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Thomas J. Nechyba
Intermediate
Microeconomics
An Intuitive Approach
with Calculus
Australia ● Brazil ● Mexico ● Singapore ● United Kingdom ● United States

Intermediate Microeconomics: An Intuitive © 2018, Cengage Learning EMEA
Approach with Calculus, First EMEA Edition WCN: 02-300
Thomas Nechyba ALL RIGHTS RESERVED. No part of this work covered by the
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Brief Contents
0 Foundational Preliminaries (Available on MindTap)

1 Introduction 1
PART 1 Utility-Maximizing Choice: Consumers, Workers and Savers 9

2 A Consumer’s Economic Circumstances 11
3 Economic Circumstances in Labour and Financial Markets 28
4 Tastes and Indifference Curves 46
5 Different Types of Tastes 74
6 Doing the Best We Can 98
7 Income and Substitution Effects in Consumer Goods Markets 126
8 Wealth and Substitution Effects in Labour and Capital Markets 153
9 Demand for Goods and Supply of Labour and Capital 179
10 Consumer Surplus and Deadweight Loss 208
PART 2 Profit-Maximizing Choice: Producers or Firms 243

11 One Input and One Output: A Short-Run Producer Model 245
12 Production With Multiple Inputs 282
13 Production Decisions in the Short and Long Run 324
PART 3 Competitive Markets and the Invisible Hand 369

14 Competitive Market Equilibrium 370
15 The Invisible Hand and the First Welfare Theorem 401
16 General Equilibrium 426
17 Choice and Markets in the Presence of Risk 465
PART 4 Distortions of the Invisible Hand in Competitive Markets 509

18 Elasticities, Price-Distorting Policies and Non-Price Rationing 511
19 Distortionary Taxes and Subsidies 543
20 Prices and Distortions Across Markets 575
21 Externalities in Competitive Markets 599
22 Asymmetric Information in Competitive Markets 637
iii
iv BRIEF CONTENTS
PART 5 Distortions of the Invisible Hand From Strategic Decisions 677

23 Monopoly 679
24 Strategic Thinking and Game Theory 718
25 Oligopoly 770
26 Product Differentiation and Innovation in Markets 804
27 Public Goods 848
28 Governments and Politics 895
PART 6 Considering How to Make the World a Better Place 925

29 What Is Good? Challenges From Psychology and Philosophy 926
30 Balancing Government, Civil Society and Markets 967
Glossary 975
Index 987
Contents
Preface xi 2B Consumer Choice Sets and Budget Equations 20

About the Authors xiii Shopping on a Fixed Income 20
Kinked Budgets 22
Choice Sets with More Than Two Goods 23
0
Foundational Preliminaries Choice Sets That Arise From Endowments 24
(Available on MindTap) 3 Economic Circumstances in Labour

0A Some Graphical Preliminaries and Financial Markets 28
Graphing Points and Sets
3A Budgets for Workers and Savers 28
Demand and Supply Curves
Our Choice Sets as Workers 28
The Concept of Equilibrium
Constraints in Planning for the Future 31
0B Some Mathematical Preliminaries Putting It All Into a Single Model 34
Functions and Sets Defined With Functions
3B Choice Sets and Budget Equations for Workers
Algebraic Operations
and Savers 36
Some Basic Calculus
Choice Sets of Workers 36
Choice Sets as We Plan for the Future 38
1 Introduction 1
Putting It All in a Single Model 41
1A What is Microeconomics? 1
Economics as a Science 1 4 Tastes and Indifference Curves 46
Rationality and Self-Interest 2 4A The Economic Model of Tastes 46
Social Consequences, Pencils and Environmental Two Fundamental Rationality Assumptions
Impact 2 About Tastes 46
Economics, Incentives and Economic Models 3 Three More Assumptions 47
Predicting versus Judging Behaviour and Social Graphing Tastes 50
Outcomes 4
4B Tastes and Utility Functions 55
The Non-Dismal Science: Some Basic Lessons 5
Two Fundamental Rationality Assumptions 55
Parts A and B Chapter Structure and
Three More Assumptions 57
Flexibility 7
Representing Tastes With Utility Functions 60
Appendix Some Basics of Multivariable Calculus 67
Part 1 Utility-Maximizing Partial Derivatives 67
Choice: Consumers, Workers Total Differential of Multivariable Functions 69
and Savers 9 5 Different Types of Tastes 74
2 A Consumer’s Economic 5A Different Types of Indifference Maps 74

Substitutability Along an Indifference Curve:
Circumstances 11 Coke, Pepsi and Coffee 74
2A Consumer Choice Sets and Budget Constraints 11 Some Common Indifference Maps 77
Shopping on a Fixed or Exogenous Income 11 Essential Goods 81
Kinked Budgets 15 5B Different Types of Utility Functions 82
Modelling More General Choices 16 Degrees of Substitutability and the Elasticities of
Endogenous Incomes That Arise From Substitution 82
Endowments 18 Essential Goods 92
Modelling Constraints Graphically or
Appendix The Calculus of Elasticities of
Mathematically? 19
Substitution 92
v
vi CONTENTS
6 Doing the Best We Can 98 9 Demand for Goods and Supply

6A Choice: Combining Economic Circumstances with of Labour and Capital 179
Tastes 98 9A Deriving Demand and Supply Curves 179
The Best Bundle of Hoodies and Jeans 98 Demand for Goods and Services 179
To Buy or Not to Buy 101 Labour Supply 184
More Than One Best Bundle? Non-Convexities of Demand and Supply Curves for Financial
Choice Sets and Tastes 104 Capital 187
Learning About Tastes by Observing Choices in
9B Demand and Supply Functions 191
Supermarkets or Laboratories 108
Demand for Goods and Services 192
6B Optimizing Within the Mathematical Model 109 Labour Supply 198
Optimizing by Choosing Jeans and Demand for and Supply of Financial Capital 201
Hoodies 109
To Buy or Not to Buy: How to Find Corner 10 Consumer Surplus and Deadweight
Solutions 114
Non-Convexities and First-Order Conditions 117 Loss 208
Estimating Tastes From Observed Choices 118 10A Measuring Consumer Welfare in Euros 208
Appendix Optimization Problems With Kinked Consumer Surplus 209
Budgets 119 What’s So Bad About Taxes? Or, Why Is the
Bucket Leaking? 215
7 Income and Substitution Effects Deadweight Loss Measured on MWTP
Curves 220
in Consumer Goods Markets 126
10B The Mathematics of Consumer Welfare and
7A Graphical Exposition of Income and Substitution Duality 224
Effects 126 Duality of Utility Maximization and Expenditure
The Impact of Changing Income on Minimization 224
Behaviour 127 Taxes, Deadweight Losses and Consumer
The Impact of Changing Opportunity Costs Welfare 230
on Behaviour 130
Appendix Shephard’s Lemma and Roy’s Identity 233
Price Changes: Income and Substitution Effects
The Envelope Theorem 233
Combined 132
The Envelope Theorem Applied to Expenditure
7B The Mathematics of Income and Substitution Minimization and Utility Maximization 234
Effects 137 Concavity of the Expenditure Function and the
The Impact of Changing Income on Slope of Compensated Demand Curves 237
Behaviour 138 Intuition Behind Shephard’s Lemma and the
The Impact of Changing Opportunity Costs on Concavity of the Expenditure Function 235
Behaviour 140 Using Shephard’s Lemma to Illustrate Consumer
Price Changes: Income and Substitution Effects Welfare Changes as Areas on Compensated
Combined 145 Demand Curves 237
8 Wealth and Substitution Effects

in Labour and Capital Markets 153 Part 2 Profit-Maximizing
8A Wealth Effects, Substitution Effects and
Choice: Producers or Firms 243
Endowments 153
An Increase in the Price of Fuel for George
11 One Input and One Output:
Shell 153 A Short-Run Producer Model 245
A Change in Wages 155 11A A Short-Run One-Input/One-Output Model 245
A Change in Real Interest Rates 159 Technological Constraints Faced by
8B Constrained Optimization With Wealth Effects 163 Producers 246
George Shell and the Price of Oil 163 ‘Tastes’ for Profits 249
A Change in Wages 166 Choosing the Production Plan That Maximizes
A Change in Real Interest Rates 170 Profit 252
CONTENTS vii
Changing the Economic Environment 256 PART 3 Competitive Markets

