МИНИСТЕРСТВО ОБРАЗОВАНИЯ РЕСПУБЛИКИ БЕЛАРУСЬ
УО «Белорусский государственный экономический университет
Иванова О.В., Кирильчик Т.К.
INTRODUCTION TO ECONOMICS
Введение в экономику
Минск 2014
А в т о р ы: Иванова О.В. , Кирильчик Т.К.
Р е ц е н з е н т : Родион С.К.
Р е к о м е н д о в а н о кафедрой теории и практики английской речи
БГЭУ
Иванова О.В., Кирильчик Т.К.,
Введение в экономику = Introduction to Economics: Электронное
учеб.-метод. пособие (ЭУМИ) / О.В. Иванова, Т.К. Кирильчик. – Минск:
БГЭУ, 2014. – 56 с., (1,9 печ. листов).
Учебно-методическое
пособие
содержит
тексты
для
изучающего
и
ознакомительного чтения, лексический материал, комплекс упражнений и заданий для
формирования англоязычных коммуникативных навыков студентов в рамках темы
«Экономика как наука» по дисциплине «Иностранный язык (английский)».
Предназначено
для
студентов
БГЭУ
дневной
формы
обучения.
2
WHAT IS ECONOMICS?
GETTING STARTED
1. Read the following quotations about economics and choose one or more
you like most of all. What do you think the authors mean by these statements?
Express your own ideas to support or refute the author’s view.
1. Economics is the science which studies human behaviour as a
relationship between ends and scarce means which have alternative uses (Lionel
Robbins - English economist, 1898-1984).
2. Economics is a subject that does not greatly respect one's wishes (Nikita
Khrushchev- Soviet state man, 1894-1971).
3. I am not prepared to accept the economics of a housewife (Jacques
Chirac - French politician, 1932).
4. If all economists were laid end to end, they would not reach a conclusion
(George Bernard Shaw, Irish dramatist, 1856-1950).
5. He who will not economize will have to agonize (Confucius, 551-479 BC).
USEFUL VOCABULARY
advanced economy — развитая экономика
allocate, v - размещать
allocation, n - размещение
allocation of resources - распределение ресурсов
assets - фонды, средства, актив (баланса)
assume, v - предполагать
assumption, n - предположение
capital goods - средства производства
choice, n — выбор
command
economy
-
административно-командная
экономика
3
commodity, n - предмет потребления, товар
consumption, n – потребление
costs, n - затраты, расходы, издержки
costs of production - издержки производства
current assets - оборотный капитал, оборотные средства
demand, n – спрос
economic growth – экономический рост
economic recession (or decline ) - экономический спад
entity, n - экономическая единица, организация
expenditure, n - расход
factors of production — факторы производства
fixed capital - основной капитал, средства, основные фонды
fixed costs - постоянные издержки
goods, products, commodities, merchandise, items — товары
Gross Domestic Product (GDP) – валовый внутренний продукт
(ВВП)
Gross National Product (GNP) – валовый национальный продукт
(ВНП)
human resources - человеческие ресурсы
income, n - доход
inflation rate - уровень инфляции
interest rate - процентная ставка
market economy - рыночная экономика
mass consumption - массовое потребление товаров
mixed economy - смешанная экономика
natural resources - природные ресурсы
opportunity costs - альтернативные издержки
output, n - выпуск продукции, объем производства
overheads, n - накладные расходы
private ownership - частная собственность
4
productive resources - производственные ресурсы
productivity, n - производительность
raw materials - сырье
revenue, n - доход; выручка
scarcity, n - дефицит, нехватка, ограниченность
standard of living - уровень жизни
surplus, n - избыток, излишек
supply, n - предложение
traditional economy - традиционная экономика
utility, n- общественная полезность
variable costs - переменные издержки
working capital — текущие активы
WHAT IS ECONOMICS?
Pre-reading activities
1. Study the different meanings of the following words:
Economics is the study of the way in which money, industry, and
trade are organized in a society.
The economy of a country or region is the system by which money,
industry, and trade are organized: a capitalist/free/market/mixed economy,
political/domestic economy. The wealth obtained by a country or region from
business and industry is also referred to as its economy: the national
economy. Economy is also careful spending or the careful use of things to
save money: economy of effort/words.
An economist is somebody who studies, works or is an expert in
the field of economics.
5
If you economize, you save money by spending it very carefully.
To economize means to reduce expenditure, or use resources less wastefully:
We had to economize on fuel.
Economic means concerned with the organization of the money,
industry, and trade of a country, region, or social group. A business that is
economic produces a profit.
Something that is economical does not require a lot of money to
operate. If someone is economical, he spends money carefully and sensibly.
Economical also means using the minimum amount of something that is
necessary.
Economic or economical?
The adjective economic denotes economics or the economy, and is
concerned with “aspects of the supply of goods and structure of wealth”:
Economic activity/theory/development/planning/policy, the economic effects
of taxation.
The adjective economical, on the other hand, has to do with economy
specifically in its senses “making the best and most frugal use of resources”
and
“inexpensiveness”:
an
economical
cook/housewife/production
process/budget.
But the two adjectives can overlap in one sense, “efficient in terms of
contributing to thrift”: an economical (or economic) use of electricity.
1.Complete the following sentences with the appropriate word from the list
below.
economic
economics
economize
economical
economist
economy
1. A good manager is _________ in the use of his funds.
6
2. An __________ is a person who studies, teaches, or writes about
economics.
3. An ___________ person saves money wherever possible.
4. By exercising strict ___________ he saved enough money to retire
early.
5. By using _________ in buying food and clothes, we were soon able to
save money for the new car we needed.
6. ___________ is a social science concerning behavior in the fields of
production, consumption, distribution, and exchange.
7. It is much more _________ to buy in bulk.
8. In times of difficulties we all have to _____________.
9. Nations experience different rates of ____________growth.
10.
The country is in the period of __________ and industrial crises.
1. READING I
1. Read the text and focus on the following points:
- the origin of economics,
- the subject of economics,
- the definitions of economics,
- its main branches.
Explain in a few words why it is important to study economics
THE MEANING OF ECONOMICS
The word “economics” derives from the Greek word “oikonomika” that
means household management. Economics came of age as a separate area of
study with the publication of Adam Smith’s “The Wealth of Nations” (1776).
Adam Smith is often considered to be the founder of modern day economics
because he was the first writer to outline and appraise the working of a free
market economy.
Although the content and character of economics can`t be described briefly,
numerous writers have attempted that. An especially useless, though once
popular, example is: “Economics is what economists do.”
7
Similarly, a notable economist of the last century Alfred Marshal called
economics “a study of mankind in the ordinary business of life.” Lionel Robbins
in the 1930s described economics as “the science of choice among scarce means
to accomplish unlimited ends.”
During much of modern history, especially in the nineteenth century,
economics was called simply “the science of wealth.” Less seriously, George
Bernard Shaw was credited in the early 1900s with the witticism that
“economics is the science whose practitioners, even all were laid end to end,
would not reach agreement.”
Most economists define economics as a social science concerned with the
production, distribution, exchange, and consumption of goods and services.
Economics is the study of how goods and services get produced and how
they are distributed.
By goods and services, economists mean everything that can be bought
and sold. The two kinds of goods are economic goods and free goods.
Economic goods are those things people will pay to receive. Bread, bicycles,
jeans are examples of economic goods. Free goods are things that can
usually be obtained without cost. Air, sunshine, and in some cases water are
examples of free goods. An item can be both a free good and an economic
good. The water people drink from a clean stream or brook is a free good.
The water that people drink from the tap in their homes has to be paid for
and is an economic good.
Services play an important part in everyone’s daily lives. Today more
people work in service industries than in the production of actual goods.
Sales policies and training of workers are directly related to the production
of goods. Sales of many goods are, in turn, often linked to a warranty and
repair service. Who would buy a TV set if there were no warranties or repair
services?
8
By produced, economists mean the processing and making of goods and
services. By distributed they mean the way goods and services are divided
among people. Economists focus on the way which individuals, groups,
business enterprises, and governments seek to achieve efficiently any
economic objective they select.
