Free Market Economics: A Syllabus
1. General Introduction
1. GENERAL INTRODUCTION
This syllabus is intended to help teachers of high school economics explain economic principles in the classroom. However, it contains many suggestions for introducing and explaining economics to younger students, as well as material to challenge older students and even adult readers. In any case, many ideas are included for varying the material— by dramatizing and simplifying explanations for younger students or “enriching” them for more mature students with extracurricular readings, papers and projects.
Any teacher embarking on the course outlined in this syllabus should be fully aware that it presents the economic theory of the free market. It begins by defining economics and describing briefly how the science of economics has been developed over centuries. It discusses various thinkers and philosophers who have contributed to economic understanding.
The theme throughout is that economics is a study of the consequences of (1) individual choices which depend on the ideas individuals hold and (2) individual actions taken in the conscious attempt to attain the various goals held by the individuals concerned. Current economic events become intelligible only when explained on the basis of economic laws derived from this insight into the nature of human action. Current economic problems can be solved only after one understands how these problems have developed—out of government interference with the “natural” economic forces, which evolve from the voluntary actions of individuals, whether acting alone or in conjunction and cooperation with others.
The material in this syllabus is arranged in three Parts, each including several Units dealing with major subject areas. Each Unit consists of (1) descriptions of various suggested activities to illustrate and dramatize the theories presented, (2) an explanatory text, (3) a list of the significant terms used in that Unit which are defined in the glossary and (4) a short list of recommended readings. The alphabetized glossary with definitions of the more important economic terms and concepts discussed throughout the syllabus appears at the back of this volume.
A collection of readings—free market economics: a basic reader—has also been compiled to accompany this syllabus. This companion volume contains 81 readings, arranged according to the 16 subject categories of the 16 Units in this volume, as well as a copy of the same complete alphabetized glossary to be found in the back of this syllabus volume. The Readings are referred to throughout the syllabus by their number in the reader.
There is more than ample material for a full year’s course in this syllabus. To select just what to include, the teacher should look over the material in advance in the light of the time available and the interests and capabilities of the students. A complete course might well be based on Part II alone. Or a single Unit could be used, with various recommended readings, as a specialized or minicourse. If time is especially short or the students relatively slow learners, instruction could be limited, with the aid of a few of the pertinent suggested activities and easier readings, to these major points:
1. economics deals with the actions of individuals based on their personal ideas, values and goals (Unit 3)
2. market prices are determined by acting individuals who buy or refuse to buy (Unit 6)
3. the purchases of consumers determine the size of every businessman’s “gate” or “box office receipts” (Unit 8)
4. money is a “trading commodity” that evolved out of barter—describe our coins and paper money physically and explain how to use a bank (Unit 10)
5. use Aesop’s “The Grasshopper and the Ant” to explain savings and the development of tools (Unit 7) and then introduce as much economic history as seems appropriate to show how people have used tools over the centuries to increase production (Unit 15)
In any event, to use the syllabus to best advantage, the teacher should become thoroughly familiar with it.
Several of the suggested activities used to illustrate and help explain economic theories in the classroom will require time to carry out and should be started in advance. In addition to the usual recommendations that various books be read and reviewed by the students, reports prepared and papers written on suitable topics, here are a few of the suggested activities which call for planning if they are to be carried out in connection with the pertinent Units:
1. Books to be read and research done on such topics as:
a. the lives and experiences of individual entrepreneurs, industrialists, inventors
Units 7, 8, 11
b. the historical development of specific business firms and industries
Units 7, 8, 11
c. the history of inventions, tools, machines, industrial techniques, transportation
Unit 7
d. the history of workers, working conditions, productivity and labor unions
Unit 9
e. the interdependence of producers and consumers in a division of labor economy
Units 5, 12
f. the development of world trade and trade routes
Units 5, 12
g. the ideas and contributions of individual economists
Unit 13
h. the theories of a specific “school” of economic thought
Unit 13
i. the governmental regulations and controls affecting a specific industry
Unit 14
j. the economic development of a specific country or geographical area
Unit 15
2. Local speakers to be invited to address the class:
a. a businessman, entrepreneur or the official of a large corporation
Units 8, 14
b. a bank official
Unit 10
3. Reports on projects of any students in the class who participated in the Junior Achievement program
Unit 8
4. Request the annual reports of large corporations
Units 7, 8, 11
5. Investment by the students of fictitious “nest eggs” on the stock market
Units 7, 8, 11
6. Write letters to the editors of local newspapers, commenting on current events in the light of economic principles covered in the classroom
Units 14, 15
7. Order film-strip, “Understanding Inflation”
Unit 10
8. Arrange field trips to local establishments such as:
a. factories
Unit 11
b. stock exchange or broker’s office
Units 7, 11
c. bank
Unit 10
9. Relating the economic principles being dealt with in the classroom to what is going on in the world is important. The teacher should, therefore, bring to class from time to time for discussion newspaper clippings which illustrate economic theories and the way government interventions have affected economic activities.