Two-Step Profit Maximization 262
11B The Mathematics of the Short-Run Model 267
and the Invisible Hand 369
Technological Constraints Faced by
Producers 267
14 Competitive Market
‘Tastes’ for Profits 269 Equilibrium 370
Choosing the Production Plan That Maximizes
14A Equilibrium: Combining Demand and Supply
Profits 270
Curves 370
Labour Demand, Output Supply and ‘Real
Equilibrium in the Short Run 370
Optima’ 271
A Market or Industry in Long-Run
Two-Step Profit Maximization 274
Equilibrium 374
Changing Conditions and Changing
12 Production With Multiple Inputs 282 Equilibria 379
12A An Intuitive Development of the Two-Input An Overview of Changes Affecting Firms and
Model 282 Industries 387
Profit Maximization With Two-Input Producer 14B The Mathematics of Industry or Market
Choice Sets 283 Equilibrium 388
Two-Input Production Sets: Isoquants and Industry Equilibrium in the Short Run 389
Returns to Scale 285 An Industry in Long-Run Equilibrium 391
Cost Minimization on the Way to Profit Changing Conditions and Changing
Maximization 293 Equilibrium 392
Bringing Cost Minimization and Profit
Maximization Together 300 15 The Invisible Hand and the First
12B The Mathematics Behind the Multiple-Input Welfare Theorem 401
Model 301
15A Welfare Analysis in Equilibrium 401
Producer Choice Sets and Production
Consumer and Worker Surplus 401
Functions 301
Producer Surplus or Profit 406
Isoprofit Planes and Profit Maximization 307
The Invisible Hand and the First Welfare
Cost Minimization on the Way to Profit
Theorem 409
Maximization 310
Conditions Underlying the First Welfare
Duality in Producer Theory 314
Theorem 414
Appendix Properties of Expenditure and Profit
15B Equilibrium Welfare Analysis: Preliminaries and an
Functions 315
Example 415
The Profit Function and Hotelling’s Lemma 316
Consumer Surplus 415
Producer Surplus 418
13 Production Decisions in the The First Welfare Theorem 419
Short and Long Run 324
16 General Equilibrium 426
13A Changes in Producer Behaviour as Conditions
Change 324 16A A Graphical Exposition of General Equilibrium 426
Different Types of Costs and Expenses in the A Pure Exchange Economy 427
Short and Long Run 324 The Fundamental Welfare Theorems and Other
Output Supply in the Short and Long Run 334 Results 435
Input Demand and Changes in the Economic A Simple Production Economy 438
Environment 339 General Equilibrium Analysis and Policy 441
13B Transitioning from Short Run to Long Run 16B The Mathematics of Competitive General
Mathematically 347 Equilibrium 443
Expenses and Costs 348 A Pure Exchange Economy 443
Output Supply and Changes in the Economic The Fundamental Welfare Theorems and Other
Environment 352 Results 450
Input Demand and Changes in the Economic A Simple Production Economy 452
Environment 358 Appendix Core Convergence 456
viii CONTENTS
17 Choice and Markets in the 19B The Mathematics of Taxes and Subsidies 557
Tax Incidence and Price Elasticities 557
Presence of Risk 465 Deadweight Loss From Taxation When Tastes Are
17A An Intuitive Model of Choice in the Presence Quasilinear 559
of Risk 465 Deadweight Loss From Taxes in Labour and
Risky Choices Involving Money 466 Capital Markets 563
Risky Choices Involving Multiple States of the Taxing Land 568
World 474 A Simple Example of General Equilibrium Tax
General Equilibrium With Uncertainty 479 Incidence 568
17B The Mathematics of Choice in the Presence of
Risk 483
20 Prices and Distortions Across
Utility and Expected Utility 483 Markets 575
Risky Choices Involving Multiple States of the 20A Exporters, Importers and Speculators 575
World 489 Buying Low and Selling High 576
General Equilibrium With Risk 493 Restricting Trade Through Tariffs or Import
Appendix 1 Expected Utility and the Independence Quotas 579
Axiom 500 Immigration Versus Outsourcing 585
Appendix 2 The Allais Paradox and Regret Theory 501 Trading Across Time 588
20B The Mathematics of Trading Across Markets 591
PART 4 Distortions of the Trade, Tariffs and Quotas 591
A Numerical Example 592
Invisible Hand in Competitive
Markets 509 21 Externalities in Competitive
Markets 599
18 Elasticities, Price-Distorting 21A The Problem of Externalities 599
Policies and Non-Price Production Externalities 600
Rationing 511 Consumption Externalities 607
Externalities: Market Failure or Failure of
18A Interactions of Markets and Price-Distorting Markets to Exist? 610
Policies 512 Smaller Externalities, the Courts and the Coase
Elasticities and the Division of Surplus 512 Theorem 613
Price Floors 520
21B The Mathematics of Externalities 617
Price Ceilings 525
Production Externalities 617
The Politics of Concentrated Benefits and Diffuse
Consumption Externalities 623
Costs 528
Externalities and Missing Markets 623
A Note on General Equilibrium
Small Markets and the Coase Theorem 628
Considerations 529
Appendix Fundamental Non-Convexities in the
18B The Mathematics of Elasticities and Price
Presence of Externalities 630
Distortions 529
Elasticities 529
Calculating Equilibria Under Price Floors and
22 Asymmetric Information
Price Ceilings 533 in Competitive Markets 637
22A Asymmetric Information and Efficiency 638
19 Distortionary Taxes and
Grade Insurance Markets 638
Subsidies 543 Revealing Information Through Signals and
19A Taxes and Subsidies in Competitive Markets 543 Screens 644
Who Pays Taxes and Receives Subsidies? 544 Real-World Adverse Selection Problems 650
Deadweight Loss From Taxation Revisited 548 Racial and Gender Discrimination 654
Taxing Land: An Efficient Real-World Tax 554 22B Insurance Contracts with Two Risk Types 657
General Versus Partial Equilibrium Tax Equilibrium Without Adverse Selection 658
Incidence 556 Self-Selecting Separating Equilibria 660
CONTENTS ix
Pooling Contracts With Asymmetric Quantity Competition: Cournot and

Information 664 Stackelberg 787
Non-Existence of a Competitive Equilibrium 669 Oligopoly Competition With Asymmetric
Information 791
PART 5 Distortions of the Fixed Entry Costs and Entry Deterrence 793
Dynamic Collusion and Cartels 796
Invisible Hand From Strategic
Decisions 677 26 Product Differentiation
and Innovation in Markets 804
23 Monopoly 679 26A Differentiated Products and Innovation 804
23A Pricing Decisions by Monopolist 679 Differentiated Tastes in Oligopoly Markets 805
Demand, Marginal Revenue and Profit 680 The Hotelling Model of Oligopoly Product
Market Segmentation and Price Differentiation 806
Discrimination 684 Entry Into Differentiated Product Markets 810
Barriers to Entry and Remedies for Inefficient Monopolistic Competition and Innovation 812
Monopoly Behaviour 690 Advertising and Marketing 817
23B The Mathematics of Monopoly 694 26B Mathematical Modelling of Differentiated Product
Demand, Marginal Revenue and Profit 695 Markets 820
Price Discrimination When Consumer Types Are Differentiated Products in Oligopoly
Observed 698 Markets 820
Discrimination When Consumer Types Are Not Hotelling’s Model With Quadratic Costs 821
Observable 700 Firm Entry and Product Differentiation 826
Monopolistic Competition and Product
Appendix Deriving a Reduced Form Utility Function
Diversity 830
From Separable Preferences 712
Advertising and Marketing 837
24 Strategic Thinking and
27 Public Goods 848
Game Theory 718
27A Public Goods and Their Externalities 849
24.A Game Theory under Complete Information 719 Public Goods and the Free-Rider Problem 849
Players, Actions, Sequence and Payoffs 719 Solving the Prisoner’s Dilemma Through
Doing the Best We Can and the Emergence Government Policy 855
of an Equilibrium 722 Solving the Prisoner’s Dilemma by Establishing
The Prisoner’s Dilemma 731 Markets 858
Mixed Strategies 737 Civil Society and the Free-Rider Problem 863
24B Game Theory Under Incomplete Information 741 Preference Revelation Mechanisms 865
Simultaneous Bayesian Games 741 27B The Mathematics of Public Goods 868
Sequential Bayesian Signalling Games 749 Public Goods and the Free-Rider Problem 868
Reputations in Finitely Repeated Prisoner’s Direct Government Policies to Address Free
Dilemmas 758 Riding 874
Appendix Infinitely Repeated Games and the Establishing Markets for Public Goods 878
Folk Theorem 761 Civil Society and the Free-Rider Problem 879
Preference Revelation Mechanisms 883
25 Oligopoly 770
25A Competition and Collusion in Oligopolies 770
28 Governments and Politics 895
Oligopoly Price or Bertrand Competition 771 28A The Economic Way of Thinking about
Oligopoly Quantity Competition 774 Politics 895
Incumbent Firms, Fixed Entry Costs and Entry Agenda Setting and Manipulation of Policy 896
Deterrence 779 Institutional Restraints on Policy
Collusion, Cartels and Prisoner’s Dilemmas 782 Manipulation 906
25B The Mathematics of Oligopoly 786 Rent Seeking, Political Competition and
Bertrand Competition 786 Government as Leviathan 909
x CONTENTS
28B An Exposition of Arrow’s Impossibility An Alternative: The Rules of the Game Are What
Theorem 911 Matter 948
Social Choice Functions and the Axiomatic 29B Some Tools in the Search for What Is Good 950
Approach 912 Probing Deeper Into Aspects of Behavioural
Arrow’s Five Axioms 912 Economics 950
Decisiveness of Coalitions 914 Normative Economics When Consequences
Proving Arrow’s Theorem 916 Matter 955
Part 6 Considering How to 30 Balancing Government,