Economists notice that there is no restriction to the amount or kinds of
things people wish to purchase. But still there is a limit to the resources used
to produce goods and services available to satisfy people’s wishes and needs.
In other words, economics always deals with the problem of scarcity
(scarcity is the condition that exists if more of a good or service is demanded
than can be produced). For an individual, limited resources include time,
money and skill. For a country, limited resources include natural resources,
capital, labour force and technology. Given that most resources, goods, and
services are scarce, every society has a lot of choices to be made. What
goods will be produced? Which limited resources will be used to produce
them? To whom will these goods and services be distributed? Since people
do not have limitless supplies of wealth, they must make decisions about
what goods and services to obtain and consume and whether they should
save or spend.
The condition of scarcity is the main problem economics studies.
Economics is a social science that studies how individuals, governments,
firms and nations make choices on allocating resources to satisfy their
unlimited wants.
In the process of making choices people and governments will try to
economize, to get the most from what they have. Taking this fact into
account we can define economics as the study of how, in a given society,
choices are made in the allocation of resources to produce goods and
services for consumption, and the mechanisms and principles that govern
9
this process. In a word, economics is the science that deals with production,
distribution and consumption of commodities.
The production, distribution and consumption of goods and services can
be strongly influenced by government actions. The government can act to
limit production of certain goods. At other times the government can
encourage greater production of certain goods. Government taxes on goods
entering a country can help to protect
nation’s industries. Government tax
policies can also affect profits made by businessmen. This, in turn, can affect
many production decisions. In some parts of the world, governments make
the major decisions on how goods and services are distributed.
Society makes two kinds of choices: economy-wide, or macro choices
and individual, or micro choices. Reflecting the macro and micro
perspectives, economics consists of two major branches: macroeconomics
and microeconomics.
The old saying “Looking at the forest rather than the trees” fits
macroeconomics. Macroeconomics is the branch of economics that studies
decision making for the economy as a whole. Macroeconomics examines
economy-wide variables, such as inflation, unemployment, growth of
economy, money supply, and national incomes.
Examining individual trees, leaves, and pieces of bark, rather than
surviving the forest, illustrates microeconomics. Microeconomics is the
branch of economics that studies decision making by a single individual,
household, firm, industry, or level of government. The focus is on small
economic issues, such as economic decisions of particular groups of
consumers and businesses.
Why should we study economics? There are several very good reasons,
all of which involve us. Some of them have to deal with us as individuals spenders, some - as citizens and finally as future economists. As members
10
of the society we live in, there is no escaping economics. The food we eat,
the dwelling we live in, the clothing we wear and the way we spend our
leisure time are all affected by economic forces. Economic forces also
influence decisions in the world of business. In fact, one common definition
of economics is “the study of how people make living”.
We have seen that economics deals with the problems of scarcity and
choice faced by societies and nations throughout history, but the
development of modern economics began in the 17 th century. Since that time
economists have developed methods of studying and explaining how
individuals, businesses and nations use their available resources. Large
corporations use economics to study the ways they manage business and to
suggest methods for making more efficient use of their employees,
equipment, factories and other resources. The government also employs
economists to study economic problems as well as solve them.
1.
Answer the following questions on the contents of the text.
1. Is economics a science?
2. Who is considered to be the father of economics?
3. What is the origin of the word ‘economics’?
4. Is it difficult to define economics? What definitions of economics
have you learned from the text?
5. What is the subject of economics?
6. What problems are economists concerned with?
7. Differentiate between the major divisions of economics.
8. Explain why scarcity is one of the main issues in economics.
9. What is the relationship between the government and economics?
10.What is the role of economists in the development of modern
societies?
11
2. Read the text again and say if the following statements are true or false
according to the information in the text.
1. Most economists define economics as an applied science concerned
with the production, distribution, exchange, and consumption of goods
and services.
2. Bread, bicycles, jeans are examples of free goods.
3. Today more people work in service industries than in the production
of actual goods.
4. For a country, limited resources include time, money, skills.
5. Economics is a system by which industry, trade and money are
organized.
6. Microeconomics is the branch of economics that studies decision
making for the economy as a whole.
7. Macroeconomics is the branch of economics that studies decision
making by a single individual, household, firm, industry, or level of
the government.
3. Choose the right variant.
1.The subject of economics is primarily the study of:
a) the government decision making process;
b) how to operate a business successfully;
c) decision-making because of the problem of scarcity;
d) how to make money in the stock market.
2.The condition of scarcity:
a) cannot be eliminated;
b) prevails in poor economies;
12
c) prevails in rich economies;
d) all of the above;
e) none of the above.
3.The condition of scarcity can be eliminated if:
a) people satisfy needs rather than false wants;
b) sufficient new resources were discovered;
c) output of goods and services was increased;
d) all of the above;
e) none of the above.
4.Which of the following is included in the study of macroeconomics?
a) salaries of college professors;
b) computer prices;
c) unemployment in the nation;
d) silver prices.
5.Microeconomics approaches the study of economics from the viewpoint of:
a) individual or specific markets;
b) the national economy;
c) government units;
d) economy-wide markets
4. Expand the sentences, using the information from the text.
1. Economics is the study of how ……
2. Economy is …..
3. Scarcity is the condition in which….
4. Macroeconomics is the branch of economics that ….
5. Microeconomics is ……
13
READING II
1. Read the text and focus on the following:
- a difference between wants and needs;
- economic goods;
- economic services;
- factors of production/productive resources;
- sectors in the economy;
- opportunity cost
SATISFYING PEOPLE’S WANTS
Economics is the study of how individuals and society choose to use limited
resources in an effort to satisfy people's unlimited wants. It is important to point
out that there is a difference between wants and needs. Needs are basic
necessities such as food, clothing and shelter. Other so-called “needs” are really
“wants”. For example, you may want new clothes, but whether or not you need
them is a value judgement. Most people’s needs are limited. In contrast,
people’s wants are unlimited. Satisfying such wants involves the production of
economic goods and services.
Economic goods are things of value that you can see and show to the others.
They are things like bicycles, books, stereos, and clothing. Economic goods also
include such things as factories, stores, machines, and tools.
Economic services are intangible things that have value but often cannot
be seen, touched, or shown to others. The examples of economic services are
medical care, legal advice, movies and national defence.
Factors of production are also called productive resources. These are the
basic resources which are needed for the production of economic goods and
services. Economists divide factors of production into four basic categories: (1)
natural resources, (2) capital goods, (3) labour and (4) entrepreneurship.
14
Natural resources are things provided by nature. Land, air, water, forests,
coal, iron ore, oil, and other minerals are examples of natural resources. They
are the starting points of all production, and they represent the most basic
limitations of the productive capacity of an economy. In other words, no matter
how much skilled labour and technological knowledge an economy has, it
cannot create goods if it lacks natural resources.
Capital goods are human-made resources that are used for the production
of other goods and services. Factories, machines, tools, trucks, and business
buildings are all examples of capital goods.
It is important to distinguish between capital goods and consumer goods.
Consumer goods, which are not a factor of production, are finished products
sold to consumers for their own personal use. They include such things as
food, clothing, TV sets, and newspapers. In contrast, capital goods are things
that are used in the production of consumer goods and services. A factory that
manufactures TV sets is a capital good. Some things can be either consumer
goods or capital goods, depending on how they are used. For example, an
automobile purchased for personal use is a consumer good. However, automobiles
purchased for use as taxis or for other business purposes are capital goods
Labour, sometimes called human resources, is any form of a human
effort exerted in production. It includes all kinds of work. The work of a
teacher, lawyer, engineer, and the governor of your state are all examples of
labour. Labour is essential to production, since natural resources and capital
goods are of no value unless they can be put to use.
The three factors of production described above - natural resources, capital
goods and labour must be combined and organized before production can take
place. This is where entrepreneurship, the fourth factor of production, enters
the picture. Entrepreneurship may be defined as the function of combining and
organizing natural resources, capital goods, and labour, assuming the risks of
business failure, and providing the creativity and managerial skills necessary
15
for production to take place. An entrepreneur is a person who carries out these
tasks in the hope of making financial gains from the endeavour.
