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Microeconomics
R O G E R A. A R N O L D
CALIFORNIA STATE UNIVERSITY
SAN MARCOS
9E
Kor Ki
Microeconomics, 9E © 2010, 2008 South-Western, a part of Cengage Learning
Roger A. Arnold ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon
Vice President of Editorial, Business: Jack W. may be reproduced or used in any form or by any means—graphic, electronic,
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Printed in the United States of America

1 2 3 4 5 6 7 12 11 10 09 08
To
Sheila, Daniel,
and David
Brief Contents
Preface xvii Part 5 Market Failure and Public Choice

Chapter 16 Market Failure: Externalities, Public Goods, and
An Introduction to Economics Asymmetric Information 380
Chapter 17 Public Choice: Economic Theory Applied to
Part 1 Economics: The Science of Scarcity Politics 406
Chapter 1 What Economics Is About 1
Appendix A Working with Diagrams 19 The Global Economy
Appendix B Should You Major in Economics? 27
Chapter 2 Economic Activities: Producing and Trading 33
Part 6 International Economics and Globalization
Chapter 3 Supply and Demand: Theory 53 Chapter 18 International Trade 427
Chapter 4 Supply and Demand: Applications 91 Chapter 19 International Finance 446
Chapter 20 Globalization and International Impacts on the
Economy 475
Microeconomics
Part 2 Microeconomic Fundamentals Practical Economics
Chapter 5 Elasticity 113
Part 7 Financial Matters
Chapter 6 Consumer Choice: Maximizing Utility and Behavioral
Economics 140 Chapter 21 Stocks, Bonds, Futures, and Options 503
Appendix C Budget Constraint and Indifference Curve Analysis 158
Chapter 7 Production and Costs 166 Web Chapter
Part 3 Product Markets and Policies Part 8 Web Chapter
Chapter 8 Perfect Competition 196 Chapter 22 Agriculture: Problems, Policies, and Unintended
Chapter 9 Monopoly 223 Effects 524
Chapter 10 Monopolistic Competition, Oligopoly, and Game

Theory 246 Self-Test Appendix 524
Chapter 11 Government and Product Markets: Antitrust and Glossary 538

Regulation 272 Index 544
Part 4 Factor Markets and Related Issues

Chapter 12 Factor Markets: With Emphasis on the Labor
Market 295
Chapter 13 Wages, Unions, and Labor 320
Chapter 14 The Distribution of Income and Poverty 339
Chapter 15 Interest, Rent, and Profit 361
iv
Contents
Preface xvii
A n Intr oduc tion t o E c onom ic s

Part  Economics: The Science of Scarcity
CHAPTER  WHAT ECONOMICS IS ABOUT

A Definition of Economics 1
1
E C O N O M I C S 24/7 Goods and Bads 1 Resources 2 Scarcity and a Definition of Economics 2

LOST Key Concepts in Economics 5
3 Opportunity Cost 5 Opportunity Cost and Behavior 6 Benefits and Costs 7
Why Didn’t Jessica Alba Decisions Made at the Margin 8 Efficiency 8 Unintended Effects 10
Go to College? Exchange 11
7 Economic Categories 13
Economics in a Cosmetic Positive and Normative Economics 13 Microeconomics and Macroeconomics 14
Surgeon’s Office? A Reader Asks 16
12
Chapter Summary 16
OFFICE HOURS Key Terms and Concepts 17
“I Don’t Believe That Questions and Problems 17
Every Time a Person Does
Something, He Compares
the Marginal Benefits
and Costs”
15
APPENDIX A: WORKING WITH DIAGRAMS 19

Two-Variable Diagrams 19
Slope of a Line 20
Slope of a Line Is Constant 22
Slope of a Curve 22
The 45-Degree Line 22
Pie Charts 23
Bar Graphs 23
Line Graphs 24
Appendix Summary 26
Questions and Problems 26
APPENDIX B: SHOULD YOU MAJOR IN ECONOMICS? 27

Five Myths About Economics and an Economics Major 28
Myth 1: Economics Is All Mathematics and Statistics 28 Myth 2: Economics Is Only About
Inflation, Interest Rates, Unemployment, and Other Such Things 28 Myth 3: People Become
v
vi CONTENTS
Economists Only if They Want to “Make Money” 29 Myth 4: Economics Wasn’t Very
Interesting in High School, So It’s Not Going to Be Very Interesting in College 30 Myth 5:
Economics Is a Lot Like Business, But Business Is More Marketable 30
What Awaits You as an Economics Major? 30
What Do Economists Do? 31
Places to Find More Information 32
Concluding Remarks 32
CHAPTER  ECONOMIC ACTIVITIES: PRODUCING AND TRADING

