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Decreases in Demand Shift the Demand Curve 74
A Decrease in Demand Decreases the Equilibrium
Price 75
Application 4 Chinese Demand and Pecan
Prices 75
Market Effects of Changes in Supply 76
Change in Quantity Supplied versus Change in
Supply 76
Increases in Supply Shift the Supply Curve 76
An Increase in Supply Decreases the Equilibrium
Price 78
Decreases in Supply Shift the Supply Curve 79
A Decrease in Supply Increases the Equilibrium
Price 79
Simultaneous Changes in Demand and Supply 80
Application 5 The Harmattan and the Price
of Chocolate 82
Predicting and Explaining Market Changes 82
Application 6 Why Lower Drug Prices? 83
* Summary 83 * Key Terms  84
* Exercises  84
* Economic Experiment  88
Part 2
A Closer Look at Demand and Supply
5 Elasticity: A Measure
of Responsiveness 89
The Price Elasticity of Demand 90
Computing Percentage Changes and
Elasticities 90
Price Elasticity and the Demand Curve 91
Elasticity and the Availability of Substitutes 93
Other Determinants of the Price Elasticity of
Demand 94
vii
Application 1 A Closer Look at the Elasticity
of Demand for Gasoline 95
Using Price Elasticity 96
Predicting Changes in Quantity 96
Price Elasticity and Total Revenue 96
Using Elasticity to Predict the Revenue Effects
of Price Changes 98
Application 2 Vanity Plates and the Elasticity
of Demand 99
Elasticity and Total Revenue for a Linear
Demand Curve 99
Price Elasticity along a Linear Demand Curve 99
Application 3 Drones and the Lower Half of a
Linear Demand Curve 101
Elasticity and Total Revenue for a Linear Demand
Curve 102
Other Elasticities of Demand 102
Income Elasticity of Demand 102
Cross-Price Elasticity of Demand 102
Application 4 I can Find that Elasticity in Four
Clicks! 103
The Price Elasticity of Supply 104
What Determines the Price Elasticity
of Supply? 105
The Role of Time: Short-Run versus Long-Run
Supply Elasticity 105
Extreme Cases: Perfectly Inelastic Supply and
Perfectly Elastic Supply 106
Application 5 The Short-Run and Long-Run
Elasticity of Supply of Coffee 107
Predicting Changes in Quantity Supplied 107
Using Elasticities to Predict Changes in
Prices 107
The Price Effects of a Change in Demand 107
The Price Effects of a Change in Supply 109
viii

Application 6 A Broken Pipeline and the Price Who Really Pays Taxes? 131
of Gasoline 111
Tax Shifting: Forward and Backward 131
* Summary 111 * Key Terms  112
* Exercises  112 Tax Shifting and the Price Elasticity of
Demand 132

Cigarette Taxes and Tobacco Land 133

6 Market Efficiency and Government
Intervention 117 The Luxury Boat Tax and Boat Workers 133

Tax Burden and Deadweight Loss 134

Consumer Surplus and Producer Surplus 118
Application 5 Response to a Luxury Tax 135
The Demand Curve and Consumer Surplus 119
* Summary 136 * Key Terms  136
The Supply Curve and Producer Surplus 120
* Exercises  136
Application 1 Consumer Surplus of Internet * Economic Experiment  140
Service 121

Market Equilibrium and Efficiency 121

7 Consumer Choice: Utility Theory
Total Surplus Is Lower with a Price below the
and Insights from Neuroscience 141
Equilibrium Price 121

Total Surplus Is Lower with a Price above the Traditional Consumer Choice: Utility
Equilibrium Price 123 Theory 142
Efficiency and the Invisible Hand 123 Consumer Constraints: The Budget Line 142
Government Intervention in Efficient Markets 124 Total and Marginal Utility 144

Application 2 Rent Control and Mismatches 124 The Marginal Principle and the Equimarginal
Rule 145
Controlling Prices—Maximum and Minimum
Conditions for Utility Maximization 147
Prices 125
Setting Maximum Prices 125 Application 1 Measuring Diminishing Marginal
Utility 149
Rent Control 125
The Law of Demand and the Individual
Application 3 Price Controls and the Shrinking Demand Curve 149
Candy Bar 127
Effect of a Decrease in Price 149
Setting Minimum Prices 127
Income and Substitution Effects of a Decrease
Controlling Quantities—Licensing and Import in Price 150
Restrictions 127
The Individual Demand Curve 152
Taxi Medallions 128
The Neuroscience of Consumer Choice 152
Licensing and Market Efficiency 129

Winners and Losers from Licensing 129 Application 2 A Revenue-Neutral Gasoline Tax 153

Import Restrictions 129 The Neuroscience of Benefit Valuation 153

The Neuroscience of Cost Valuation 154

Application 4 The Cost of Protecting a Lumber
Job 131 The Wisdom of Gut Feelings 155

Cognition and Choice 155
Predicting Consumer Choice 156
Fuel for Cognition 157
Application 3 Coke versus Pepsi in the Prefrontal
Cortex 158
Consumer Decisions: Insights from
Neuroscience 158
Dietary Choice: Donut versus Apple 158
Present Bias: Spending versus Saving 160
Present Bias and Credit Cards 161
Present Bias and Smoking 162
Gambling as a Consumer Good 162
Application 4 Taxing Cigarettes to Offset Present
Bias 164
* Summary 164 * Exercises 165
Appendix: Mental Shortcuts and Consumer
Puzzles 169
Mental Accounting and Bundling  169
Anchoring 170
The Decoy Effect 170
The Appeal of Percentage Changes  171
* Summary 172
Part 3
Market Structures and Pricing
8 Production Technology
and Cost 173
Economic Cost and Economic Profit 174
Application 1 Opportunity Cost
and Entrepreneurship 175
A Firm with a Fixed Production Facility:
Short-Run Costs 175
Production and Marginal Product 175
Short-Run Total Cost 177
ix
Short-Run Average Costs 178
Short-Run Marginal Cost 180
The Relationship between Marginal Cost
and Average Cost 180
Application 2 The Rising Marginal Cost
of Crude Oil 182
Production and Cost in the Long Run 182
Expansion and Replication 182
Reducing Output with Indivisible Inputs 184
Scaling Down and Labor Specialization 185
Economies of Scale 185
Diseconomies of Scale 185
Actual Long-Run Average-Cost Curves 186
Short-Run versus Long-Run Average Cost 187
Application 3 Indivisible Inputs and the Cost
of Fake Killer Whales 187
Examples of Production Cost 188
Scale Economies in Wind Power 188
The Average Cost of a Music Video 188
Solar versus Nuclear: The Crossover 189
* Summary 190 * Key Terms  190
* Exercises  191
9 Perfect Competition 194
Preview of the Four Market Structures 195
Application 1 Wireless Women in Pakistan 197
The Firm’s Short-Run Output Decision 197
The Total Approach: Computing Total Revenue
and Total Cost 198
The Marginal Approach 199
Economic Profit and the Break-Even Price 201
Application 2 The Break-Even Price for
Switchgrass, a Feedstock For Biofuel 201
x

The Firm’s Shut-Down Decision 202 Application 7 Economic Detective and the Case
of Margarine Prices 214
Total Revenue, Variable Cost, and the Shut-Down
Decision 202 * Summary 215 * Key Terms  215
* Exercises  215
The Shut-Down Price 203

Fixed Costs and Sunk Costs 204

10 Monopoly and Price
Application 3 Straddling the Zinc Cost Discrimination 220
Curve 204
The Monopolist’s Output Decision 221
Short-Run Supply Curves 205
Total Revenue and Marginal Revenue 222
The Firm’s Short-Run Supply Curve 205
A Formula for Marginal Revenue 223
The Short-Run Market Supply Curve 205
Using the Marginal Principle 224
Market Equilibrium 206
Application 1 Marginal Revenue From
Application 4 Short-Run Supply Curve for a Baseball Fan 226
Cargo 207
The Social Cost of Monopoly 227
The Long-Run Supply Curve for an
Deadweight Loss from Monopoly 227
Increasing-Cost Industry 207
Rent Seeking: Using Resources to Get Monopoly
Production Cost and Industry Size 208
Power 229
Drawing the Long-Run Market Supply
Monopoly and Public Policy 229
Curve 209

Examples of Increasing-Cost Industries: Sugar and
Apartments 209
Application 5 Chinese Coffee Growers Obey the
Law of Supply 210
Short-Run and Long-Run Effects of Changes
in Demand 210
The Short-Run Response to an Increase in
Demand 210
Application 2 Rent Seeking for Tribal Casinos 230
Patents and Monopoly Power 230
Incentives for Innovation 230
Trade-Offs from Patents 231
Application 3 Bribing the Makers of Generic
Drugs 231
Price Discrimination 232

The Long-Run Response to an Increase in Senior Discounts in Restaurants 233

Demand 211 Price Discrimination and the Elasticity of
Demand 234
Application 6 The Upward Jump and Downward
Slide of Blueberry Prices 212 Examples: Movie Admission versus Popcorn,
and Hardback versus Paperback Books 234
Long-Run Supply for a Constant-Cost
Industry 213 Application 4 Why does Movie Popcorn Cost so
Much? 235
Long-Run Supply Curve for a Constant-Cost
Industry 213 * Summary 235 * Key Terms  236
* Exercises  236
Hurricane Andrew and the
Price of Ice 213 * Economic Experiment  239

11 Market Entry and Monopolistic
Competition 240
The Effects of Market Entry 241
Entry Squeezes Profits from Three Sides 242
Examples of Entry: Car Stereos, Trucking,
and Tires 243
Application 1 Satellite versus Cable 243
Monopolistic Competition 244
When Entry Stops: Long-Run Equilibrium 244
Differentiation by Location 245
Application 2 Opening a Motel 246
Trade-Offs with Entry and Monopolistic
Competition 247
Average Cost and Variety 247
Monopolistic Competition versus Perfect
Competition 247
Application 3 Happy Hour Pricing 248
Advertising for Product Differentiation 249
Application 4 Picture of Man versus Picture
of Woman 249
* Summary 251 * Key Terms  251
* Exercises  251
* Economic Experiment  253
12 Oligopoly and Strategic
Behavior 255
13
Cartel Pricing and the Duopolists’ Dilemma 257
Price Fixing and the Game Tree 258
Equilibrium of the Price-Fixing Game 260
Nash Equilibrium 261
Application 1 Failure of the Salt Cartel 262
Overcoming the Duopolists’ Dilemma 262
xi
Low-Price Guarantees 262
Repeated Pricing Games with Retaliation for
Underpricing 263
Price Fixing and the Law 265
Price Leadership 265
Application 2 Low-Price Guarantee Increases Tire
Prices 266
Simultaneous Decision Making and the Payoff
Matrix 266
Simultaneous Price-Fixing Game 266
The Prisoners’ Dilemma 267
Application 3 Cheating on the Final Exam:
The Cheaters’ Dilemma 268
The Insecure Monopolist and Entry
Deterrence 269
Entry Deterrence and Limit Pricing 270
Examples: Aluminum and Campus Bookstores 271
Entry Deterrence and Contestable Markets 272
When Is the Passive Approach Better? 272
Application 4 Microsoft as an Insecure
Monopolist 273
The Advertisers’ Dilemma 273
Application 5 Got Milk? 275
* Summary 276 * Key Terms  276
* Exercises  276
* Economic Experiment  281
Controlling Market Power: Antitrust
and Regulation 282
Natural Monopoly 283
Picking an Output Level 283
Will a Second Firm Enter? 284
Price Controls for a Natural Monopoly 285
Application 1 Public versus Private Waterworks 286
xii

