经济学原理作为商务英语专业的核心主干课程,基本可用的相关教材数量较多,其中比较受欢迎的中文教材有复旦大学尹伯成主编的《西方经济学简明教程》、北京大学梁小民主编的《西方经济学导论》、中国人民大学高鸿业主编的《西方经济学》(上、下册)等;英文教材有PrinciplesofEconomicsbyN.GregoryMankiw, IntermediateMicroeconomicsbyHalR.Varian 等。但是,在众多教材中却又很难找到一本比较适合我国相关专业学生特点的英文版经济学教材,因此,才有了编写一本英文版有中国故事的经济学原理教材的想法。









国内商务英语专业教材的编写才刚刚开始,因此,鉴于我们水平有限,时间仓促,书中难免存在一些缺点和错误,恳请各位专家和广大读者在阅读本书的过程中,能不吝提出宝贵的指导意见,谢谢!谭亮2016年8月Chapter1Introduction to Economics

Let us firstly read the following story about China.

In 1978, the government of the People’s Republic of China started to implement the policy of“Reform and Opening to the Outside World”.In contrast to the previous Soviet-style centrally planned economy,the new measures progressively relaxed restrictions on agricultural production and distribution and, several years later, on enterprises and international trade.The more market-oriented approach reduced inefficiencies and stimulated productivity that led to increased investment and output.One featurewas the establishment of four Special Economic Zones, namely, Shenzhen,Zhuhai, Shantou and Xiamen located along the South-east coast of China.

The reforms proved spectacularly successful in terms of increased output.In real terms, the economy doubled in size between 1978 and 1986, doubled again by 1994, and again by 2003.By 2008, the economy was16.7 times the size itwas in 1978.International trade progressed even more rapidly, doubling on average every 4.5 years.Total two-way trade in January 1998 exceeded that for all of 1978; in the first quarter of 2009, trade exceeded the full-year 1998 level.In 2008, China’s two-way trade totaled USD 2.56 trillion.

In 1991, China joined the Asia-Pacific Economic Cooperation (APEC) group, a trade-promotion forum.In 2001, it also joined the World Trade Organization(WTO).By 2011, China’s socialistmarket economy is the world’s second largest economy by nominal GDP, and the world’s largest economy by purchasing power parity according to the IMF.It is the world’s fastest-growing major economy, with growth rates averaging 10 percent over the past 30 years.

China is now a global hub formanufacturing,and is the largestmanufacturing economy in the world aswell as the largest exporter of goods in the world.China is also the world’s fastest growing consumermarket and second largest importer of goods.

The story continues.

In 2014,China initiated the“One Belt and One Road” program.The“One Belt and One Road” refers to the Silk Road Economic Belt and the Maritime Silk Road of the 21st Century.The Silk Road concept is a strategy for promoting trade and communications in the region.Experts say it would help to resolve China’s domestic overcapacity problems while also promoting regional development and connectivity.

In 2015,the Asian Infrastructure Investment Bank (AIIB) was proposed by China.As of April 15,2015, almost all Asian countries and mostmajor countries outside Asia had joined the AIIB,except the US, Japan (which dominated the ADB) and Canada.The Articles of Agreement(AOA)would be finalized and open for signature by prospective founding members from June 2015.The AOA was expected to enter into force and AIIB to be fully established by the end of 2015.

The purpose of thismultilateral development bank is to provide finance to infrastructure projects in the Asia region.AIIB is regarded by some as a rival for the IMF, the World Bank and the Asian Development Bank, which are regarded as dominated by developed countries.The United Nations has addressed the launch of AIIB as “scaling up financing for sustainable development”.

While reading the above story, you may have numerous questions to ask: what ismeant by planned economy, nominal GDP, or purchasing power parity, etc.? Why can China’seconomy grow at such a speed? What are the benefits of joining APEC and WTO for China? Why can AIIB attract somany foundingmembers, both developing and developed countries?

After reading the consequent chaptersof this book,youmay find answers to the above and other similar questions,and have a better understanding of the Chinese economy in particular and economics as a subject in general.

1.1 Definitions of Econom ics

Theword economics comes from an ancientGreek word whichmeans“house” and“custom” or“law”, hence economics is the “rules of the house”.

Economicswas only a branch of political economy initially,but economists in the late 19th century suggested “economics” as a shorter term for“economic science” to establish itself as a separate discipline outside of political economy.

Then what is economics? To begin with, we can say that economics is a subject that is about resources and choices.

To see the logic here, letusnavigate back to Paleolithic era.Ever since that time, mankind has been evolving on Earth for millions of years.And human beings must rely on different types of resources to evolve and survive.Resources include not only the time and talent, the land, buildings,equipment, and other toolson hand, but information, network and the knowledge of how to combine them to create useful products and services.

Nevertheless, from an economist’s point of view, resources are abbreviated as labor, capital and technology, which are the inputs to produce outputs, called goods.Goods are classified into economic goods and free goods.Economic goods are products produced by using scarce resources,while free goods refer to goods that are free, for example, the sunshine we bath and the air we breathe.In our context, we use economic goods as they are more important and relevant.

