THERE ARE MANY TESTS OF A GOOD ECONOMICS TEXT: how effectively it engages students, leading them to see familiar things in new ways, and to ask probing questions about old and often entrenched ways of viewing the world; whether the intellectual adventure that it takes students on inspires them to seek out greater exposure to the discipline and to find ways of putting economics to work for them; and whether students who, having been introduced to the discipline but who then choose to put both the text and economics aside, do so having developed a sense of admiration for the power of economic ideas. In the case of an introductory level text, another test is how well it cements the foundations for further enquiry, providing students with a pathway to a deeper understanding of the discipline.

While we have taken the opportunity provided by a third edition to review, update and extend many parts of this text, the spirit and integrity of our approach has been preserved. From the outset we encourage the student to become a skilled economic naturalist—that is, someone who instinctively uses basic economic principles to interpret and explain what they observe in the world around them. An economic naturalist understands, for example, why infant safety seats are required in cars but not in aeroplanes, why movie theatres give discounts to senior citizens on the price of a movie ticket but not on popcorn, and why a struggling lawyer buys an expensive Gucci suit that he can ill afford. We teach the student to become an economic naturalist through numerous ‘Thinking as an economist’ examples, chosen both to grab attention and to demonstrate the breadth of applications of economic thinking. By building on the student’s own experience of economic decision-making, we encourage the student to see each feature of their economic landscape as the result of the application of the cost–benefit principle. We alert students early in the book to the pitfalls that people commonly encounter when making economic decisions—such as considering sunk costs when they are best ignored, and failing to account for difficult-to-see opportunity costs.

We present concepts intuitively through examples drawn from a wide range of familiar contexts, avoiding excessive reliance on mathematical derivations. Learning is reinforced when students are asked to apply each concept by answering related questions, exercises and problems. Concepts are further illustrated and extended through a series of colourful and contemporary background briefings. A well-designed package of pedagogical resources, described in the ‘How to use this book’ section, assists instructors in the design of their courses and provides students with ample opportunity to practise their newly acquired skills. We also encourage students to master the art of asking economic questions in the belief that the ability to see, and to clearly articulate, the economic puzzles encountered in various domains of life, is as important an element of economic understanding as being able to answer economic questions.

Our experience with introducing students to economics convinces us that when it comes to the content of introductory courses more is definitely not always better. We therefore deliberately avoid overwhelming newcomers to the discipline with encyclopaedic coverage. In fact, the text’s limited coverage is itself the result of our applying the cost–benefit test. A few core principles do most of the work in economics. By focusing almost exclusively on this short list of well-articulated principles, the text ensures that students have the best chance of leaving the course with a deep mastery of these principles.

As is the case with earlier editions of the text we choose not to provide in-depth treatment of a number of market models, in the belief that such discussion is best left for later studies. Instead, we focus on the single, common feature that differentiates all imperfectly competitive firms from their perfectly competitive counterparts, namely their price-setting ability, emphasising the implications of market power for pricing and production decisions. Likewise, our treatment of cost curves is deliberately kept simple and uncluttered, reflecting our experience that full-blown treatment of production and costs is ill-advised at the principles level. Chapters on the economics of information and strategic behaviour continue to deliver key insights from these important areas of the discipline in an intuitively accessible form and provide students with further opportunity to consolidate their understanding of core principles.

In addition to a thorough overhaul of all explanations and language, this third edition includes a number of key innovations. The decision pitfalls, introduced in Chapter 1 but exercised throughout the text, have been reorganised and expanded to include the danger of disregarding the timing of costs and benefits as a potential trap for economic thinking. A revised explanation of opportunity cost and a new core principle highlighting the central role of incentives in influencing economic behaviour have also been incorporated in this important introductory chapter. We have also extended our treatment of demand with the inclusion of a new appendix on the use of indifference curve and budget constraint analysis to help explain buyer behaviour.

A new concluding chapter brings the economic naturalist full-circle, reinforcing core principles. By successfully solving a number of thinking-as-an-economist puzzles in this chapter that might, at the beginning of students’ journey through this book, have seemed intractable, students will understand just how far down the path to economic naturalism they have come.

A key contributor to modern microeconomics, Arnold Harberger, once commented that ‘the strength of microeconomics comes from the simplicity of its underlying structure and its close touch with the real world’. Our hope is that, having passed the test of a good text, the same will be said of this book.

SARAH JENNINGS
University of Tasmania