The economy includes several sectors (also called industries), that evolve in
successive phases. They are the following:
• Primary sector. It involves the extraction and production of raw materials.
• Secondary sector. It involves the transformation of raw or intermediate
materials into goods.
• Tertiary sector. It involves the provision of services to consumers and
businesses.
• Quaternary sector. It involves the research and development needed to
produce products from natural resources.
Economists use the term opportunity cost to refer to the value of what is
foregone in order to have something else or it is the next best alternative
which is given up when a decision is made to use limited resources in a
particular
way.
Opportunity
cost
is
an
important
concept
in
microeconomics. Many courses of action are valued in terms of what is
sacrificed so that they might be undertaken. For example, the opportunity
cost of a public project is the value of the additional goods that the private
sector would have produced with the resources used for the public project.
Opportunity cost is different for each individual and nation. Thus, what is
valued more than something else will vary among people and countries
when decisions are made about how to allocate resources.
1.Answer the following questions on the contents of the text.
1. What is the difference between economic goods and economic services? Give
examples to illustrate them.
2. What are the basic categories of the factors of production?
3. Are consumer goods considered to be factors of production? What is the
difference between consumer and capital goods?
16
4. How can you prove that labour is an essential factor of production?
5. Are there any other factors that influence production in the modern world?
6.What are the four main sectors of economic activity in modern economies?
7.What is opportunity cost?
2.Read the text again and say if the following statements are true or false
according to the information in the text.
1.Economics is the study of how individuals and society choose to use unlimited
resources in an effort to satisfy people's limited wants.
2.Most people’s needs are unlimited.
3.Economists divide the factors of production into three basic categories.
4.The four factors of production must be combined and organized before
production can take place.
5.Primary sector involves
the
transformation
of
raw
or
intermediate
materials into goods.
6.Quaternary sector involves the research and development needed to
produce products from natural resources.
7.Opportunity cost is an important concept in macroeconomics.
3.Match the beginnings and endings of the following statements.
1.economic goods
a.finished products sold to consumers for
their own personal use
2.economic services
b. the next best alternative which is given
up when a decision is made to use limited
resources in a particular way
3.capital goods
c. intangible things that have value but
often cannot be seen, touched or shown to
others
4.productive resources
d. things of value that you can see, and
which can be shown to the others
5.natural resources
e. the basic resources which are needed
17
for the production of economic goods and
services
6.consumer goods
f. human-made resources that are used for
the production of other goods and
services
7.opportunity cost
g. things provided by nature
READING III
As you read the text, focus on the concept of "economic system" and its
various types.
ECONOMIC SYSTEMS
Allocating resources efficiently is complicated because there is almost always a
very thorny tradeoff between what is efficient and what is "fair." People and
societies organize economic life to deal with the basic problems raised by scarcity
and opportunity cost through economic systems. An economic system can be
described as the collection of institutions, laws, activities, controlling values,
human incentives that collectively provide a framework for economic
decision-making. An economic system works via the interaction of three invisible
forces: the invisible hand (economic forces), invisible foot (political forces) and
invisible handshake (social forces).
There are three basic economic questions that every nation must consider.
They are (1) What goods and services shall be produced? (2) How shall they be
produced? and (3) For whom shall they be produced?
Any economic system must use one or more decision-making methods or rules.
Though the list of ways to make decisions is long, economic systems are classified
into four broad categories. These are traditional, command, market, and mixed
economies. Each of these systems works well to some degree at different points in
time and for different cultures, but some are often better for answering one of the
basic economic questions, while other systems may answer other questions more
successfully.
18
Traditional economy is an economic system using social customs to answer the
basic economic questions. Nowadays traditional economies are found primarily in
the rural, non-industrial areas of the world, tribes in African countries, for
example. In such areas, there is no national economy. Instead, there are many
small segmented economies, each centered around a family or tribal unit. Each
unit produces most of its own goods and consumes what it produces. The basic
economic questions of "what", "how", and "for whom" are answered directly by
the people involved, and the answers are usually based on tradition.
In command or planned economies the basic economic questions are answered by
government officials. Command economies are characterized by government
ownership of the economy's natural resources and capital goods. Government
leaders decide what goods and services will be produced, how they will be
produced, and how they will be distributed. Individuals have little control or
influence over the way the basic economic questions are answered. There are very
few command economies left in the world, and North Korea is one of the examples.
A planned economy is simple to understand but not simple to operate. It does,
however, have a number of advantages:
- everyone in society receives enough goods and services to enjoy a basic
standard of living;
- nations do not waste resources duplicating production;
- the state can use its control of the economy to divert resources to wherever it
wants. As a result, it can ensure that everyone receives a good education, proper
health care or that transport is available.
Several disadvantages also exist. It is these disadvantages that have led
to many nations abandoning planned economies over recent years:
-there is no incentive for individuals to work hard in planned economies;
- any profits that are made are paid to the government;
- citizens cannot start their own businesses and so new ideas rarely come
forward;
- as a result, industries in planned economies can be very inefficient.
19
A major problem faced by command or planned economies is that of
deciding what to produce. Command economies tend to be slow when responding
to changes in people's tastes and fashions. Planners are likely to underproduce
some items as they cannot predict changes in demand. Equally, some products,
which consumers regard as obsolete and unattractive, may be overproduced.
A market economy or free economy is the opposite of a command economy. In a
market economy
basic economic questions are answered by individuals,
households and businesses through a system of freely operating markets. Natural
resources and capital goods are usually privately owned. In such economies
buyers and sellers have a great deal of economic freedom, and they send signals to
one another as they interact through the system. For example, by purchasing more
of an item than usual, buyers send a signal to producers to increase production of
that item. Similarly, by reducing their purchases of an item, buyers signal
producers to reduce production of that item. In a true market economy the
government plays no role in
management of the economy, the government
does not intervene in it. The system is based on private enterprise with
private ownership of the means of production and private supplies of capital,
which can be defined as surplus income available for investment in new
business activities. Workers are paid wages by employers according to how
skilled they are and how many firms wish to employ them. They spend their
wages on the products and services they need. Consumers are willing to spend
more on products and services, which are favoured. Firms producing these goods
will make more profits and this will persuade more firms to produce these
particular goods rather than less favoured ones.
Thus, we can see that in a market economy consumers decide what is to be
produced. Consumers will be willing to pay high prices for products they
particularly desire. Firms, which are privately owned, see the opportunity of
increased profits and produce the new fashionable and favoured products.
Such a system is, at first view, very attractive. The economy adjusts
automatically to meet changing demands. No planners have to be employed, which
20
allows more resources to be available for production. Firms tend to be highly
competitive in such an environment. New advanced products and low prices
are good ways to increase sales and profits. Since all firms are privately owned
they try to make the largest profits possible. In a free market individual people
are free to pursue their own interests. They can become millionaires, for
example.
Not surprisingly there are also problems. Some goods would be
underpurchased if the government did not provide free or subsidized supplies.
Examples of this type of good and service are health and education. There are
other goods and services, such as defence and policing, that are impossible to
supply individually in response to consumer spending. Once defence or a
police force is supplied to a country, then everyone in this country benefits.
A cornerstone of the market system is that production alters swiftly to meet
changing demands. These changes can, however, have serious consequences.
Imagine a firm, which switches from labour-intensive production to the one
where new technology is employed in the factory. The resulting
unemployment could lead to many social as well as economic problems.
In a market economy there might be minimal control on working
conditions and safety standards concerning products and services. It is
necessary to have large-scale government intervention to pass laws to
protect consumers and workers.
Some firms produce goods and then advertise heavily to gain sufficient
sales. Besides wasting resources on advertising, firms may also duplicate
one another's services. Rival firms, providing rail services, for example, could
mean that two or more systems of rail are laid.
Finally, firms have to have confidence in future sale if they are to produce
new goods and services. At certain times they tend to lack confidence and cut
back on production and the development of new ideas. This decision, when
taken by many firms, can lead to a recession. A recession means less
spending, fewer jobs and a decline in the prosperity of the nation.