Application 2 Satellite Radio as a Natural Adverse Selection for Sellers: Insurance 304
Monopoly 287
Health Insurance 304
Antitrust Policy 287 Equilibrium with All High-Cost Consumers 305

Breaking Up Monopolies 288 Responding to Adverse Selection in Insurance:

Group Insurance 306
Blocking Mergers 288
The Uninsured 306
Merger Remedy for Wonder Bread 290
Other Types of Insurance 307
Regulating Business Practices 291
Application 3 Genetic Discrimination 307
A Brief History of U.S. Antitrust Policy 291
Insurance and Moral Hazard 308
Application 3 Merger of Pennzoil and Quaker
Insurance Companies and Moral Hazard 308
State 292
Deposit Insurance for Savings and Loans 308
Application 4 Merger of Office Depot
and Officemax 292 Application 4 Car Insurance and Risky Driving 309

* Summary 293 * Key Terms  293 The Economics of Consumer Search 309
* Exercises  293
Search and the Marginal Principle 310
Reservation Prices and Searching Strategy 311

Part 4 The Effects of Opportunity Cost and Product

Prices on Search Effort 313
Externalities and Information
Application 5 Income and Consumer Search 313

14 Imperfect Information: Adverse * Summary 314 * Key Terms  314

Selection and Moral Hazard 296 * Exercises  314

* Economic Experiment  318

Adverse Selection for Buyers: The Lemons
Problem 297
15 Public Goods and Public
Uninformed Buyers and Knowledgeable Sellers 297 Choice 320
Equilibrium with All Low-Quality Goods 298
External Benefits and Public Goods 322
A Thin Market: Equilibrium with Some
High-Quality Goods 299 Public Goods and the Free-Rider Problem 323

Overcoming the Free-Rider Problem 323

Application 1 Are Baseball Pitchers Like Used
Cars? 301 Application 1 Clearing Space Debris 324
Evidence of the Lemons Problem 301
Application 2 Global Weather Observation 324
Responding to the Lemons Problem 302
Private Goods with External Benefits 325
Buyers Invest in Information 302
External Benefits from Education 325
Consumer Satisfaction Scores from ValueStar and
eBay 302 External Benefits and the Marginal Principle 325

Guarantees and Lemons Laws 303 Other Private Goods That Generate External
Benefits 326
Application 2 Regulation of the California Kiwifruit
Market 303 Application 3 External Benefits from Lojack 327

Application 4 The Private and External Benefit
of Trees 327
Public Choice and the Median Voter 327
Voting and the Median-Voter Rule 328
The Median Voter and the Median Location 329
Alternative Models of Government: Self-Interest
and Special Interests 330
Which Theory Is Correct? 331
Application 5 The Median Voter in the NBA 331
* Summary 332 * Key Terms  332
* Exercises  332
* Economic Experiment  334
16 External Costs and Environmental
Policy 336
The Optimal Level of Pollution 337
Using the Marginal Principle 337
Example: The Optimal Level of Water
Pollution 338
Coase Bargaining 339
Application 1 Reducing Methane Emissions 340
Taxing Pollution 341
A Firm’s Response to a Pollution Tax 341
The Market Effects of a Pollution Tax 342
Example: A Carbon Tax 343
Application 2 Washing Carbon Out of the Air 344
Traditional Regulation 345
Uniform Abatement with Permits 345
Command and Control 345
Market Effects of Pollution Regulations 346
Lesson from Dear Abby: Options for Pollution
Abatement 346
Application 3 Options for Reducing CO2
Emissions From International Shipping 347
Marketable Pollution Permits 347
Voluntary Exchange and Marketable Permits 347
xiii
Supply, Demand, and the Price of Marketable
Permits 348
Application 4 Weather and the Price of Pollution
Permits 350
External Costs from Automobiles 350
External Costs from Pollution 350
External Costs from Congestion 352
External Costs from Collisions 352
Application 5 Young Drivers and Collisions 353
* Summary 353 * Key Terms  354
* Exercises  354
* Economic Experiment  356
Part 5
The Labor Market and Income
Distribution
17 The Labor Market and the
Distribution of Income 358
The Demand for Labor 359
Labor Demand by an Individual Firm in the Short
Run 359
Market Demand for Labor in the
Short Run 361
Labor Demand in the Long Run 362
Short-Run versus Long-Run Demand 363
Application 1 Marginal Revenue Product in Major
League Baseball 363
The Supply of Labor 364
The Individual Labor-Supply Decision: How
Many Hours? 364
An Example of Income and Substitution
Effects 364
The Market Supply Curve for Labor 365
Application 2 Cabbies Respond to an Increase
in the Wage 366
xiv
Labor Market Equilibrium 366
Changes in Demand and Supply 366
The Market Effects of the Minimum Wage 367
Why Do Wages Differ across Occupations? 368
The Gender Pay Gap 369
Racial Discrimination 370
Why Do College Graduates Earn Higher
Wages? 370
Labor Unions and Wages 371
Application 3 The Beauty Premium 372
The Distribution of Income 372
Income Distribution in 2007 372
Recent Changes in the Distribution of
Income 373
Application 4 Trade-Offs From Immigration 374
Public Policy and the Distribution
of Income 375
Effects of Tax and Transfer Policies on the
Distribution of Income 375
Poverty and Public Policy 376
The Earned Income Tax Credit 377
Application 5 Expanding the Eitc 378
* Summary 378 * Key Terms  379
* Exercises  379
Part 6
The International Economy
18 International Trade and Public
Policy 383
Benefits from Specialization and Trade 384
Production Possibilities Curve 384
Comparative Advantage and the Terms
of Trade 386
The Consumption Possibilities Curve 386
How Free Trade Affects Employment 387
Protectionist Policies 388
Import Bans 388
Quotas and Voluntary Export Restraints 389
Responses to Protectionist Policies 390
Application 1 The Impact of Tariffs on the Poor 391
What Are the Rationales for Protectionist
Policies? 391
To Shield Workers from Foreign Competition 392
To Nurture Infant Industries until They
Mature 392
To Help Domestic Firms Establish Monopolies
in World Markets 392
Application 2 Chinese Imports and Local
Economies 393
A Brief History of International Tariff and Trade
Agreements 393
Recent Policy Debates and Trade
Agreements 394
Are Foreign Producers Dumping Their
Products? 394
Application 3 Does Losing in the Wto Really
Matter? 395
Do Trade Laws Inhibit Environmental
Protection? 396
Application 4 How American are American
Cars? 397
Do Outsourcing and Trade Cause Income
Inequality? 398
Why Do People Protest Free Trade? 399
* Summary 399 * Key Terms  400
* Exercises  400
Glossary 403
Photo Credits 408
Index 409
Preface
In preparing this ninth edition, we had three primary goals.
First, we wanted to incorporate the sweeping changes in
the United States and world economies we have all wit-
nessed in the last several years, and the difficulties that the
world economics have continued to experience in recover-
ing from the severe economic downturn. Second, we strived
to update this edition to reflect the latest exciting develop-
ments in economic thinking and make these accessible to
new students of economics. Finally, we wanted to stay true
to the philosophy of the textbook—using basic concepts of
economics to explain a wide variety of timely and interesting
economic applications.
c What’s New To This Edition
In addition to updating all the figures and data, we made a
number of other key changes in this edition. They include
the following:
• At the beginning of each chapter, we carefully refined
our Learning Objectives to match the contents of the
chapter closely. These give the students a preview of
what they will learn in each section of the chapter,
facilitating their learning.
• We incorporated a total of seven new chapter-opening
stories. These chapter-opening stories show the wide-
spread relevance of economic analysis.
• In the opening four chapters, the new Applications
include housing prices in Cuba (Chapter 1), property
rights in urban slums (Chapter 3), and the effects of
winds from the Sahara Desert on the price of chocolate
(Chapter 4).
• In the core microeconomics chapters, the new
Applications include the market effects of a luxury
tax (Chapter 6), the neuroscience of the “cola wars”
between Coke and Pepsi (Chapter 7), the time path
of blueberry prices triggered by publicity about the
health benefits of eating blueberries (Chapter 9), the
new advertising program for dairy products, “Milk
Life” (Chapter 12), genetic discrimination in insur-
ance (Chapter 14), clearing space debris (Chapter 15),
responding to climate change by washing carbon out
of the air (Chapter 16), and proposals to expand the
earned income tax credit (Chapter 17).
xv
xvi

c Applying The Concepts

This is an Applications-driven textbook. We carefully selected over 80 real-world Applications that help students develop
and master essential economic concepts. Here is an example of our approach from Chapter 4, “Demand, Supply, and Market
Equilibrium.”
64 part 1

Application 1

the laW Of DeManD fOr yOUng SMOkerS

APPLying the COnCePts #1: What is the law of demand?

that increases in state cigarette taxes between 1990 and 2005

Each chapter includes three to five thought-provoking

As price decreases and we move downward along the market
demand for cigarettes, the quantity of cigarettes demanded
increases for two reasons. First, people who smoked cigarettes
at the original price respond to the lower price by smoking more.
Second, some people start smoking.
In the United States, cigarette taxes vary across states,
and studies of cigarette consumption patterns show that higher
taxes mean less cigarette consumption by youths. Using data
from the Youth Risk Behavior Surveys (YSBS), one study shows
resulted in less participation (fewer smokers) and lower fre-
quency (fewer cigarettes per smoker).
A change in cigarette taxes in Canada illustrates the sec-
ond effect, the new-smoker effect. In 1994, several provinces
in eastern Canada cut their cigarette taxes in response to the
Applying the Concepts questions that convey impor-
smuggling of cigarettes from the United States (where taxes are
lower), and the price of cigarettes in the provinces decreased tant economic concepts, paired with and illustrated by
by roughly 50 percent. Researchers tracked the choices of 591
youths from the Waterloo Smoking Prevention Program and
concluded that the lower price increased the smoking rate by
an Application that discusses the concept and conveys its
real-world use.
roughly 17 percent. Related to Exercises 1.6 and 1.8.
SOURCES: (1) Anindya Sen and Tony Wirjanto, “Estimating the Impacts of Cigarette
Taxes on Youth Smoking Participation, Initiation, and Persistence: Empirical Evi-
dence from Canada,” Health Economics 19 (2010), pp. 1264–1280. (2) Christopher
Carpentera and Philip J. Cook, “Cigarette Taxes and Youth Smoking: New Evi-
dence from National, State, and Local Youth Risk Behavior Surveys,” Journal of
Health Economics 27 (2008), pp. 287–299.