Resources are basically considered scarce because of their limited availability in a given period of time and unlimited demand for them by human beings at the same time.The contradiction between limited availability and unlimited demand refers to the situation where goods are not enough relative to the insatiable needs of human beings.(1)

As is identified by Abraham Maslow, human needs are classified into five tiers, which are physiological needs, safety needs, psychological needs, esteem needs and needs for self-actualization.At the bottom of the hierarchy are the physiological needs of a human being: food,water and sleep.And at the top of the pyramid, needs for self-actualization occur when individuals reach a state of harmony and understanding because they are engaged in achieving their full potential.Once a person has reached the self-actualization state, they focus on themselves and try to build their own image.They may look at this in terms of feelings such as self-confidence or by accomplishing a set goal.

With scarcity as the precondition, choice becomes relatively simp le.Important choices involve how much time to devote to work, to school, and to leisure, how much money to spend and how much to save, how to combine resources to produce goods and services, and how to vote and shape the level of taxes and the role of government.Often, people appear to use their resources to improve their well-being.Well-being includes the satisfaction people gain from the products and services they choose to consume,from their time spent in leisure and with family and community as well as in jobs, and the security and services provided by effective governments.Sometimes, however, people appear to use their resources in ways that don’t improve their well-being.

In short, economics ismainly concerned with the choice of resources, or the allocation of scarce resources.

One way by which society allocates resources is themarket system.The term market refers to any arrangement that allows people to trade with one another.Themarket system is the name given to the collection of allmarkets and also refers to the relationshipsamong thesemarkets.The study of the market system, which is the subject of economics, is divided into two main branches or theories;they are microeconomics and macroeconomics.Microeconomics starts by thinking about how individualsmake decisions, while macroeconomics considers what the aggregate outcomes are.The two points of view are essential in understanding economic phenomena.

In our definition,economics is a subject in the realm of social science which studies the allocation of scarce resources and maximization of production against the constraints of scarce resources.

There are of course various definitions of economics and these definitions reflect evolving views of the subject over the centuries.Let us review the definitions of economics by three big masters,who are regarded as the milestones in the development of economics.

1.1.1 Adam Sm ith

Adam Smith(1723—1790), the founding father of economics, defined what was then called political economy as“an inquiry into the nature and causes of the wealth of nations”, in particular as a branch of the science of a statesman or legislator(with the twofold objectives of providing), a plentiful revenue or subsistence for the people...(and) to supply the state or commonwealth with a revenue for the public services.

Hewas a Scottish moral philosopher and a pioneer of political economy.As one of the key figures of the Scottish Enlightenment, Smith is best known for two classic works: The Theory of Moral Sentiments(1759), and An Inquiry into the Nature and Causes of the Wealth of Nations(1776).The latter, usually abbreviated as The Wealth of Nations, is considered hismagnum opus and the firstmodernwork of economics.The book offersone of theworld’s first collected descriptions of what builds nations’ wealth and is today a fundamental work in classical economics.Through reflection over the economics at the beginning of the Industrial Revolution,the book touches upon such broad topics as the division of labor, productivity and freemarkets.As a result, Adam is cited as the “father ofmodern economics” and is still among themost influential thinkers in the field of economics today.

Smith studied social philosophy at the University of Glasgow and (2)at Balliol College, Oxford,where hewas one of the first students to benefit from scholarships.After graduating, he delivered a successful series of public lectures at the University of Edinburgh,leading him to collaborate with David Hume during the Scottish Enlightenment.Smith obtained a professorship at Glasgow teaching moral philosophy, and during this time he wrote and published The Theory ofMoral Sentiments.In his later life, he took a tutoring position that allowed him to travel throughout Europe, where hemet other intellectual leaders of his day.

Smith laid the foundationsof classical freemarketeconomic theory.TheWealth ofNations wasa precursor to themodern academic discipline of economics.In this and other works, he expounded upon how rational self-interest and competition can lead to economic prosperity.In 2005, TheWealth ofNations was named among the 100 Best Scottish Books of all time.Former UK Prime Minister Margaret Thatcher, it is said, used to carry a copy of the book in her handbag.

1.1.2 Alfred Marshall

After Adam Smith,Alfred Marshall(1842—1924) described “economics is the study of peop le in the ordinary business of life” in his Principles ofEconomics(1890).

Alfred Marshall was one of the most influential economists of his time.His book, Principles of Economics(1890), was the dominant economic textbook in England for many years.It brings the ideas of supply and demand, marginal utility, and costs of production into a coherentwhole.He is known as one of the founders of economics, or to bemore specific, microeconomics.