10. Have the students watch newspapers and magazines for articles dealing with economic matters—business, money, competition, investment, and so on. Each student may choose a topic, with the teacher’s approval, and start accumulating a file of clippings on that subject, for possible use later in preparing papers or reports. One student might take “money,” another “new businesses,” another “bankruptcies,” and so on. Here are a few topics on which students could accumulate newspaper clippings and magazine articles:
Money and banking Large corporations
Business activities within your state, or across state lines, that is “interstate commerce”
New businesses
New products or inventions
Manufacturing
Advertisements which refer to economics—for instance, Warner & Swazey has published good ones on free enterprise and Mobil on the reasons for the energy shortage Bankruptcies Transportation routes Foreign investments International trade
Production in “undeveloped” areas or specific countries Price and wage controls Minimum wage laws Agricultural production Changes in land uses, such as for highways, building construction or demolition, zoning, and so on Labor unions Wages and employment
11. Students might interview local businessmen, asking their reasons for entering a particular business when and where they did. Why did they decide to produce certain goods or services and not others? What investment was needed? What competition did they encounter? What government agencies, licenses and forms were involved? Have new government rules and regulations forced them to make changes in their methods of operation? Have they succeeded, at least in part, in accomplishing what they had hoped? If so, why? If not, why not? Do they anticipate having to cope with any particular problems or difficulties in the future?
12. Arrange a field trip to a local museum or historical home. Then compare living conditions of the past with those of today. Call attention to some of the primitive and often quite ingenious tools used, to make manual labor easier or more effective. Contrast the relative selfsufficiency of a community or family in earlier days with today’s widespread interdependence based on our complex and ultra-fine specialization and division of labor. List on the blackboard and discuss some of the activities formerly carried out in the home or local community which are now handled by specialists providing goods and services for a far-flung market. See how long a list may be compiled and discuss the reasons for such highly developed division of labor.
13. Hold “sound off” sessions from time to time. Name a specific subject the students have been studying, call on a student, and have him “sound off” for two minutes. Use a stopwatch. If another student catches the speaker in an error he or she should raise his or her hand, be asked for the right answer and, if correct, given the floor to continue for another two minutes by the stopwatch. Using a stopwatch helps make the students eager to participate, keeps them alert and challenged to listen for factual misstatements.
14. Divide the students into two or three teams, to compete with one another in a battle of knowledge based on quick recall, along the lines of a TV quiz show or the old “College Bowl” or “It’s Academic” program. Anyone who thinks he knows the answer to a question should raise his hand. Call on the first student to volunteer. If the answer is correct, credit that team with ten points. The team with the highest score at the end of the period wins. This activity is probably more appropriate for use with Unit 13 on the history of economic thought than with any other for historical data lend themselves most easily to the formulation of short factual questions.
15. As the course progresses and the students complete their individual research projects, try using the TV interview or panel discussion format to present the results of their studies to the class. For instance, one student might play the part of the moderator, asking the students questions on current economic programs such as minimum wage laws, inflation, tariffs or import quotas. If some students have made special studies of the theories of leading economists such as Adam Smith, Jean Baptiste Say, Frederic Bastiat, John Stuart Mill, Carl Menger, John Maynard Keynes, Henry Hazlitt or Ludwig von Mises, a debate or round table discussion might be held among several students, each representing one of these notables and arguing in the light of his doctrines.
16. The Congressional Committee format might be used. Student “Congressmen” would question student “experts” on their recommendations for legislation to enact, amend or repeal price controls, farm subsidies, welfare benefits, the right to own and trade in gold, federal spending on schools or highways and the like.
When working with high school students, keep in mind that they are often restless and impatient. Shift pace from time to time. The suggested activities with each Unit offer many more ideas for varying techniques. The questions formulated in the explanatory text may be used as the basis for discussions, oral reports, research, written papers or essay-type examinations. No class will have time to implement all the suggested activities described, so pick and choose according to the interests and capabilities of your students.