The market demand is negatively sloped, reflecting the law of demand. This is
sensible, because if each consumer obeys the law of demand, consumers as a group
will too. When the price increases from $4 to $8, there is a change in quantity
demanded as we move along the demand curve from point f to point c. The move-
ment along the demand curve occurs if the price of pizza is the only variable that has

For each Application and Applying the Concepts changed.

question, we provide end-of-chapter

The Supply
Learning Objective 4.2 Curve exercises KeY TermS

that test students’ understanding

Describe and explain the law of supply.
of
On the supply side of a market, the
firms concepts.
sell their products to consumers. Suppose you
ask the manager of a firm, “How much of your product are you willing to produce
expectations of inflation, p. 326
expectations phillips curve, p. 329
monetarists, p. 340
money illusion, p. 326
rational expectations, p. 330
real wages, p. 326
and sell?” The answer is likely to be “it depends.” The manager’s decision about how growth version of the quantity nominal wages, p. 326 seignorage, p. 339
much to produce depends on many variables, including the following, using pizza as equation, p. 337 quantity equation, p. 336 velocity of money, p. 336
an example:
hyperinflation, p. 338
• The price of the product (e.g., the price per pizza)
• The wage paid to workers
• The price of materials (e.g., the price of dough and cheese) exerCISeS all problems are assignable in MyEconLab exercises that update with real-time data are marked with .
• The cost of capital (e.g., the cost of a pizza oven)
• The state of production technology (e.g., the knowledge used in making pizza) Money Growth, Inflation, and Interest Rates Understanding the Expectations Phillips Curve: The
5.6 Using Open-Economy Multipliers. In an open
• Producers’ econ- about
expectations A leftward
6.4 future pricesshift in the aggregate demand curve cor- Describe how an economy at full employment with inflation Relationship between Unemployment and Inflation
omy, the marginal propensity to consume is 0.9, and responds to a(n) _________ in equilibrium income. differs from one without inflation. Explain the relationship between inflation and unemployment
• Taxes paid to the government or subsidies (payments from the government to
the marginal propensity to import is 0.3. How much of 6.5 Using Multipliers to Determine the Shift of the in the short run and long run.
firms to produce a product)
an increase in investment would be necessary to raise Aggregate Demand Curve. 1.1 The expected real rate of interest is the nominal interest
GDP by 200? What wouldTogether,
quantity supplied be your answer
theseifvariables
this was determine
a how much ofthe
a. Suppose a product
MPC is firms
equalare to
willing to pro-
0.8. Government rate plus the expected inflation rate. _________ (True/ 2.1 If inflation increases less than expected, the actual
The amount ofclosed
a product economy?
that firms are duce and sell, the quantity supplied. We start our
spending discussion
increases of market
by $20 billion.supply
How farwith
does the False) unemployment rate will be _________ (above/below)
willing and
5.7ableExport-Led
to sell. the relationship
Growth Strategies. Manybetween
countriesthe price of a good and the
aggregate quantity
demand curveofshift
that to
good
the supplied,
right? the natural rate.
1.2 Countries with lower rates of money growth have
believe that they need to increase exports in order to b. Now suppose that the MPC is 0.8 and the marginal _________ interest rates. 2.2 James Tobin explained business cycles with rational
grow. Some of this belief is based on long-run consid- propensity to import is 0.2. How far to the right expectations. _________ (True/False)
1.3 If the growth rate of money increases from 3 to
erations, as competing in export markets may induce will the $20 billion in government spending shift 5 percent, initially interest rates will _________. 2.3 The increase in the fraction of young people in the
their firms to innovate. But some countries also focus the aggregate demand curve?
on the short-run benefits. What are these benefits? 1.4 A firm that expects higher profits from higher prices labor force that occurred when the baby-boom genera-
6.6 Falling Exports and Aggregate Demand. Suppose but does not recognize its costs are increasing is suf- tion came of working age tended to _________ (raise/
(Related to Application 4 on page 238.)
M04_OSUL8847_09_SE_C04.indd 64
foreign countries grow less rapidly than anticipated and
26/10/15 5:35 pm fering from _________. lower) the natural rate of unemployment.
U.S. exports also fall.
1.5 Nominal and Real Interest Rates. In Japan in the 2.4 In the late 1980s, as unemployment fell below the natu-
The Income-Expenditure Model and the Aggregate a. Using the income-expenditure model, first show 1990s interest rates were near zero on government ral rate, inflation _________.
Demand Curve how the decrease in exports will decrease U.S. GDP. bonds. Some economists said that it was still possible to 2.5 Targeting the Natural Rate of Unemployment?
Explain how the aggregate demand curve is related to the b. Using your results in part (a), explain how the stimulate investment by creating negative real interest
income-expenditure model. Because the natural rate of unemployment is the
aggregate demand curve shifts with the decrease in rates. If nominal rates could not fall below zero, explain economists’ notion of what constitutes “full employ-
exports. how real interest rates could be made negative. (Hint: ment,” it might seem logical for the Fed to use mon-
6.1 An increase in the price level will _________ GDP and 6.7 The Size of the Wealth Effect and the Slope of Think about inflation.) etary policy to move unemployment toward its natural
thereby move the economy _________ the aggregate the Aggregate Demand Curve. Suppose the wealth 1.6 Money Neutrality, Long-Run Inflation, and the rate. However, many economists believe such a policy
demand curve. effect is very small; that is, a large fall in prices will not Natural Rate. Explain carefully the relationship would be unwise because the natural rate may shift
6.2 At any price level, the income-expenditure model increase consumption by very much. Explain carefully between the concept of monetary neutrality and the over time and policymakers may misjudge the cor-
determines the level of equilibrium output and the cor- why this will imply that the aggregate demand curve idea that the natural rate is independent of the longrun rect rate. What would happen if the Fed targeted a
responding point on the _________ curve. will have a steep slope. inflation rate. 5 percent unemployment rate but the true natural rate
6.3 An increase in the price level will not shift the aggre- 1.7 Taxes, Inflation, and Interest Rates. If a business were 6 percent?
gate demand curve. _________ (True/False) borrows funds at 10 percent per year, the business has 2.6 Hysteresis and the Labor Force Participation Rate.
a 40 percent tax rate, and the annual inflation rate is In economics the term “hysteresis” means that the his-
5 percent, what are the real after-tax costs of funds to tory of the economy has a lingering effect on current
the business? Similarly, if an investor receives a nomi- economic performance. During the U.S. recession
nal return of 8 percent on a savings deposit, the tax rate starting in 2007, the labor force participation rate con-
ECOnOMIC ExpErIMEnT is 30 percent, and the inflation rate is 6 percent, what tinued to remain below the levels that prevailed before
is the after-tax rate of return? the recession. Could this be an example of hysteresis?
ESTIMaTInG ThE MarGInal prOpEnSITy 1.8 Examples of Money Illusion. What do the following Can you suggest any other explanations?
Monthly $1,250 $1,500 $1,750 $2,000
TO COnSUME two quotes have in common?
Disposable 2.7 Oil Price Changes, Vacancies, and the Natural
Income a. “My wages are going up 5 percent a year. If only
For this experiment, each class member is asked to fill out the Rate. During the mid-1970s, changes in oil prices
Expenditures inflation weren’t 5 percent a year, I would be rich.” required products to be produced by different types of
following table. Given a certain monthly income, how would
you spend it and how much would you save? The top row of and savings b. “My bank is paying 10 percent a year, but the firms in different locations. This raised the number of
each column gives you the monthly disposable income. How Food 8 percent inflation rate is just eating up all my real vacancies relative to the unemployment rate. Accord-
would you allocate it each month among the various catego- housing investment gains.” ing to the theory of William Dickens, how did this
ries of spending in the table and savings? Complete each Transportation 341
column in the table. The sum of your entries should equal Medical
your disposable income at the top of each column. After you
Entertainment
have filled out the chart, compute the changes in your savings
Other expenses
and total consumption as your income goes up. What is your
marginal propensity to save (MPS)? What is your marginal Savings
propensity to consume (MPC) over your total expenditures? M16_OSUL8847_09_SE_C16.indd 341 26/10/15 6:10 pm
Graph your consumption function.
MyEconLab
For additional economic experiments, please visit
In addition, some chapters contain an Economic
www.myeconlab.com.
Experiment section that gives students the opportu-
nity to do their own economic analysis.
244

