standards, 202–3; measures, 158; property rights and, 160, 202–3, 204–5, 431–32; as public good, 202, 431–32; relationship to economic freedom, 159–60; relationship to economic growth, 158, 300; resource use issues, 151–52, 162–63, 375; role of markets, 400; waste disposal issues, 162–63, 203. See also environmental damage; recycling

environmental regulation: approaches, 170, 441; benefit-cost analysis, 38–39, 441–42; compliance costs, 152, 153, 165, 170, 399, 400, 401; effects on energy production, 143; effects on home prices, 246; federal role, 399–400; pollution controls, 399–402, 441; risk levels, 447; standards, 153, 400, 401; tradable permits, 170, 210, 401–2, 440; water pollution, 400

EPA. See Environmental Protection Agency

EPAct. See Energy Policy Act of 1992

equation of exchange, 263–64, 532, 546

equilibrium prices, 271, 481

equipment obligations, 42

equities. See stock

Erhard, Ludwig, 163, 217–18

estate taxes, 492–93, 596

ETFs. See exchange-traded funds

ethics, 160–63. See also corruption; crime

E-toys, 302

EU. See European Union

Eucken, Walter, 217

euro: criteria for joining, 360; criticism of, 73; effects on trade, 199; future effects, 359; introduction, 164, 186. See also currencies; European Monetary Union

Euronext.liffe, 209

Europe: anti-inflation policies, 318–19; central banks, 354, 360; depression of 1980s, 318–19; guild system, 575, 599; social security programs, 463; wages, 543. See also Eastern Europeand individual countries

European Central Bank (ECB), 73, 164, 360

European Coal and Steel Community, 163

European Economic Community (EEC), 163, 299

European Free Trade Area, 299

European Monetary Union (EMU), 186, 319, 358, 359–60. See also euro

European System of Central Banks, 360

European Union (EU), 163–66; agricultural subsidies, 5, 166; bureaucracy, 165; Common Agricultural Policy, 166; common market, 164, 299; constitution, 164; distributive programs, 166; enlargement, 164, 165, 499, 502; free-trade agreements with nonmembers, 300; harmonization, 165, 299; internal trade, 164, 199; labor mobility, 572; Maastricht Treaty, 186, 360; members, 164; “Open Skies” agreements, 9; origins and development, 163–64; regulation, 165; sanctions on other countries, 18, 455–56; Single European Act, 164

exchange rates: appreciation, 197; definition, 197; depreciation, 197; determination, 198; devaluations, 341; effects of trade barriers, 207; fixed, 197, 222–23, 230–31, 358, 571; floating, 197, 356, 571; forward, 199; future, 199; impact of fiscal policy, 183; long-run equilibrium, 198; managed float, 197–98; monetary policy and, 356; nominal, 198; overshooting model, 198; pegged, 198; purchasing power parity, 198, 297, 528; random walk, 198; real, 198; relationship to interest rates, 183, 198; relationship to international trade, 341, 359; relationship to investment, 358–59; spot, 199; volatility, 198. See also currencies; foreign exchange market; gold standard

exchange-risk premium, 199

exchanges: futures, 207, 209; options, 210, 585. See also stock exchanges

exchange-traded funds (ETFs), 479

excise taxes, 328, 490, 495

expansions, 47; causes, 48, 49; inflationary, 48; during World War II, 50. See also business cycles

expectations, 432–33. See also rational expectations theory

expectations-augmented Phillips curve, 393, 394

expenditures tax. See consumption tax

experimental economics, 166–69, 592–93

exports: mercantilist view, 340, 341; subsidies, 5; voluntary restrictions, 426. See also international trade

externalities, 169–72; arguments against government intervention, 171; of energy use, 151–52, 170; government intervention justified by, 170, 440–41, 577, 596–97; measuring, 170; negative, 169, 170–71, 577; positive, 169, 171, 577

extinctions, 159

Exxon Valdez, 506

FAA (Federal Aviation Administration), 9, 10

facilitation payments, 98, 99

factor proportions model, 296, 576, 583

Fair Labor Standards Act, 320, 346

“fair trade” laws, 426–27

Fama, Eugene, 139, 140, 584

families: economic mobility, 123, 250; education levels, 250; income inequality, 119–20; influences on children, 250. See also households

famines, 403, 588

farming. See agriculture

fascism, 172–74; central planning, 124; compared to socialism, 172; distinction from interventionism, 172; economic policies, 172; in Germany, 173; influence on New Deal, 173; in Italy, 173, 577; state role in economy, 172, 173

FCC. See Federal Communications Commission

FDA. See Food and Drug Administration

FDIC (Federal Deposit Insurance Corporation), 179, 180, 181, 459

Federal Aviation Administration (FAA), 9, 10

Federal Communications Commission (FCC): cell telephone licenses, 495–96; radio licenses, 99, 496; spectrum management, 495–97; wireless bandwidth auctions, 22–23, 522