Make the World a Better Place 925
Civil Society and Markets 967
30A Resolvable Versus Unresolvable Differences 967
29 What Is Good? Challenges 30B The Three-Legged Stool 968
From Psychology and 30C Combining the First Welfare Theorem With Other
Philosophy 926 Insights 969
30D Non-market Institutions and Their Challenges 970
29A Who Are We Really, and What Is It All About? 927
Psychology and Behavioural Economics 927 30E Spontaneous Order Outside the Market 971
Happiness: The Social Sciences Versus the 30F A Beginning, Not An End 972
Humanities 936
Evaluating Distributions of Outcomes: Glossary 975
Philosophy and Normative Economics 940 Index 987
Preface
To Students
Here are a few points on how best to use this text:
1 You may want to review parts of Chapter 0, which is available on the MindTap to revise some
basics before proceeding to Chapter 2.
2 Attempt the within-chapter exercises as you read—and check your answers with those in the Study
Guide. (Quasi-controlled experiments during the initial drafting of this text with students show
that those who use within-chapter exercises and solutions, do considerably better on exams.)
3 Graphs with blue bars at the bottom can be unpacked directly within the MindTap Reader, and
almost all graphs are available to view as animated and narrated videos that can be accessed
through MindTap. While some of the video animations are long, you can skip ahead and use
chapter markers to locate the part of the video you are most interested in.
4 Look for interesting applications in the end-of-chapter exercises, but know that some of these are
designed to be challenging. Don’t get frustrated if they don’t make sense at first. It helps to work
with others to solve these.
5 The book has an extensive Glossary and Index but develops definitions within a narrative rather
than pulling them out within the text. Use the Glossary to remind yourself of the meaning of
terms and the Index to find where the associated concepts are discussed in detail. Resist the
temptation to memorize too much. The terms aren’t as important as the concepts.
To Instructors
This book attempts to build a framework around five primary goals that we believe any microeconomics
course should accomplish:
1 It should present microeconomics not as a collection of unrelated models but as a way of look-
ing at the world. People respond to incentives because they try to do the best they can given their
circumstances. That’s microeconomics in a nutshell—and everything—everything—flows from it.
2 It should persuade that microeconomics does not just change the way we think about the world—it
also tells us a lot about how and why the world works and sometimes doesn’t work.
3 It should not only get us to think more clearly about economics but also to think more clearly in
general—without relying on memorization. Such conceptual thinking skills are the very skills that
are most sought after and most rewarded in the modern world.
4 It should directly confront the fact that few of us can move from memorizing to conceptual think-
ing without applying concepts directly, but different students learn differently, and instructors need
the flexibility to target material to their students’ needs.
5 Finally, it should provide students with a roadmap for further studies—a sense of what the most
compelling next courses might be given their interests.
Half the text builds up to the most fundamental result in all of economics—that self-interested indi-
viduals will—under certain conditions and without intending to—give rise to a spontaneous order that has
great benefits for society. The second half probes these certain conditions and develops insights into how
firms, governments and civil society can contribute to human welfare when markets by themselves fail.
Future courses can then be seen as sub-fields that come to terms with these certain conditions.
While the material in the full text is more than enough for a two-semester sequence, the text offers a
variety of flexible paths for a one-semester course. In each chapter, you can emphasize an intuitive A part
or link it to a more mathematical B part; and, while the last part of the text relies heavily on game theory,
xi
xii Preface
the underlying narrative can also be developed through a non-game theoretic approach. Substantive paths
include some focused on theory, others focused on policy, and yet others focused on business, with all
paths including core material as well as optional topics. Throughout, the models build in complexity, with
applications woven into the narrative. They are then further developed in an extensive array of exercises
that get students to apply concepts to Everyday, Business and Policy settings.
The Instructor’s Manual provides more details on how you might use the various parts of the text and
its accompanying tools.
While the student study guide includes answers to all odd numbered end-of-chapter exercises (in addition
to answers to within-chapter exercises), answers to all end-of-chapter exercises are available to instructors.
Acknowledgements
The publisher wishes to thank the following reviewers for their helpful feedback during the development
of this edition:
Sean Byrne, Dublin Institute of Technology, Ireland
Giovanni Ferro-Luzzi, University of Geneva, Switzerland
Alain Kaninda, Monash University, South Africa
Stefan Franz Schubert, Free University of Bozen-Bolzano, Italy
Thomas Wein, Leuphana University, Germany
About the Author
PROFESSOR THOMAS J. NECHYBA who received his PhD from the University of Rochester, USA in
1994, joined the Duke faculty, USA in 1999 after spending five years on the faculty at Stanford University,
USA. In addition to his activities in the USA, he has lectured internationally in Europe, Latin America
and New Zealand. His teaching has been recognized with numerous awards including the Stanford Dean’s
Award for Distinguished Teaching (1996), the Southern Economic Association’s Ken Elzinga Distin-
guished Teaching Award (2004) and the Duke University Scholar/Teacher of the Year Award (2007).
Dr Nechyba is currently a Research Associate at the National Bureau of Economic Research and has
served (or is serving) as Associate Editor for the American Economic Review, International Tax and Public
Finance and the Journal of Economic Literature, among others. At Duke, he has previously served as
Director of Undergraduate Studies and as Department Chair and currently directs the Economics Center
for Teaching (EcoTeach) as well as Duke’s Social Science Research Institute. Dr Nechyba’s research on
public finance, urban economics and the economics of education has been funded by agencies such as
the National Science Foundation and has been published in journals such as the American Economic
Review, the Journal of Political Economy, the International Journal of Economics and the Journal of Public
Economics, among others.
Adapting Author for Europe, Middle East and Africa

ANDREW ASHWIN has over 20 years’ experience as a teacher of economics. He has an MBA from the
University of Hull and a PhD in assessment and the notion of threshold concepts in economics from the
University of Leicester. Andrew is an experienced author, writing a number of texts for students at dif-
ferent levels, and journal publications related to his PhD research. Andrew was Chair of Examiners for a
major awarding body for business and economics in England and is a subject specialist consultant in eco-
nomics for the UK regulator, Ofqual. Andrew has a keen interest in assessment and learning in econom-
ics and has received accreditation as a Chartered Assessor with the Chartered Institute of Educational
Assessors. He has also edited the journal of the Economics, Business and Enterprise Association (EBEA).
xiii
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Chapter 1
Introduction
Do safer cars necessarily result in fewer traffic deaths? Is it sensible to subsidize solar energy in an effort
to reduce the reliance on fossil fuel energy? Would outlawing live Christmas trees help to reduce defor-
estation? Should we impose laws against ‘price gouging’? Is boycotting companies that use cheap labour
abroad a good way to protest about working conditions in those countries? Should we tax the profits of
monopolies?
Many people would instinctively answer ‘yes’ to each of these questions. Many economists would say
‘no’, or at least ‘not necessarily’. Why is that?
By and large, economists are an ideologically diverse group, distributed along the political spectrum
much as the rest of the population. Economists do, however, look at the world through a somewhat dif-
ferent lens, a lens that presumes people respond to incentives and that these responses aggregate in ways
that are often surprising, frequently humbling and sometimes quite stunning. What we think we know
isn’t always so, and, as a result, our actions, particularly in the policy realm, often have ‘unintended’
consequences.
Through the lens of social science, economists see many instances of remarkable social order emerg-
ing from millions of seemingly unconnected choices in the marketplace, spontaneous cooperation
among individuals on different ends of the globe, the kind of cooperation that propels societies out
of the material poverty and despair that has characterized most of human history. At the same time,
our lens clarifies when individual incentives run counter to the common good, when private interests
unravel social cooperation in the absence of corrective non-market institutions. Markets have given
rise to enormous wealth, but we also have to come to terms with issues such as economic inequal-
ity, the impact on the environment of human activity, unscrupulous business practices and racial
discrimination.
1A What is Microeconomics?
We will define microeconomics as the science that investigates the social consequences of the interaction of
rational beings that pursue their perceived self-interest. At first glance, this description of human beings as
‘rational’ and ‘self-interested’ may sound naive. After all, most people would not characterize their fellow
citizens as always ‘rational’. It is useful to say a bit more about this definition.
1A.1 Economics as a Science

Economics is not a science in the same way that physics or chemistry are science. Knowledge and
understanding through science progresses through the formulation and testing of models that generate
hypotheses, and in this sense, economics can be viewed as a science. Economists formulate models that
1
2 CHAPTER 1 Introduction
are rooted in economic theory and check to see whether the hypotheses that emerge are rejected by real-
world observations. Some economists actually do perform experiments, but most look at data from the
real world to see whether their predictions hold.
1A.2 Rationality and Self-Interest

Many economic models are based on an assumption that people are rational and in pursuit of their
perceived self-interest. The term ‘rational’ is taken to mean that individuals seek to do the best they can
given their circumstances, that is, they are deliberative in trying to achieve their goals. Those goals might
include improving the welfare of others they care about, and they may include goals that make sense to
them but don’t make sense to others. Someone who sacrifices personal consumption to improve their
children’s well-being may be thought of as ‘unselfish’, but it may still be in the individual’s perceived self-
interest if, in making their children happy, their own happiness is improved. That seems quite noble, but not
everything that one individual finds worthwhile might be worthwhile in some deeper sense. The business
person may seek to maximize their own profit when they could be saving starving children instead; the
politician may seek to win elections when they could be making a worthwhile difference in people’s lives
by doing something unpopular; the drug addict may seek to get their next fix when they might be better
off checking into a rehab centre. Nevertheless, each of these individuals is directing their actions towards
a goal they perceive to be worthwhile and in their own self-interest.
Self-interest is not necessarily the same as selfishness. The latter presumes you care only about yourself;
the former leaves open the possibility that others may contribute to your perception of your own well-
being. Often, selfishness and self-interest coincide, but not always. In economics, the term rational simply
means that we pick the best available course of action to achieve our self-interested goal.
1A.3 Social Consequences, Pencils and Environmental Impact