M11_OSUL8847_09_SE_C11.indd 244 26/10/15 6:06 pm


c Why Five Key Principles?
In Chapter 2, “The Key Principles of Economics,” we intro-
duce the following five key principles and then apply them
throughout the book:
1. The Principle of Opportunity Cost. The opportunity
cost of something is what you sacrifice to get it.
2. The Marginal Principle. Increase the level of an activ-
ity as long as its marginal benefit exceeds its marginal
cost. Choose the level at which the marginal benefit
equals the marginal cost.
3. The Principle of Voluntary Exchange. A voluntary
exchange between two people makes both people bet-
ter off.
4. The Principle of Diminishing Returns. If we increase
one input while holding the other inputs fixed, output
will increase, but at a decreasing rate.
5. The Real-Nominal Principle. What matters to people
is the real value of money or income—its purchasing
power—not the face value of money or income.
This approach of repeating five key principles gives stu-
dents the big picture—the framework of economic rea-
soning. We make the key concepts unforgettable by using
them repeatedly, illustrating them with intriguing examples,
and giving students many opportunities to practice what
they’ve learned. Throughout the text, economic concepts
xvii
are ­connected to the five key principles when the following
callout is provided for each principle:
P RINCI P LE O F O P P O RTUNITY C O S T
The opportunity cost of something is what you sacrifice to get it.
c How Is The Book Organized?
Chapter 1, “Introduction: What Is Economics?” uses three
current policy issues—traffic congestion, poverty in Africa,
and Japan’s prolonged recession—to explain the eco-
nomic way of thinking. Chapter 2, “The Key Principles
of Economics,” introduces the five principles we return to
throughout the book. Chapter 3, “Exchange and Markets,” is
devoted entirely to exchange and trade. We discuss the fun-
damental rationale for exchange and introduce some of the
institutions modern societies developed to facilitate trade.
Students need to have a solid understanding of demand
and supply to be successful in the course. Many students
have difficulty understanding movement along a curve ver-
sus shifts of a curve. To address this difficulty, we devel-
oped an innovative way to organize topics in Chapter 4,
“Demand, Supply, and Market Equilibrium.” We examine
the law of demand and changes in quantity demanded, the
law of supply and changes in quantity supplied, and then
the notion of market equilibrium. After students have a
firm grasp of equilibrium concepts, we explore the effects
of changes in demand and supply on equilibrium prices and
quantities.
xviii
Summary of the Chapters
A course in microeconomics starts with the first four chap-
ters of the book, which provide a foundation for more
detailed study of individual decision making and markets.
Part 2, “A Closer Look at Demand and Supply,”
(Chapters 5 through 7), provides a closer look at demand
and supply, including elasticity, market efficiency, and
consumer choice. Part 3, “Market Structures and Pricing”
(Chapters 8 through 13), starts with a discussion of pro-
duction and costs, setting the stage for an examination
of alternative market structures, including the extremes
of perfect competition and monopoly, as well as the middle
ground of monopolistic competition and oligopoly. Part 4,
“Externalities and Information” (Chapters 14 through 17),
discusses the circumstances under which markets break
down, including imperfect information, public goods, and
environmental degradation.
Part 5, “The Labor Market and Income Distribution”
(Chapter 18), explores the economic forces that determine
wages, and also examines recent changes in the distribution
of income and the effects of government programs on the
income distribution.

c MyEconLab ®
Digital Features Located in MyEconLab
MyEconLab is a unique online course management, testing,
and tutorial resource. It is included with the eText version
of the book or as a supplement to the print book. Students
and instructors will find the following online resources to
accompany the ninth edition:
• Concept Checks: Each section of each learning objec-
tive concludes with an online Concept Check that con-
tains one or two multiple choice, true/false, or fill-in
questions. These checks act as “speed bumps” that
encourage students to stop and check their understand-
ing of fundamental terms and concepts before moving
on to the next section. The goal of this digital resource
is to help students assess their progress on a section-by-
section basis, so they can be better prepared for home-
work, quizzes, and exams.
• Animations: Graphs are the backbone of introductory
economics, but many students struggle to understand and
work with them. Many of the numbered figures in the
text a supporting animated version online. The goal of
this digital resource is to help students understand shifts
in curves, movements along curves, and changes in equi-
librium values. Having an animated version of a graph
helps students who have difficulty interpreting the static
version in the printed text. Graded practice exercises are
included with the animations. Our experience is that
many students benefit from this type of online learning.
• Graphs Updated with Real-Time Data from
FRED: Approximately 16 graphs are continuously
updated online with the latest available data from
FRED (Federal Reserve Economic Data), which is a
comprehensive, up-to-date data set maintained by the
Federal Reserve Bank of St. Louis.
Students can display a pop-up
graph that shows new data
plotted in the graph. The
goal of this digital feature is to help students under-
stand how to work with data and understand how
including new data affects graphs.
• Interactive Problems and Exercises Updated with
Real-Time Data from FRED: The end-of-chapter
problems in select chapters include real-time data
exercises that use the latest data from FRED. The
book contains several of these specially-selected exer-
cises. The goal of this digital feature is to help students
become familiar with this key data source, learn how to
locate data, and develop skills in interpreting data.
c Integrated Supplements
The authors and Pearson Education have worked together
to integrate the text and media resources to make teaching
and learning easier.
xix
For the Instructor
Instructors can choose how much or how little time to
spend setting up and using MyEconLab. Here is a snapshot
of what instructors are saying about MyEconLab:
MyEconLab offers [students] a way to practice
every week. They receive immediate feedback and a
feeling of personal attention. As a result, my teach-
ing has become more targeted and efficient.
—Kelly Blanchard, Purdue University
Students tell me that offering them MyEconLab is
almost like offering them individual tutors.
—Jefferson Edwards, Cypress Fairbanks College
MyEconLab’s eText is great—particularly in that
it helps offset the skyrocketing cost of textbooks.
Naturally, students love that.
—Doug Gehrke,
Moraine Valley Community College
Each chapter contains two preloaded exercise sets
that can be used to build an individualized study plan
for each student. These study plan exercises contain
tutorial resources, including instant feedback, links to
the appropriate learning objective in the eText, pop-up
definitions from the text, and step-by-step guided solu-
tions, where appropriate. After the initial setup of the
course by the instructor, student use of these materials
requires no further instructor setup. The online grade
book records each student’s performance and time spent
on the tests and study plan and generates reports by stu-
dent or chapter.
Instructors can fully customize MyEconLab to match
their course exactly, including reading assignments,
homework assignments, video assignments, current news
assignments, and quizzes and tests. Assignable resources
include:
• Preloaded exercise assignments sets for each chapter
that include the student tutorial resources mentioned
earlier
• Preloaded quizzes for each chapter that are unique to
the text and not repeated in the study plan or home-
work exercise sets
• Study plan problems that are similar to the end-of-
chapter problems and numbered exactly like the book
to make assigning homework easier
• Real-Time-Data Analysis Exercises, marked with ,
allow students and instructors to use the very latest data
from FRED. By completing the exercises, students
become familiar with a key data source, learn how to
locate data, and develop skills in interpreting data.
• In the eText available in MyEconLab, select figures
labeled MyEconLab Real-time data allow students to
display a pop-up graph updated with real-time data
from FRED.
xx
• Current News Exercises provide a turnkey way to
assign gradable news-based exercises in MyEconLab.
Each week, Pearson scours the news, finds a current
microeconomics and macroeconomics article, creates
exercises around these news articles, and then automat-
ically adds them to MyEconLab. Assigning and grading
current news-based exercises that deal with the latest
micro and macro events and policy issues has never
been more convenient.
• Experiments in MyEconLab are a fun and engag-
ing way to promote active learning and mastery of
important economic concepts. Pearson’s Experiments
program is flexible, easy-to-assign, auto-graded, and
available in Single and Multiplayer versions.
• Single-player experiments allow your students to play
against virtual players from anywhere at any time so
long as they have an Internet connection.
• Multiplayer experiments allow you to assign and man-
age a real-time experiment with your class.
• Pre- and post-questions for each experiment are avail-
able for assignment in MyEconLab.