Federal Deposit Insurance Corporation (FDIC), 179, 180, 181, 459

Federal Energy Regulatory Commission (FERC), 142, 143, 144, 370, 487

federal funds, 355

federal funds rates, 355, 356, 357, 362

federal government. See U.S. government

Federal Highway Administration, 486

Federal Home Loan Bank Board (FHLBB), 461, 462

Federal Housing Administration (FHA), 513

Federal Open Market Committee (FOMC), 176, 178, 355, 357

Federal Republic of Germany. See Germany

Federal Reserve, 174–78; anti-inflation policies, 50, 178, 264, 266, 318, 353, 554; Burns as chairman, 177, 528; discount rate, 175, 176, 231, 232, 355, 361, 362; establishment, 50; financial regulation function, 179; functions, 174; gold holdings, 175, 176, 231; Greenspan as chairman, 178, 353, 362, 554; independence, 176, 353; inflation targets, 362; interest rate policies, 49, 355, 357; lending to illiquid banks, 180, 355–56; Martin as chairman, 176–77; member institutions, 355; monetarist policies, 175, 351–52; monetary policy procedures, 355–56, 361, 362; money supply control, 48–49, 177, 178, 263; in 1920s, 175–76, 231; open-market operations, 176, 263, 355, 357, 361, 362; original system, 174–75; power, 353; recessions caused by policies, 48–49, 353, 357; reserve requirements changes, 233, 357, 361; reserve tests, 355; responses to Great Depression, 175–76, 231, 232, 233; responsibility for Great Depression, 534; Volcker as chairman, 177–78, 351, 353, 357, 362, 460

Federal Reserve Act, 174, 175

Federal Reserve Banks: borrowing from, 355; currency holdings, 361; customers, 355; functions, 175; organization, 174

Federal Reserve Board, 174–75

Federal Savings and Loan Insurance Corporation (FSLIC), 180, 459, 461–62, 498

Federal Trade Commission (FTC), 3, 12, 82, 259, 366

Feinstein, Charles, 260

Feldstein, Martin, 484, 504, 506

FERC. See Federal Energy Regulatory Commission

FHA (Federal Housing Administration), 513

FHLBB (Federal Home Loan Bank Board), 461, 462

fiat monies, 71, 72, 73, 172, 351, 360

films. See movie industry

FILP (Fiscal Investment and Loan Program), 310

finance, behavioral, 35–36, 140

financial crises, in transition economies, 500–501

financial distress costs, 87, 89

financial economics, 562, 589, 598

financial futures, 207, 208, 209, 210

financial institutions: credit unions, 178–79, 180; deregulation of industry, 177; international transactions, 291; purposes, 178; types, 178–79. See also banks; depository institutions; insurance companies; savings and loans

financial markets. See capital markets; futures markets; options markets; stock markets

financial regulation, 178–82; agencies, 179; capital requirements, 179, 531; compliance, 178, 179, 181–82; deposit insurance, 180–81, 459–60, 462, 498; enforcement, 179, 182; goal, 182; history, 179; insolvency, 179–80; reforms, 180–81; safety-and-soundness, 178–80; savings and loans, 180, 459–61, 462–63; securities markets, 91, 179, 277, 279–80

financial reports: accounting scandals, 90, 98; auditing, 91; Sarbanes-Oxley Act, 90, 91

Finsbury Group Ltd., 315

Firestone, 43

first-mover advantages, 302

fiscal gap, 187–88

Fiscal Investment and Loan Program (FILP), 310

fiscal policy, 182–85; automatic stabilizers, 184; contractionary, 182, 184; countercyclical, 184, 550; definition, 182; effects on economy, 182–84; effects on exchange rate, 183; effects on saving rate, 184–85, 458; effects on trade balance, 183; in European Union, 164, 360; exchange rate regimes and, 571; expansionary, 182–83, 184; during Great Depression, 233, 234; Keynesian, 355, 483, 550; long-run effects, 184; political issues, 185; in recessions, 184, 226–27, 550; relationship to monetary policy, 355; responses to Great Depression, 232; Ricardian equivalence, 185, 226–27, 378; supply-side approach, 482–84; sustainability, 185–88. See also budget deficits; taxes

fiscal relativity, 186–87

fiscal sustainability, 185–88, 402–3

Fisher, Irving, 79, 265, 305, 350, 433; biography, 531–32; theory of interest, 531, 603

Fisher relationship, 265

Fitzsimmons, Cotton, 472

flat tax, 60, 85, 484, 489, 492, 568

Fleming, J. Marcus, 571

flood insurance, 115, 282

FMC, 327

Fogel, Robert W., 532–33

FOMC (Federal Open Market Committee), 176, 178, 355, 357

food: effects of global warming, 220; famines, 403, 588; population growth and supply of, 561; price controls, 115; prices, 166, 403, 437; production increases, 403, 562. See also agriculture