21
There are no real economies in the world that rely solely on freely operating
markets or on government decisions to answer the basic economic questions. All
major economies are mixed economies. A mixed economy contains elements of both
market and planned economies. Some countries are nearer to command economies,
while others are closer to free market economies.
The aim of mixed economies is to avoid the disadvantages of both systems
while enjoying the benefits that they both offer. So, in a mixed economy the
government and the private sector interact in solving economic problems. The
state controls the share of the output through taxation and transfer payments
and intervenes to supply essential items such as health, education and defence,
while private firms produce cars, furniture, electrical items and similar, less
essential products.
1.Say whether the following characteristics of economic systems are typical for
a)traditional economic systems, b) command economic systems, c)market
economic systems.
1. Not a national economy.
2. Not government itself holds a monopoly.
3. Resources are distributed evenly, creating less socio-economic inequality.
4. “Invisible hand” is responsible for the production of goods and services, and
their pricing.
5. Prices and supply of goods are controlled by the government.
6. Consumers enjoy the privilege of choosing among competitive products and
services.
7. No opportunities for personal profit motives for any producer or consumer.
8. Individuals do not benefit from innovation or product development.
2.Answer the following questions on the contents of the text.
1. What is the definition of an economic system?
22
2. What are the three invisible forces which make economic systems work?
3. What are the three basic economic questions that every nation must
answer?
4. What are the three basic approaches to economic decisions based on?
5.Where can traditional economies be found?
6.Can a traditional economy bring high living standards to its people?
7.Are there many command economies left in the world nowadays?
8.How are economic decisions made in command economies?
9.What is the most essential element of a market economy?
10.What is the main drive and purpose of goods and services producers in a
market economy?
11.What is the role of the government in a market economy?
3.Read the text again and say if the following statements are true or false
according to the information in the text.
1. An economic system is interrelated with a political system.
2. Every nation can produce enough goods and services to satisfy everybody’s
wants.
3. Every economic system answers the basic questions: what, how and for whom.
4. An economic system works via the interaction of three invisible forces: the
invisible hand (economic forces), invisible foot (political forces), and invisible
handshake (social forces).
5. In command economies the basic economic questions are answered by
government officials.
6. Market economies are often called planned economies.
7. All major economies in the world are market economies.
23
4.Complete the following table.
Type of economy
Advantages
Disadvantages
traditional
command
market
mix
DEVELOPING VOCABULARY
1. Match the words listed below with the definitions that follow.
Econometrics, well-being, wealth, production, economy, seller ,
economist, finance, value, distribution , exchange, money, investment ,
banking, buyer, enterprise, income, price
1. The business engaged in by a bank.
2. A person who buys; purchaser; customer.
3. The division of the total income of a community among its members.
4. The application of mathematical and statistical techniques to
economic problems and theories.
5. A specialist in economics.
6. The complex of human activities concerned with the production,
distribution, and consumption of goods and services.
7. A business unit; a company or a firm.
8. The system by which commercial debts between parties in different
places are settled by commercial
documents, esp. bills of exchange, instead of
by direct payment of money.
9. The system of money, credit, etc., esp. with respect to government
revenues and expenditures.
10. The amount of monetary or other returns, either earned or unearned,
24
accruing over a given period of time.
11. The act of investing money.
12. The official currency, in the form of bank-notes, 'coins, etc., issued by a
government or other authority.
13. The cost at which anything is obtained.
14. The creation or manufacture for sale of goods and services with
exchange value.
15. A person who sells.
16. The worth attached by someone to something.
17. All goods and services with monetary, exchangeable, or productive
value.
18. The condition of being contented healthy or successful; welfare.
2. Group the words that follow into six synonymous groups.
aim
examination
investigation
research
analysis
exploration
merchandise
study
buyer
goal
objective
welfare
commodities
goods
organization
well-being
customers
inquiry
purchaser
establishment
institution
purpose
3. Group the words that follow into six antonymous groups.
buyer
expenditure
infinite
consumer
finite
producer
decline
growth
seller
employment
income
unemployment
25
4. Complete the sentences with appropriate terms from the list below.
allocation of resources
macroeconomics
development economics
microeconomics
normative economics
positive economics
opportunity cost
econometrics
factors of production
economics
economic efficiency
economic growth
social sciences
scarce goods
1.The branch of economics that focuses on the activities of individual decisionmaking units is ….
1. The branch of economics that focuses on the behavior of the entire economy is
….
2. The science that studies how societies allocate scarce resources is ….
3. The study of economic phenomena that applies mathematical and statistical
techniques to economic problems and theories is …
4. Goods the supply of which is insufficient to satisfy the demand are….
5. The ability of a manufacturing plant to produce at a low cost or market value is
…
6. Choosing the particular use to which scarce resources(means of production)
are put, e.g. whether to use water for electric power or for crops, is…
7. An economic analysis that includes judgments about what to be done, rather
than simply theorizing is…
8. An economic analysis that is free of value judgments, i.e. independent of any
particular ethical position or normative judgments is ….
9. A branch of economics that examines and explains the process of economic
growth and the human and social organizations that make this growth possible
is …
10.The benefits lost by not employing an economic resource in the most profitable
alternative activity is …..
26
11.Where there is an increase in real output there is…
12.Those things that are transformed into final goods and services desired by
society are…
13.The group of studies seeking to establish a science of the social life of human
groups is called…
5.Add an appropriate preposition to each of the following sentences where
indicated.
About, against, between, in, on, for, into, with
1. No one ever succeeded … neatly defining the scope of economics.
2. Macroeconomics is concerned … the economy as a whole.
3. Economists engage … systematic inquiry … the effects of those human
activities which are grouped under three broad headings: production,
exchange, and consumption.
4. Economics seeks to apply a scientific method to construct theories… the
processes involved and to test them… what actually happens.
5. Economics examines conflicting demands… resources and the consequences
of whatever choices are made.
6. Macroeconomics deals … the behavior of individual consumers, companies,
traders, and farmers.
7. Specialised area of economics attempt to answer questions … a broad
spectrum of human economic activity, including public finance, money
supply and banking, international trade, etc.
8. Economics deals primarily…relations…buyer and seller.
9. The areas of investigation… economics overlap…other social sciences.
10.Many factors are responsible … self-sustaining economic growth.
6.Match the words and their definitions.
27
1.microeconomics
2. consumer
3. wellbeing
4. macroeconomics
a) total obtained by adding together
b) one`s regular work or occupations
c) being overcrowded
d) the branch of economics that studies
individual producers, consumers or markets
e) condition of having comfortable living
and working conditions, good health
f) the branch of economics that studies the
economy as a whole
g) a person who uses, buys goods
h) money received during a given period
i) rise in prices brought about by the
expansion of the supply of money, credit,
etc.
j) plan of actions, statement of aims and
ideas
k) a system for the management, use and
control of the money, goods and other
recourses of a country, community or
household
l) useful thing, esp. an article of trade
5. employment
6. congestion
7. aggregate
8. commodity
9.economy
10. income
11. policy
12. inflation
7.The snowball definition game.
1
2
5
1
2
8
8
1
1
3
3
6
6
8
8
1
10
2
2
4
28
9
9
1
10
4
4
7
4
7
9
9
3
3
5
5
6
6
7
7
7
Across
Down
1. Everything a company a person
1. The people who buy products.
owns.
2. A person owning shares of a
2. The total sales of a company.
company.
3. A document showing you have paid.
3. A bill listing the products delivered.
4. Money spent on goods and services.
4. Money borrowed from a bank.
5. What a bank charges for a loan.
5. A business selling products to the
6. A business selling goods to retail public.
stores.
6. When revenue is higher than costs.
7. A reduction in price.
7. When costs are higher than sales.
8. When you get your money back.
8. The money a country uses.
9. The money you earn at your job.
9. Money you pay to the government.
29
10. Money needed to start a business.
10. Money that a company owns.
8.Translate into English.
Экономика - это общественная наука, изучающая поведение в сферах
производства,
потребления,
распределения
и
обмена.