The Production Possibilities Frontier 33
33
E C O N O M I C S 24/7 The Straight-Line PPF: Constant Opportunity Costs 33 The Bowed-Outward (Concave-
Downward) PPF: Increasing Opportunity Costs 34 Law of Increasing Opportunity Costs 36
The PPF and Your Grades
40
Economic Concepts Within a PPF Framework 37
Exchange or Trade 39
Trading Prisoners
41
Periods Relevant to Trade 39 Trade and the Terms of Trade 41 Costs of Trades 42
Trades and Third-Party Effects 44
Jerry Seinfeld, the
Doorman, and Production, Trade, and Specialization 44
Adam Smith Producing and Trading 44 Profit and a Lower Cost of Living 47 A Benevolent and All-
47 Knowing Dictator Versus the Invisible Hand 48
OFFICE HOURS A Reader Asks 50
“What Purpose Does the Chapter Summary 50
PPF Serve?” Key Terms and Concepts 51
49
Working with Numbers and Graphs 52
CHAPTER  SUPPLY AND DEMAND: THEORY

A Note About Theories 53
53
E C O N O M I C S 24/7 What Is Demand? 54

Ticket Prices at The Law of Demand 54 What Does Ceteris Paribus Mean? 55 Four Ways to Represent
Disney World the Law of Demand 56 Two Prices: Absolute and Relative 56 Why Does Quantity
58 Demanded Go Down as Price Goes Up? 57 Individual Demand Curve and Market Demand
iPods and the Law of
Curve 58 A Change in Quantity Demanded Versus a Change in Demand 59 What Factors
Demand Cause the Demand Curve to Shift? 62 Movement Factors and Shift Factors 65
62 Supply 66
Advertising and the The Law of Supply 66 Why Most Supply Curves Are Upward Sloping 67 Changes
Demand Curve in Supply Mean Shifts in Supply Curves 68 What Factors Cause the Supply Curve to
63 Shift? 69 A Change in Supply Versus a Change in Quantity Supplied 70
The Dowry and Marriage The Market: Putting Supply and Demand Together 71
Market Disequilibrium Supply and Demand at Work at an Auction 71 The Language of Supply and Demand: A
75 Few Important Terms 72 Moving to Equilibrium: What Happens to Price when There Is
Overbooking and the a Surplus or a Shortage? 72 Speed of Moving to Equilibrium 74 Moving to Equilibrium:
Airlines Maximum and Minimum Prices 75 Equilibrium in Terms of Consumers’ and Producers’
80 Surplus 76 What Can Change Equilibrium Price and Quantity? 78
OFFICE HOURS Demand and Supply as Equations 81
“I Thought Prices Equaled Price Controls 82
Costs Plus 10 Percent” Price Ceiling: Definition and Effects 82 Price Floor: Definition and Effects 85
86 A Reader Asks 87
Chapter Summary 87
Key Terms and Concepts 88
CONTENTS vii
CHAPTER  SUPPLY AND DEMAND: APPLICATIONS

Application 1: Why Is Medical Care So Expensive? 91
91
OFFICE HOURS Application 2: Where Will House Prices Change the Most? 94
“Doesn’t High Demand Application 3: Why Do Colleges Use GPAs, ACTs, and SATs for Purposes of
Mean High Quantity Admission? 95
Demanded?”
109
Application 4: Supply and Demand on a Freeway 96
Application 5: Price Ceilings in the Kidney Market 97
Application 6: The Minimum Wage Law 99
Application 7: Price Floors and Winners and Losers 101
Application 8: Are Renters Better Off? 102
Application 9: Do You Pay for Good Weather? 104
Application 10: College Superathletes 105
Application 11: 10 A.M. Classes in College 107
Application 12: What will Happen to the Price of Marijuana if the Purchase and Sale
of Marijuana Are Legalized? 108
A Reader Asks 110
Chapter Summary 110
Micr oe cono m ic s
Part  Microeconomic Fundamentals
CHAPTER  ELASTICITY 113