Food and Drug Administration (FDA), 82, 83, 239, 388–90, 447, 505–6

food stamps, 407, 510, 512–13, 514

football, 420, 473, 475

Ford, Gerald, 486, 488

Ford Motor Company, 43–44, 154, 276

forecasting, 188–94; accuracy, 190–91; input errors, 190; model errors, 190; time-series, 191–93

foreign aid, 194–97; arguments for, 194; conditionality, 195–96; corrupt use of, 194; economic case for, 195, 196; effects on poverty, 194, 195, 196; humanitarian motives, 194, 196; industry, 196; Marshall Plan, 218–19, 342; origins, 194; political motives, 194; to transition economies, 501

Foreign Corrupt Practices Act, 99

foreign direct investment: in developing countries, 293–94; income from, 293; outflows from industrialized countries, 293–95; from United States, 295; in United States, 293, 295

foreign exchange market, 197–200; arbitrage, 528; forward, 199; futures, 207, 209; hedging, 198–99, 209; options, 197, 210; participants, 197; spot, 197; trading volume, 197, 199. See also currencies; exchange rates

forests, 158, 160

fossil fuels: coal, 143, 399, 546; electricity generation from, 143, 399; global warming caused by burning, 204, 219, 375; natural gas, 370–72; use in United States, 150. See also energy; oil

401(k) plans, 36–37

France: budget deficits, 186; cultural protectionism, 20; European Coal and Steel Community, 163; gold standard, 223, 231; labor force participation, 330; laissez-faire policies, 579, 599; marginal tax rates, 330; Mississippi bubble, 46–47; nuclear weapons tests, 453; Physiocrats, 579, 599–600; shipping laws, 341

Franklin, Benjamin, 288

Fraser Institute, 124

fraud, in securities firms, 181. See also accounting scandals

free banking systems, 71–73

freedom. See economic freedom; political freedom

Freedom House, 68, 124, 148

free-market environmentalism, 202–5

free markets, 200–202; arguments for, 534; creative destruction, 101–4, 155, 272, 586; criticism of, 201–2, 596–97; development, 200–201; entrepreneurship, 201; exchanges, 200; French policies, 579, 599; government roles, 591–92; importance of property rights, 201; innovation in, 275; institutional flexibility, 566; moderate view, 588. See also economic freedom; markets

free-rider problems: examples, 431; in national defense, 107–8, 431; private solutions, 593; for shareholders, 334. See also public goods

free trade, 205–7; arguments for, 425, 537; benefits, 298; as component of economic freedom, 125; definition, 298; fears of lost jobs, 206, 342; mercantilist argument against, 200; public attitudes toward, 205; within United States, 206. See also international trade agreements; protectionism; trade liberalization

free-trade areas (FTAs), 299. See also North American Free Trade Agreement

Freiburg school, 217

French, Kenneth, 140

Friedland, Claire, 595

Friedman, Milton: accelerationist hypothesis, 351; biography, 533–34; constant-money-growth rule, 351; criticism of Phillips curve, 351, 392, 534, 559; on free markets, 217, 534; on gold standard, 224; on inflation, 264, 396, 534; Knight and, 551–52; as monetarist, 350, 354–55, 534; monetary reform proposals, 434; on money, 71, 350–51; on money supply, 354–55, 534; on natural rate of unemployment, 318, 351, 354, 392–93, 504; on occupational licensing, 82–83; permanent income theory of consumption, 433–34; on price and wage flexibility, 316–17; on privatization, 159; on socialism, 467; Solow on, 593

fringe benefits, 347

Frisch, Ragnar, 535

FSLIC (Federal Savings and Loan Insurance Corporation), 180, 459, 461–62, 498

FTAs. See free-trade areas

FTC. See Federal Trade Commission

full employment, 48, 317, 354, 526, 550

functional finance, 557

futures: air pollution, 210; commodity, 151, 207, 208, 209, 210; currency, 207, 209; definition, 207–8; energy, 151, 210, 371; financial, 207, 208, 209, 210; hedging with, 209; options on, 210; political, 210; prices, 208; stock-index, 207, 210

futures markets, 207–11; clearinghouses, 208; electronic trading, 208; exchanges, 207, 209; participants, 209–10; speculators, 209–10; trading volumes, 209; uses, 208–9

Galbraith, John Kenneth, 59, 124, 411, 535–36, 593

game theory, 211–14; analysis of monopolies, 13; application to economics, 574, 575; application to sports, 472; brinkmanship strategy, 213; cooperative and noncooperative games, 573–74; incomplete information, 539–40; independence of strategies, 211–12; leading figures, 211, 570, 573–74; Nash equilibria, 212, 573–74, 587; negative-sum games, 201, 211; positive-sum games, 200, 211; “trembling hand” equilibrium, 587–88; win-win transactions, 200; zero-sum games, 211. See also prisoners’dilemma

