Although many millions of dollars are spent each year on introductory economics instruction in American colleges and universities, the return on this investment has been disturbingly low. Studies have shown, for example, that several months after having taken a principles of economics course, former students are no better able to answer simple economic questions than others who never even took the course. Most students, it seems, leave our introductory courses without having learned even the most important basic economic principles.

The problem, in our view, is that these courses almost always try to teach students far too much. In the process, really important ideas get little more coverage than minor ones, and everything ends up going by in a blur. Many instructors ask themselves, “How much can I cover today?” when instead they should be asking, “How much can my students absorb?”

Our textbook grew out of our conviction that students will learn far more if we attempt to cover much less. Our basic premise is that a small number of basic principles do most of the heavy lifting in economics, and that if we focus narrowly and repeatedly on those principles, students can actually master them in just a single semester.

The enthusiastic reactions of users of our first two editions affirm the validity of this premise. Although recent editions of a few other texts now pay lip service to the less-is-more approach, ours is by consensus the most carefully thought-out and well-executed text in this mold. Avoiding excessive reliance on formal mathematical derivations, we present concepts intuitively through examples drawn from familiar contexts. We rely throughout on a well-articulated short list of core principles, which we reinforce repeatedly by illustrating and applying each principle in numerous contexts. We ask students periodically to apply these principles themselves to answer related questions, exercises, and problems.

Throughout this process, we encourage students to become “economic naturalists,” people who employ basic economic principles to understand and explain what they observe in the world around them. An economic naturalist understands, for example, that infant safety seats are required in cars but not in airplanes because the marginal cost of space to accommodate these seats is typically zero in cars but often hundreds of dollars in airplanes. Scores of such examples are sprinkled throughout the book. Each one, we believe, poses a question that should make any normal, curious person eager to learn the answer. These examples stimulate interest while teaching students to see each feature of their economic landscape as the reflection of an implicit or explicit cost-benefit calculation. Students talk about these examples with their friends and families. Learning economics is like learning a language. In each case, there is no substitute for actually speaking. By inducing students to speak economics, the economic naturalist examples serve this purpose.

FEATURES

• An emphasis on core principles: As noted, a few core principles do most of the work in economics. By focusing almost exclusively on these principles, the text assures that students leave the course with a deep mastery of them. In contrast, traditional encyclopedic texts so overwhelm students with detail that they often leave the course with little useful working knowledge at all.
  • The Scarcity Principle: Having more of one good thing usually means having less of another.
  • The Cost-Benefit Principle: Take no action unless its marginal benefit is at least as great as its marginal cost.
  • The Incentives Matter Principle: Cost-benefit comparisons are relevant not only for identifying the decisions that rational people should make, but also for predicting the actual decisions they do make.
  • The Principle of Comparative Advantage: Everyone does best when each concentrates on the activity for which he or she is relatively most productive.
  • The Principle of Increasing Opportunity Cost: Use the resources with the lowest opportunity cost before turning to those with higher opportunity costs.
  • The Equilibrium Principle: A market in equilibrium leaves no unexploited opportunities for individuals but may not exploit all gains achievable through collective action.
  • The Efficiency Principle: Efficiency is an important social goal, because when the economic pie grows larger, everyone can have a larger slice.
• Economic Naturalism introduced in Micro: Our ultimate goal is to produce economic naturalists—people who see each human action as the result of an implicit or explicit cost-benefit calculation. The economic naturalist sees mundane details of ordinary existence in a new light and becomes actively engaged in the attempt to understand them. Some representative examples:
  • Why are whales and elephants, but not chickens, threatened with extinction?
  • Why do we often see convenience stores located on adjacent street corners?
  • Why do supermarket checkout lines all tend to be roughly the same length?
• Active learning stressed: The only way to learn to hit an overhead smash in tennis is through repeated practice. The same is true for learning economics. Accordingly, we consistently introduce new ideas in the context of simple examples and then follow them with applications showing how they work in familiar settings. At frequent intervals, we pose exercises that both test and reinforce the understanding of these ideas. The end-of-chapter questions and problems are carefully crafted to help students internalize and extend core concepts. Experience with our first two editions confirms that this approach really does prepare students to apply basic economic principles to solve economic puzzles drawn from the real world.
• Modern Microeconomics: Economic surplus, introduced in Chapter 1 and employed repeatedly thereafter, is more fully developed here than in any other text. This concept underlies the argument for economic efficiency as an important social goal. Rather than speak of trade-offs between efficiency and other goals, we stress that maximizing economic surplus facilitates the achievement of all goals. Common decision pitfalls identified by 2002 Nobel Laureate Daniel Kahneman and others—such as the tendency to ignore implicit costs, the tendency not to ignore sunk costs, and the tendency to confuse average and marginal costs and benefits—are introduced early in Chapter 1 and invoked repeatedly in subsequent chapters.
       There is perhaps no more exciting toolkit for the economic naturalist than a few principles of elementary game theory. In Chapter 11, we show how these principles enable students to answer a variety of strategic questions that arise in the marketplace and everyday life. We believe that the insights of the Nobel Laure ate Ronald Coase are indispensable for understanding a host of familiar laws, customs, and social norms. In Chapter 12 we show how such devices function to minimize misallocations that result from externalities. A handful of simple principles from the economics of information form another exciting addition to the economic naturalist's toolkit. In Chapter 13 we show the insights that earned the 2001 Nobel Prize in economics for George Akerlof, Joseph Stiglitz, and Michael Spence can be employed to answer a variety of questions from every day experience.
• Web site: Developed by Scott Simkins of North Carolina A&T State University, an expert in the growing field of economics education on the World Wide Web. The ambitious Web site contains a host of features that will enhance the principles classroom, including dynamic graphs, video lectures, e-mail updates, microeconomic experiments, current news articles, information about the text, an eLearning session, and more.