Экономисты
анализируют происходящие в этих сферах процессы и исследуют их
последствия для физических лиц, организаций, например фирм, и общества в
целом. В экономической науке существует много конкурирующих между
собой направлений. Однако основным делением является деление на
классическую и неоклассическую школы.
В систему экономических наук входят науки, которые изучают
функциональные
аспекты
развития
экономики
(финансы
и
кредит,
ценообразование, экономика труда, материально-техническое обеспечение,
планирование экономического и социального развития и др.) или ее
отраслевые особенности (экономики промышленности, сельского хозяйства,
транспорта и др.).
DISCOVERING LANGUAGE
Passive Voice
The Passive Voice is formed by putting the auxiliary verb “to be” into the
necessary form and adding the Past Participle of the main verb. Verbs which take
an object (transitive verb) can have a passive form.
 They destroyed the building – The building was destroyed.
 The news surprised me. – I was surprised by the news.
Verbs which don`t take an object (intransitive verbs) don`t have passive
forms. For example, there are no passive forms for the following sentences:
 I slept for nearly ten hours last night.
 The ship slowly disappeared from view.
A good dictionary will tell you whether verbs are transitive or intransitive.
30
1. Make these sentences passive. Use by if it is necessary to say who did the
action.
1. Karl Marks wrote Das Kapital.
2. They are repairing your car now.
3. Steve Jobes founded Apple Computers.
4. The board will discuss the proposal.
5. Did anyone inform Mrs. Wilson about the agenda of the conference?
6. They make Renault cars in Slovenia.
7. They have transferred him to the New York office.
8. The Princess opened the new conference centre.
9. They had made a full investigation of the case by October.
10.I didn`t realize someone was listening to my telephone conversations.
2.Complete this advertisement, using either active or passive forms.
Communicado`s presentation skills training courses ___ (tailor) to each client`s
individual needs, so the main focus is on the type of presentations that ___ (give)
by the participants in their everyday working lives. Courses ____ (conduct) either
on a one-to-one basis or in groups. They are highly participative and ___ (design)
to be enjoyable as well as instructive.
Communicado ____ (encourage) clients to ____ (build) on their existing social
communication skills. Through a number of interesting techniques we ___(show)
clients how time can ____ (save) in preparation, how body language can ____
(use) to maximum effect and how visual aids can ___ (create) for maximum
impact.
For more details on how Communicado can ___ (help) your company improve its
business presentations, call 09002224577 now.
3. The following passage describes the production of paper. Put the words in
brackets into the appropriate forms.
From trees to pulp
The trees ____ (transport) to the paper mill by lorry, train or ship. First, the bark
___ (remove). This ___ (burn) at a later stage so that energy can ____ (generate)
for the paper- making process. Then the logs ___ (cut) into chips and ___ (cook)
under high pressure for four hours to make paper pulp. Next the pulp
____(bleach) to ___ (remove) dirt sports and ____ (improve) its ageing properties.
31
From pulp to paper
The manufacturing process also ____ (require) chemicals to strengthen the paper.
The fibres ____ (mix) with additives and ____ (dilute) with water. This mixture
____(spray) onto the paper machine where it ___ (press), then ___ (dry) and ___
(wind) onto one large reel which ___ (weigh) up to 20 tons. Each part of the
process ___ (control) by computers which automatically ___ (correct) any errors.
4.Complete these sentences with appropriate passive or active forms of the
verbs
arrive destroy deteriorate develop follow exist
happen need prevent recede release wear
1.
2.
3.
4.
5.
A number of priceless works of art ____ in the earthquake.
By the time Carol ____ we had finished eating and were ready to go.
No record ___ of the visit he claimed to have made to Paris in 1941.
Because my visa had expired I ___ from re-entering the country.
It is generally agreed that new industries ____ for the southern part of the
country.
6. If Nick hadn`t come along, I don`t know what would ___.
7. The economic situation in the region ___ quite sharply over the last year.
8. The coastline___ into the distance as our ship sailed further away.
9. It`s incredible to think that these clothes____ by Queen Victoria.
10.A new drug ___ to combat asthma in small children.
11.When Kathy left the room, everyone_____.
12.A number of political prisoners ___ within the next few days.
5.Make one corresponding sentence or two, if possible.
1. Someone threw a lifebelt to me.
I was thrown a lifebelt. A lifebelt was thrown to me.
2. Someone outlined the problem to me.
3. Someone has reported the theft to the police.
4. Someone told the story to me.
5. Someone has given 1 0.000 $ to charity.
6. Someone will demonstrate the game to the children.
7. Someone was offering drinks to the guests.
8. Someone explained the procedure to me.
9. Someone sold the car to Tom.
32
6.Using one was/were +Past Participle (passive) form, and one past simple
(active) form, which one of the two verbs can complete both sentences in the pair?
Recall/notice catch/not mind imagine/hear dislike/keep find/dread see/like
1. a. She _____ coming into class late.
b. I _____ her carrying a yellow bag.
2. a. I ____ them taking apples from my garden.
b. They _____stealing apples from the farmer`s fields.
3. a. As he fell into the pool, he ___ himself shouting for help.
b. Jones ___ shouting at Mrs. Markham before the robbery.
4. a. I _____waiting for at least an hour.
b. I ___ getting caught in the rain without an umbrella.
5. a. We ____ the bills waiting for us when we got home.
b. They _____ entering the building with knives.
6. a. We ____ the birthday presents that uncle sent.
b. The children ___ playing football in the park this morning.
7. If possible, rewrite these newspaper headlines as passive sentences. Begin
each sentence with It has been … that.. . If it is not possible write X after the
headline.
1. Discovery that aspirin can help fight cancer.
2. Agreement that UN will send in troops.
3. Aid workers yell of massacre.
4. “Earth shrinking by ten meters each year” claim scientists.
5. Earthquake calculated to have cost $3 billion.
6. Young people encouraged to apply for government grants.
7. Reports of rebel troops entering capital.
8.Tony has taken his old car in for an inspection. The news is not good. Read
what he was told and report it using a passive +to-infinitive.
1. We have discovered that the brakes are badly worn.
2. We consider that the petrol tank is dangerous.
3. We think that the electrical system is a fire hazard.
4. We expect the repairs to be very expensive indeed.
LISTENING
Import-Export
Part One
Questions 1-15
Conversation One (Questions 1-5)
33
 You are going to hear an economist talking about free trade
 Write one letter (A-H) next to the number of the recording.
 Don`t use any letter more than once.
Free trade…
1…
A. allows people to export their goods
2…
B. stimulates competition
3…
C. allows companies to grow
4…
D. promotes world peace and understanding
5…
E. encourages travel
F. keeps prices down
G. creates wealth
H. helps domestic manufacturers to survive
Conversation Two (Questions 6-8)
 Read the tip about comparative advantage
Comparative advantage
An economic theory which claims that all countries will be better off if each
of them concentrates on doing the things it does best. For example, a country
that produces cotton and cotton textiles efficiently and cheaply should
concentrate on this.
 Now listen to part B and for each question (6-8) choose one letter
(A, B or C) for the correct answer.
6. What examples of comparative advantage are given?
A. Manufacturers in countries with small populations can find new markets
which will allow them to expand.
B. They may have a natural resource like coal or rubber, or a climate which is
perfect for growing bananas.
34
C. Some companies dump their goods in importing countries.
7. How can countries without clear or natural comparative advantage succeed?
A. Import the things they produce less well.
B. Create competition between producers.
C. Concentrate on doing the things they do best.
8. What country is a good example of this?
A. Uzbekistan is a good example of this.
B. Georgia is a good example of this.
C. Uzbekistan and Singapore.
Conversation Three (Questions 9-15)
 Listen and complete the gaps in the sentences.
Protectionism is justified for developing countries when they want to start (9)
______. This helps them become less dependent on (10)______ and this is good
for the country`s (11)_______ . Protectionism is even justified for developed
countries when they have problems with (12) _______, for example, when
aggressive competitors (13) _______. The competitor doesn`t make (14) _______
but it (15) ________.