GAO (General Accounting Office), 462

gas. See natural gas

gasoline: automobile fuel efficiency, 153, 374; consumption, 153; lead in, 402; price controls, 382, 409–10; taxes, 153. See also oil

Gates, Bill, 53, 154

GATS (General Agreement on Trade in Services), 299, 342

GATT. See General Agreement on Tariffs and Trade

GDP. See gross domestic product

gender-based discrimination, 215, 273

gender gap, 214–16; definition, 214; in earnings, 117–18, 214–16; factors in, 215–16; in labor force participation, 214, 215; in occupations, 214–15

General Accounting Office (GAO), 462

General Agreement on Tariffs and Trade (GATT): agricultural subsidy programs excluded from, 5–6; founding, 298–99, 342; negotiating rounds, 299, 342; tariff reductions, 299; trade liberalization, 164

General Agreement on Trade in Services (GATS), 299, 342

General Aviation Revitalization Act of 1994, 326

General Electric, 319

general equilibrium theory, 378, 523–24, 530, 544, 602

generalized ARCH, 531

general obligation bonds, 42, 224

generational accounting, 187, 458

generations, sizes, 403. See also baby boomers; elderly

generic products, 2, 44, 391

George, Henry, 536–37

German economic miracle, 216–19; abolition of price controls and rationing, 115, 216, 217–18; comparison to East German economy, 146; currency reform, 216, 217–18; free-market policies, 146, 163; growth, 145, 146; industrial production, 218; results, 218; speed, 113; tax cuts, 218; U.S. advisers, 218, 544

Germany: Allied occupation, 216–18, 219; Bundesbank, 354; conditions after World War II, 216–17; conscription, 77; defense spending, 109; economic freedom, 125; economic growth of East and West, 145, 146; European Coal and Steel Community, 163; historical school, 23; hyperinflation, 251, 252, 354; insider trading regulations, 277; Marshall Plan aid, 218–19; monetary policy, 319; Nazi rule, 173, 216–17, 252, 541; population movements, 115; reparations after World War I, 549; resistance to Nazis, 217; social security programs, 463; welfare state, 229; World War II, 67, 114, 536

Gerry, Elbridge, 111

Gillette, 275

Giuliani, Rudolph, 314, 315

globalization: of art, 20; benefits, 471; competition, 469, 470–71; criticism of, 59, 300

global warming, 219–22; adjustment to, 221; benefits, 171, 220–21; causes, 204, 219, 375; costs, 171, 204, 220, 221; debate on, 159, 171; economic effects, 220; evidence, 159; international agreements, 219–20, 221; predictions, 219, 221; sea levels and, 220; speed, 221

Goering, Hermann, 216–17

gold: Federal Reserve holdings, 175, 176, 231; prices, 222; production costs, 224

Goldberger, Arthur, 551

gold exchange standard, 222, 231

gold standard, 222–24; abandonment, 222, 360; classical period, 222; costs, 224; current interest in, 222, 224; definition, 222; free banking systems based on, 72; in interwar period, 222, 230–31; operation, 222–23, 360; performance, 223–24; in United Kingdom, 222, 223, 232; in United States, 174, 175, 222–24, 230–31

Gompers, Samuel, 322

Gorbachev, Mikhail, 68, 467

Gordon, David, 435

Gordon, Robert, 318

Gore, Albert, Jr., 51

governance. See corporate governance

government debt, 224–27; defaults, 186; definition, 224; effects on economy, 225–26; future tax burden, 318, 378, 458; market values, 225; measuring, 225; service obligations, 253; types, 224; of United States, 40, 224–25, 293, 355. See also municipal bonds; U.S. government bonds

government deficits. See budget deficits

government growth, 227–30; employment, 230; expenditures, 227; in future, 229; regulation, 227; responses to crises, 228, 230; scope, 227–28, 229; structural change and, 228–29

governments: advertising by, 3; bankruptcies, 185–86; bulk purchases of drugs, 391; bureaucracies, 399, 429–30, 468, 603; coercion, 201; corruption, 98–99; credibility, 559; expenditures as proportion of GDP, 227; incentives of officials, 597; interventionism, 60, 342; intervention justified by externalities, 170, 440–41, 577, 596–97; labor unions representing employees, 320, 322, 416; measuring sizes, 227; promotion of economic freedom, 124; provision of public goods, 107–8; redistribution programs, 119–21, 437–39, 576; roles in free markets, 591–92; time-consistency problem, 553–54. See also regulation; state; state governments; U.S. government