Part of the goal of economics is understanding the social consequences of the interaction of rational,
self-interested individual behaviour. We may model how an individual behaves under certain assumptions,
but of greater interest is what happens when hundreds, thousands or even millions of rational, self-
interested individuals pursue their individual goals given that everyone else is doing the same. Economists
call the outcome of these interactions an equilibrium, and it is in this equilibrium that we find the social
consequences of individual behaviour.
Nobel Prize winning economist, Milton Friedman, famously held up a pencil and made the initially
preposterous claim that no one in the world knows how to make that pencil. This might seem to be a
strange claim, but if we seriously think about the challenge of making a pencil from scratch it sounds less
strange. One would have to know which trees to harvest for the wood, how to make the tools to harvest
the trees, what chemicals to use to treat the wood once it is cut into the right shape, how to drill the hole to
make room for the lead and how to make the tools to drill the hole. That does not begin to scratch the sur-
face, because we also have to know everything about where to get the materials to eventually make the lead
and how to make it and all the necessary tools required for that, how to create the paint and paintbrushes
to coat the outside of the pencil, and so on. When you really think about it, tens of thousands of people
somehow cooperated across all the continents in the world to make the pencil Friedman was holding, and
few of those tens of thousands of people would be aware that they were participating in a process that
would result in a pencil.
Economists are fascinated by the fact that pencils, and many other goods, are produced despite the
fact that few individuals know how to produce them and despite the fact that no one is charged with
coordinating all these people and materials into the production of pencils. Cooperation on such a massive
scale can emerge from the bottom up without the individuals knowing that they are cooperating with one
another. This cooperation can emerge purely from the rational, self-interested choices that individuals
make along the way, each one trying to earn a living, to do the best they can given the circumstances.
This is a social consequence of the interaction of rational, self-interested behaviour, one that is guided
by the impersonal forces of market prices that tell individuals where to work, what to produce, whom to
sell to, etc.
What is Microeconomics? 3
Not all social consequences of rational, self-interested behaviour are desirable. The same economic
lens that explains how people cooperate to make pencils also highlights the impact of human activity
on the environment, how relative as opposed to absolute poverty persists, how concentrated power
distorts markets and how some goods might never get produced unless non-market institutions intervene.
Understanding when we can rely on individual self-interest to give rise to cooperation – and when such
self-interest impedes cooperation – is one of the key themes of this book and one of the central goals
of microeconomics. With such an understanding, we can formulate ways of changing the circumstances
in which decisions are made to bring those decisions more in line with social goals: to change the social
consequences of rational, self-interested behaviour by altering the incentives people face along the way.
1A.4 Economics, Incentives and Economic Models

Economics can be seen as an exploration of the premise that people respond to incentives because they
generally attempt to do the best they can given their circumstances. It is a premise that leads to a rich
framework through which to analyze many small and large debates in the world in a logical and rigorous
manner. However, much of this book is devoted to the building of economic models that, at least initially,
seem to be starkly disconnected from reality. One criticism of these models is that they involve simplistic and
unrealistic characterizations of what we are as human beings. In certain ways, this is correct. Nevertheless,
the use of such models represents one method through which economists can make some sense of the
underlying issues we are concerned about. In the process, we also get an unintended consequence of
learning through economic models. We learn to think more conceptually, to move beyond memorization
to ‘think in the subject’.
1A.4.1 Economic Models and Simplicity In the first section of this book we will assume consumers are
individuals who rationally calculate the costs and benefits of different alternatives using a mechanical
characterization of tastes as a guide. This is not a full characterization of all the complexity that underlies
the human condition, and it omits some of the very aspects of our make-up that make us human.
Economics does not claim to paint a full picture of who we are as human beings. Economics tries to
provide a framework for systematically studying aspects of human decision making that relate to our
desire to pursue perceived self-interest in different institutional settings, and how such self-interested
decision making affects society as a whole. Simplicity in models becomes a virtue as long as the models
can predict well what we are trying to predict.
Economic models are constructed to strip away all the complexity, all the noise that gets in the way of
an analysis of particular economic problems and leave us with the essence of individual decision making
that matters for the questions at hand. They will not tell us whether there is a God or why we like to stare
at the stars at night or why we fall in love. But they can be powerful tools that allow us to understand as-
pects of the world that would remain impenetrable without the use of simplified models. For this reason,
resist the temptation of dismissing models – in economics or elsewhere – by suggesting that they are sim-
plistic. A measuring tape is simplistic, but it is a useful tool to the carpenter who attempts to build a piece
of furniture, much more useful than the more complex microscopic tools a neurosurgeon might use to do
their work. In the same way, it is precisely because they are simple that many economic models become
useful tools as we try to build an understanding of how individual decision making impacts the world.
1A.4.2 Economic Models, Realism and Snooker Players Another analogy by Milton Friedman illustrates
a slightly different aspect of economic models. Think about snooker players on the professional circuit.
These players are typically not expert physicists who can calculate the precise paths of snooker balls under
different circumstances, using the latest knowledge of underlying equations that govern the behaviour of
snooker balls. Suppose we wanted to arrive at a useful model that could predict the next move of each
snooker player, and suppose it was suggested to you that we should model each snooker player as an ex-
pert physicist who can instantly access the latest mathematical complexities in physics to predict the best
possible next move. The model is absurd in the sense that it is completely unrealistic; many of these players
will not have any advanced grounding in physics or maths. It is likely, however, that the model would do
pretty well at predicting the next move of the best snooker players, better than virtually any other model
we could come up with.
4 CHAPTER 1 Introduction
Similarly, consider the problem of predicting the growth of a particular plant. Which branches will grow
leaves this season and in which direction? One possible model would assume that the plant consciously
calculates, using the latest knowledge of biologists and other scientists, how to distribute the nutrients it
gains from the soil to various branches optimally, taking into consideration the path of the sun and thus
the distribution of resulting sunlight, the rotation of the earth, etc. The model is once again absurd in the
sense that we can be fairly certain that there is no conscious mind in the plant that is capable of accessing
all the relevant facts and making the appropriate calculations. Nevertheless, a model that assumes the
presence of such a mind within the plant may well be a useful model to help us predict how the plant will
grow.
Models, regardless of what they aim to predict, do not have to be realistic. They can be, and it
sometimes might help our understanding if they were. Equally, not all aspects of economic models
need to be fully realistic. The consumer model we will look at in the next few chapters implies that
individuals can map their tastes into complicated graphs or, alternatively, that they use multivariable
calculus to analyze choice alternatives using mathematical functions of which few people are aware.
This is absurd in the same way as it is absurd to assume that snooker players are expert physicists or
plants are expert biologists. In the same way that these assumptions help us predict the next moves of
snooker players and the next steps in the growth of a plant, our assumptions about consumers allow us
to make predictions about their economic choices. Thus, just as it is hoped you will not dismiss models
because of their simplicity, it is also hoped you will not dismiss them if they appear to be unrealistic
in certain ways.
1A.4.3 An Unintended Consequence of Learning Through Economic Models Economists often point out
unintended consequences, consequences that don’t immediately come to mind when we contemplate doing
something. The models we’ll be using are specialized in some sense, but they are general in the sense that
each model can be applied to many different real-world problems. Once you get really comfortable with
the way economists model behaviour, it boils down to one single model, or at least one single conceptual
approach. As you internalize this conceptual approach to thinking about the world, you will find that your
conceptual thinking skills become much sharper, and that has implications that go far beyond economics.
There is, thus, an unintended consequence of learning microeconomics.
The modern world expects more than good memorization skills from students. Those who succeed in
the modern world have developed higher conceptual thinking skills that have virtually nothing to do with
memorization.
What is important, therefore is to train your conceptual muscle, the muscle that allows you to progress
beyond viewing each new situation you encounter as a new problem to be solved from scratch and
permits you to learn from situations that share some features in common. The framework of economics
enables you to develop skills that allow for the translation of knowledge across time and space.
1A.5 Predicting Versus Judging Behaviour and Social Outcomes

Aside from learning to think in the subject or think more conceptually, the real point of these models is
to predict behaviour and to predict the social consequences of that behaviour. For the vast majority of
economists, a model is good if it predicts well. The self-interested goals individuals pursue matter in the
analysis because they help us predict how behaviour will change as circumstances change; to the economist
interested in prediction, the deeper philosophical question of whether some goals are inherently more
worthwhile than others, is irrelevant. What matters for predicting what you will do if the price of fuel
increases, is how much fuel you consume as a result, not whether it is morally good or bad to consume
fuel. Whether it might be good or bad to raise the price of fuel is a very different question, one that
presumes some deeper philosophical views about how to judge what is good and bad.
Economists do, of course, have objective standards for what is ultimately in our best interest. As human
beings, almost all of us, explicitly or implicitly, hold to such standards and wish that we and the rest
of the world would abide by them more frequently. Most of us believe the drug addict would indeed
be better off if they checked into a treatment centre, that the politician ought to care about more than
the next election, and that the business person should care about starving children. Most economists, in
their role as economists, are in the business of predicting how changing incentives will change the actual
What is Microeconomics? 5
behaviour of people who may have quite different ideas about what is worthwhile than the economist
who is modelling them. What matters for their behaviour is what they think is worthwhile, not what the
economist thinks should be worthwhile.
1A.5.1 Positive Economics: How to Predict Real Outcomes The branch of economics that concerns itself
primarily with such predictions is known as positive economics, and it is the branch of economics that
is in a real sense value-free. In the economist’s pursuit to predict what will actually happen as incentives
change, there is not the luxury of making value judgments about what people ought to be like; there is
the taking of people’s goals as given and attempting to analyze real behaviour that follows from these
goals and the incentive structures within which people attempt to translate those goals to real outcomes.
If you are a policy maker who is attempting to determine the best way to lower infant mortality or
improve low-income housing or provide a more equitable distribution of educational opportunities, it is
important to get the best positive economic analysis of each of the policy alternatives you are considering.
It is important to know what the real impact of each policy will be before we attempt to choose the ‘best’
policies. The same is true if you are a business person pricing goods; you need to know how people will
actually respond to different prices, not just how you would like them to respond.
1A.5.2 Normative Economics: How to Judge Outcomes Normative economics goes beyond a value-free
analysis of what will happen as incentives change. Positive economics can provide predictions of what will
happen as a result of various possible policy alternatives; normative economics uses tools that capture
explicit value judgments about what outcomes are ‘good’ and what outcomes are ‘bad’ to determine
which of the policies is the best for society. Normative economists thus draw on disciplines such as
political philosophy to formalize mechanisms through which to translate particular values into policy
recommendations based on a positive analysis of the likely impact of different incentives.
Much of this book concerns itself with positive rather than normative economics by attempting to
build a framework through which we can predict the impact of different institutions on individual deci-
sion making. We will have to be careful along the way, however, because the positive models we develop
are often used for policy analysis in ways that allow particular normative value judgments to slip in.
1A.5.3 Efficiency: Positive or Normative? You will notice the term efficient or Pareto efficient appears
throughout the text, often with a normative connotation that efficiency is somehow a good thing. We
will define a situation as efficient if there is no way, given the resources available, to change the situation
so as to make some people better off without making anyone worse off. Within this definition, we find
our value-free notion of better off and worse off; that is, we will consider someone to be better off if they
think they are better off, and we will consider someone as worse off if they think themselves worse off. In
that sense, the statement ‘situation x is efficient’ is a positive statement that could be restated to say there
is no way to change things so that someone thinks they are better off without making someone else think
they are worse off.
Given this definition of efficiency, you can see how one might tend to be concerned about inefficiencies.
An inefficient situation is one where we can see how to make some people better off without making
anyone else worse off. We should also be careful not to assume immediately that moving towards greater
efficiency is always good in some bigger philosophical sense. A policy that increases the wealth of the rich
by a lot while leaving the wealth of the poor unchanged may be a policy that moves us to greater efficiency,
as is a policy that makes the poor a lot wealthier while leaving the wealth of the rich unchanged. It is likely
that most of us, if pressed, will think one of these policies is better than the other. Some might think that
the first policy, because it increases inequality, is actually bad even if it really doesn’t make anyone worse
off. Similarly, as we will see in Chapter 18, allowing a healthy poor person to sell their kidney to someone
who needs it and can pay a lot for it may indeed make both of them better off, and yet there are many who
would have moral concerns over such transactions. We will see other examples of this throughout the text.
1A.6 The Non-Dismal Science: Some Basic Lessons