REFERENCES
It is impossible to keep up with the latest news as to what books are in or out of print. However, the majority of the books listed on the bibliography (pp, 9-10) and among the recommended readings at the end of each Unit should be in print and, thus, readily available from their respective publishers, local bookstores and/or this Foundation (write for our latest catalog). Consult the current edition of Books In Print. Out-of-print titles have been limited primarily to fairly well known books that should be found in most sizeable libraries. However, the teacher might well find it helpful to have a few books on hand as a “nucleus library” in the classroom for easy reference. The twelve titles marked † on the bibliography are especially pertinent and recommended for this purpose.
In addition to various books and the articles included in the basic reader, copies of at least one daily newspaper and various news weeklies should be available in the classroom. The students should be encouraged also, to become familiar with the following types of references.
1. Encyclopedias—The students will have occasion, when working on papers and special reports, to refer to the encyclopedias available in the school library.
2. Old mall order catalogs—It would be helpful to have on hand some of the early Sears, Roebuck and Montgomery Ward catalogs that have been revived and reprinted lately. These illustrate graphically the tremendous changes which have taken place as the result of new ideas, new inventions, new products, and new methods of production.
3. Biographies and histories—Teacher and librarian should accumulate biographies of economists and businessmen, as well as histories of business firms, industries, inventions, trade routes, methods of transportation, and so on. Such books would be suitable not only for reference but also for assigned book reviews in connection with Units 7, 8, 11, 12 and 15.
4. Periodicals—It would help to have the following available for reference in the classroom library:
Barrons
Business Week
The Freeman (available since 1965, bound in annual volumes)
U. S. News & World Report Wall Street Journal
Miscellaneous bank letters such as those of the
Federal Reserve Bank of Philadelphia
Federal Reserve Bank of St. Louis
First National City Bank (Monthly Economic Letter)
Morgan Guaranty Trust Company (Survey)
NOTE: On the bibliography as well as on the lists of Recommended Readings throughout the SYLLABUS, the more difficult readings are starred with asterisks. The other titles should be intelligible to most high school students.
QUESTIONS TO DETERMINE STUDENT UNDERSTANDING
Some or all may be asked at the start of the course and then again upon its conclusion
QUESTIONS
1. What is “economics?”
2. Should individuals be allowed to own private property? If so, why? If not, why not?
3. Why do people trade with one another?
4. Who benefits from a trade?
5. Does a buyer or a seller benefit more from a transaction? Explain your answer.
6. What is the purpose of production?
7. Why do people want jobs?
8. Can it be said that production is the outcome of the cooperation of many persons? If so, how does their cooperation lead to production?
9. What are the economic consequences of competition among producers? Workers? Traders? Customers?
10. What is an “entrepreneur?” What does he do?
11. How do producers in a free market learn what goods and services to produce and how much to produce?
12. What must a businessman do to make a profit?
13. Why do some businessmen suffer losses?
14. What does it mean when a businessman earns a profit (or a loss) on a free market economy?
15. Does it help or hurt economic production for people to save?
16. What is a “tool?”
17. What are the advantages, or disadvantages, of using tools and machines in production?
18. What is “money?”
19. How are prices determined on a free market?
20. How are wages and salaries determined on a free market?
21. What is “inflation?”
22. Who, or what, is responsible for inflation?
23. What is, or was, the “Industrial Revolution?”
24. Modern capitalism is characterized by mass production. What does this mean?
25. What is the effect of high or progressive taxes on production?
26. Suppose the government tries to regulate and control buying and selling on the market?
27. Suppose the government compels a businessman to sell his output at artificially low prices. What effect will this have on supply? Demand?
28. Have you or your family bought anything in recent weeks that came from another state or country? If so, why did you buy it?
29. How do you define a free market? Human rights? Property rights? Capitalism? Competition? Laissez faire? Communism? Socialism?
30. What economic system is most productive? Why?
ANSWERS
1. The study of purposive human actions (Units 2, 16 and glossary).
2. Yes, for it enables them to better attain their various ends (Unit 4).
3. To improve their respective situations (Units 4, 5 and 12).
4. Both parties, if they trade voluntarily and anticipate the future correctly (Units 4, 5 and 12).
5. Comparisons are not possible for each party’s gain depends on his/her subjective (personal) values (Unit 3).
6. To provide for consumption (Units 2, 3, 4, 7,8, etc.).
7. Because for most people having a job is the easiest way to get what they want and need to consume (Unit 9).
8. Production is the outcome of cooperation—in the form of specialization, division of labor and exchange (Units 4 and 5).