Granger, Clive W. J., 537–38

Granger causality, 538

Great Britain. See United Kingdom

Great Depression, 230–35; banking crises, 30, 175–76, 180, 232; causes, 225, 230, 534, 581; charitable giving, 64–65; countries affected, 230, 231; economic policy lessons, 50, 230; effects on individuals, 230; Federal Reserve responses, 175–76, 231, 232, 233; Federal Reserve responsibility, 534; population movements, 115, 230; recovery, 230, 233, 234; stock market crash, 231; unemployment, 230, 231, 233–34; wage rates, 231, 233. See also New Deal

Greenfield, Robert, 73

greenhouse gases. See global warming

Greenspan, Alan, 178, 353, 362, 554

gross domestic product (GDP): components, 367–68, 369; definition, 367–68; deflator, 263; effects of fiscal policy, 183–84; per capita, 369; as welfare measure, 369. See also economic growth

Grossman, Gene, 426

growth. See economic growth

Grunberg, Emile, 570

guild system, 575, 599

gun control, 105

gun ownership rights, 105, 111, 325

Haavelmo, Trygve, 305–6, 538

Haiti, sanctions on, 455

Hall, Robert E., 434

Hammarskjöld, Dag, 604

Hardin, Garrett, 404

Harrod, Roy F., 539

Harrod-Domar model, 539, 593

Harsanyi, John C., 539–40

Hartrich, Edwin, 218

Hart-Scott-Rodino Act of 1978, 259

Hayek, Friedrich August: biography, 540–43; business cycle theory, 569; criticism of Galbraith, 535; Denationalisation of Money, 71; differences from Keynes, 541; on economic freedom, 545; on government roles, 542; influences on, 24, 545; on information, 269; on innovation, 273; on labor unions, 319; on law and economics, 323; on monetary competition, 73; on monetary theory, 541; on prices, 25; on socialism, 467–68, 541, 542, 554; students, 561

head taxes, 489

health: causes of death, 446–47; safety regulation, 446–51

health care, 235–41; competition, 237; consumer-driven, 240, 242–43; demand for, 242, 332, 392; differences from other industries, 235; for elderly, 185, 402, 403; expenditures, 235, 242, 243, 392; improvements, 477; industry structure, 240; lack of competition, 241–42; malpractice cases, 325, 327; managed care, 237–38, 239, 242, 391; marginal analysis, 332; outlook, 240; overuse of, 236, 237; problems with system, 243–45; as proportion of GDP, 236; regulation, 239–40, 241; socialized, 238, 391; vaccines, 326; value of, 236. See also hospitals; pharmaceutical industry

health insurance, 241–45; asymmetric information, 596; community rating, 245; cost-plus reimbursements, 241; costs, 237; coverage, 281; demand for, 236; development of market, 241; effects on prices, 236; employer-provided, 235–37, 242, 244, 245, 283; future of, 240; incentives for use of health care services, 236, 237, 332, 392; lack of portability, 244; premiums, 241; prescription drug coverage, 391; proportion of health care spending, 235; regulation, 239–40, 244; subsidies in tax code, 235–36, 244, 283; uninsured individuals, 236, 240, 244–45, 391–92. See also insurance; Medicaid; Medicare

health reimbursement arrangements (HRAs), 242

health savings accounts (HSAs), 242–43

Heckman, James J., 543–44

Heckscher, Eli, 296, 576

hedging: foreign exchange risk, 198–99, 209; with options, 210

Heller, Walter Wolfgang, 218, 483, 544, 598

Helms-Burton Act, 454

Herfindahl-Hirschman Index (HHI), 257–58

Heritage Foundation, economic freedom index, 124, 148

HHI (Herfindahl-Hirschman Index), 257–58

Hicks, John R., 432–33, 544–45, 582

Hicks compensation test, 544

higher education. See colleges and universities

Higher Education Act, 135

highways: congestion, 499, 507–8; subsidies, 509; toll roads, 415, 431, 499, 507, 509, 551, 601

high-yield bonds. See junk bonds

historical school, 23

history, economic: cliometrics, 575; historians, 532–33, 575, 596, 601–2

Hitler, Adolf, 67, 173, 216–17, 229

Holland. See Netherlands

Holt, Charles, 168

homelessness, 246, 347

Hong Kong, economic freedom, 125

Hooker Chemical Company, 203

Hoover, Herbert, 231–32, 483

Hope tax credit, 135

horizontal contracts, 12, 13

hospitals: bulk purchases of drugs, 391; competition among, 238; consolidation, 240; cost-plus reimbursements, 241; Medicare payments, 238–39, 241, 242; not-for-profit, 240; prices, 241–42; regulation, 239. See also health care

households: debt, 225; income distribution, 119–21, 122. See also families

housing, 245–48; affordability, 245, 247; amenities, 245; effects of new construction, 247; government assistance, 513, 514; government expenditures, 246; homelessness, 246, 347; price controls, 246–47; prices, 245–46; public, 246, 513, 516; regulation, 245–47; sizes of houses, 245; subsidies, 246, 437–38, 513, 516. See also rent control