How to Approach the Study of Microeconomics 113
E C O N O M I C S 24/7 Consumers 114 Firms 114 Factor Owners 114 The Choices Made in Market
Settings 114 Recap 115
Drug Busts and Crime
121 Elasticity: Part 1 115
Why Is Jack Bauer Eating
Price Elasticity of Demand 115 Elasticity Is Not Slope 116 From Perfectly Elastic
a CalorieMate Block in to Perfectly Inelastic Demand 117 Price Elasticity of Demand and Total Revenue
Japan? (Total Expenditure) 119
126 Elasticity: Part 2 123
Will High Taxes on Price Elasticity of Demand Along a Straight-Line Demand Curve 123 Determinants of Price
Cigarettes Reduce Smoking? Elasticity of Demand 124
128 Other Elasticity Concepts 126
Greenhouse Gases and Gas- Cross Elasticity of Demand 127 Income Elasticity of Demand 127 Price Elasticity of
Efficient Cars Supply 130 Price Elasticity of Supply and Time 131
129
The Relationship Between Taxes and Elasticity 132
OFFICE HOURS Who Pays the Tax? 132 Elasticity and the Tax 133 Degree of Elasticity and Tax
“What Is the Relationship Revenue 134
Between Different Price
Elasticities of Demand and
Total Revenue?”
136
viii CONTENTS
A Reader Asks 137

Chapter Summary 137
CHAPTER  CONSUMER CHOICE: MAXIMIZING UTILITY AND

BEHAVIORAL ECONOMICS 140
Utility Theory 140
E C O N O M I C S 24/7 Utility: Total and Marginal 140 Law of Diminishing Marginal Utility 141 The Solution to
Who Would Spend
the Diamond-Water Paradox 144
$16,000 for a Peanut Consumer Equilibrium and Demand 145
Butter and Jelly Sandwich? Equating Marginal Utilities per Dollar 145 Maximizing Utility and the Law of
143 Demand 146 Should the Government Provide the Necessities of Life for Free? 148
How You Pay for Good Behavioral Economics 149
Weather Are People Willing to Reduce Others’ Incomes? 149 Is $1 Always $1? 150 Coffee
147 Mugs and the Endowment Effect 151 Does the Endowment Effect Hold Only for New
Which Is Better: A Tax Traders? 153
Rebate or a Tax Bonus?
A Reader Asks 155
150
Chapter Summary 156
To Accept or Reject the
Money Key Terms and Concepts 156
153 Questions and Problems 156
OFFICE HOURS Working with Numbers and Graphs 157
“Is There an Indirect
Way of Proving the Law
of Diminishing Marginal
Utility?”
154
APPENDIX C: BUDGET CONSTRAINT AND INDIFFERENCE CURVE ANALYSIS 158

The Budget Constraint 158
Slope of the Budget Constraint 158 What Will Change the Budget Constraint? 158
Indifference Curves 159
Constructing an Indifference Curve 159
Characteristics of Indifference Curves 160
The Indifference Map and the Budget Constraint Come Together 163
From Indifference Curves to a Demand Curve 163
Appendix Summary 164
CONTENTS ix
CHAPTER  PRODUCTION AND COSTS

Why Firms Exist 166
166
E C O N O M I C S 24/7 The Market and the Firm: Invisible Hand Versus Visible Hand 166 The Alchian and Demsetz
Answer 167 Shirking in a Team 167 Ronald Coase on Why Firms Exist 168 Markets:
High School Students,
Staying Out Late, and Outside and Inside the Firm 169
More The Firm’s Objective: Maximizing Profit 169
177 Accounting Profit Versus Economic Profit 170 Zero Economic Profit Is Not as Bad as It
What Matters to Global Sounds 171
Competitiveness? Production 172
182 Production in the Short Run 172 Marginal Physical Product and Marginal
“I Have to Become an Cost 174 Average Productivity 177
Accountant” Costs of Production: Total, Average, Marginal 179
186
The AVC and ATC Curves in Relation to the MC Curve 180 Tying Short-Run Production to
OFFICE HOURS Costs 183 One More Cost Concept: Sunk Cost 184
“What Is the Difference Production and Costs in the Long Run 188
Between the Law of Long-Run Average Total Cost Curve 188 Economies of Scale, Diseconomies of Scale, and
Diminishing Marginal Constant Returns to Scale 189 Why Economies of Scale? 190 Why Diseconomies of
Returns and Diseconomies Scale? 190 Minimum Efficient Scale and Number of Firms in an Industry 190
of Scale?”
192 Shifts in Cost Curves 190
Taxes 191 Input Prices 191 Technology 191
A Reader Asks 193
Chapter Summary 193
Part  Product Markets and Policies
CHAPTER  PERFECT COMPETITION

