A Summary of Chapters One and Two In The Book New Ideas From Dead Economists, by Todd Buchholz.

Lee Trent

January 22, 2004

Macroeconomics 201

A Summary of Chapters One and Two In The Book New Ideas From Dead Economists, by Todd Buchholz

In chapter one of the book New Ideas from Dead Economists by Todd Buchholz, there is an introduction to the study of economics. Chapter one defines the term economics as the choices people make. It also describes the influence of economics on the world and its importance. The chapter moves on to describe a man named Alfred Marshall. Marshall believed economics should be a science, but at the same time it should still cater to citizens. Some of the best information in chapter one about the study of economics comes sporadically, such as when the subject of economic fluidity arises. The book explains that economies are very fluid and are affected by a vast number of factors, thus, denying people from every being able to completely predict the market. “Weather, musical tastes, weight, income, inflation, political campaigns, and the performance of U.S. Olympic teams” (4) are only a few of the variables involved in determining consumer spending and, in turn, the state of the economy. The chapter closes reinforcing the idea that conventional economics do not explain everything.

The emphasis in chapter two is on a man named Adam Smith. This is because Smith’s theories were groundbreaking in the field of economics. Smith became enormously successful as an economist, especially so after he published his book An Inquiry Into The Nature And Causes Of The Wealth Of Nations. In his book, Smith aims to reveal the causes and effects of different actions in economics. Using this tool, Smith explains how one can become wealthy.

Another of Smith’s major ideas is related to the basic foundation behind economics: The human mind. He further argues that an economy should ...

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Another of Smith’s major ideas is related to the basic foundation behind economics: The human mind. He further argues that an economy should capitalize on the way the human mind works, harnessing its potential. He also points out that people do things only for themselves. When people in a market do things only for themselves, a phenomenon occurs Smith entitled the “invisible hand.” More accurately, the invisible hand is the free market, either “approving” or “disapproving” of the choices people make, by either keeping them in business, or putting them out. The invisible hand regulates the economy through division of labor. Specialization can cause “one day’s output [to] explode by 400,000%!” (25). According to Smith, there are three things that could make the economy grow. One is a larger labor pool. Two is the division of labor. And three is the use of new technology to increase work quality.

While Adam Smith’s ideas are the main focus of chapter two, there are several other important ideas discussed. One is that the nations become richer if markets spread. Another discusses the negative effects of assembly lines on the human psych. One more important point talked about in chapter one is how economics are linked to the real world through politics.

Today, Smith’s ideas are associated with conservative politics, limited government, and deregulation. He is without a doubt one of the greatest influences to the study of economics.