The Economic

Way of Thinking
Paul Heyne
University of Washington

Peter J. Boettke
George Mason University

David L. Prychitko
Northern Michigan University

Twelfth Edition

Pearson Education International

Contents
Preface 11
About the Authors 17

1 The Economic Way of Thinking 19

Questions for Discussion 33

2 Efficiency, Exchange,
and Comparative Advantage 37
An Appendix: Economic Growth: Specialization,
Exchange, and The Rule of Law 51
Questions for Discussion 56

3 Substitutes Everywhere: The Concept of Demand 61

Questions for Discussion 83

4 Cost and Choice: The Concept of Supply 91

Questions for Discussion 109

5 Supply and Demand: A Process of Coordination 115

An Appendix: Coordination Problems:
Transaction Costs 125
Questions for Discussion 131

6 Unintended Consequences: More Applications

of Supply and Demand 135
An Appendix: Framing Economic Questions
Correctly 155
Questions for Discussion 160

7 Profit and Loss 169

An Appendix: Profiteering in Futures Markets 183
Questions for Discussion 190

8 Price Searching 199

Questions for Discussion 213

9 Competition and Government Policy 221

Questions for Discussion 239
 10 Externalities and Conflicting Rights 245
Questions for Discussion 261

Contents n Markets and Government 271

Questions for Discussion 292

12 Measuring the Overall Performance of Economic

Systems 299
An Appendix: Limitations of National
Income Accounting 319
Questions for Discussion 324

13 The Wealth of Nations: Globalization and

Economic Growth 329
An Appendix: The Difficulties of International GDP
Comparisons 350
Questions for Discussion 353

14 Money 357
An Appendix: What About Gold? 371
Questions for Discussion 3 73

15 Economic Performance and Real-World Politics 379

Questions for Discussion 402

16 Renewal of the Debate: Some Parting

Thoughts 411
Glossary 423
Index 431