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Paper Abstract: Review of David Friedman's 1996 book. Overview of economic theory. Value as it relates to economics and motivations for spending money. The triple equality of price/value/cost. Choices in life attributable to different sets of opportunities. Concept of economic efficiency. Economic situation in the U.S. Paper Introduction: In his book, Hidden Order: The Economics of Everyday Life, David Friedman works to bring a basic understanding of the complex world of economics within the grasp of the average person. The book begins with an overview (Sections I and II) of economic theory. By the end of Section III, most of the tools are in place for the reader to begin making informed connections between economic theory and occurrences in today’s environment. Section 1: Economics for Pleasure and Profit Friedman discusses value as it relates to economics and our motivations for spending money. Value has a different connotation for each consumer, but according to Friedman, it is consistently the value we judge something (material or otherwise) to be worth and as revealed by our actions (17). Actions reveal preference. Akin to value is the concept of choice as well as the m Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Akin to value is the concept ofchoice as well as the manner in which the individual judges value in lightof whatever constraints are present at the time the choice is made. Works CitedFriedman, David. How the "price" of goods or services regulate economic activity is,by Friedman's definition (18), "price theory." Not a simple concept,although viewed by many in simplistic terms. Price equals marginal valuetherefore diamonds cost more than water (Friedman 45). Because a competitive industry is efficient,imposition of tariffs at any point in the process associated with thisconversion will alter the efficiency of the process by means of reducingsource and production quantity utilization. Thus, one way to look at the problem of solvingan economy is to find that set of prices such that the quantity demandedfor all goods and services, will just equal that which is supplied.Section 3: In Search of the Real World Given the foregoing, and the need to have someone, or something, incharge, three questions arise. First, why do corporations exist-or myprecisely, why is there a need for "control" in a market economy? One recurring challenge to economists is determining how to adddifferent people's utilities together in order to decide whether a gain toone individual justifies the loss to another (218). Third, how can the existence of acorporation be melded into a discussion of economic theory? Politically speaking, sometimes the reasoning behind the impositionof tariffs, while fairly straightforward, is often presented to the publicin such a manner as to favor a very high cost of access to the associateddecision-making and background information (Friedman, 292-293). At the intersectionof supply and demand is the equilibrium price. Trade occurs until there are no additional trades to bemade. The profit a producer makes on the sale of an object is called theproducer surplus and represents the producer's gain. Hidden Order: The Economics of Everyday Life. Another motivation for exchange is change in tastes by the consumer. Competition according to Friedman (238) is efficient whereas amonopolistic situation is inefficient. The standard cure for naturalmonopolies, given by most economic texts, is the introduction of governmentregulation or ownership (Friedman, 239). If the quantity supplied isgreater than the demand, price will fall and rise if the reverse occurs,continuing back and forth until the point of stability (equilibrium price)is reached (Friedman 96). Thus if the value of goods are different to different people, both sidescan gain by exchange. New York: Harper Business, 1996. This is theapproach Friedman takes to explaining economics in general, break thesubject into pieces and combine the pieces into larger groups, such at theend, as the pieces fall into place, the assumptions that were initially"assumed away" will better fit into the grand scheme of betterunderstanding the scope of the problem (22).Section 2: Price = Value = Cost: Solving a Simple Economy The price/value/cost equality is what Friedman terms the "tripleequality" (23). In answer to thethird question, the behavior of the corporation as both a buyer of goodsand producer of output is the way by which comparisons and connections toeconomic theory can be drawn. Price equals both the cost of manufacture as well as thevalue to the end user. This is the oppositeof the consumer surplus. Declining marginal value to the consumer, of a product or servicemotivates exchange. The more the user has of a particular good orservice, the less value is attributed to marginal increases in the samegood or service. The foregoing represents the principle of decliningmarginal value. Hence the reasontariffs go to those industries that are in decline as opposed to those thatare