Studying microeconomics has a way of changing how we think about ourselves and those we interact with
and the implications for the larger world we occupy. Often economics stands accused of being a ‘dismal
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we have some interest. I think that as white men we have. Do we not
wish for an outlet for our surplus population, if I may so express
myself? Do we not feel an interest in getting at that outlet with such
institutions as we would like to have prevail there? If you go to the
Territory opposed to slavery and another man comes upon the same
ground with his slave, upon the assumption that the things are equal,
it turns out that he has the equal right all his way and you have no
part of it your way. If he goes in and makes it a slave Territory, and
by consequence a slave State, is it not time that those who desire to
have it a free State were on equal ground? Let me suggest it in a
different way. How many Democrats are there about here [“A
thousand”] who left slave States and came into the free State of
Illinois to get rid of the institution of slavery? [Another voice—“A
thousand and one.”] I reckon there are a thousand and one. I will ask
you, if the policy you are now advocating had prevailed when this
country was in a Territorial condition, where would you have gone to
get rid of it? Where would you have found your free State or
Territory to go to? And when hereafter, for any cause, the people in
this place shall desire to find new homes, if they wish to be rid of the
institution, where will they find the place to go to?
Now irrespective of the moral aspect of this question as to whether
there is a right or wrong in enslaving a negro, I am still in favor of
our new Territories being in such a condition that white men may
find a home—may find some spot where they can better their
condition—where they can settle upon new soil and better their
condition in life. I am in favor of this not merely (I must say it here
as I have elsewhere) for our own people who are born amongst us,
but as an outlet for free white people every where, the world over—
in which Hans and Baptiste and Patrick, and all other men from all
the world, may find new homes and better their conditions in life.
I have stated upon former occasions, and I may as well state again,
what I understand to be the real issue in this controversy between
Judge Douglas and myself. On the point of my wanting to make war
between the free and the slave States, there has been no issue
between us. So, too, when he assumes that I am in favor of
introducing a perfect social and political equality between the white
and black races. These are false issues, upon which Judge Douglas
has tried to force the controversy. There is no foundation in truth for
the charge that I maintain either of these propositions. The real issue
in this controversy—the one pressing upon every mind—is the
sentiment on the part of one class that looks upon the institution of
slavery as a wrong, and of another class that does not look upon it as
a wrong. The sentiment that contemplates the institution of slavery
in this country as a wrong is the sentiment of the Republican party. It
is the sentiment around which all their actions—all their arguments
circle—from which all their propositions radiate. They look upon it as
being a moral, social and political wrong; and while they contemplate
it as such, they nevertheless have due regard for its actual existence
among us, and the difficulties of getting rid of it in any satisfactory
way and to all the constitutional obligations thrown about it. Yet
having a due regard for these, they desire a policy in regard to it that
looks to its not creating any more danger. They insist that it should
as far as may be, be treated as a wrong, and one of the methods of
treating it as a wrong is to make provision that it shall grow no
larger. They also desire a policy that looks to a peaceful end of
slavery at some time, as being wrong. These are the views they
entertain in regard to it as I understand them; and all their
sentiments—all their arguments and propositions are brought within
this range. I have said, and I repeat it here, that if there be a man
amongst us who does not think that the institution of slavery is
wrong, in any one of the aspects of which I have spoken, he is
misplaced and ought not to be with us. And if there be a man
amongst us who is so impatient of it as a wrong as to disregard its
actual presence among us and the difficulty of getting rid of it
suddenly in a satisfactory way, and to disregard the constitutional
obligations thrown about it, that man is misplaced if he is on our
platform. We disclaim sympathy with him in practical action. He is
not placed properly with us.
On this subject of treating it as a wrong, and limiting its spread, let
me say a word. Has any thing ever threatened the existence of this
Union save and except this very institution of slavery? What is it that
we hold most dear amongst us? Our own liberty and prosperity.
What has ever threatened our liberty and prosperity save and except
this institution of slavery? If this is true, how do you propose to
improve the condition of things by enlarging slavery—by spreading it
out and making it bigger? You may have a wen or cancer upon your
person and not be able to cut it out lest you bleed to death; but surely
it is no way to cure it, to engraft it and spread it over your whole
body. That is no proper way of treating what you regard a wrong. You
see this peaceful way of dealing with it as a wrong—restricting the
spread of it, and not allowing it to go into new countries where it has
not already existed. That is the peaceful way, the old-fashioned way,
the way in which the fathers themselves set us the example.
On the other hand, I have said there is a sentiment which treats it
as not being wrong. That is the Democratic sentiment of this day. I
do not mean to say that every man who stands within that range
positively asserts that it is right. That class will include all who
positively assert that it is right, and all who like Judge Douglas treat
it as indifferent and do not say it is either right or wrong. These two
classes of men fall within the general class of those who do not look
upon it as a wrong. And if there be among you any body who
supposes that he, as a Democrat, can consider himself “as much
opposed to slavery as anybody,” I would like to reason with him. You
never treat it as a wrong. What other thing that you consider as a
wrong, do you deal with as you deal with that? Perhaps you say it is
wrong, but your leader never does, and you quarrel with any body
who says it is wrong. Although you pretend to say so yourself you
can find no fit place to deal with it as a wrong. You must not say any
thing about it in the free States, because it is not here. You must not
say any thing about it in the slave States, because it is there. You
must not say anything about it in the pulpit, because that is religion
and has nothing to do with it. You must not say any thing about it in
politics, because that will disturb the security of “my place.” There is
no place to talk about it as being a wrong, although you say yourself
it is a wrong. But finally you will screw yourself up to the belief that if
the people of the slave States should adopt a system of gradual
emancipation on the slavery question, you would be in favor of it.
You would be in favor of it. You say that is getting it in the right
place, and you would be glad to see it succeed. But you are deceiving
yourself. You all know that Frank Blair and Gratz Brown, down there
in St. Louis, undertook to introduce that system in Missouri. They
fought as valiantly as they could for the system of gradual
emancipation which you pretend you would be glad to see succeed.
Now I will bring you to the test. After a hard fight they were beaten,
and when the news came over here you threw up your hats and
hurrahed for Democracy. More than that, take all the argument
made in favor of the system you have proposed, and it carefully
excludes the idea that there is any thing wrong in the institution of
slavery. The arguments to sustain that policy carefully excluded it.
Even here to-day you heard Judge Douglas quarrel with me because I
uttered a wish that it might some time come to an end. Although
Henry Clay could say he wished every slave in the United States was
in the country of his ancestors, I am denounced by those pretending
to respect Henry Clay for uttering a wish that it might some time, in
some peaceful way, come to an end. The Democratic policy in regard
to that institution will not tolerate the merest breath, the slightest
hint, of the least degree of wrong about it. Try it by some of Judge
Douglas’s arguments. He says he “don’t care whether it is voted up or
voted down” in the Territories. I do not care myself in dealing with
that expression, whether it is intended to be expressive of his
individual sentiments on the subject, or only of the national policy he
desires to have established. It is alike valuable for my purpose. Any
man can say that he does not see any thing wrong in slavery, but no
man can logically say it who does see a wrong in it; because no man
can logically say he don’t care whether a wrong is voted up or voted
down. He may say he don’t care whether an indifferent thing is voted
up or down, but he must logically have a choice between a right thing
and a wrong thing. He contends that whatever community wants
slaves has a right to have them. So they have if it is not a wrong. But
if it is a wrong, he cannot say people have a right to do wrong. He
says that upon the score of equality, slaves should be allowed to go in
a new Territory, like other property. This is strictly logical if there is
no difference between it and other property. If it and other property
are equal, his argument is entirely logical. But if you insist that one is
wrong and the other right, there is no use to institute a comparison
between right and wrong. You may turn over every thing in the
Democratic policy from beginning to end, whether in the shape it
takes on the statute books, in the shape it takes in the Dred Scott
decision, in the shape it takes in conversation, or the shape it takes in
short maxim-like arguments—it everywhere carefully excludes the
idea that there is any thing wrong in it.
That is the real issue. That is the issue that will continue in this
country when these poor tongues of Judge Douglas and myself shall
be silent. It is the eternal struggle between these two principles—
right and wrong—throughout the world. They are the two principles
that have stood face to face from the beginning of time; and will ever
continue to struggle. The one is the common right of humanity and
the other the divine right of kings. It is the same principle in
whatever shape it develops itself. It is the same spirit that says, “You
work and toil and earn bread, and I’ll eat it.” No matter in what
shape it comes, whether from the mouth of a king who seeks to
bestride the people of his own nation and live by the fruit of their
labor, or from one race of men as an apology for enslaving another
race, it is the same tyrannical principle. I was glad to express my
gratitude at Quincy, and I re-express it here to Judge Douglas—that
he looks to no end of the institution of slavery. That will help the
people to see where the struggle really is. It will hereafter place with
us all men who really do wish the wrong may have an end. And
whenever we can get rid of the fog which obscures the real question—
when we can get Judge Douglas and his friends to avow a policy
looking to its perpetuation—we can get out from among that class of
men and bring them to the side of those who treat it as a wrong.
Then there will soon be an end of it, and that end will be its “ultimate
