Essentials of economics: introduction and outline for students and for the general reader/by Dougles C. Hague and Alfred W. Stonier C.2

MANY questions spring automatically to the mind of anyone who takes an intelligent interest today in current economic affairs. Such questions are: Why did the price of commodities like wool rise so sharply after war broke out in Korea? Why do firms spend so much money on advertising? What difference does it make if the Bank of England alters 'Bank Rate'? Why can we be allowed to spend only a limited amount of money each year on foreign travel? And why does a pound buy a different number of francs, lire or kroner at various times? In this book we shall not attempt to answer such questions

in all their complex detail. The exact importance of the various influences at work will differ from time to time. We shall, how ever, try to show what are the essential factors on which such problems always depend. This immediately raises the basic difficulty of all economics. The only way in which it is possible to provide a simple outline of the fundamental features and pro blems of the modern economy is by following the traditional methods of 'deductive' economic analysis. One must use ob servation and common sense to determine what are the most important facts in any situation which one wishes to explain. One must then proceed from assumptions about these under lying facts to draw generally applicable conclusions. In doing this, however, one can do little more than rely on the assumptions that have become generally accepted by economists. For it is here that the economist meets with a problem that does not often beset the chemist or physicist. In economics it is impossible to carry out a controlled experiment either inside or outside a laboratory.

There are three main reasons for this inability to experiment. First, economists are not in a position to experiment with either individual consumers or individual business-men. In those instances where there is no way of experimenting save with a whole economy, such experiments are even more obviously out of the question.