in the early phases of their development. Thus, by the "principle of comparative advantage"two entities can gain by the trade of goods for which there is a mutualcomparative advantage (Friedman 69). This is the reasoning, in Friedman'sopinion as to why a diamond costs so much more than a glass of water.Diamonds are used in very few applications. By normalizing thebasis of valuing these utilities to a dollar, the economist is in a betterposition to determine if a change in value can be measured as animprovement (Friedman, 219). Value has a different connotation for eachconsumer, but according to Friedman, it is consistently the value we judgesomething (material or otherwise) to be worth and as revealed by ouractions (17). All economic situations have varying degrees of equilibrium andelasticity. Actions reveal preference. Second,how are corporations controlled? The section concludes with adiscussion pertaining to market failure which Friedman (278) views asunfairness as opposed to inefficiency.Section 5: Applications: Conventional and Un This final section melds the contents of the first four into acommentary on the present economic situation in the United States.Friedman asserts (288) that foreign trade is an engine (more specifically atechnology) turning agricultural output (in this case wheat) into hardgoods (in this case autos). Theanswer to the second question is much more straightforward and will not befurther detailed for the purposes of this discussion. As such, a tariff does notrepresent an economic improvement although at some times, according toFriedman (288) imposition of a tariff may be necessary as in the case ofprotecting infant or fledgling industry. By improving economic efficiency they, bydefault find answers and solutions to questions and problems respectively. The "flexibility" (elasticity) of both supply and demand areusually greater in the long run than they are in the short (Friedman 9 ).High elasticity implies a high level of excess burden. Changes to the details associated witha set of opportunity factors adjust the value of the good to the user.Rational consumers purchase the quantity of a good or service for which themarginal value equals the price. The economic principles presented throughout the book by Friedman areapplicable to the workings of illegal industry as well as to betterunderstanding crime, punishment, the decline of marriage in the UnitedStates over the last 1 years (32 ) and other facets of life in the UnitedStates as well as in the rest of the world. As such it becomes a buyer of goods and a producer of output. By the end of SectionIII, most of the tools are in place for the reader to begin making informedconnections between economic theory and occurrences in today's environment.Section 1: Economics for Pleasure and Profit Friedman discusses value as it relates to economics and ourmotivations for spending money. According to Friedman (63), production and consumption are the sameproblem. The complexities associatedwith price theory are vast and normally need to be segmented into smallerpieces, analyzed on a piecewise basis, and the resulting analyses re-combined at the end into a coherent summary or principle. From this can beextrapolated different definitions of monopoly.Section 4: Standing in for Moral Philosophy: The Economist as Judge In attempting to find answers for the myriad of questions facingeconomists, they are faced with measuring the situations based upon theassociated economic efficiency. Once the corporation is compared in thismanner it is relatively easy to make the same comparisons and connectionsto an industry. This exactly the opposite in the case of a "Giffen good," which isnot particularly likely and in Friedman's model is an inferior good sinceas people become richer they have less need for the Giffen good. As these connections and comparisons are drawn, it becomes apparentthat individual (or groups thereof) corporations, because of the inherentbetter ability to control production and distribution of product, work intoa position of controlling the supply of a product. Most of the decisions in life are really a choice between differentsets of opportunity (Friedman 41). In answer to the first question, corporations exist as a means tobetter direct the collaborative efforts of individuals working to productgoods. The book begins with anoverview (Sections I and II) of economic theory. In his book, Hidden Order: The Economics of Everyday Life, DavidFriedman works to bring a basic understanding of the complex world ofeconomics within the grasp of the average person. Thus, the three steps to the logic of productionare 1) to produce, 2) determine how much to produce, and 3) to combine theproduction decisions of many producers-the aggregate supply curve (56-6 ).Logically speaking consumers buy more of a product or service as the pricedrops. It alsoobscures the true beneficiary of the action that is often a large corporategroup, a union, or some other large interest entity. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.