HRAs (health reimbursement arrangements), 242

HSAs (health savings accounts), 242–43

human capital, 248–51; family influences, 250; importance in economic growth, 250; investment in, 147, 248, 305, 525, 586; training, 249–50. See also education; health care

human rights, 201, 422, 424

Hume, David, 24, 545, 558, 571

Hungary: hyperinflation, 251; privatization, 501. See also Eastern Europe

hurricanes, 114. See also disasters

Hutterites, 498

hyperbolic discounting, 37

hyperinflation, 251–53; causes, 251, 253, 264; definition, 251; effects, 252–53; ending, 252; in Germany, 251, 252, 354; in Hungary, 251; in Latin America, 253; rates, 251, 262; in transition economies, 500

hysteresis hypothesis, 395

IATA (International Air Transport Association), 74

IBM, 154, 275

ICC (Interstate Commerce Commission), 366, 485–86, 487, 488

image advertising, 2

IMF (International Monetary Fund), 99, 500, 596, 597

immigrants: economic performance, 254–55; illegal, 254; impact on native earnings, 255–56; in labor force, 122; national origins, 254, 255; proportion of U.S. population, 407; skilled workers, 255, 256; wages, 254–55; welfare use, 255, 256, 515

immigration, 253–57; debates on, 254, 470; economic impact, 256; illegal, 254, 470; impact on poverty rates, 407; rates in United States, 253–54; selection methods, 254, 256; U.S. policies, 254, 256, 515

imperialism, 341, 591

import barriers: agricultural, 5; costs, 206–7, 437, 506; mercantilist support, 340, 341; political support, 298, 342; quotas, 207, 506; unintended consequences, 506; wealth transferred by, 437. See also tariffs; trade barriers

impossibility theorem, 428, 523, 588

inclusionary zoning, 246–47

income, national. See national income

income distribution, 119–23; causes of inequality, 121–22; economic mobility and, 123, 406; effects of economic growth, 553; effects of Industrial Revolution, 261; effects of minimum wages, 347–48; global, 145–47; Pareto’s law, 577; redistribution by government, 119–21, 437–39, 576; relationship to economic freedom, 127; in transition economies, 501; trends, 119–21; in United Kingdom, 261

income mobility, 123, 406, 457

incomes: gender gap, 117–18, 214–16; marginal utility, 526; per capita growth, 128, 476, 557–58; real, 261. See also gross domestic product; poverty; standard of living; wages

income taxes: average rates, 329; disincentives for working, 600–601; distribution of burden, 491–92; on dividends, 83, 87, 94, 492; Earned Income Tax Credit, 122, 408, 438, 510, 513–14; education credits, 135; flat, 60, 85, 484, 489, 492, 568; in former communist countries, 484; in Germany, 218; health insurance subsidies, 235–36, 244, 283; incentives for saving, 458, 491, 492; income distribution data from returns, 120; inflation indexing, 265, 492, 572; on interest income, 84, 87, 94, 289, 308; in Japan, 308; optimum rates, 568; personal, 84, 92, 490; rate cuts, 318, 355; rates, 92, 491; self-employment and, 155. See also capital gains taxes; corporate taxation; marginal tax rates; taxes

incorporation, 95. See also corporations

increasing-returns model of international trade, 296

India: economic freedom, 125–26; economic policies, 129–30; education system, 132; rents created by regulation, 446

individualism, 57

individual retirement accounts (IRAs), 36–37, 84, 85, 491

industrial concentration, 257–60; causes, 258; definition, 257; effects, 258–59; measuring, 257–58; public policy, 260; relationship to advertising, 2; relationship to prices, 258; relationship to profits, 12, 258–59, 365; trends, 258; in United States, 257–58. See also antitrust; monopolies; oligopolies

industrial development bonds, 42

industrial organization, 11, 561

industrial policy, Japanese, 308–9

Industrial Revolution, 260–62; agricultural productivity and, 67; capital sources, 96; in communist countries, 67; effects on living standards, 260–62, 476; in England, 58, 260–62, 575; working conditions, 58

inequality: economic case for, 122; income distribution, 119–23, 127, 501; relationship to economic freedom, 127; social function, 122

inferior goods, 112–13

inflation, 262–66; adjusting bond values for, 225; anticipated rates, 264–65, 393; Austrian School view, 25–26; benefits, 266; causes, 263–64; central bank policies, 318–19, 554; consequences, 264–66; consumer price indexes, 77–81; controlling, 264; costpush explanation, 264; costs, 25–26; creeping, 545; definition, 262; demand-pull explanation, 264; estimating, 78, 80; expectations and interest rates, 264–65, 289, 362; Federal Reserve policies, 50, 178, 264, 266, 318, 353, 554; under gold standard, 223; hyper;n-, 251–53, 264, 354, 500; Keynesian view, 317; measuring, 262–63; menu costs, 265, 379–80; monetarist view, 396, 534; in 1970s and 1980s, 177, 351, 353, 534; optimal rate, 265; quantity theory of money, 25; reduced (disinflation), 266, 354, 361, 412; repressed, 115; Social Security cost of living adjustments, 463; in transition economies, 500; Treasury Inflation-Protected Securities, 41; unanticipated, 265–66; in United States, 262–63; during World War II, 230–31, 411. See also Phillips curve; price controls