For a complete list of available experiments, visit http://
www.myeconlab.com.
• Test Item File questions that allow you to assign quiz-
zes or homework that will look just like your exams
• Econ Exercise Builder, which allows you to build cus-
tomized exercises
Exercises include multiple-choice, graph drawing, and
free-response items, many of which are generated algorith-
mically so that each time a student works them, a different
variation is presented.
MyEconLab grades every problem type except essays,
even problems with graphs. When working homework exer-
cises, students receive immediate feedback, with links to
additional learning tools.
Customization and Communication
MyEconLab in MyLab/Mastering provides ­ additional
optional customization and communication tools. Instructors
who teach distance-learning courses or very large lecture sec-
tions find the MyLab/Mastering format useful because they
can upload course documents and assignments, customize the
order of chapters, and use communication features such as
Document Sharing, Chat, ClassLive, and Discussion Board.
For the Student
MyEconLab puts students in control of their learning
through a collection of testing, practice, and study tools tied
to the online, interactive version of the textbook and other
media resources. Here is a snapshot of what students are
saying about MyEconLab:
It was very useful because it had EVERYTHING,
from practice exams to exercises to reading. Very
­helpful.
—student, Northern Illinois University
I would recommend taking the quizzes on
MyEconLab because it gives you a true account of
whether or not you understand the material.
—student, Montana Tech
It made me look through the book to find answers,
so I did more reading.
—student, Northern Illinois University
Students can study on their own or can complete assign-
ments created by their instructor. In MyEconLab’s structured
environment, students practice what they learn, test their
understanding, and pursue a personalized study plan generated
from their performance on sample tests and from quizzes cre-
ated by their instructors. In Homework or Study Plan mode,
students have access to a wealth of tutorial features, including:
• Instant feedback on exercises that helps students under-
stand and apply the concepts
• Links to the eText to promote reading of the text just
when the student needs to revisit a concept or an expla-
nation
xxi
• Step-by-step guided solutions that force students
to break down a problem in much the same way an
instructor would do during office hours
• Pop-up key term definitions from the eText to help
students master the vocabulary of economics
• A graphing tool that is integrated into the various exer-
cises to enable students to build and manipulate graphs
to better understand how concepts, numbers, and
graphs connect.
Additional MyEconLab Tools
MyEconLab includes the following additional features:
• Enhanced eText—Students actively read and learn,
and with more engagement than ever before, through
embedded and auto-graded practice, real-time data-
graph updates, animations, author videos, and more.
• Print upgrade—For students who wish to complete
assignments in MyEconLab but read in print, Pearson
offers registered MyEconLab users a loose-leaf version
of the print text at a significant discount.
• Glossary flashcards—Every key term is available as
a flashcard, allowing students to quiz themselves on
vocabulary from one or more chapters at a time.
• MySearchLab—MySearchLab provides extensive help
on the research process and four exclusive databases
of credible and reliable source material, including the
New York Times, the Financial Times, and peer-reviewed
journals.
MyEconLab content has been created through the
efforts of Chris Annala, State University of New York–
Geneseo; Charles Baum, Middle Tennessee State University;
Peggy Dalton, Frostburg State University; Carol Dole,
Jacksonville University; David Foti, Lone Star College; Sarah
Ghosh, University of Scranton; Satyajit Ghosh, Universtity
of Scranton; Melissa Honig, Pearson Education; Woo
Jung, University of Colorado; Courtney Kamauf, Pearson
Education; Chris Kauffman, University of Tennessee–
Knoxville; Russell Kellogg, University of Colorado–Denver;
Noel Lotz, Pearson Education; Katherine McCann,
University of Delaware; Daniel Mizak, Frostburg State
University; Christine Polek, University of Massachusetts–
Boston; Mark Scanlan, Stephen F. Austin State University;
Leonie L. Stone, State University of New York–Geneseo;
and Bert G. Wheeler, Cedarville University.
c Other Resources
for the ­Instructor
Instructor’s Manuals
Jeff Phillips of Colby-Sawyer College revised the Instructor’s
Manuals for Microeconomics and Macroeconomics for
the ninth edition. The Instructor’s Manuals are designed to
xxii
help the instructor incorporate applicable elements of the
supplement package. Each Instructor’s Manual contains the
following resources for each chapter:
• Chapter Summary: a bulleted list of key topics in the
chapter
• Learning Objectives
• Approaching the Material; student-friendly examples
to introduce the chapter
• Chapter Outline: summary of definitions and concepts
• Teaching Tips on how to encourage class participation
• Summary and discussion points for the Applications in
the main text
• New Applications and discussion questions
• Solutions to all end-of-chapter exercises.
The Instructor’s Manuals are available for download from the
Instructor’s Resource Center (http://www.pearsonhighered
.com/osullivan). The solutions to the end-of-chapter
review questions and problems were prepared by the authors
and Jeff Phillips.
Two Test Item Files
Jeff Phillips of Colby-Sawyer College prepared the Test
Item Files for Microeconomics and Macroeconomics. Each
Test Item File includes approximately 6,000 multiple-choice,
true/false, short-answer, and graphing questions. There are
questions to support each key feature in the book. The Test
Item Files are available for download from the Instructor’s
Resource Center (http://www.pearsonhighered.com/­
osullivan). Test questions are annotated with the following
information:
• Difficulty: 1 for straight recall, 2 for some analysis, 3
for complex analysis
• Type: multiple-choice, true/false, short-answer, essay
• Topic: the term or concept the question supports
• Learning outcome
• AACSB (see description that follows)
• Page number in the text.
The Association to Advance Collegiate Schools of
Business (AACSB) The Test Item File author has con-
nected select questions to the general knowledge and skill
guidelines found in the AACSB Assurance of Learning
Standards.
What Is the AACSB? AACSB is a not-for-profit corpo-
ration of educational institutions, corporations, and other
organizations devoted to the promotion and improvement
of higher education in business administration and account-
ing. A collegiate institution offering degrees in business
administration or accounting may volunteer for AACSB
accreditation review. The AACSB makes initial accredita-
tion decisions and conducts periodic reviews to promote
continuous quality improvement in management educa-
tion. Pearson Education is a proud member of the AACSB
and is pleased to provide advice to help you apply AACSB
Assurance of Learning Standards.
What Are AACSB Assurance of Learning Standards?
One of the criteria for AACSB accreditation is the quality
of curricula. Although no specific courses are required, the
AACSB expects a curriculum to include learning experiences
in the following categories of Assurance of Learning Standards:
• Written and Oral Communication
• Ethical Understanding and Reasoning
• Analytical Thinking Skills
• Information Technology
• Diverse and Multicultural Work
• Reflective Thinking
• Application of Knowledge.
Questions that test skills relevant to these standards are
tagged with the appropriate standard. For example, a
­question testing the moral questions associated with exter-
nalities would receive the Ethical Understanding and
Reasoning tag.
How Can Instructors Use the AACSB Tags? Tagged
questions help you measure whether students are grasp-
ing the course content that aligns with the AACSB guide-
lines noted earlier. This in turn may suggest enrichment
activities or other educational experiences to help students
achieve these skills.
TestGen
The computerized TestGen package allows instructors to
customize, save, and generate classroom tests. The test pro-
gram permits instructors to edit, add, or delete questions
from the Test Item Files; analyze test results; and orga-
nize a database of tests and student results. This software
allows for extensive flexibility and ease of use. It provides
many options for organizing and displaying tests, along with
search and sort features. The software and the Test Item
Files can be downloaded from the Instructor’s Resource
Center (http://www.pearsonhighered.com/osullivan).
PowerPoint Lecture Presentation
Two sets of PowerPoint slides, prepared by Brock Williams
of Metropolitan Community College, are available:
1. A comprehensive set of PowerPoint slides can be used
by instructors for class presentations or by students
for lecture preview or review. These slides include all
the graphs, tables, and equations in the textbook. Two
versions are available—step-by-step mode, in which
you can build graphs as you would on a blackboard,
and automated mode, in which you use a single click

per slide. Instructors can download these PowerPoint
presentations from the Instructor’s Resource Center
(http://www.pearsonhighered.com/osullivan).
2. A student version of the PowerPoint slides is avail-
able as .pdf files. This version allows students to print
the slides and bring them to class for note taking.
Instructors can download these PowerPoint presenta-
tions from the Instructor’s Resource Center (http://
www.pearsonhighered.com/osullivan).
Learning Catalytics™
Learning Catalytics is a “bring your own device” Web-based
student engagement, assessment, and classroom intelligence
system. This system generates classroom discussion, guides
lectures, and promotes peer-to-peer learning with real-time
analytics. Students can use any device to interact in the class-
room, engage with content, and even draw and share graphs.
To learn more, ask your local Pearson representative or
visit https://www.learningcatalytics.com.
Digital Interactives
Focused on a single core topic and organized in progres-
sive levels, each interactive immerses students in an assign-
able and auto-graded activity. Digital Interactives are also
engaging lecture tools for traditional, online, and hybrid
courses, many incorporating real-time data, data displays,
and analysis tools for rich classroom discussions.
c Other Resources
for the Student
In addition to MyEconLab, Pearson provides the following
resources.
Dynamic Study Modules
With a focus on key topics, these modules work by continu-
ously assessing student performance and activity in real time
and, using data and analytics, provide personalized content
to reinforce concepts that target each student’s particular
strengths and weaknesses.
PowerPoint Slides
For student use as a study aid or note-taking guide,
PowerPoint slides, prepared by Brock Williams of
Metropolitan Community College, can be downloaded from
MyEconLab or the Instructor’s Resource Center (http://
www.pearsonhighered.com/osullivan) and made avail-
able to students. The slides include:
• All graphs, tables, and equations in the text
• Figures in step-by-step mode and automated modes,
using a single click per graph curve
• End-of-chapter key terms with hyperlinks to relevant
slides
xxiii
c Reviewers OF PREVIOUS ­EDITIONS
A long road exists between the initial vision of an i­nnovative
principles text and the final product. Along our journey
we participated in a structured process to reach our goal.
We wish to acknowledge the assistance of the many people
who participated in this process.
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xxiv
Colorado
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Another random document with
no related content on Scribd:
Venetian merchant, proposes to stand security for a friend who
wants to borrow three thousand ducats of the Jew, on Antonio’s
bond. Even while negotiating the loan, the Christian reviles the Jew
as “an evil soul, a villain with a smiling cheek,” a whited sepulchre.
Shylock now reminds him of all the insults and invectives he used to
heap upon him in the Exchange:

“You call me misbeliever, cut-throat dog,

And spit upon my Jewish gaberdine,

and yet you solicit my help.” The Christian answers:

“I am as like to call thee so again,

To spit on thee again, to spurn thee too,”

and asks him to lend the money as to an enemy. The Jew pretends
to forgive and forget; but he takes Antonio at his word, and playfully
demands a forfeit “for an equal pound of your fair flesh, to be cut off
and taken in what part of your body pleaseth me.” The bond is
sealed, and it proves a fatal bond. Antonio’s ships are wrecked at
sea, and, when the term expires, he finds himself unable to pay the
Jew.
Shylock, like Barabas, has an only daughter, Jessica, whom he
cherishes and trusts above all human beings. All the love that he can
spare from his ducats is lavished upon this daughter. Fair as Abigail,
Jessica lacks the filial loyalty and sweet grace which render the
daughter of Barabas so charming a contrast to her father. Jessica is
“ashamed to be her father’s child.” She detests him, and to her her
own home “is hell.” Enamoured of a Christian youth, she enters into
a shameless intrigue with him to deceive and rob her father, and,
disguised as a boy, she runs away with her lover, carrying a quantity
of gold and jewels from the paternal hoard. The discovery of his
daughter’s desertion throws Shylock, as it did Barabas, into despair.
He never felt his nation’s curse until now.
 While in this mood he hears of Antonio’s losses and rejoices
exceedingly thereat. The news of his enemy’s mishap acts as a
salve for his own domestic woes. His old grudge against the
Christian, embittered by his recent misfortune, steels him against
mercy. He recalls the indignities and injuries of which he had been
the recipient at Antonio’s hands, all because he was a Jew, and
vows to exact the full forfeit: to have the Christian’s flesh. Antonio is
taken to prison and implores Shylock for pity; but the latter grimly
answers: “I’ll have my bond. Thou call’dst me dog before thou hadst
a cause; but since I am a dog, beware my fangs. I will have my
bond.”
The Venetian law was strict on the subject of commercial
transactions. The prosperity of the Republic depended on its
reputation for equity and impartiality, and not even the Doge could
interfere with the course of Justice. The trial commences. Antonio
appears in court, and Shylock demands justice. He is not to be
softened by prayers from the victim’s friends, or by entreaties from
the Duke. He will not even accept the money multiplied three times
over; but he insists on the due and forfeit of his bond. Thus matters
stand, when Portia, the betrothed of Antonio’s friend, appears on the
scene in the guise of a young and learned judge. She first
endeavours to bend the Jew’s heart; but on finding him inflexible,
she acknowledges that there is no power in Venice that can alter a
legally established claim: “The bond is forfeit, and lawfully by this the
Jew may claim a pound of flesh.”
Antonio is bidden to lay bare his breast, and Shylock is gleefully
preparing to execute his cruel intent; the scene has reached its
climax of dramatic intensity, when the tables are suddenly turned
upon the Jew. The young judge stays his hand with these awful
words:

“This bond doth give thee here no jot of blood.

Take thou thy pound of flesh;
But, in the cutting it, if thou dost shed
One drop of Christian blood, thy lands and goods
 Are, by the laws of Venice, confiscate
Unto the state of Venice.”

Shylock has scarcely recovered from this thunderclap, and

expressed his willingness to accept the money offered to him at first,
when the judge interrupts him: “The Jew shall have all justice—
nothing but the penalty”—just a pound of flesh, not a scruple more or
less. If not, “thou diest and all thy goods confiscate.”
Shylock is now content to accept only the principal. But the judge
again says: “Since the Jew refused the money in open Court, he
shall have merely justice and his bond—nothing but the forfeiture,”
under the conditions already named.
Shylock offers to give up his claim altogether. But no! the judge
again says:

“The law hath yet another hold on you.