9. Producers are pressured to serve consumers at the lowest possible prices (Units 8 and 11). Workers are encouraged to do their best and assured that employers will pay them the market value of their output (Unit 9).
Traders are spurred to search throughout the trading area for things consumers want and need (Units 8, 11 and 12).
Customers are provided with freedom to choose among varieties of goods, services, prices, etc. (Units 6, 8, 11 and 12).
10. An entrepreneur tries to produce things consumers want, in the hope of earning profits (Unit 8 and glossary).
11. Through consumer purchases, refusals to purchase, their “gate” or “box office receipts” (Unit 8).
12. Provide consumers with things they want and will pay more for than it cost to produce them (Unit 8).
13. They fail to satisfy consumers, or fail to keep their costs below what consumers will pay (Unit 8).
14. Success (or failure) in serving consumers (Unit 8).
15. Saving helps production, for the tools and machines which make more production easier and quicker depend on savings (Unit 7).
16. Anything that is used for a purpose (Unit 7 and glossary).
17. They make it possible to increase the quantity and improve the quality of production (Unit 7).
18. A very marketable commodity, a “trading commodity” or medium of exchange (Unit 10 and glossary).
19. By the bidding and refusals to bid of potential buyers and sellers (Unit 6).
20. By the bidding and refusals to bid of potential employers and employees (Unit 9).
21. An increase in the quantity of money (Unit 10 and glossary).
22. Anyone who may increase the quantity of the “trading commodity”—under present conditions, governments and banks that are privileged to issue banknotes and/or expand credit are responsible for inflation (Unit 10 and glossary).
23. Any significant shift in industrial methods is an “industrial revolution.” However this term is frequently applied specifically to the 18th-19th century change-over from manual labor to steam power and small-scale to mass production methods (Units 7, 9, 15 and glossary).
24. Production on a large scale for many customers (Units 11, 15 and glossary).
25. Reduced production and increased costs (Unit 14).
26. It hampers production and violates consumer sovereignty (Units 11 and 14).
27. Shortages will develop on the market, for demand will rise but production will decline (Unit 14).
28. If imports were voluntarily purchased, the purchaser must have thought they were the best things then available for the money (Unit 12).
29. See glossary definitions.
30. A free market economy—because competition among producers to serve consumers assures the greatest amount of production at lowest possible prices.
BIBLIOGRAPHY OF BOOKS REFERRED TO IN THE SYLLABUS
An asterisk (*) indicates more difficult readings
† Recommended for classroom Nucleus Library
* Ashton, T. S. An Economic History of England: The 18th Century (New York: Barnes & Noble, 1954)
†* __The Industrial Revolution: 1760-1830(New York: Oxford Univ. Press, 1948/1962/1973)
† Ballvé, Faustino. The Essentials of Economics. From the Spanish, 1956. (Princeton, N. J.: D. Van Nostrand, 1963; Foundation for Economic Education, 1969)
Bastiat, Frederic. Economic Harmonies. From the French, 1851. (Princeton, N. J.: D. Van Nostrand, 1964; Foundation for Economic Education, 1968)
__Economic Sophisms. From the French, 1844-1850. (Princeton, N. J.: D. Van Nostrand, 1964; Foundation for Economic Education, 1968)
† __The Law. From the French, 1850. (Foundation for Economic Education, 1950/1961)
__“What is Seen and What is Not Seen.” From the French, 1850. Reprinted in Selected Essays on Political Economy (Princeton, N. J.: D. Van Nostrand, 1964; Foundation for Economic Education, 1968)
†* Boehm-Bawerk, Eugen von. Value and Price. From the German 4th edition of Capital and Interest, 1921. (South Holland, 111.: Libertarian Press, 1960/1973)
Campus Studies Institute. The Incredible Bread Machine (San Diego, Calif.: World Research, Inc., 1974)
† Carson, Clarence B. Throttling the Railroads (Indianapolis, Ind.: Liberty Fund, 1971)
† Chamberlain, John. The Enterprising Americans (New York: Harper & Row, 1963/1974)
Cooley, Oscar W. Paying Men NOT to Work (Caldwell, Idaho: Caxton Printers, 1964)
Curley, Charles. The Coming Profit in Gold (New York: Bantam Books, 1974)
† Curtiss, W. M. The Tariff Idea (Foundation for Economic Education, 1953/1962)
Defoe, Daniel. Robinson Crusoe (1719). Many editions.