inflation-protected securities, 41

information: assumption of perfect, 267–68, 269, 521; costs, 267–68; efficient markets hypothesis and, 35; failures, 267; in game theory, 213; imperfect, 268–69; in insurance market, 282; overreactions to new, 35; prices and, 73–74, 270–72. See also asymmetric information

information economics, 267–70

information technology. See computer industry; Internet

inheritance. See estate taxes

initial public offerings (IPOs), 56, 141

innovation, 272–76; benefits, 273–74; as competitive advantage, 74; conditions for, 274–76; definition, 272; demand for, 274; discouraged by liability concerns, 327; discovery of social values, 273; effects of regulation, 21; by entrepreneurs, 25, 155, 274, 586; intellectual property protection and, 276, 554; lock-in concept, 302; in natural resource extraction, 373–74, 384, 546; opposition to, 273; promoted by trade, 296; role in economic growth, 128–29, 130; role of large firms, 275. See also research and development; technological change

input-output analysis, 555

insider trading, 276–80; debates on, 279–80; definition, 276, 277; economic analysis, 277–78; efficiency, 278; examples, 276, 277; by market professionals, 279; profitability, 278; regulations, 277, 279–80

Instinet, 335

institutions: as by-product of human actions, 26; role in economic growth, 575. See also legal systems; property rights

insurance, 281–84; adverse selection, 282; basic concepts, 281–82; disability, 463, 464, 513; economic role, 281; equity issues, 283; flood, 115, 282; government programs, 182, 283; government roles, 283–84; liability, 283, 326, 327, 328; premiums, 281, 282; property, 282, 283, 326; workers’ compensation, 311, 313. See also deposit insurance; health insurance; moral hazard; unemployment insurance

insurance companies: categories, 179; regulation, 181, 283. See also financial institutions

intellectual property, 284–88; alternatives, 286–87; consumption/production trade-off, 285–86; definition, 284; demand for, 285; government role, 287

intellectual property rights protection: controversies, 287–88; international agreements, 299; limited term, 286; results, 276, 286, 554; role in economic growth, 129, 130; trademarks, 81. See also copyrights; patents

interest-group competition, in South Africa, 14, 15. See also special interests

interest income: compounding, 288; taxes on, 84, 87, 94, 289, 308

interest rates, 288–90; covered interest parity, 199; determinants of, 288–89; discount rate, 175, 176, 231, 232, 355, 361, 362; explanation of positive, 526; federal funds, 355, 356, 357, 362; Federal Reserve policies, 176, 355, 357; long-term, 356; natural, 603; real vs. nominal, 350, 353, 532; regulation of, 460, 558; relationship to bond prices, 289; relationship to exchange rates, 183, 198; relationship to expected inflation rate, 264–65, 289, 362; relationship to money supply, 362; relationship to stock prices, 480; short-term, 356; term structure, 290; uncovered interest parity, 199; usury, 409, 460

Intergovernmental Panel on Climate Change (IPCC), 219, 220, 221

interindustry analysis, 555

International Air Transport Association (IATA), 74

International Bank for Reconstruction and Development, 194. See also World Bank

International Brotherhood of Teamsters, 487

international capital flows, 290–95; composition, 293–94; controls, 199; between developed countries, 291; historical, 294–95; relationship to international trade, 290–92, 297; unreported, 293. See also capital account; foreign direct investment

International Monetary Fund (IMF), 99, 500, 596, 597

International Monetary Market, 207

international organizations, 291

international trade, 295–98; agricultural, 5–6, 427; in arts, 20; economists’ views of, 295; effects of exchange-rate fluctuations, 341, 359; effects on wages, 300; factor proportions model, 296, 576, 583; financial flows, 290–92, 297; gains from, 296–97, 300; impact of agricultural subsidies, 5–6; increasing-returns model, 296; intrafirm, 291; Leontief paradox, 555; mercantilist policies, 340–43; sanctions, 452, 453, 454; in services, 27, 299, 342. See also exports; free trade; protectionism; trade barriers; trade liberalization

international trade agreements, 298–301; bilateral, 298, 299–300, 427; common markets, 299; environmental and labor standards, 300, 427; free-trade areas, 299; labor and environmental standards, 300, 427; regional, 299–300, 427. See also customs unions; General Agreement on Tariffs and Trade; World Trade Organization

