By Michael Pohst
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Extra resources for Algorithmic Methods in Algebra and Number Theory
Where laboratory experiments are not possible, economists carefully observe the economy and try to figure out what is affecting what. To do so they look for natural experiments—naturally occurring events that approximate a controlled experiment where something has changed in one place but has not changed somewhere else. Economists can then compare the results in the two cases. An example of a natural experiment was when New Jersey raised its minimum wage and neighboring state Pennsylvania did not.
The list is long. You cannot understand economics without understanding the limitations that political and social forces place on economic actions. In summary, what happens in a society can be seen as the reaction to, and interaction of three sets of forces: (1) economic forces, (2) political and legal forces, and (3) social and historical forces. Economics has a role to play in sociology, history, and politics, just as sociology, history, and politics have roles to play in economics. Using Economic Insights Economic insights are based on generalizations, called theories, about the workings of an abstract economy as well as on contextual knowledge about the institutional structure of the economy.
If you think it’s a killer to read a book this long, you ought to try writing one. indd Page 5 30/08/12 5:18 AM user-f502 /203/MH01848/coL21707_disk1of1/0078021707/coL21707_pagefiles Chapter 1 ■ Economics and Economic Reasoning coordination refers to how the three central problems facing any economy are solved. These central problems are: 1. What, and how much, to produce. 2. How to produce it. 3. For whom to produce it. How hard is it to make the three decisions? Imagine for a moment the problem of living in a family: the fights, arguments, and questions that come up.