The Theory of Perfect Competition
196
196
E C O N O M I C S 24/7 A Perfectly Competitive Firm Is a Price Taker 197 The Demand Curve for a Perfectly
Do Churches Compete? Competitive Firm Is Horizontal 197 The Marginal Revenue Curve of a Perfectly Competitive
199 Firm Is the Same as Its Demand Curve 200 Theory and Real-World Markets 201
Frank Sinatra, Sugar Perfect Competition in the Short Run 201
Ray Robinson, and the What Level of Output Does the Profit-Maximizing Firm Produce? 202 The Perfectly
Jamestown Settlement Competitive Firm and Resource Allocative Efficiency 203 To Produce or Not to
208 Produce: That Is the Question 203 The Perfectly Competitive Firm’s Short-Run Supply
Lost Salaries Curve 206 From Firm to Market (Industry) Supply Curve 207 Why Is the Market Supply
218 Curve Upward Sloping? 208
OFFICE HOURS Perfect Competition in the Long Run 209
The Conditions of Long-Run Competitive Equilibrium 209 The Perfectly Competitive Firm
“Do You Have to Know the and Productive Efficiency 211 Industry Adjustment to an Increase in Demand 211 Industry
MR ⫽ MC Condition to
Adjustment to a Decrease in Demand 215 Differences in Costs, Differences in Profits: Now
Be Successful in Business?”
219
You See It, Now You Don’t 215 Profit and Discrimination 216
Topics for Analysis Within the Theory of Perfect Competition 217
Do Higher Costs Mean Higher Prices? 217 Will the Perfectly Competitive Firm
Advertise? 217 Supplier-Set Price Versus Market-Determined Price: Collusion or
Competition? 218
A Reader Asks 220
x CONTENTS
Chapter Summary 220

CHAPTER  MONOPOLY 223

The Theory of Monopoly 223
E C O N O M I C S 24/7 Barriers to Entry: A Key to Understanding Monopoly 223 What Is the Difference Between a
Monopoly and the Boston
Government Monopoly and a Market Monopoly? 225
Tea Party Monopoly Pricing and Output Decisions 226
225 The Monopolist’s Demand and Marginal Revenue 226 The Monopolist’s Demand and
Amazon and Price Marginal Revenue Curves Are Not the Same 227 Price and Output for a Profit-Maximizing
Discrimination Monopolist 228 If a Firm Maximizes Revenue, Does It Automatically Maximize Profit Too? 228
237 Perfect Competition and Monopoly 230
Why Do District Attorneys Price, Marginal Revenue, and Marginal Cost 231 Monopoly, Perfect Competition, and
Plea-Bargain? Consumers’ Surplus 231 Monopoly or Nothing? 232
239
The Case Against Monopoly 233
If I Want ESPN, Why Am The Deadweight Loss of Monopoly 233 Rent Seeking 234 X-Inefficiency 236
I Buying MSNBC Too?
Price Discrimination 236
241
Types of Price Discrimination 236 Why a Monopolist Wants to Price Discriminate 236
OFFICE HOURS Conditions of Price Discrimination 237 Moving to P ⫽ MC Through Price
“Does the Single-Price Discrimination 238 You Can Have the Comics, Just Give Me the Coupons 238
Monopolist Lower Price Only A Reader Asks 243
on the Additional Unit?”
242
Chapter Summary 244
CHAPTER  MONOPOLISTIC COMPETITION, OLIGOPOLY, AND

GAME THEORY 246
The Theory of Monopolistic Competition 246
E C O N O M I C S 24/7 The Monopolistic Competitor’s Demand Curve 246 The Relationship Between Price and
The People Wear Prada Marginal Revenue for a Monopolistic Competitor 247 Output, Price, and Marginal Cost
250 for the Monopolistic Competitor 247 Will There Be Profits in the Long Run? 247 Excess
Capacity: What Is It, and Is It “Good” or “Bad”? 248 The Monopolistic Competitor and
How Is a New Year’s
Two Types of Efficiency 250
Resolution Like a Cartel
Agreement? Oligopoly: Assumptions and Real-World Behavior 250
254 The Concentration Ratio 251
Grade Inflation at College Price and Output Under Three Oligopoly Theories 251
266 The Cartel Theory 251 The Kinked Demand Curve Theory 255 The Price Leadership
OFFICE HOURS Theory 256
“Are Firms (as Sellers) Price Game Theory, Oligopoly, and Contestable Markets 258
Takers or Price Searchers?” Prisoner’s Dilemma 258 Oligopoly Firms’ Cartels and the Prisoner’s Dilemma 260 Are
268 Markets Contestable? 262
A Review of Market Structures 263
Applications of Game Theory 263
Grades and Partying 263 The Arms Race 265 Speed Limit Laws 266 The Fear of Guilt
as an Enforcement Mechanism 266
A Reader Asks 269
Chapter Summary 270
CONTENTS xi