Marshall was born in Clapham, England, 26 July, 1842.His father was a bank cashier and a devout Evangelical.Marshall grew up in the London suburb of Clapham and was educated at the Merchant Taylors’ School and St John’s College, Cambridge, where he demonstrated an aptitude in mathematics, achieving the rank of Second W rangler in the 1865 Cambridge Mathematical (3)Tripos.Marshall experienced amental crisis that led him to abandon physics and switch to philosophy.He began with metaphysics, specifically “the philosophical foundation of knowledge, especially in relation to theology”.Metaphysics led Marshall to ethics, specifically a Sidgwickian version of utilitarianism; ethics, in turn, led him to economics, because economics played an essential role in providing the preconditions for the improvement of the working class.Even as he turned to economics, his ethical views continued to be a dominant force in his thinking.

He saw that the duty of economics was to improve material conditions,but such improvement would occur, Marshall believed, only in connection with social and political forces.His interest in liberalism, socialism, trade unions, women’s education, poverty and progress reflect the influence of his early social philosophy on his later activities and writings.

Marshallwas elected in 1865 to a fellowship at St John’s College at Cambridge, and became lecturer in the moral sciences in 1868.In 1885, he became professor of political economy at Cambridge, where he remained until his retirement in 1908.Over the years he interacted with many British thinkers including Henry Sidgwick, W.K.Clifford, Benjamin Jowett, William Stanley Jevons, Francis Ysidro Edgeworth, John Neville Keynes and John Maynard Keynes.Marshall founded the “Cambridge School” which paid special attention to increasing returns, the theory of the firm, and welfare economics; after his retirement, leadership passed to Arthur Cecil Pigou and John Maynard Keynes.

1.1.3 John Maynard Keynes

John Maynard Keynes(1883—1946) once said, “The theory of economics does not furnish a body of settled conclusions immediately applicable to policy.It is amethod rather than a doctrine,an apparatus of themind, which helps its possessor to draw correct conclusions.”

Keynes’s classic works of The General Theory of Employment, Interest and Money lay the foundation for macroeconomics.Keynes was a British economist whose ideas have fundamentally affected the theory and practice ofmodern macroeconomics and informed the economic policies of governments.He builton and greatly refined earlierwork on the causesof business cycles, and he is widely considered to be one of the founders of modern macroeconomics and the most influential economist of the 20th century.His ideas are the basis for the school of thought known as Keynesian economics and its various offshoots.

In the 1930s, Keynes spearheaded a revolution in economic thinking, overturning the older ideas of neoclassical economics that held that free markets would, in the short to medium term,automatically provide full employment, as long as workers were flexible in their wage demands.Keynes instead argued that aggregate demand determined the over-all level of economic activity and that inadequate aggregate demand could lead to prolonged periods of high unemployment.According to Keynesian economics, state intervention was necessary to moderate “boom and bust” cycles of economic activity.He advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic recessions and depressions.Following the outbreak of World War II, Keynes’s ideas concerning economic policy were adopted by leading Western economies.In 1942, Keynes was awarded a hereditary peerage as Baron Keynes of Tilton in the County of Sussex.Keynes died in 1946; but, during the 1950s and 1960s, the success of Keynesian economics resulted in almost all capitalist governments adopting its policy recommendations.

Keynes’s influence waned in the 1970s, partly as a result of problems that began to afflict the Anglo-American economies from the start of the decade and partly because of critiques from Milton Friedman and other economistswho were pessimistic about the ability of governments to regulate the business cycle with fiscal policy.However, the advent of the global financial crisis of 2007—2008 caused a resurgence in Keynesian thought.Keynesian economics provided the theoretical underpinning for economic policies undertaken in response to the crisis by President George W.Bush of the United States, Prime Minister Gordon Brown of the United Kingdom, and other heads of governments.

In 1999,Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century, commenting that: “ His radical idea that governments should spend money they don’t have may have saved capitalism.” He has been described by The Economist as“Britain’smost famous20th-century economist”.In addition to being an economist, Keyneswas also a civil servant, a director of the Bank of England, a part of the Bloomsbury Group of intellectuals, a patron of the arts and an art collector, a director of the British Eugenics Society, an advisor to several charitable trusts, a successful private investor, a writer, a philosopher, and a farmer.

1.2 Ten Concepts of Econom ics(4)

Nicholas Gregory Mankiwdefined “economics is the study of how society manages its scarce resources”.In his popular book entitled Principles of Economics(1998), he listed ten principles of economics.Parallel to his principles, we have revised them into ten concepts as follows.

1.2.1 Concept#1: Choice

Choice involvesmentallymaking a decision:judging themerits and demerits ofmultiple options and selecting one ormore of them.One canmake a choice between imagined options(“whatwould I do if...?”) or between real options followed by the corresponding action.For example, a traveler might choose a route for a journey based on his preference of arriving at a given destination as soon as possible.The preferred (and therefore chosen) route can then follow from information such as the length of each of the possible routes, traffic conditions, scenic spots, etc.If the arrival at a choice includesmore complex motivators, cognition, instinct and feeling can become more intertwined.

Simple choicesmight include what to eat for dinner or what to





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