extinction.” Whenever the issue can be distinctly made, and all
extraneous matter thrown out so that men can fairly see the real
difference between the parties, this controversy will soon be settled,
and it will be done peaceably too. There will be no war, no violence.
It will be placed again where the wisest and best men of the world
placed it. Brooks of South Carolina once declared that when this
Constitution was framed, its framers did not look to the institution
existing until this day. When he said this, I think he stated a fact that
is fully borne out by the history of the times. But he also said they
were better and wiser men than the men of these days; yet the men
of these days had experience which they had not, and by the
invention of the cotton-gin it became a necessity in this country that
slavery should be perpetual. I now say that, willingly or unwillingly,
purposely or without purpose, Judge Douglas has been the most
prominent instrument in changing the position of the institution of
slavery which the fathers of the Government expected to come to an
end ere this—and putting it upon Brooks’s cotton-gin basis—placing
it where he openly confesses he has no desire there shall ever be an
end of it.
I understand I have ten minutes yet. I will employ it in saying
something about this argument Judge Douglas uses, while he
sustains the Dred Scott decision, that the people of the Territories
can still somehow exclude slavery. The first thing I ask attention to is
the fact that Judge Douglas constantly said, before the decision, that
whether they could or not, was a question for the Supreme Court.
But after the court has made the decision he virtually says it is not a
question for the Supreme Court, but for the people. And how is it he
tells us they can exclude it? He says it needs “police regulations,” and
that admits of “unfriendly legislation.” Although it is a right
established by the Constitution of the United States to take a slave
into a Territory of the United States and hold him as property, yet
unless the Territorial Legislature will give friendly legislation, and,
more especially, if they adopt unfriendly legislation, they can
practically exclude him. Now, without meeting this proposition as a
matter of fact, I pass to consider the real Constitutional obligation.
Let me take the gentleman who looks me in the face before me, and
let us suppose that he is a member of the Territorial Legislature. The
first thing he will do will be to swear that he will support the
Constitution of the United States. His neighbor by his side in the
Territory has slaves and needs Territorial legislation to enable him to
enjoy that Constitutional right. Can he withhold the legislation which
his neighbor needs for the enjoyment of a right which is fixed in his
favor in the Constitution of the United States which he has sworn to
support? Can he withhold it without violating his oath? And more
especially, can he pass unfriendly legislation to violate his oath?
Why, this is a monstrous sort of talk about the Constitution of the
United States! There has never been as outlandish or lawless a
doctrine from the mouth of any respectable man on earth. I do not
believe it is a Constitutional right to hold slaves in a Territory of the
United States. I believe the decision was improperly made and I go
for reversing it. Judge Douglas is furious against those who go for
reversing a decision. But he is for legislating it out of all force while
the law itself stands. I repeat that there has never been so monstrous
a doctrine uttered from the mouth of a respectable man.
I suppose most of us (I know it of myself) believe that the people of
the Southern States are entitled to a Congressional Fugitive Slave law
—that is a right fixed in the Constitution. But it cannot be made
available to them without Congressional legislation. In the Judge’s
language, it is a “barren right” which needs legislation before it can
become efficient and valuable to the persons to whom it is
guarantied. And as the right is Constitutional I agree that the
legislation shall be granted to it—and that not that we like the
institution of slavery. We profess to have no taste for running and
catching niggers—at least I profess no taste for that job at all. Why
then do I yield support to a Fugitive Slave law? Because I do not
understand that the Constitution, which guaranties that right, can be
supported without it. And if I believed that the right to hold a slave in
a Territory was equally fixed in the Constitution with the right to
reclaim fugitives, I should be bound to give it the legislation
necessary to support it. I say that no man can deny his obligation to
give the necessary legislation to support slavery in a Territory, who
believes it is a Constitutional right to have it there. No man can, who
does not give the Abolitionists an argument to deny the obligation
enjoined by the Constitution to enact a Fugitive Slave law. Try it now.
It is the strongest Abolition argument ever made. I say if that Dred
Scott decision is correct, then the right to hold slaves in a Territory is
equally a Constitutional right with the right of a slaveholder to have
his runaway returned. No one can show the distinction between
them. The one is express, so that we cannot deny it. The other is
construed to be in the Constitution, so that he who believes the
decision to be correct believes in the right. And the man who argues
that by unfriendly legislation, in spite of that Constitutional right,
slavery may be driven from the Territories, cannot avoid furnishing
an argument by which Abolitionists may deny the obligation to
return fugitives, and claim the power to pass laws unfriendly to the
right of the slaveholder to reclaim his fugitive. I do not know how
such an argument may strike a popular assembly like this, but I defy
any body to go before a body of men whose minds are educated to
estimating evidence and reasoning, and show that there is an iota of
difference between the Constitutional right to reclaim a fugitive, and
the Constitutional right to hold a slave, in a Territory, provided this
Dred Scott decision is correct. I defy any man to make an argument
that will justify unfriendly legislation to deprive a slaveholder of his
right to hold his slave in a Territory, that will not equally, in all its
length, breadth and thickness, furnish an argument for nullifying the
Fugitive Slave law. Why, there is not such an Abolitionist in the
nation as Douglas, after all.
MR. DOUGLAS’S REPLY.
Mr. Lincoln has concluded his remarks by saying that there is not
such an Abolitionist as I am in all America. If he could make the
Abolitionists of Illinois believe that, he would not have much show
for the Senate. Let him make the Abolitionists believe the truth of
that statement and his political back is broken.
His first criticism upon me is the expression of his hope that the
war of the Administration will be prosecuted against me and the
Democratic party of this State with vigor. He wants that war
prosecuted with vigor; I have no doubt of it. His hopes of success,
and the hopes of his party depend solely upon it. They have no
chance of destroying the Democracy of this State except by the aid of
federal patronage. He has all the federal office-holders here as his
allies, running separate tickets against the Democracy to divide the
party, although the leaders all intend to vote directly the Abolition
ticket, and only leave the greenhorns to vote this separate ticket who
refuse to go into the Abolition camp. There is something really
refreshing in the thought that Mr. Lincoln is in favor of prosecuting
one war vigorously. It is the first war I ever knew him to be in favor
of prosecuting. It is the first war I ever knew him to believe to be just
or Constitutional. When the Mexican war was being waged, and the
American army was surrounded by the enemy in Mexico, he thought
that war was unconstitutional, unnecessary, and unjust. He thought
it was not commenced on the right spot.
When I made an incidental allusion of that kind in the joint
discussion over at Charleston some weeks ago, Lincoln, in replying,
said that I, Douglas, had charged him with voting against supplies for
the Mexican war, and then he reared up, full length, and swore that
he never voted against the supplies—that it was a slander—and
caught hold of Ficklin, who sat on the stand, and said, “Here, Ficklin,
tell the people that it is a lie.” Well, Ficklin, who had served in
Congress with him, stood up and told them all that he recollected
about it. It was that when George Ashmun, of Massachusetts,
brought forward a resolution declaring the war unconstitutional,
unnecessary, and unjust, that Lincoln had voted for it. “Yes,” said
Lincoln, “I did.” Thus he confessed that he voted that the war was
wrong, that our country was in the wrong, and consequently that the
Mexicans were in the right; but charged that I had slandered him by
saying that he voted against the supplies. I never charged him with
voting against the supplies in my life, because I knew that he was not
in Congress when they were voted. The war was commenced on the
13th day of May, 1846, and on that day we appropriated in Congress
ten millions of dollars and fifty thousand men to prosecute it. During
the same session we voted more men and more money, and at the
next session we voted more men and more money, so that by the
time Mr. Lincoln entered Congress we had enough men and enough
money to carry on the war, and had no occasion to vote for any more.
When he got into the House, being opposed to the war, and not being
able to stop the supplies, because they had all gone forward, all he
could do was to follow the lead of Corwin, and prove that the war was
not begun on the right spot, and that it was unconstitutional,
unnecessary, and wrong. Remember, too, that this he did after the
war had been begun. It is one thing to be opposed to the declaration
of a war, another and very different thing to take sides with the
enemy against your own country after the war has been commenced.
Our army was in Mexico at the time, many battles had been fought;
our citizens, who were defending the honor of their country’s flag,
were surrounded by the daggers, the guns and the poison of the
enemy. Then it was that Corwin made his speech in which he
declared that the American soldiers ought to be welcomed by the
Mexicans with bloody hands and hospitable graves; then it was that
Ashmun and Lincoln voted in the House of Representatives that the
war was unconstitutional and unjust; and Ashmun’s resolution,
Corwin’s speech, and Lincoln’s vote, were sent to Mexico and read at
the head of the Mexican army, to prove to them that there was a
Mexican party in the Congress of the United States who were doing
all in their power to aid them. That a man who takes sides with the
common enemy against his own country in time of war should
rejoice in a war being made on me now, is very natural. And in my
opinion, no other kind of a man would rejoice in it.
Mr. Lincoln has told you a great deal to-day about his being an old
line Clay Whig. Bear in mind that there are a great many old Clay
Whigs down in this region. It is more agreeable, therefore, for him to
talk about the old Clay Whig party than it is for him to talk
Abolitionism. We did not hear much about the old Clay Whig party
up in the Abolition districts. How much of an old line Henry Clay
Whig was he? Have you read General Singleton’s speech at
Jacksonville? You know that Gen. Singleton was, for twenty-five
years, the confidential friend of Henry Clay in Illinois, and he
testified that in 1847, when the Constitutional Convention of this
State was in session, the Whig members were invited to a Whig
caucus at the house of Mr. Lincoln’s brother-in-law, where Mr.
Lincoln proposed to throw Henry Clay overboard and take up Gen.