It is enacted in the laws of Venice—
If it be proved against an alien
That by direct or indirect attempts
He seek the life of any citizen,
The party ’gainst the which he doth contrive
Shall seize one half his goods; the other half
Comes to the privy coffer of the State;
And the offender’s life lies in the mercy
Of the Duke only, ’gainst all other voice.
In which predicament, I say, thou stand’st.
Down, therefore, and beg mercy of the Duke.”

Antonio intercedes on behalf of his enemy, and allows him to

retain the use of one half of his goods, on condition that he become
a Christian and bequeath his property to his Christian son-in-law and
his daughter. The Jew perforce accepts these terms, leaves the
Court crestfallen, and every good man and woman is expected to
rejoice at his discomfiture.
 Such is the Jew in Shakespeare’s eyes, or rather in the eyes of
the public which Shakespeare wished to entertain. Yet, despite the
poet’s anxiety to interpret the feelings of his audience, his own
humanity and sympathetic imagination reveal themselves in the
touching appeal put into the victim’s mouth: “Hath not a Jew eyes?
hath not a Jew hands, organs, dimensions, senses, affections,
passions? Fed with the same food, hurt with the same weapons,
subject to the same diseases, healed by the same means, warmed
and cooled by the same winter and summer, as a Christian? if you
prick us, do we not bleed? if you tickle us, do we not laugh? if you
poison us, do we not die? and, if you wrong us, shall we not
revenge? If we are like you in the rest, we will resemble you in that.”
But few, if any, of Shakespeare’s contemporaries shared his own
broad sense of justice. The Jew was popularly regarded as the
quintessence of all that is foul, grim, and greedy in human form. In
him the Elizabethan Englishman saw all the qualities that he
detested: covetousness, deceitfulness, and cruelty. Moreover, the
Jew was still identified with the typical usurer, and usury continued to
be regarded in England with all the superstitious horror of the Middle
Ages. It was not until the reign of Henry VIII. that a law
1546
was reluctantly passed, fixing the interest at 10 per
cent. But the prejudice against lending money for profit was so
strong that the law had to be repealed in the following reign. All loans
at interest were again pronounced illegal under Edward VI. by an Act
which defeated its own purpose, and was in its turn repealed during
the reign of Queen Elizabeth, when, despite the law, the rate of
interest was 14 per cent. A second Act, passed in 1571, while
violently condemning usury, in the modern sense of the term, permits
an interest of 10 per cent. This rate remained in force under James I.
Bacon has recorded for us the opinions and the sentiments of
his contemporaries on the subject. In his essay Of Seditions and
Troubles, written some time between 1607 and 1612, he says:
“Above all things, good Policie is to be used, that the Treasure and
Moneyes, in a State, be not gathered into few Hands. For otherwise,
a State may have a great Stock, and yet starve.... This is done,
chiefly, by suppressing, or at least, keeping a strait Hand, upon the
Devouring Trades of Usurie, etc.” In this passage Bacon objects to
usury on economic grounds. Elsewhere he sets forth objections of a
totally different nature. In the essay Of Riches, published in 1625, he
says: “Usury is the certainest Meanes of Gaine, though one of the
worst; As that, whereby a Man doth eate his Bread; In sudore vultûs
alieni; and besides, doth Plough upon Sundaies.” Aristotle’s
mischievous metaphor was still quoted as an argument against
usury. It is mentioned by Bacon among the many “witty invectives
129
against usury” current in his time, and it is embodied by
Shakespeare in the phrase that usurers “take a breed for barren
130
metal.”
At that time the question was engrossing public attention. In
1621 a Bill for the abatement of usury had been brought into
Parliament, and two years later a second Bill to the same effect
passed the Commons. Bacon seized the opportunity for the
publication of his essay Of Usurie, which appeared in 1623. In a
letter to Secretary Conway he states that his object in writing it was
to suggest means, whereby “to grind the teeth of usury and yet to
make it grind to his Majesty’s mill in good sort, without discontent or
perturbation.” In consonance with this view, Bacon describes usury
as an evil, indeed, but as an inevitable evil: “For since there must be
Borrowing and Lending, and Men are so hard of Heart, as they will
not lend freely, Usury must be permitted.” He proceeds to balance
the advantages and disadvantages of the practice and comes to the
conclusion that it should be recognised and controlled by the State,
for “It is better to mitigate Usury by Declaration, than to suffer it to
rage by Connivance.” Bacon’s advocacy was not wasted. In the
1624
following year Usury was once more sanctioned by the
Legislature and interest was reduced to 8 per cent. But
this measure did not obliterate the deep-seated hatred of the money-
lender, nor did it weaken the popular idea that usury was the peculiar
attribute of a Jew. Bacon in the same essay tells us that there were
among his contemporaries men who recommended “that Usurers
should have Orange-tawney Bonnets, because they doe Judaize.”
 However, the abhorrence of the Jew was that which is inspired
by a repulsive abstraction rather than by a concrete individual. The
Jew in the flesh was practically an unknown creature to the ordinary
English man and woman of the age. If he was hated as a blood-
sucking ghoul, he was not more real than a ghoul. But scarcely had
the generation that hissed Barabas and Shylock on the stage passed
away, when the Jew reappeared as a human reality upon the soil
which his fathers had quitted more than three centuries before.
Meanwhile a great change had come over England. The protest
against authority, both in its intellectual and in its spiritual form, had
crossed the Channel and been welcomed by responsive souls on
our shores. When Erasmus came to England in 1498, he found here
more than he brought with him. Grocyn had learnt his Greek in Italy,
and Colet had returned from that country breathing scorn for the
“ungodly refinements” of theology. In these scholars, and scholars
like these, Erasmus found kindred spirits; hearty allies in the struggle
for light. Colet enchanted him with his Platonic eloquence, and Sir
Thomas More with the sweetness of his temper. And the band of
these three noble men—Colet, Erasmus and More—all eager for
reform and for purification of mind and soul, sowed the seed from
which was to spring a plant that even they little dreamed of. The
characteristic compromise between the new and the old under Henry
VIII., grew into the purer Protestantism of Elizabeth and James I.,
and, though in Shakespeare we still see a world essentially Catholic
in tone and ideas, it is a world that is fast dying away. Yet a few
years more and Protestantism, under its most militant and morose
aspect, has banished the last vestiges of mediaeval Catholicism and
merriment from Merry England. King Charles is gone, and Oliver
Cromwell has inherited the realities, if not the pomp, of royalty.
 CHAPTER XVIII

