Economics for Business

Second Edition

by Chris Mulhearn and Howard Vane

Palgrave Macmillan and the Lindau Nobel Laureate Meetings

The theme of Nobel-Prize winning economics running through this textbook demonstrates the degree to which cutting-edge work has informed developments in economic theory in very business-relevant contexts.

The global economic crisis

Watch the video below to find out what the perspectives of Nobel Laureates such as Joseph Stiglitz (2001), Christopher Pissarides (2010), Robert Mundell (1999), Daniel McFadden (2000) and Roger Myerson (2007) are on the major causes of the global economic crisis and its effects:
Now look back at the following pages of your textbook:
  • Chapter 1, pp.23-5 – Look over the discussion of the UK government's response to the credit crunch and its aftermath and the examination of the notion of moral hazard in banking
  • Chapter 3, p.80 – Read the 'Applying Economics to Business' feature on patterns of bank lending in the aftermath of the credit crunch
  • Chapter 3, pp.97-100 – Think about the discussion of the Lehman Brothers' debacle and the issues of asymmetric information and moral hazard
  • Chapter 8, p.252 – Watch the 12-minute TV debate between Paul Krugman and Bruce Bartlett about the US government's attempt to spend its way out of the 2008-09 recession as suggested in the 'One thing you should watch' feature
  • Chapter 9, p.227 – Look over the 'Applying Economics to Business' feature for more on the UK's response to the 2008-09 recession
  • Chapter 15, pp.441-2 – Read the section on the contribution to the financial crisis made by a world economy out of balance.

Behavioural economics

Watch the video below which explores the relatively new field of behavioural economics from the point of view of young economics researchers and Nobel Laureates:
Now look back at the following pages of your textbook:
  • Chapter 2, pp.67-8 – Read this introduction to Kahneman and Tversky's notion of anchoring in consumer behaviour, and the discussion of Schelling's challenge to the more-consumption-is-better basis of rational behaviour
  • Chapter 3, pp.84-6 – Look over this overview of 'sub-rational' behaviour by firms and read the ‘Applying Economics to Business’ feature on Herbert Simon's 'satisficing' behaviour by firms
  • Chapter 3, p.95 – Look at the Business Case Study here on optional insurance on electronics that uses the behaviourist's endowment effect.

The Nobel Laureates and their work


For more information on many of the Laureates featured in these videos and the work which won them a Nobel accolade see the following pages of the textbook:

George Akerlof (2001)
See chapter 2: pp.65-66, chapter 3: pp.93-4 and chapter 10: p. 285 for discussions of his work on asymmetric information

Joseph Stiglitz (2001)
See chapter 3: pp.93-4 and chapter 15: p.446 for content related to his work on asymmetric information and his thoughts on how globalization can work better

Thomas Schelling (2005)
See chapter 2: p.68 and chapter 5: p. 154 for information on game theory and behavioural economics which come out of his work

Michael Spence (2001)
See chapter 7: p.210 to read about his insights into asymmetric information in the labour market

Robert Mundell (1999
See chapter 14: p.422 to review his work on optimum currency areas

Paul Krugman (2008)
See chapter 8: p.252, chapter 11: p.310, chapter 12: p.348 and chapter 13: p.360 for discussions of his New Trade Theory (NTT)

Finn Kydland (2004) and Edward Prescott (2004)
See chapter 11: p.319 and chapter 12: p.340 to review their work on time inconsistency in macroeconomic policymaking

Bertil Ohlin (1977
See chapter 13: pp.357-9 and p.361 for content on the Heckscher-Ohlin trade theory

Wassily Leontief (1973)
See chapter 13: pp.358-9 to read the section on the Leontief paradox

Herbert Simon (1978)
See chapter 3: pp.84-5 for a discussion of behavioural decision making in firms

Robert Solow (1987)
See chapter 11: pp.306-9, p.322 and pp.325-30 for information on his work on economic growth

Ronald Coase (1991)
See chapter 3: p.75 and chapter 6: pp.174-5 to read about his work on transaction costs and the Coase theorem

Daniel Kahneman's (2002)
See chapter 2: p.67 for material on his contribution to behavioural economics

Robert Merton (1997), James Mirrlees (1996), James Heckman (2000) and Amartya Sen (1998)
See chapter 1: p.6 for the 'Reflecting on Economics' box in which they discuss why they became economists

Milton Friedman (1976)
See chapter 1: p.6, chapter 6: p.179, chapter 8: p.240 and p.249, chapter 9: p.266, chapter 10: pp.285-90, chapter 11: p.315, chapter 12: p.336 and chapter 14: p.402 for sections on a his work on inter alia the expectations-augmented Phillips curve and the case for flexible exchange rates

Robert Lucas Jr. (1995)
See chapter 9: p. 268, chapter 11: p.317 and chapter 12: pp.342-3 for discussions of his work on rational expectations and the Lucas critique

Edmund Phelps (2006)
See chapter 10: p.285 for a review of his work on the expectations-augmented Phillips curve.

Note: These videos were short on location at the 2011 Lindau Meeting in the Economic Sciences and were put together by Palgrave Macmillan, Nature Video, and Worth Publishers in collaboration with the Meetings of Nobel Laureates at Lindau. Additional films of lectures recorded at the 2011 Meeting can be viewed by visiting the Linda Mediatheque at www.mediatheque.lindau-nobel.org