Part Two
Section One (Questions 16-22)
 John Buchanan is calling Mandy Forbes of Forbes Stationary Suppliers to
order stationery for his company
 Listen and complete the delivery note extract.
Quantity
10
Description
Price
(17)…
gram $ 5.20
packets photocopy
35
Total
(21)… $
1
(16)…
paper (500 sheets)
Box of OHP film (19)… $
(18)… sheets)
Packs OHP pens (20)… $
permanent
(22)… $
$19.40
$ 103.90
Section Two
Questions 23-30
 Elena Furia, a teacher at an international school in Italy, is calling New
Traditions, a sport equipment manufacturer and supplier in California, for
some information.
 Listen again and complete these questions.
1. (23) _____________, Ms Furia?
2. (24) ____________to know?
3. (25) ____________ interested in?
4. (26) ____________ to send me a quotation?
 Now match these answers a-e with the questions. Write your answers here.
1. (27)_______.
2. (28)_______.
3. (29) _______.
4. (30) _______.
a) Well, I was wondering if you had a stockiest in Italy.
b) I could give you a discount for three sets but the transportation costs could
be high.
c) I`ve read the information on your website about the bike polo equipment.
d) I`ll send you a pro forma invoice.
e) I`d like to know your price for …
36
SPEAKING
HOW TO MAKE A GOOD PRESENTATION
 Preparation is essential for an effective presentation. Think about the
presentation beforehand.
 Do use PowerPoint if the facilities are available. Although some speakers seem
to have taken an aversion to PowerPoint, it is so convenient and ensures that
your presentation has a clear structure and something for your listeners to take
away.
 Face your audience at all times even though the screen to which you are
speaking is behind you.
 Be very clear about how much time you have - and stick to that time in
preparing and delivering your presentation.
 Be very clear about your key message - and ensure that everything in your
presentation is both consistent with, and supportive of, that key message.
 Ensure that the slides look good. This does not necessarily mean that they look
flashy - although suitable pictures or illustrations are very effective - but it does
mean using a consistent format and typeface and readable colours plus giving
each slide the logo of the organization you are representing and a chronological
number.
 The first slide should announce the title of your presentation, the event and
date, and your name and position.
 The second slide should seize the attention of your audience for your
presentation.
 The third slide should set out the structure of your presentation.
 Each theme should be the subject of a small number of slides. Again, a good
working assumption is that three slides for each theme is about right. Less than
two and it isn't substantial enough to be a separate theme; more than five and it
should probably be broken up into two themes.
 Each slide should have a clear heading. A question is often a good way of
winning attention - but, in that case, make sure you answer the question in the
body of the slide.
 Each slide should normally contain around 25-35 words, unless it is a quote
(when you might use more) or contains an illustration (when you will probably
use less). Too many words and your audience will have trouble reading the
material; too few words and you're likely to be flashing through the slides and
spending too much time clicking the mouse.
Useful Phrases for Presentations
37
Starting the presentation
Good morning, everyone.
Hello everyone, welcome to…
The subject of my presentation
today is…
What I`m going to talk about today is…
Stating the main points
The main points I will be talking about today are
firstly…, secondly…, next…, finally, we are going to
look at.
I'm going to divide my talk into four parts.
First,
I'll give you . . . .
After that, . . . . Finally, . ...
I n t rod u ci n g th e f i r st p oi n t
Le t `s s t a rt / b e gi n wi t h
I`d l i k e t o st ar t b y…
Moving on to the next point
Now let`s move on to…
Referring to visuals
If you look at the graph..
Could I draw your attention to the chart?
I`d like to illustrate this by showing you…
Giving background information
I'll give you some background. Let's start with the
background.
Referring to the audience’s knowledge
As you know,…
As you are aware,…
Changing the topic
Right, let’s move on to…
O.K., I’ll now look at…
Summarising
To sum up,...
38
I`d like to recap the main points of my presentation.
First I covered…, then we talked about… and finally
we looked at…
I`d now like to sum up the main points, which
were…
Ending
Thanks very much. Any questions/
Well, that’s all I have to say. Thank you for
listening.
Inviting questions
If you have any questions, don't hesitate to
ask.
I'll be glad to answer any questions (at the
end of my talk).
Finally, I will be happy to answer your questions.
A. Make a presentation on countries with different economic systems. Focus on:
1. Geographical position.
2. Political system.
3. Economic system.
4. Current economic situation.
5. World-known business companies based in the country if there are any.
B. Listen to your fellow-students' presentations. After each presentation rate the
following aspects of the presentation from 1 to 5 (1 = unacceptable, 2 = fair,
3 = average, 4 = good, 5 = excellent).
1
The presentation was interesting.
The presentation was clear.
The presentation's beginning made an
impact.
39
2
3
4
5
The presentation had a logical manner
structure.
The presentation had a summary or
conclusion.
TOTAL: 25
C.Discuss the following questions.
1. Do you agree that economics is helpful in everyday life? Give your
arguments.
2. Try to think of several important decisions that you have made
recently. What
was the opportunity cost of each decision?
3. Do you think economics is a theoretical or applied discipline?
4. Imagine the world without a problem of scarcity. Would you enjoy
living in
such a world?
5. Are there any countries with traditional economies nowadays?
6. Is it correct to say that all major economies in the world are market
economies?
7. How can you define the economic system of Belarus?
WRITING
Write an essay of at least 500 words describing economics and its major
concepts.
SUPPLEMENTARY READING
ADAM SMITH
Economics, like every other intellectual discipline, has its roots in early
Greece and Rome; but economics was first considered as a branch of domestic
40
science (home economics) dealing with such matters as the management of
slaves and the allocation of manure among alternative agricultural uses. In the
revival of learning that followed the Middle Ages, economics emerged as a
branch of moral philosophy concerned with such issues as the ethics of loan
interest and the “justness” of market-determined wages and prices.
By the beginning of the eighteenth century, the subject had lost most of its
theological overtones and had taken shape as an academic discipline, largely as a
branch of political theory dealing with problems of government intervention
in economic affairs.
Then in 1776 the Scottish moral philosopher Adam Smith published the first
edition of «Inquiry into the Nature and Causes of the Wealth of Nations», and
economics soon became an independent science.
The Vision of Adam Smith
Smith lived in an age when the right of rulers to impose arbitrary and
oppressive restrictions on the political and economic liberties of their subjects
was coming under strong attack throughout the civilized world. As other men
of that time were arguing that democracy could and should replace autocracy
in the sphere of politics, so Adam Smith argued that laissez-faire could and
should replace government direction and regulation in economics. The “should”
was so mixed with the “could” portion of Smith's analysis that much of his book
seemed almost as much a political tract as a work of science. What gave the
book lasting significance was the Smith's strong arguments that the economic
activities of individuals would be more effectively coordinated through the
indirect and impersonal action of natural forces of self-interest and competition
than through the direct and frequently ill-considered
actions of
government authorities. Smith opened minds to the existence of a “grand
design” in economic affairs similar to that which Newton had earlier shown, to
exist in the realm of physical phenomena. The impact of Smith's ideas upon his
41
contemporaries was widespread and immediate. As one modern scientist
observed, “before Adam Smith there had been much economic discussion; with
him we reach the stage of discussing economics”.
That Smith's vision of the economy should ever have been considered
original might seem strange to modern minds, but that would be because we now
see economic phenomena in the light of his conception. As two leading scholars
recently remarked. The immediate “common sense answer to the question”,
“What will an economy motivated by greed and controlled by a large number of
different agents look like?” is probably: there will be chaos”. That is certainly
the answer that would have been given by most of Smith's contemporaries before they read his book. The greatness of Smith's accomplishment lies
precisely in the fact that he, unlike his predecessors, was able to think away
extraneous complications and so perceive an order in economic affairs that
common sense did not reveal.