IMPROVEMENTS

That our less-is-more approach is well-suited for a wide spectrum of institutions is evidenced by the breadth of our earlier adoptions lists. Yet it remains a formidable challenge for any single book to fit the needs and capabilities of students across these diverse institutions. Some students arrive with AP credit in advanced calculus, while others still lack confidence in basic geometry and algebra. Guided by extensive reviewer feedback, our main goal in preparing our third edition has been to re-organize our presentation to accommodate the broadest possible range of student preparation. For example, while continuing to emphasize verbal and graphical approaches in the main text, we have added several appendices that offer more detailed and challenging algebraic treatments of the same material. And although we continue to believe that the indifference curve approach to the consumer choice problem is in general best postponed until an intermediate course, we have added a comprehensive indifference curve appendix for our many adopters who feel their students would benefit from that option. Among the hundreds of specific refinements we made, the following merit explicit mention.

IN MICROECONOMICS

• “Incentives matter” is a new core principle: If we asked a thousand economists to provide their own versions of the most important economic principles, we'd get a thousand different lists. Yet to dwell on their differences would be to miss their essential similarities. It is less important to have exactly the best short list of principles than it is to use some well-thought-out list of this sort. New to our short list is the “incentives matter” principle, which we added to emphasize that cost-benefit comparisons are relevant not only for identifying the decisions that rational people should make, but also for predicting the actual decisions they do make across numerous diverse domains.
• International trade chapter moved forward: Because the topic is so important, the chapter on international trade (Chapter 16 in our second edition) has been moved forward to appear at the end of Part 2 (Competition and the Invisible Hand). This chapter (now Chapter 9) has been extensively rewritten to incorporate explicit analysis of how producer and consumer surplus are affected by trade and by policies such as tariffs and quotas. A new section addresses the question of which jobs are most vulnerable to outsourcing.
• More emphasis on monopolistic competition and oligopoly: In our second edition, the chapter on imperfect competition (Chapter 9 in that edition) briefly defined the three forms of imperfect competition and then focused exclusively on pure monopoly. In this edition, we have added more detailed descriptive accounts of monopolistic competition and oligopoly to this chapter (now Chapter 10). We also have added numerous additional examples involving these industry structures in the succeeding chapter on strategic choice (now Chapter 11).
• Added material on indifference curves: In our second edition, we offered an appendix on the indifference curve approach to the consumer choice problem on the text Web site. But because a number of reviewers felt strongly that this material should be more accessible for those who want to use it, we've added it as an extensively revised appendix to Chapter 5. This topic can be skipped at no compromise to the material in the succeeding chapters.
• Algebra appendixes added: To the basic review of the algebra and geometry of straight lines presented in the mathematical appendix to Chapter 1, we have added a basic primer on how to solve simple systems of two equations with two unknowns. In this edition, the treatment of supply and demand in the main text is carried out exclusively in verbal and graphical terms. But we have added an appendix to Chapter 3 that presents an algebraic treatment of supply and demand. We also have added a brief appendix to Chapter 10 showing how monopoly profit maximization can be treated in an algebraic framework.
• Additional Economic Naturalist drawings: For reasons best explained by educational psychologists, illustrations can be an enormously effective pedagogical tool, in part because of their ability to trigger rich networks of cognitive association. To exploit this tool more effectively, we commissioned line drawings by the renowned New Yorker cartoonist Mick Stevens and other artists to accompany many of the Economic Naturalist examples.

THE CHALLENGE

The world is a more competitive place now than it was when we started teaching in the 1970s. In arena after arena, business as usual is no longer good enough. Baseball players used to drink beer and go fishing during the off season, but they now lift weights and ride exercise bicycles. Assistant professors used to work on their houses on weekends, but the current crop can now be found most weekends at the office. The competition for student attention has grown similarly more intense. There are many tempting courses in the typical college curriculum and even more tempting diversions outside the classroom. Students are freer than ever to pick and choose. Yet many of us seem to operate under the illusion that most freshmen arrive with a burning desire to become economics majors. And many of us do not yet seem to have recognized that students' cognitive abilities and powers of concentration are scarce resources. To hold our ground, we must become not only more selective in what we teach, but also more effective as advocates for our discipline. We must persuade students that we offer something of value.

A well-conceived and well-executed introductory course in economics can teach our students more about society and human behavior in a single term than virtually any other course in the university. This course can and should be an intellectual adventure of the first order. Not all students who take the kind of course we envisioned when writing this book will go on to become economics majors, of course. But many will, and even those who do not will leave with a sense of admiration for the power of economic ideas.

A salesperson knows that he or she often gets only one chance to make a good first impression on a potential customer. Analogously, the principles course is often our only shot at persuading most students to appreciate the value of economics. By trying to teach them everything we know—rather than teaching them the most important things we know—we too often squander this opportunity.