RESETTLEMENT

There was much in Cromwell’s followers to dispose them favourably

towards Israel. Their history, their theology, their character, their
morals, and their ideals were all as Hebraic as anything could be that
had not had its birth in Asia. The Puritans boasted, as the Jews had
always done, that they themselves were the only pure Church, and
hated all others as idolaters. They believed, as the Jews had always
done, that they were the favourite people of Heaven, selected by the
Almighty to bear testimony to His unity, to fight His battles and to
exterminate His enemies: “Destroy the Amalekites, root and branch,
hip and thigh,” was the burden of the Puritan preachers. They
dreamed of a Theocracy, as the Jews had always done; of a state in
which the civil should be subordinated to religious authority. The
spiritual arrogance of the Jew met with its other half in the spiritual
arrogance of the Puritan. If the Jew held that for him Jehovah had
spoken on Mount Sinai, the Puritan was equally certain that for him
God had suffered on the hill of Calvary. If the Jew applied to himself
the prophecies of the Old Testament, the Puritan was as eager to
appropriate the fulfilments of the New. They both walked with their
heads in the skies, but with their feet firm upon solid earth. The daily
contemplation of eternal interests did not disqualify either of them for
the successful pursuit of temporal ends. Spiritual at once and
practical, they saw in material prosperity a proof of divine
approbation. Believing, as they did, that “thrift is blessing,” they
strove to earn the fruits of thrift by excessive piety. And, while they
established their own rule, they had no doubt that they were
promoting the Kingdom of God.
 The resemblance can be traced to the minutest details. The
Puritan’s detestation of the fine arts, of ecclesiastical decoration, and
of sacerdotal foppery was not less sincere than that of the Jew.
Equally strong was the hatred entertained by both sects towards
public amusements. Under the reign of the Puritans the playhouses
were closed, masques were anathematised, maypoles demolished;
all beauty was denounced as a sin, all pleasure punished as a crime.
Even so at the same period (about 1660) a Rabbi of Venice
expressed his horror at the establishment of theatres by Venetian
Jews, wherein men, women, and children of the chosen people
assisted at frivolous performances, and regretted his inability to
suppress the graceless and godless gatherings. Both Jews and
Puritans in the seventeenth century were ready to subscribe to the
words of the Talmudic sage of the first: “I give thanks to thee, O Lord,
my God and God of my fathers, that thou hast placed my portion
among those who sit in the House of Learning and the House of
Prayer, and didst not cast my lot among those who frequent theatres
and circuses. For I labour, and they labour; I wait, and they wait; I to
131
inherit paradise, they the pit of destruction.”
Lastly, both Puritans and Jews had suffered sorely for dissent,
and they had both made others suffer as sorely for the same reason.
The heroic fortitude of both sects under affliction was disgraced by
their fierce intolerance when in power.
This close similarity in temperament and ideas found expression
in many ways, more or less marvellous, more or less amusing. It
originated that partiality to the Old Testament which was responsible
for most of the Puritans’ peculiarities and sins. The Lord’s Day in
their mouths became the Sabbath; their children were baptized by
the uncouth names of ancient Hebrew patriarchs and prophets; their
everyday conversation was a compound of sanctity and Semitism.
Hebrew was revered as the primitive tongue of mankind, and it was
held that a child brought up in solitude would naturally speak Hebrew
at four years of age. Not only were their notions on social and moral
questions derived from the code of Moses, but even in matters
judicial that code was gravely recommended as a substitute for
English jurisprudence, and the extreme Puritans, who migrated to
America, actually adopted the Mosaic law in Massachusetts, acted
Hebrew masquerades in the island of Rhode, and called the
members of the Constitutional Committee of New Haven “The seven
pillars hewn out for the House of Wisdom.” Last, but most important
of all, Cromwell’s Ironsides found in the Old Testament precedent
and sanction for deeds which are utterly abhorrent to the teaching of
the New.
Under the circumstances, it is not surprising that, while the
persecution of Papists and Episcopalians was at its highest in
England, the public attitude towards the Jews should have
undergone a marked change for the better. Members of the race
were already established in London, though secretly. On January 5,
1649, two inhabitants of Amsterdam presented to Fairfax and the
Army a petition for the repeal of the banishment of the Jews under
Edward I., and they must have found the public mind not unprepared
for their request. The question of the rehabilitation of the Jews
formed about this time the subject of earnest consideration in certain
circles. Edward Nicholas, ex-Secretary to Parliament, advocated it
with fervour and biblical erudition, declaring his belief that the
tribulations which England had endured for a generation were a
punishment for the expulsion of God’s people. A newspaper,
published on May 6, 1652, contains the account of a visit to a
synagogue in Leghorn by a friendly sailor, ending with the appeal,
“Shall they be tolerated by the Pope, and by the Duke of Florence,
by the Turks, and by the Barbarians and others, and shall England
132
1652 still have laws in force against them?” When Dr.
John Owen drew up his scheme for a national Church
and submitted it to Parliament, Major Butler and some others
attacked it as not liberal enough. Not only did they denounce
interference on the part of the State in matters spiritual and doctrinal,
but they asked: “Is it not the duty of magistrates to permit the Jews,
whose conversion we look for, to live freely and peaceably amongst
us?” Roger Williams was strongly on the same side, and so was
Whalley, the gallant Major of Naseby fame, both on religious and on
practical grounds.
 As a result of this agitation in favour of Israel, four conferences
were publicly held for a discussion of the matter. The last of these
occurred on Wednesday, December 12th, 1655, at Whitehall, under
the presidency of the Protector. It was a great event, and it created a
deep sensation throughout the country. All the highest authorities of
the Church and the State assisted at the consultation, and argued
out the question whether the Jews should be permitted to settle and
trade in England again.
The proposer was Manasseh Ben Israel, a Rabbi of Amsterdam,
the son of a Marrano of Lisbon, who had suffered at the hands of the
Inquisition. Manasseh was a true patriot: rich in nothing but
Rabbinical and Cabbalistic lore, a fluent speaker, and a prolific
writer; withal a firm believer in the approaching advent of the
Messiah, and in his own divinely appointed mission to promote that
advent. Indeed, he had a family interest in the matter; for he had
married a descendant of the House of David, and entertained hopes
that, in accordance with the ancient prophecies, the King of Israel
might be among his own offspring. Manasseh, thinking that the
establishment of the Puritan Commonwealth and of liberty of
conscience in England, as well as the enormous attention paid by
the European world at that time to questions of biblical prophecy,
afforded an opportunity for the readmission of his co-religionists, had
already approached the English Puritans and Millennarians, and had
made several attempts to obtain a hearing of Parliament; but he had
failed until Cromwell’s accession to the head of affairs. Manasseh, in
his declaration to the Commonwealth of England, dwelt at great
length and with great historical knowledge on the loyalty shown by
the Jewish people in the countries where they were treated kindly.
Among other examples he quoted the heroic fidelity of the Jews of
133
Burgos to the fallen King of Castile, Don Pedro. But his principal
argument was that by the admission of the Jews into England the
biblical prophecies concerning the Messianic era—namely, that it
would not dawn until the Israelites had been dispersed through all
the nations of the earth—would be fulfilled, and thus the era itself
brought materially nearer. It was an argument well calculated to
appeal to an audience thirsting for the Millennium and the Fifth
Monarchy of the Apocalypse, and terribly anxious to pave the way
for the Redeemer.
Cromwell himself—whether influenced by Messianic
expectations, by the desire to win over the Jews to Christianity
through kindness, by broad principles of religious toleration, or by the
less aërial motive of making use of the Jews as a means of obtaining
intelligence on international affairs and of profiting by their wealth
and commercial ability—was earnestly in favour of Manasseh’s
proposal, and supported it with great eloquence. But it was not to be.
Though the conference decided that there was no legal obstacle to
the settlement of Jews in England, public opinion, and religious
sentiment more especially, were not yet ripe for so revolutionary a
measure. Despite the enlightened example of leaders like Cromwell
and Milton, the majority thought otherwise. Liberty of conscience?
they said. Yes, but within certain limits. So, after a long and
wearisome controversy, in which prophecies and statutes were
solemnly quoted by both sides, weighed and rejected, prejudice
prevailed over reason and Christian charity; and Manasseh Ben
Israel was obliged to depart—not quite empty-handed; for Cromwell
rewarded his labours in the good cause with an annual allowance of
one hundred pounds, which, however, the rabbi did not live to enjoy.
He died on the way to Amsterdam; like Moses, denied the
satisfaction of witnessing the fruit of his zeal. For, though a public
and general admission of his co-religionists was found impracticable,
it was understood that individual members of the race could settle in
the country by Cromwell’s private permission. Many availed
themselves of this privilege, in the teeth of strong opposition on the
part of the Christian merchants of the city, and soon a humble
synagogue and a Jewish cemetery were seen in London—nearly
four hundred years after their confiscation by Edward I.
1657
This return is still celebrated by English Jews as Re-
settlement Day, its anniversary constituting one of the few “red-letter
days” in their calendar. Nor is the man forgotten who practically
secured the boon. Manasseh’s memory is held in deservedly high
honour among Hebrews, and the English Jewish community in 1904
celebrated the 300th anniversary of his birth.
 When, a few years after the settlement, the
1660
Commonwealth was overthrown by the Restoration,
the Jewish community survived their protector. Charles II., too needy
to despise the Jews, not bigoted enough to persecute them, followed
the tolerant policy of his great predecessor, and, though from entirely
different motives, granted to them the benefit of an unmolested, if
legally unrecognised, residence in his dominions. Mr. Pepys visited
their synagogue in London on October 13th, 1663, and seems to
have been greatly amazed, amused, and scandalised by what he
saw therein:
“After dinner my wife and I, by Mr. Rawlinson’s conduct, to the
Jewish Synagogue: where the men and boys in their vayles, and the
women behind a lettice out of sight; and some things stand up, which
I believe is their law, in a press to which all coming in do bow; and at
the putting on their vayles do say something, to which others that
hear the Priest do cry Amen, and the party do kiss his vayle. Their
service all in a singing way and in Hebrew. And anon their Laws that
they take out of the press are carried by several men, four or five
several burthens in all, and they do relieve one another; and whether
it is that every one desires to have the carrying of it, thus they carried
it round about the room while such a service is singing. And in the
end they had a prayer for the King, in which they pronounced his
name in Portugall; but the prayer, like the rest, in Hebrew.
“But, Lord! to see the disorder, laughing, sporting, and no
attention, but confusion in all their service, more like brutes than
people knowing the true God, would make a man forswear ever
seeing them more; and indeed I never did see so much, or could
have imagined there had been any religion in the whole world so
absurdly performed as this.”
Such was the impression which the Jewish congregation
produced on that keen observer of the surface of things.
The inference to be drawn from these sprightly comments is that
the Jew was far from having outlived his unpopularity. Though the
doctrine of toleration, for which Cromwell had fought and Milton
suffered, was still preached by divines like Taylor and expounded by
philosophers like Locke, the English public was far from recognising
every man’s right to think, act and worship as seemed good to him.
So hard it is even for the faintest ray of light to pierce the mists of
prejudice.
To Mr. Pepys we also owe a curious glimpse of the vigour with
which the Messianic Utopia was cherished at this time amongst us.
The fame of Sabbataï Zebi had reached England, and the Prophet of
Smyrna found adherents even in the city of London. We are in 1666,
on the eve of the mystic era fixed by enthusiasts as the year that
was to see the restoration of Israel to the Holy Land. Under date
February 19th, Mr. Pepys makes the following entry in his Diary;—“I
am told for certain, what I have heard once or twice already, of a Jew
in town, that in the name of the rest do offer to give any man £10 to
be paid £100, if a certain person now at Smyrna be within these two
years owned by all the Princes of the East, and particularly the
Grand Segnor, as the King of the world, in the same manner we do
the King of England here, and that this man is the true Messiah. One
named a friend of his that had received ten pieces in gold upon this
score, and says that the Jew hath disposed of £1,100 in this manner,
which is very strange; and certainly this year of 1666 will be a year of
great action; but what the consequences of it will be, God knows!”
1689 But the Messiah did not come; and twenty-four
years later, under William and Mary, an attempt was
made to fleece the unpopular race in London. It was proposed in the
Commons that £100,000 should be exacted from the Jews; and the
proposition impressed the House as tempting. But the Jews
presented a petition pleading their inability to comply and declaring
that they would rather leave the kingdom than submit to such
treatment. Their protest was seconded by statesmen who, be their
personal feelings towards the Jews what they might, objected to the
measure as contrary to the spirit of the British Constitution; and after
some discussion the project was abandoned, though not the
prejudice which had made such a proposal possible.
Sober Protestantism did not in the least share the Puritan
preference for Hebrew ideals. If the Spectator may be taken as a
mirror of public opinion on the subject, in the reign of Queen Anne,
English Protestants objected to “the Multiplicity of Ceremonies in the
Jewish Religion, as Washings, Dresses, Meats, Purgations, and the
like.” Addison states that the reason for these minute observances,
adduced by the Jews, was their anxiety to create as many occasions
as possible of showing their love to God, by doing in all
circumstances of life something to please Him. However, this
explanation does not seem convincing to the critic, who goes on to
remark that Roman Catholic apologists use similar arguments in
defence of their own rites, and concludes, “But, notwithstanding the
plausible Reason with which both the Jew and the Roman Catholick
would excuse their respective Superstitions, it is certain there is
something in them very pernicious to Mankind, and destructive to
134
Religion.” Accordingly, a statute of Queen Anne encouraged
conversion to Christianity by compelling Jewish parents to support
their apostate children.
Addison, elsewhere, recognises the advantages, commercial
and other, which the world owes to the Jews’ dispersion through the
nations of the earth; but he quaintly observes: “They are like the
Pegs and Nails in a great Building, which, though they are but little
valued in themselves, are absolutely necessary to keep the whole
135
Frame together.” He is impressed by the multitude of the Jews,
despite the decimations and persecutions to which they had been
exposed for so many centuries, no less than by their world-wide
dissemination and firm adherence to their religion; and he
endeavours to explain these remarkable phenomena by several
reflections which deserve to be quoted, not only on account of the
intrinsic sound sense of some of them, but also for the sake of the
picture which they present of the Jewish nation in the early days of
the eighteenth century, as it appeared to a highly cultured Gentile,
and of the highly cultured Gentile’s attitude towards the nation:
“I can,” says the Spectator, “in the first place attribute their
numbers to nothing but their constant Employment, their Abstinence,
their Exemption from Wars, and, above all, their frequent Marriages;
for they look on Celibacy as an accursed State, and generally are
married before Twenty, as hoping the Messiah may descend from
them.”
Their dispersion is explained as follows:
“They were always in Rebellions and Tumults while they had the
Temple and Holy City in View, for which reason they have often been
driven out of their old Habitations in the Land of Promise. They have
as often been banished out of most other Places where they have
settled.... Besides, the whole People is now a Race of such
Merchants as are Wanderers by Profession, and, at the same time,
are in most if not all Places incapable of either Lands or Offices, that
might engage them to make any part of the World their Home. This
Dispersion would probably have lost their Religion had it not been
secured by the Strength of its Constitution: For they are to live all in
a Body, and generally within the same Enclosure; to marry among
themselves, and to eat no Meats that are not killed or prepared their
own way. This shuts them out from all Table Conversation, and the
most agreeable Intercourses of Life; and, by consequence, excludes
them from the most probable Means of Conversion.
“If, in the last place, we consider what Providential Reason may
be assigned for these three Particulars, we shall find that their
Numbers, Dispersion, and Adherence to their Religion, have
furnished every Age, and every Nation of the World, with the
strongest Arguments for the Christian Faith, not only as these very
Particulars are foretold of them, but as they themselves are the
Depositories of these and all the other Prophecies, which tend to
their own Confusion. Their Number furnishes us with a sufficient
Cloud of Witnesses that attest the Truth of the Old Bible. Their
Dispersion spreads these Witnesses thro’ all parts of the World. The
Adherence to their Religion makes their Testimony unquestionable.
Had the whole Body of the Jews been converted to Christianity, we
should certainly have thought all the Prophecies of the Old
Testament, that relate to the Coming and History of our Blessed
Saviour, forged by Christians, and have looked upon them, with the
Prophecies of the Sybils, as made many Years after the Events they
pretended to foretell.”
 This cold-blooded habit of drawing from the sufferings of fellow-
men an assurance of our own salvation is still cultivated by many
good Christians. It is a comfortable doctrine, though not particularly
complimentary to Providence.
1723 But if the progress of reason is slow, it is sure. A
few years after the publication of Addison’s essay, the
Jews already established in England were recognised as British
subjects. Two years later a Jewish mathematician was
1725
made Fellow of the Royal Society, and not long after a
Jew became secretary and librarian of the Society. Judges also
refrained from summoning Jewish witnesses on the Sabbath. The
concession of 1723 was followed, thirty years later, by
1753
the right of naturalisation. But, even then, though the
Commons passed the Bill, the Lords and the Bishops endorsed it,
and King George II. ratified it, so loud an outcry from traders and
theologians arose thereat that the gift had to be revoked. “No more
Jews, no wooden shoes,” was the elegant refrain in which the British
public sang its sentiments on the subject, and the effigy of an
enlightened Deacon, who had defended the Act, was burnt publicly
at Bristol. England, which in the Middle Ages had been induced to
persecute and expel the Jews by the example of the Continent, was
once more to be influenced by the Continental attitude towards the
race. Fortunately, this influence was now of a different kind.
 CHAPTER XIX