It is one thing, of course, to say that Smith's conception of economic
phenomena is original, another – to suggest that it corresponds to
contemporary experience. According to Smith, society in its economic aspect
is a vast concourse of people held together by the desire of each to exchange
goods and services with others. Each person is concerned directly only to
further his own self-interest, but in pursuing that aim each “is led by invisible
hand” to promote the interests of others. Forbidden by law and social custom to
acquire the property of other people by force, fraud, or stealth, each person
attempts to maximize his own gains from trade by specializing in the production
of goods and services for which he has a comparative advantage, trading part of
his produce for the produce of others on the best terms he can obtain. As a
consequence, the “natural forces” of market competition — the result of each
person attempting to “buy cheap and sell expensive” — come into play to establish equality between demand and supply for each commodity at rates of
exchange (prices).
42
The economic system (so Smith and later writers argued) is a selfregulating mechanism that, like the human body, tends naturally toward a state
of equilibrium if left to itself.
Vocabulary
allocation of manure - зд. распределение органических удобрений
revival, n - возрождение, возобновление
emerge - появляться, всплывать
intervention - вмешательство
affair, n - дело
impose, v - налагать
arbitrary - произвольный
restrictions - ограничения
argue, v - спорить
laissez-faire - невмешательство
significance, n - значимость, значительность
ill-considered - необдуманный
perceive, v - воспринимать
reveal, v - обнаруживать, открывать
acquire, v - приобретать
fraud, n - мошенничество
stealth, n - кража
consequence, n - последствие
1. Answer the following questions.
1) What was economics first considered to be?
2) A branch of what discipline did economics become in the Middle ages?
3) What changes had happened by the beginning of the 18th century?
4) When did economics, according to the text, become «an independent
science»?
5) In what “age” did Adam Smith live?
43
6) What was Smith's point of view on the role of government in
economics?
7) Why does the author refer to Smith's work as a “political tract”?
8) What was Smith's great “accomplishment”?
9) What, according to the author, gave the book «lasting significance»?
10) What was Smith's vision of “society”, “each person”, and “economic
system”?
2. Which of the following statements are true/false?
1. Economics is an intellectual discipline because it has its roots and branches
in early Greece and Rome.
2. First it was considered as a branch of home economics.
3. The allocation of manure among alternative agricultural uses once was one of
the questions of economics.
4. The ethics of loan rates and management of slaves were among the most
important problems of economics during the Middle Ages.
5. Adam Smith argued that laissez-faire could and should replace government
direction and regulation in economics.
6. According to the author, Smith and Newton “opened minds” to the existence
of a “grand design” in the fields of their studies.
7. Modern economists don't find Smith's vision of economics revolutionary.
8. According to Smith, people are motivated by “greed, fraud and stealth”.
3. Do you agree or disagree with the following opinions? Why yes and why
not? Write an essay of 150-200 words to support your opinion.
1. “Before Adam Smith there had been much economic discussion; with
him we reach the stage of discussing economics”.
2. “The immediate common sense» answer to the question, «What will
an economy motivated by greed and controlled by a large number of
different agents look like?” is: there will be chaos”.
44
THE CHALLENGE OF LORD JOHN MAYNARD KEYNES
Smith's version of the economic system as a naturally self-organizing and
self-adjusting “social mechanism” - known latterly as classical or neoclassical
economic doctrine (or sometimes, more shortly and perhaps satirically, as
orthodox or conventional wisdom) — was never confirmed by factual evidence,
as Newton's laws of motion were; all the same, classical doctrine dominated
economic thinking and national economic policy in all advanced economies for
the next 150 years, and it plays a prominent role in many countries to this
day.
Whether right or wrong, classical theory was first seriously challenged by
the great English statesman and economist Lord John Maynard Keynes, who
claimed to see in the Great Depression of the 1930s evidence that the
economic system was not self-adjusting, and whose followers argued that
without continued government intervention the economic system would
typically operate at levels of activity substantially lower than required to
achieve full employment of labor and other resources. Exactly what Keynes
said, or what he meant, or what he really meant, has been hotly disputed
among economists for more than 50 years, conveying to many noneconomists the
notion that economists as a group are uniquely quarrelsome and doubtfully
competent. There is no merit in this notion. What is true, as the great
English economist Joan Robinson once observed, is that “in a subject where
there is no agreed procedure for knocking out error, doctrine has long life”.
Perhaps time and further study will some day reveal whether the classical
or the Keynesian conception of economic life accords more closely with
experience.
Meanwhile, the great worry is that, in the absence of professional competence
to make valid diagnoses, we will treat cases of economic toothache as cases of
lockjaw and kill our patient: or, no less seriously, we will leave apparently
45
minor economic lumps untreated and so, through inaction, fail to cure
problems that turn out to be terminal. On a brighter note we may recall Lord
Keynes' wistful observation: “If economists could someday manage to get
themselves thought of as humble, competent people, on a level with dentists, that
would he splendid”! Perhaps, that time will one day come. If it does, and if
economists are then able accurately to diagnose and prescribe cures for
economic ills, they will have little reason to feel humble”.
VOCABULARY
self-organizing - самоорганизующаяся
self-adjusting — саморегулирующаяся
latterly - недавно, в последнее время
confirm, v - подтверждать
laws of motion - законы движения
advanced - развитой, прогрессивный
prominent - выдающийся
evidence - свидетельство
full employment - полная занятость
dispute, v - спорить, оспаривать
notion - понятие
merit - достоинство
knock out , v - выбросить
valid - действительный
lockjaw - столбняк
apparently - по всей видимости
wistful – тоскливый
1. Answer the following questions.
1. What is a classical economic doctrine?
2. What does the author say about Newton's and Smith's laws or doctrines?
46
3. Who first challenged the classical economics? When was that? Under
what circumstances?
4. What were Keynes' and his followers' arguments against the selfadjusting market doctrine?
5. How had the noneconomists' opinion changed toward the economist? How
does the author comment on that common opinion?
6.According to the author, which concept or doctrine accords more closely
with experience?
7.What is author's “great worry”?
8. Why should economists feel “humble”?
2. Which of the following statements are true/false?
1. Smith's version of the economic system was proved to be right for the
advanced economies.
2. Keynes challenged both classical and neoclassical economic doctrines.
3.Lord John Maynard Keynes was not alone in his beliefs.
4. The reason why Smith's theory of self-organizing and self-adjusting “social
mechanism” was criticized was the Great Depression of the 1930s.
5. According to the Keynes and his colleagues, continued government
intervention is necessary to achieve required employment of labour and
other positive results.
6. Keynes works were proved to be true and that was the reason why no one
disputed them during the following 50 years.
7. Keynes himself wasn't really sure that economics is an accurate science.
8. Keynes thought that dentists are more competent economists than Adam
Smith followers.
3. Questions for discussion.
1. Was the Great Depression the only reason for Keynes' criticism? Do we
have to wait till the next crisis to come up with the new theory or it could be
proved experimentally?
47
2. Why did it take 150 years for economists to realize that Smith's
theory was not correct?
3. Do you agree with the author that the “great worry” is that there is
a lack of professional competence to make valid diagnoses? Is it a
problem of economics as a science?
СLASSICAL LIBERALISM
In the seventeenth century, liberalism emerged as the radical philosophy that
attacked authoritarianism and paternalism in the political sphere by defending
the rights of the individual against the commands of monarchs and other rulers.
The seventeenth-century philosopher John Locke questioned claims to political
authority based on birth, social status, privilege, and divine right. Political
authority either derived from the consent of the governed or else was
illegitimate.
Later in the eighteenth century, liberals added the notion of the “rule of
law”, the idea that the government in its legislative capacity had to enact
general rules that apply to all citizens equally. The substitution of the rule of
people for the rule of law created a capricious, uncertain, and sometimes cruel
community life. This early variety of liberalism — often termed “classical liberalism”
— stimulated the development of the social sciences by insisting that what
holds society together and promotes an orderly commercial economy is the
mutual interplay of the passions and interests of ordinary citizens in the market.
The basic principle of liberal thought is that individuals are the best and
most accurate judges of their own interests and can be relied upon to pursue
those interests with great dedication and creativity. The mighty arm of the state
with its web of regulations and bureaucratic agents often does more harm than
good when trying to substitute administrative methods of organization for
48
impersonal market processes that spring out of self-interested individual
action.