* Dietze, Gottfried. In Defense of Property (Baltimore: Johns Hopkins Press, 1971)
Fleming, Harold M. States, Contracts and Progress: Dynamics of International Wealth (Dobbs Ferry, N. Y.: Oceana Pubns., 1960/1966)
__Ten Thousand Commandments: A Story of the Antitrust Laws (Englewood Cliffs, N. J.: Prentice-Hall, 1951; New York: Amo Press, 1971)
* Greaves, Percy L., Jr. Is Further Intervention a Cure for Prior Intervention? (Foundation for Economic Education, 1956)
* __Mises Made Easier: A Glossary for Ludwig
von Mises’ HUMAN ACTION (Dobbs Ferry, N. Y.: Free Market Books, 1974)
†* __Understanding the Dollar Crisis (Belmont, Mass.: Western Islands, 1973)
* Hayek, F. A. Capitalism and the Historians (Chicago Univ. Press, 1954/1963)
*--The Counter-Revolution of Science (New York: Free Press of Glencoe/Macmillan, 1952/ 1964)
*--The Road to Serfdom (Chicago Univ. Press, 1944/1956)
Hazlitt, Henry. The Conquest of Poverty (New Rochelle, N. Y.: Arlington House, 1973)
†__Economics in One Lesson (New York: Harper & Brothers, 1946; 2nd ed., New York: MacFadden Pubns., 1962; New York: Manor Books, 1973)
*__The Failure of the “New Economics” (Princeton, N. J.: D. Van Nostrand, 1959; New Rochelle, N. Y.: Arlington House, 1973)
__Man vs. the Welfare State (New Rochelle, N. Y.: Arlington House, 1969)
--What You Should Know About Inflation (Princeton, N. J.: D. Van Nostrand, 1960/1965; New York: Funk & Wagnalls, 1968)
* Kirzner, Israel. The Economic Point of View (Princeton, N. J.: D. Van Nostrand, 1960)
* Menger, Carl. Principles of Economics. From the German, 1871. (New York: Free Press of Glencoe/ Macmillan, 1950)
† Mises, Ludwig von. Bureaucracy (Yale Univ. Press, 1944; New Rochelle, N. Y.: Arlington House, 1969)
__The Free and Prosperous Commonwealth. From the German, 1927. (Princeton, N. J.: D. Van Nostrand, 1962)
--The Historical Setting of the Austrian School of Economics (New Rochelle, N. Y.: Arlington House, 1969)
*__Human Action (Yale Univ. Press, 1949; 2nd ed., 1963; 3rd ed. Chicago: Regnery, 1966)
--Planned Chaos (Foundation for Economic Education, 1947/1961); reprinted as “Epilogue” in Socialism, 1951/1969)
--Planning for Freedom (South Holland, 111.: Libertarian Press, 1952/1962/1974)
*--Socialism. From the German, 1922. (Yale Univ. Press, 1951; London: Jonathan Cape, 1969)
* North, Gary. Marx’s Religion of Revolution (Nutley, N. J.: Craig Press, 1968)
Petro, Sylvester. The Kohler Strike (Chicago: Regnery, 1961; Belmont, Mass.: Western Islands, 1965)
Polo, Marco. The Travels of Marco Polo (c.1300). Many editions
Read, Leonard E. Anything That’s Peaceful (Foundation for Economic Education, 1964)
--Deeper Than You Think (Foundation for Economic Education, 1967)
†--The Free Market and Its Enemy (The Foundation for Economic Education, 1965)
--Let Freedom Reign (Foundation for Economic Education, 1969)
Roche, George C. III. Frederic Bastiat: A Man Alone (New Rochelle, N. Y.: Arlington House, 1971)
† Rothbard, Murray N. What Has Government Done to Our Money? (Colorado Springs, Colo.: Pine Tree Press, 1964; 2nd ed., Santa Ana, Calif.: Rampart College, 1974)
* Rougier, Louis. The Genius of the West (Los Angeles: Nash Pub., 1971)
* Smith, Adam. The Wealth of Nations (1776). Many editions
Sumner, William Graham. What Social Classes Owe to Each Other (1883). Many editions. (Caldwell, Idaho: Caxton Printers, 1952/1970)
Velasco, Gustavo R. Labor Legislation from an Economic Point of View (Indianapolis, Ind.: Liberty Fund, 1973)
Weaver, Henry Grady. The Mainspring of Human Progress (Foundation for Economic Education, 1947/1953)
White, Andrew Dickson. Fiat Money Inflation in France (1912). Many editions
Williams, Roger J. You Are Extraordinary (New York: Random House, 1967; Pyramid Books, 1974)
