The Concise Encyclopedia of Economics
FEATURED ARTICLE

Public Choice

William F. Shughart II

Public choice applies the theories and methods of economics to the analysis of political behavior, an area that was once the exclusive province of political scientists and sociologists. Public choice originated as a distinctive field of specialization a half century ago in the works of its founding fathers, Kenneth Arrow, Duncan Black, James Buchanan, Gordon Tullock, Anthony Downs, William Niskanen, Mancur Olson, and William Riker. Public choice has revolutionized the study of democratic decision-making processes....

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RECENT ARTICLE

Division of Labor

Michael Munger

Division of labor combines specialization and the partition of a complex production task into several, or many, sub-tasks. Its importance in economics lies in the fact that a given number of workers can produce far more output using division of labor compared to the same number of workers each working alone. Interestingly, this is true even if those working alone are expert artisans. The production increase has several causes. According to Adam Smith, these include increased dexterity from learning, innovations in tool design and use as the steps are defined more clearly, and savings in wasted motion changing from one task to another....

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ALSO OF INTEREST

Immigration

George J. Borjas

Health Care

Michael A. Morrisey

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FEATURED BIOGRAPHY

Robert E. Lucas

(1937-)

Robert Lucas was awarded the 1995 Nobel Prize in economics "for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy." More than any other person in the period from 1970 to 2000, Robert Lucas revolutionized macroeconomic theory. His work led directly to the pathbreaking work of Finn Kydland and Edward Prescott, which won them the 2004 Nobel Prize.

Before the early 1970s, wrote Lucas, "two very different styles of macroeconomic theory, both claiming the title of Keynesian Economics, co-existed." One was an attempt to make macroeconomics fit with standard microeconomics. The problem with this was that such models could not be used to make predictions. The other style was macroeconometric models that could be fit to data and used to make predictions but that did not have a clear relationship to economic theory. Many economists were working to unify the two, but economists themselves saw the results as unsatisfactory....

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