THE EVE OF EMANCIPATION

About the middle of the eighteenth century a new spirit had arisen
on the Continent of Europe; or rather the spirit of the Renaissance,
suppressed in Italy, had re-asserted itself in Central Europe under a
more highly developed form. Seventeen hundred years had passed
since the heavenly choir sang on the plain of Bethlehem the glorious
anthem, “Peace on earth, good-will toward men.” And the message
which had been blotted out in blood, while the myth and the words
were worshipped, was once more heard in a totally different version.
Those who delivered it were not angels, but men of the world; the
audience not a group of rude Asiatic shepherds, but the most
polished of European publics; and the tongue in which it was
delivered not the simple Aramaic of Palestine, but the complex
vehicle of modern science. Once more man, by an entirely new
route, had arrived at the one great truth, the only true
commandment: “Love one another, O ye creatures of a day. Bear
with one another’s faults and follies. Life is too brief for hatred;
human blood too precious to be wasted in mutual destruction.”
It was the age of Voltaire, Diderot and Jean Jacques Rousseau
in France; of Lessing and Mendelssohn in Germany. The doctrine of
universal charity and happiness which, like its ancient prototype, was
later to be inculcated at the point of the sword and illustrated by
rape, murder, fire and famine, as yet found its chief expression in
poetical visions of freedom and in philosophical theories of equality
promulgated by sanguine Encyclopaedists. It was a period of lofty
aspirations not yet degraded by mediocre performance; and the
Jews, who had hitherto passively or actively shared in every stage of
Europe’s progress, were to participate in this development also.
Unlike the earlier awakenings of the fifteenth and sixteenth centuries,
this call for tolerance did not die away on the confines of
Christendom. The time had come for the question to be put: “Sind
Christ and Jude eher Christ und Jude als Mensch?” Israel was
destined to receive at the hands of Reason what Conscience had
proved unable to grant. And in this broader awakening both Teuton
and Latin were united. The French philosophers served the cause of
toleration by teaching that all religions are false; the German by
teaching that they are all true.
But, ere this triumph could be achieved, the Jews had to
overcome many and powerful enemies. Among these were the two
most famous men of the century.
1740–86 Frederick the Great, King of Prussia and ardent
friend of philosophy, appears anything but great or
philosophical in his policy towards the children of Israel. Under his
reign the prohibitive laws of the Middle Age were revived in a
manner which exceeded mediaeval legislation in thoroughness,
though it could not plead mediaeval barbarism as an excuse. Only a
limited number of Jews were permitted to reside in Frederick’s
dominions. By the “General Privilege” of 1750 they were divided into
two categories. In the first were included traders and officials of the
Synagogue. These had a hereditary right of residence restricted to
one child in each family. The right for a second child was purchased
by them for 70,000 thalers. The second division embraced persons
of independent means tolerated individually; but their right of abode
expired with them. The marriage regulations were so severe that
they condemned poor Jews to celibacy; while all Jews, rich and poor
alike, were debarred from liberal professions, and they all were
fleeced by taxes ruinous at once and ludicrous.
Voltaire, the arch-enemy of Feudalism, yet defended the feudal
attitude towards the Jews. His enmity for the race did not spring
entirely from capricious ill-humour. He had a grudge against the
Jews owing to some pecuniary losses sustained, as he complained,
through the bankruptcy of a Jewish capitalist of the name of Medina.
The story, as told by the inimitable story-teller himself, is worth
repeating: “Medina told me that he was not to blame for his
bankruptcy: that he was unfortunate, that he had never been a son
of Belial. He moved me, I embraced him, we praised God together,
and I lost my money. I have never hated the Jewish nation; I hate
136
nobody.”
1750–51 But this was not all. Whilst in Berlin, Voltaire waged
a protracted warfare against a Hebrew jeweller. It was
a contest between two great misers, each devoutly bent on over-
reaching the other. According to a good, if too emphatic, judge,
“nowhere, in the Annals of Jurisprudence, is there a more despicable
thing, or a deeper involved in lies and deliriums,” than this Voltaire-
137
Hirsch lawsuit. It arose out of a transaction of illegal stock-
jobbing. Voltaire had commissioned the Jew Hirsch to go to Dresden
and purchase a number of Saxon Exchequer bills—which were
payable in gold to genuine Prussian holders only—giving him for
payment a draft on Paris, due after some weeks, and receiving from
him a quantity of jewels in pledge, till the bills were delivered. Hirsch
went to Dresden, but sent no bills. Voltaire, suspecting foul play,
stopped payment of the Paris draft, and ordered Hirsch to come
back at once. On the Jew’s arrival an attempt at settlement was
made. Voltaire asked for his draft and offered to return the diamonds,
accompanied with a sum of money covering part of the Jew’s
travelling expenses. Hirsch on examining the diamonds declared that
some of them had been changed, and declined to accept them. It
was altogether a mauvaise affaire, and to this day it remains a
mystery which of the two litigants was more disingenuous.
The case ended in a sentence which forced Hirsch to restore the
Paris draft and Voltaire to buy the jewels at a price fixed by sworn
experts. Hirsch was at liberty to appeal, if he could prove that the
diamonds had been tampered with. In the meantime he was fined
ten thalers for falsely denying his signature. Voltaire shrieked
hysterically, trying to convince the world and himself that he had
triumphed. But the world, at all events, refused to be convinced. The
scandal formed the topic of conversation and comment throughout
the civilised world. Frederick’s own view of the case was that his
friend Voltaire had tried “to pick Jew pockets,” but, instead, had his
own pocket picked of some £150, and, moreover, he was made the
laughing-stock of Europe in pamphlets and lampoons innumerable—
one of these being a French comedy, Tantale en Procès, attributed
by some to Frederick himself; a poor production wherein the author
ridicules—to the best of his ability—the unfortunate philosopher. The
incident was not calculated to sweeten Voltaire’s temper, or to
enhance his affection for the Jewish people. Vain and vindictive, the
sage, with all his genius and his many amiable qualities, never forgot
an injury or forgave a defeat.
On the other hand, the Jews could boast not a few allies. Among
the champions of humanity, in the noblest sense of the term, none
was more earnest than Gotthold Ephraim Lessing, the prince of
modern critics. His pure and lofty nature had met with her kindred in
Moses Mendelssohn, the Jewish philosopher, born within the same
twelvemonth. The friendship which bound these two
1728–9
children of diverse races and creeds together was a
practical proof of Lessing’s own doctrine that virtue is international,
and that intellectual affinity recognises no theological boundaries.
This doctrine, already preached in most eloquent
1779
prose, found an artistic embodiment, and a universal
audience, in Nathan der Weise—the first appearance of the Jew on
the European stage as a human being, and a human being of the
very highest order. The Wise Nathan was no other than Moses
Mendelssohn, scarcely less remarkable a person than Lessing
himself. Years before Mendelssohn had left his native town of
Dessau and trudged on to Berlin in search of a future. A friendless
and penniless lad, timid, deformed, and repulsively ugly, he was with
the utmost difficulty admitted into the Prussian capital, of which he
was to become an ornament. For long years after his arrival in
Berlin, the gifted and destitute youth laboured and waited with the
patient optimism of one conscious of his own powers, until an
unwilling world was forced to recognise the beauty and heroism of
the soul which lurked under that most unpromising exterior; and the
Jewish beggar lad, grown into an awkward, stuttering and
insignificant-looking man, gradually rose to be the idol of a salon—
the eighteenth century equivalent for a shrine—at which every
foreign visitor of distinction and culture, irrespective of religion or