Taylor in his place, giving, as his reason, that if the Whigs did not
take up Gen. Taylor the Democrats would. Singleton testifies that
Lincoln, in that speech, urged, as another reason for throwing Henry
Clay overboard, that the Whigs had fought long enough for principle
and ought to begin to fight for success. Singleton also testifies that
Lincoln’s speech did have the effect of cutting Clay’s throat, and that
he (Singleton) and others withdrew from the caucus in indignation.
He further states that when they got to Philadelphia to attend the
National Convention of the Whig party, that Lincoln was there, the
bitter and deadly enemy of Clay, and that he tried to keep him
(Singleton) out of the Convention because he insisted on voting for
Clay, and Lincoln was determined to have Taylor. Singleton says that
Lincoln rejoiced with very great joy when he found the mangled
remains of the murdered Whig statesman lying cold before him.
Now, Mr. Lincoln tells you that he is an old line Clay Whig! Gen.
Singleton testifies to the facts I have narrated, in a public speech
which has been printed and circulated broadcast over the State for
weeks, yet not a lisp have we heard from Mr. Lincoln on the subject,
except that he is an old Clay Whig.
What part of Henry Clay’s policy did Lincoln ever advocate? He
was in Congress in 1848–9, when the Wilmot proviso warfare
disturbed the peace and harmony of the country, until it shook the
foundation of the Republic from its centre to its circumference. It
was that agitation that brought Clay forth from his retirement at
Ashland again to occupy his seat in the Senate of the United States,
to see if he could not, by his great wisdom and experience, and the
renown of his name, do something to restore peace and quiet to a
disturbed country. Who got up that sectional strife that Clay had to
be called upon to quell? I have heard Lincoln boast that he voted
forty-two times for the Wilmot proviso, and that he would have voted
as many times more if he could. Lincoln is the man, in connection
with Seward, Chase, Giddings, and other Abolitionists, who got up
that strife that I helped Clay to put down. Henry Clay came back to
the Senate in 1849, and saw that he must do something to restore
peace to the country. The Union Whigs and the Union Democrats
welcomed him the moment he arrived, as the man for the occasion.
We believed that he, of all men on earth, had been preserved by
Divine Providence to guide us out of our difficulties, and we
Democrats rallied under Clay then, as you Whigs in nullification time
rallied under the banner of old Jackson, forgetting party when the
country was in danger, in order that we might have a country first,
and parties afterward.
And this reminds me that Mr. Lincoln told you that the slavery
question was the only thing that ever disturbed the peace and
harmony of the Union. Did not nullification once raise its head and
disturb the peace of this Union in 1832? Was that the slavery
question, Mr. Lincoln? Did not disunion raise its monster head
during the last war with Great Britain? Was that the slavery question,
Mr. Lincoln? The peace of this country has been disturbed three
times, once during the war with Great Britain, once on the tariff
question, and once on the slavery question. His argument, therefore,
that slavery is the only question that has ever created dissension in
the Union falls to the ground. It is true that agitators are enabled
now to use this slavery question for the purpose of sectional strife.
He admits that in regard to all things else, the principle that I
advocate, making each State and Territory free to decide for itself,
ought to prevail. He instances the cranberry laws, and the oyster
laws, and he might have gone through the whole list with the same
effect. I say that all these laws are local and domestic, and that local
and domestic concerns should be left to each State and each
Territory to manage for itself. If agitators would acquiesce in that
principle, there never would be any danger to the peace and harmony
of the Union.
Mr. Lincoln tries to avoid the main issue by attacking the truth of
my proposition, that our fathers made this Government divided into
free and slave States, recognizing the right of each to decide all its
local questions for itself. Did they not thus make it? It is true that
they did not establish slavery in any of the States, or abolish it in any
of them; but finding thirteen States, twelve of which were slave and
one free, they agreed to form a government uniting them together, as
they stood divided into free and slave States, and to guaranty forever
to each State the right to do as it pleased on the slavery question.
Having thus made the government, and conferred this right upon
each State forever, I assert that this Government can exist as they
made it, divided into free and slave States, if any one State chooses to
retain slavery. He says that he looks forward to a time when slavery
shall be abolished everywhere. I look forward to a time when each
State shall be allowed to do as it pleases. If it chooses to keep slavery
forever, it is not my business, but its own; if it chooses to abolish
slavery, it is its own business—not mine. I care more for the great
principle of self-government, the right of the people to rule, than I do
for all the negroes in Christendom. I would not endanger the
perpetuity of this Union, I would not blot out the great inalienable
rights of the white men for all the negroes that ever existed. Hence, I
say, let us maintain this Government on the principles that our
fathers made it, recognizing the right of each State to keep slavery as
long as its people determine, or to abolish it when they please. But
Mr. Lincoln says that when our fathers made this Government they
did not look forward to the state of things now existing; and
therefore he thinks the doctrine was wrong; and he quotes Brooks, of
South Carolina, to prove that our fathers then thought that probably
slavery would be abolished by each State acting for itself before this
time. Suppose they did; suppose they did not foresee what has
occurred,—does that change the principles of our Government? They
did not probably foresee the telegraph that transmits intelligence by
lightning, nor did they foresee the railroads that now form the bonds
of union between the different States, or the thousand mechanical
inventions that have elevated mankind. But do these things change
the principles of the Government? Our fathers, I say, made this
Government on the principle of the right of each State to do as it
pleases in its own domestic affairs, subject to the Constitution, and
allowed the people of each to apply to every new change of
circumstances such remedy as they may see fit to improve their
condition. This right they have for all time to come.
Mr. Lincoln went on to tell you that he did not at all desire to
interfere with slavery in the States where it exists, nor does his party.
I expected him to say that down here. Let me ask him then how he
expects to put slavery in the course of ultimate extinction every
where, if he does not intend to interfere with it in the States where it
exists? He says that he will prohibit it in all the Territories, and the
inference is, then, that unless they make free States out of them he
will keep them out of the Union; for, mark you, he did not say
whether or not he would vote to admit Kansas with slavery or not, as
her people might apply (he forgot that as usual, etc.); he did not say
whether or not he was in favor of bringing the Territories now in
existence into the Union on the principle of Clay’s Compromise
measures on the slavery question. I told you that he would not. His
idea is that he will prohibit slavery in all the Territories and thus
force them all to become free States, surrounding the slave States
with a cordon of free States and hemming them in, keeping the
slaves confined to their present limits whilst they go on multiplying
until the soil on which they live will no longer feed them, and he will
thus be able to put slavery in a course of ultimate extinction by
starvation. He will extinguish slavery in the Southern States as the
French general did the Algerines when he smoked them out. He is
going to extinguish slavery by surrounding the slave States, hemming
in the slaves, and starving them out of existence, as you smoke a fox
out of his hole. He intends to do that in the name of humanity and
Christianity, in order that we may get rid of the terrible crime and sin
entailed upon our fathers of holding slaves. Mr. Lincoln makes out
that line of policy, and appeals to the moral sense of justice and to
the Christian feeling of the community to sustain him. He says that
any man who holds to the contrary doctrine is in the position of the
king who claimed to govern by divine right. Let us examine for a
moment and see what principle it was that overthrew the Divine
right of George the Third to govern us. Did not these colonies rebel
because the British parliament had no right to pass laws concerning
our property and domestic and private institutions without our
consent? We demanded that the British Government should not pass
such laws unless they gave us representation in the body passing
them,—and this the British government insisting on doing,—we went
to war, on the principle that the Home Government should not
control and govern distant colonies without giving them
representation. Now, Mr. Lincoln proposes to govern the Territories
without giving them a representation, and calls on Congress to pass
laws controlling their property and domestic concerns without their
consent and against their will. Thus, he asserts for his party the
identical principle asserted by George III. and the Tories of the
Revolution.
I ask you to look into these things, and then tell me whether the
Democracy or the Abolitionists are right. I hold that the people of a
Territory, like those of a State (I use the language of Mr. Buchanan in
his letter of acceptance), have the right to decide for themselves
whether slavery shall or shall not exist within their limits. The point
upon which Chief Justice Taney expresses his opinion is simply this,
that slaves being property, stand on an equal footing with other
property, and consequently that the owner has the same right to
carry that property into a Territory that he has any other, subject to
the same conditions. Suppose that one of your merchants was to take
fifty or one hundred thousand dollars’ worth of liquors to Kansas. He
has a right to go there under that decision, but when he gets there he
finds the Maine liquor law in force, and what can he do with his
property after he gets it there? He cannot sell it, he cannot use it, it is
subject to the local law, and that law is against him, and the best
thing he can do with it is to bring it back into Missouri or Illinois and
sell it. If you take negroes to Kansas, as Col. Jeff. Davis said in his
Bangor speech, from which I have quoted to-day, you must take
them there subject to the local law. If the people want the institution
of slavery they will protect and encourage it; but if they do not want
it they will withhold that protection, and the absence of local
legislation protecting slavery excludes it as completely as a positive
prohibition. You slaveholders of Missouri might as well understand
what you know practically, that you cannot carry slavery where the
people do not want it. All you have a right to ask is that the people
shall do as they please; if they want slavery let them have it; if they
do not want it, allow them to refuse to encourage it.
My friends, if, as I have said before, we will only live up to this
great fundamental principle, there will be peace between the North
and the South. Mr. Lincoln admits that under the Constitution on all
domestic questions, except slavery, we ought not to interfere with the