The philosopher and American revolutionary, Thomas Paine, wrote that
“society is created by our wants, government by our wickedness”.
Classical liberals are not anarchists and at the very least recommend a
minimal state: a state that protects lives, defines property rights, and
enforces private contracts. Many classical liberals (such as Adam Smith and
the later classical school of economists) went somewhat further and requested
that the state builds and maintains certain public works (bridges, canals,
highways, harbors, recreational parks, and so on), maintains standing
armies, provides basic education, promotes invention and innovation, and
intervenes in the market on a limited scale for specific humane purposes such
as the enactment and enforcement of child labor laws.
Generally, the classical liberal believes in the general rule of laissez-faire
and wants to preserve self-regulating market processes as much as possible.
The classical liberal is confident that with the enactment of strict
constitutional safeguards and the elimination of monopoly and the neverending varieties of special-interest legislation, peace and material progress
are within the reach of all societies and all social classes.
The leading works of classical liberalism include Adam Smith's Wealth of
Nations (1776), Herbert Spencer's The Man versus the State (1892),
Friedrich A. Hayek's Constitution of Liberty (1960), Ludwig von Mises's
Liberalism: A Socio-Economic Exposition (1962), and Milton Friedman's
Capitalism and Freedom (1962).
VOCABULARY
authoritarianism - авторитаризм
rulers - правители
privilege - привилегия
divine right - божественное право
derived - производное
illegitimate - не легитимный
49
enact - вводить
capricious – капризный, прихотливый
rely on (upon), v - полагаться на кого-либо (что-либо)
spring out - происходить из
wickedness - злоба
harbor - бухта
recreational parks - парки отдыха
intervene - вмешиваться
enforce, v - принуждать, заставлять, настаивать
confident – уверенный
1. Answer the following questions.
1.When and why did liberalism emerge?
2.What did John Locke claim?
3.What notion was added to the liberalism in 18 thcentury?
4.What is the basic principle of liberal thought?
5.How does the author refer to the state?
6.What was Thomas Paine's vision of society and government?
2.Complete the following sentences:
1. The classical liberal believes in:
a)... the general rule of laissez-faire.
b)... Karl Marx.
c)... the state that protects rights, defines property
rights and enforces private contracts.
d).. near end of Capitalism.
e)... the leading works of classical liberalism.
2. The classical liberal is confident that:
a) ... monopolies should be eliminated.
b)... material progress is more important than public
education.
c)... constitution should work properly.
50
d)... everyone can be rich and live in a peace.
3. Classical liberal recommends:
a) ... a minimal state.
b) ... invention of new weapons.
c) ... children to work.
d) ... maintain bridges, canals, harbours because water
is nice.
3. Questions for discussion.
1. Do you agree that classical liberalism “stimulated the development of social
sciences”?
3. Can you agree with Thomas Paine that “society is created by our wants”?
NEOCLASSICAL ECONOMICS
The most remarkable feature of neoclassical economics is that it reduces
many broad categories of market phenomena to considerations of individual
choice and, in this way, suggests that the science of economics can be firmly
grounded on the basic individual act of subjectively choosing among
alternatives.
Neoclassical economics began with the so-called marginalist revolution in
value theory that emerged toward the end of the nineteenth century. Strictly
speaking, neoclassical economics is not a school of thought (in the sense of a
well-defined group of economists following a single great master) but more a
loose amalgam of subschools of thought, each revolving around such
acknowledged masters as Alfred Marshall in England, Leon Walras in
France, and Carl Menger in Austria. What these subschools have in common is
the importance they attach to explaining the coordinating features of market
processes in terms of plans and subjective evaluations carried out by
51
individuals in the market subject to the constraints of technological
knowledge, social custom and practice, and scarcity of resources.
THE SUBSCHOOLS
In England, Marshall's appointment to the chair of political economy at
Cambridge University in 1885 marked the start of the Cambridge school – a
variant of neoclassical economics that stressed continuity with the past
achievements of the classical school, especially the economics of David
Ricardo and John Stuart Mill. In 1890 Marshall published his “Principles of
Economics” which demonstrated how the forces that determine the normal
prices of commodities can be explained by means of supply and demand in the
context of firms struggling to survive within industries. Marshall's disciplines
included A. C. Pigou, D. H. Robertson, Ralph Hawtrey, and to some extent
the controversial John Maynard Keynes. (During the 1930s, Keynes turned
against his old master by explaining how subjective evaluations can lead to
discoordinating market processes and the unemployment of labor and disuse of
capital.)
In France, Walras founded the general equilibrium school with the
publication of his “Elements of Pure Economics” (1874). This school would
eventually take root in Lausanne, Switzerland, through the contributions of
Vilfredo Pareto, especially in his “Cours d' economic politique” (1896—
1897). Some of Walras's teaching reached England by way of A. L. Bowley's
“Mathematical Groundwork of Economics” (1924). Like Marshall, Walras and
his followers were concerned with a supply and demand account of market
pricing, but Walras went somewhat beyond Marshall and investigated the
mathematical conditions under which all markets could be in equilibrium
simultaneously.
52
In Austria, Carl Menger founded the Austrian school with the publication of
his “Principles of Economics” (1871).
Subsequent professors at the University of Vienna, such as Friedrich von
Wieser, Eugen von Bohm-Bawerk, and later Ludwig von Mises and Friedrich A.
von Hayek, focused on the essential problems of economic organization by starting
with Monger's insights about the importance of economizing action in shaping
economic institutions in the market. Among Austrians, the important task of
economic reasoning is to disaggregate economic phenomena so that the
events can be made intelligible in terms of basic market forces of supply and
demand operating through the decisions of individuals.
VOCABULARY
remarkable feature -отличительная черта
be firmly grounded - твердо основываться на чем-либо
acknowledged -подтверждать, признавать
attach - прикреплять, прилагать
struggling to survive - борьба за существование
controversial - противоречивый
simultaneously - одновременно
subsequent - последующий
disaggregate economic phenomena – расчленять(нить) экономические
явления
1. Answer the following questions.
1. What is the most remarkable feature of the neoclassical economics?
2. When did neoclassical economics begin?
3. How does the author refer to the neoclassical economics and neoclassical
economists?
4.What subschools and names are mentioned in the text?
5. What economists worked in: a) England b) France c) Austria
53
2. Which of the following statements are true/false?
1. Neoclassical economists simplified many broad categories of market
phenomena.
2. Neoclassical economics began when Adam Smith died.
3. Neoclassical economics is not a school of thought.
4. Marshall's appointment to the chair of political economy at Oxford
University was the beginning of neoclassical economics.
5. A.C.Pigou, D.H. Robertson and Ralph Hawtrey were the followers of Alfred
Marshall.
6. Vilfredo Pareto took root in Lausanne, in France.
7. “Principles of economics” was written in 1871 by Carl Menger.
8. Ideas of Sir Walras were promoted in England by H A.L. Bowley.
3.Questions for discussion.
1. Do you agree with the author that “the most remarkable feature of neoclassical
economics is that it reduces many broad categories of market phenomena to
considerations of individual choice”? Why yes and why not?
2. Do you think that neoclassical economics is a “loose amalgam of subschools
of thought”?
3.Whose works are of the most importance for the development of
economics?
54
Reference Literature
1. English for Business. A Functional Approach. DP Publications LTD, 1995.
2. Horner, D. Words at Work / D. Horner, P. Strutt. CUP, 1998.
3. Jones, L. International Business English / L. Jones, R. Alexander. CUP, 1994.
4. Mac Kenzie, I. English for Business Studies / I. Mac Kenzie. Cambridge
University Press, 2000.
5. MacConner, C. Macroeconomics / C. MacConnel, S. Brue. McGraw-Hill, Inc,
1990.
6. Mankiw, N. Rssentials of Economics / N. Gregory Mankiew. Harcourt College
Publishers, 2001.
7. Market Leader. Intermediate Business English Course. David Cotton, David
Falvey, Simon Kent, Oxford University Press, 2003.
55