Internet, 301–4; advertising on, 303–4; business strategies, 303–4; e-commerce, 82, 302, 303; economic effects, 301–2, 469; expectations for, 301; file sharing, 287; first-mover advantages, 302; information transmission costs, 301, 469; lock-in concept, 302–3; network effects, 302; occupations created by growth of, 102; telephone service, 495; travel sites, 8; usage estimates, 304; winner-take-all conditions, 302

Internet stocks: booms, 54; bubble, 44–45, 140, 141, 301; prices, 44–45

Interstate Commerce Commission (ICC), 366, 485–86, 487, 488

interventionism. See mixed economies

inventions. See innovation; patents

investment, 304–8; decisions, 307; definition, 304; distinction from saving, 456; domestic saving as source, 305; effects of exchange-rate fluctuations, 358–59; effects of monetary policy, 598; foregone consumption and, 304–5, 307, 419–20; influences of government policy, 306; international agreements, 299; international flows, 293; irreversibility, 307; in Japan, 308; liquidity constraints, 306; neoclassical theory, 306; relationship to economic growth, 147, 304–5; resources, 304; share of GDP, 304, 368; sunk costs, 307; tax incentives, 306, 491, 554; theories, 306–7; user-cost model, 306. See also foreign direct investment

investment analysts, 138

investment banks: functions, 179; spreads on underwriting municipal bonds, 365. See also financial institutions

investment tax credits, 306

invisible hand, 102, 413, 505

Iowa Electronic Market, 210

IPCC (Intergovernmental Panel on Climate Change), 219, 220, 221

IPOs (initial public offerings), 56, 141

Iraq, sanctions on, 452, 454–55

IRAs (individual retirement accounts), 36–37, 84, 85, 491

iron ore, 373

IS-LM model, 544

Italy, fascist regime, 173, 577

Jack-in-the-Box, 44

“January effect,” 139–40

Japan, 308–11; agricultural subsidy programs, 5; automobile industry, 309, 426; bank failures, 310; culture, 308; deposit insurance, 181; economic freedom, 308; economic growth, 150, 308, 309; fiscal policy, 309; futures markets, 209; government role in economy, 308–9, 310; industrial policy, 308–9; investment, 308; Ministry of International Trade and Industry, 308–9; monetary policy, 309–10; natural gas imports, 372; population movements, 115; postwar recovery, 113, 115; recessions, 309–10; sanctions on, 453; savings, 308, 310; tax code, 308, 309; voluntary export restrictions, 426

Jevons, William Stanley, 23, 545–46, 565

jobs. See employment; occupations

job safety, 311–13

Johnson, Harry Gordon, 547

Johnson, Lyndon B., 99, 177, 544, 576

Johnson and Johnson, 44

Jorgenson, Dale, 306

judicial system. See courts

junk bonds, 41, 313–16, 462

Justice Department. See U.S. Department of Justice

Kahneman, Daniel, 450, 547–48

Kantorovich, Leonid Vitalievich, 549

Kendall, Maurice, 139

Kennedy, John F., 306, 320, 486, 536, 544, 576, 598

keyboard designs, 302–3

Keynes, John Maynard: biography, 549–50; biography by Harrod, 539; on classical economics, 376; differences from Hayek, 541; on expectations, 432–33; General Theory of Employment, Interest, and Money, 305, 379, 541, 544, 550, 556, 568, 576, 582; influence, 379, 550; Lerner and, 556; Marshallian user cost theory, 305; on speculative nature of stock prices, 138–39, 140

Keynesian economics, 316–19; acceptance, 230; business cycle theory, 49, 432–33; compared to monetarism, 353–55; consumption function, 433; debates with new classical economists, 317, 376, 379; fiscal policy, 355, 483, 550; focus on aggregate demand, 376, 483, 550, 581; full employment goal, 354, 550; inflation-unemployment relationship, 266; monetary policy, 316, 350, 353–55, 550; natural rate of unemployment, 266, 317–18, 354, 393, 504–5; price, wage, and interest-rate rigidities, 268, 316; recessions, 376; relative importance of unemployment and inflation, 317; stabilization policies, 317, 318, 341–42; unemployment, 266, 317. See also new Keynesian economics; Phillips curve

Kirzner, Israel, 24, 155

Klein, Benjamin, 73

Klein, Lawrence Robert, 551

Klemp, Katherine Hussman, 424

Knight, Frank Hyneman, 411, 527, 551–52, 574, 583, 602

Koch, Ed, 444

Koopmans, Tjalling Charles, 552

Korea, economic growth of North and South, 145, 146

Krueger, Anne, 445

Krugman, Paul, 296, 426

Kuznets, Simon: biography, 552–53; Friedman and, 533–34; national income measurement, 369, 570; students, 533

Kydland, Finn E.: biography, 553–54; business cycle theory, 377, 578; on time-consistency problem, 553–54

Kyoto protocol, 219–20, 221