people of each State. What right have we to interfere with slavery any
more than we have to interfere with any other question? He says that
this slavery question is now the bone of contention. Why? Simply
because agitators have combined in all the free States to make war
upon it. Suppose the agitators in the States should combine in one-
half of the Union to make war upon the railroad system of the other
half? They would thus be driven to the same sectional strife. Suppose
one section makes war upon any other peculiar institution of the
opposite section and the same strife is produced. The only remedy
and safety is that we shall stand by the Constitution as our fathers
made it, obey the laws as they are passed, while they stand the
proper test and sustain the decisions of the Supreme Court and the
constituted authorities.
Speech of Hon. Jefferson Davis, Senator from
Mississippi,
On retiring from the United States Senate. Delivered in the Senate
Chamber January 21, 1861.
I rise, Mr. President, for the purpose of announcing to the Senate
that I have satisfactory evidence that the State of Mississippi, by a
solemn ordinance of her people in convention assembled, has
declared her separation from the United States. Under these
circumstances, of course my functions are terminated here. It has
seemed to me proper, however, that I should appear in the Senate to
announce that fact to my associates, and I will say but very little
more. The occasion does not invite me to go into argument; and my
physical condition would not permit me to do so if it were otherwise,
and yet it seems to become me to say something on the part of the
State I here represent, on an occasion so solemn as this. It is known
to Senators who have served with me here, that I have for many years
advocated as an essential attribute of State sovereignty, the right of a
State to secede from the Union. Therefore, if I had not believed there
was justifiable cause; if I had thought that Mississippi was acting
without sufficient provocation, or without an existing necessity, I
should still, under my theory of the government, because of my
allegiance to the State of which I am a citizen, have been bound by
her action. I, however, may be permitted to say that I do think she
has justifiable cause and I approve of her act. I conferred with her
people before that act was taken, counseled them then that if the
state of things which they apprehended should exist when the
convention met, they should take the action which they have now
adopted.
I hope none who hear me will confound this expression of mine
with the advocacy of the right of a State to remain in the Union and
to disregard its constitutional obligations by the nullification of the
law. Such is not my theory. Nullification and secession so often
confounded are indeed antagonistic principles. Nullification is a
remedy which it is sought to apply within the Union and against the
agents of the States. It is only to be justified when the agent has
violated his constitutional obligation, and a State, assuming to judge
for itself denies the right of the agent thus to act and appeals to the
other States of the Union for a decision; but when the States
themselves and when the people of the States have so acted as to
convince us that they will not regard our constitutional rights, then,
and then for the first time, arises the doctrine of secession in its
practical application.
A great man who now reposes with his fathers and who has been
often arraigned for a want of fealty to the Union advocated the
doctrine of Nullification because it preserved the Union. It was
because of his deep-seated attachment to the Union, his
determination to find some remedy for existing ills short of the
severance of the ties which bound South Carolina to the other States,
that Mr. Calhoun advocated the doctrine of nullification, which he
proclaimed to be peaceful, to be within the limits of State power, not
to disturb the Union, but only to be a means of bringing the agent
before the tribunal of the States for their judgment.
Secession belongs to a different class of remedies. It is to be
justified upon the basis that the States are sovereign. There was a
time when none denied it. I hope the time may come again when a
better comprehension of the theory of our government and the
inalienable rights of the people of the States will prevent any one
from denying that each State is a sovereign, and thus may reclaim
the grants which it has made to any agent whomsoever.
I therefore say I concur in the action of the people of Mississippi,
believing it to be necessary and proper, and should have been bound
by their action if my belief had been otherwise; and this brings me at
the important point which I wish, on this last occasion, to present to
the Senate. It is by this confounding of nullification and secession
that the name of a great man whose ashes now mingle with his
mother earth, has been invoked to justify coercion against a seceding
state. The phrase “to execute the laws” was an expression which
General Jackson applied to the case of a State refusing to obey the
laws while yet a member of the Union. That is not the case which is
now presented. The laws are to be executed over the United States,
and upon the people of the United States. They have no relation with
any foreign country. It is a perversion of terms, at least it is a great
misapprehension of the case, which cites that expression for
application to a State which has withdrawn from the Union. You may
make war on a foreign State. If it be the purpose of gentlemen they
may make war against a State which has withdrawn from the Union;
but there are no laws of the United States to be executed within the
limits of a Seceded State. A State finding herself in the condition in
which Mississippi has judged she is; in which her safety requires that
she should provide for the maintenance of her rights out of the
Union, surrenders all the benefits, (and they are known to be many)
deprives herself of the advantages, (they are known to be great)
severs all the ties of affection (and they are close and enduring)
which have bound her to the Union; and thus divesting herself of
every benefit, taking upon herself every burden, she claims to be
exempt from any power to execute the laws of the United States
within her limits.
I well remember an occasion when Massachusetts was arraigned
before the Bar of the Senate, and when then the doctrine of coercion
was rife, and to be applied against her because of the rescue of a
fugitive slave in Boston. My opinion then was the same as it is now.
Not in the spirit of egotism, but to show that I am not influenced in
my opinion because the case is my own, I refer to that time and that
occasion as containing the opinion which I then entertained and on
which my present conduct is based. I then said, if Massachusetts,
following her through a stated line of conduct, chooses to take the
last step which separates her from the Union, it is her right to go, and
I will neither vote one dollar nor one man to coerce her back; but will
say to her, “God speed,” in memory of the kind associations which
once existed between her and the other States. It has been a
conviction of pressing necessity, it has been a belief that we are to be
deprived in the Union, of the rights which our fathers bequeathed to
us, which has brought Mississippi into her present decision. She has
heard proclaimed the theory that all men are created free and equal,
and this made the basis of an attack on her social institutions; and
the sacred Declaration of Independence has been invoked to
maintain the position of the equality of the races. That Declaration of
Independence is to be construed by the circumstances and purposes
for which it was made. The communities were declaring their
independence; the people of those communities were asserting that
no man was born—to use the language of Mr. Jefferson—booted and
spurred to ride over the rest of mankind; that men were created
equal—meaning the men of the political community; that there was
no divine right to rule; that no man inherited the right to govern;
that there were no classes by which power and place descended to
families, but that all stations were equally within the grasp of each
member of the body politic. These were the great principles they
announced; these were the purposes for which they made their
declaration; these were the ends to which their enunciation was
directed. They have no reference to the slave; else, how happened it
that among the items of arraignment made against George III. was
that he endeavored to do just what the North has been endeavoring
of late to do—to stir up insurrection among our slaves? Had the
Declaration announced that the negroes were free and equal how was
it the Prince was to be arraigned for stirring up insurrection among
them? And how was this to be enumerated among the high crimes
which caused the colonies to sever their connection with the mother
country? When our constitution was formed, the same idea was
rendered more palpable, for there we find provision made for that
very class of persons as property; they were not put upon the footing
of equality with white men—not even upon that of paupers and
convicts, but so far as representation was concerned, were
discriminated against as a lower caste only to be represented in a
numerical proportion of three-fifths.
Then, Senators, we recur to the compact which binds us together;
we recur to the principles upon which our government was founded;
and when you deny them, and when you deny to us, the right to
withdraw from a government which thus prevented, threatens to be
destructive of our rights, we but tread in the path of our fathers when
we proclaim our independence, and take the hazard. This is done not
in hostility to others, not to injure any section of the country, not
even for our own pecuniary benefit, but from the high and solemn
motive of defending and protecting the rights we inherited, and
which it is our sacred duty to transmit unshorn to our children.
I find in myself, perhaps, a type of the general feeling of my
constituents towards yours. I am sure I feel no hostility to you,
Senators from the North. I am sure there is not one of you, whatever
sharp discussion there may have been between us, to whom I cannot
now say, in the presence of my God, “I wish you well,” and such, I am
sure, is the feeling of the people whom I represent towards those
whom you represent. I therefore feel that I but express their desire
when I say I hope, and they hope for peaceful relations with you,
though we must part. They may be mutually beneficial to us in the

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PART 4 Distortions of the Invisible Hand in Competitive Markets 509

PART 5 Distortions of the Invisible Hand From Strategic Decisions 677

PART 6 Considering How to Make the World a Better Place 925

Preface xi 2B Consumer Choice Sets and Budget Equations 20

(Available on MindTap) 3 Economic Circumstances in Labour

2 A Consumer’s Economic 5A Different Types of Indifference Maps 74

6 Doing the Best We Can 98 9 Demand for Goods and Supply

8 Wealth and Substitution Effects

Changing the Economic Environment 256 PART 3 Competitive Markets

Pooling Contracts With Asymmetric Quantity Competition: Cournot and

Part 6 Considering How to 30 Balancing Government,

Adapting Author for Europe, Middle East and Africa

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1A.1 Economics as a Science

1A.2 Rationality and Self-Interest

1A.3 Social Consequences, Pencils and Environmental Impact

1A.4 Economics, Incentives and Economic Models

1A.5 Predicting Versus Judging Behaviour and Social Outcomes

1A.6 The Non-Dismal Science: Some Basic Lessons

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