CHAPTER  GOVERNMENT AND PRODUCT MARKETS: ANTITRUST AND

REGULATION 272
Antitrust 272
E C O N O M I C S 24/7 Antitrust Acts 273 Unsettled Points in Antitrust Policy 275 Antitrust and
Thomas Edison and Mergers 277 Seven Antitrust Cases and Actions 277 Network Monopolies 280 Civil
Hollywood Action No. 98-1232 281
274 Regulation 284
High-Priced Ink Cartridges The Case of Natural Monopoly 284 Regulating the Natural Monopoly 285 Regulating
and Expensive Minibars Industries That Are Not Natural Monopolies 287 Theories of Regulation 288 The
281 Costs and Benefits of Regulation 288 Some Effects of Regulation Are
Macs, PCs, and People Unintended 289 Deregulation 290
Who Are Different A Reader Asks 292
283
Chapter Summary 292
Why Am I Always Flying
to Dallas?
OFFICE HOURS Working with Numbers and Graphs 294
“What Is the Advantage of
the Herfindahl Index?”
291
Part  Factor Markets and Related Issues
CHAPTER  FACTOR MARKETS: WITH EMPHASIS ON THE LABOR

MARKET 295
Factor Markets 295
E C O N O M I C S 24/7 The Demand for a Factor 295 Marginal Revenue Product: Two Ways to Calculate
Why Jobs Don’t Always
It 296 The MRP Curve Is the Firm’s Factor Demand Curve 297 Value Marginal
Move to the Low-Wage Product 298 An Important Question: Is MRP ⫽ VMP ? 298 Marginal Factor Cost:
Country The Firm’s Factor Supply Curve 299 How Many Units of a Factor Should a Firm
304 Buy? 300 When There Is More Than One Factor, How Much of Each Factor Should the
How Crime, Outsourcing,
Firm Buy? 301
and Multitasking Might Be The Labor Market 302
Related Shifts in a Firm’s MRP, or Factor Demand, Curve 302 Market Demand for Labor 304 The
307 Elasticity of Demand for Labor 305 Market Supply of Labor 306 An Individual’s
The Wage Rate for a Street- Supply of Labor 307 Shifts in the Labor Supply Curve 308 Putting Supply and Demand
Level Pusher in a Drug Together 309 Why Do Wage Rates Differ? 309 Why Demand and Supply Differ Among
Gang Labor Markets 310 Why Did You Choose Your Major? 311 Marginal Productivity
312 Theory 312
It’s a Party Every Night Labor Markets and Information 314
313 Screening Potential Employees 314 Promoting from Within 315 Discrimination or an
OFFICE HOURS Information Problem? 315
“Why Do Economists A Reader Asks 317
Think in Twos?” Chapter Summary 317
316
xii CONTENTS
CHAPTER  WAGES, UNIONS, AND LABOR

The Facts and Figures of Labor Unions
320
320
E C O N O M I C S 24/7 Types of Unions 320 Union Membership: The United States and Abroad 321
Technology, the Price of Objectives of Labor Unions 321
Competing Factors, and Employment for All Members 321 Maximizing the Total Wage Bill 322 Maximizing
Displaced Workers Income for a Limited Number of Union Members 322 Wage-Employment Trade-Off 322
327
Practices of Labor Unions 323
College Professors’ Affecting Elasticity of Demand for Union Labor 323 Affecting the Demand for Union
Objectives Labor 324 Affecting the Supply of Union Labor 325 Affecting Wages Directly: Collective
328
Bargaining 325 Strikes 326
Are You Ready for Some Effects of Labor Unions 327
Football?
The Case of Monopsony 327 Unions’ Effects on Wages 330 Unions’ Effects on
333
Prices 332 Unions’ Effects on Productivity and Efficiency: Two Views 333
“Don’t Higher Wages Chapter Summary 336
Reduce Profits?”
335 Key Terms and Concepts 337
CHAPTER  THE DISTRIBUTION OF INCOME AND POVERTY

Some Facts About Income Distribution 339
339
E C O N O M I C S 24/7 Who Are the Rich and How Rich Are They? 339 The Effect of Age on the Income
Statistics Can Mislead if Distribution 341 A Simple Equation 342
You Don’t Know How Measuring Income Equality 344
They Are Made The Lorenz Curve 344 The Gini Coefficient 345 A Limitation of the Gini Coefficient 346
343
Why Income Inequality Exists 347
Winner-Take-All Markets Factors Contributing to Income Inequality 347 Income Differences: Some Are Voluntary,
350 Some Are Not 349
Q&A: Poverty and Income Normative Standards of Income Distribution 350
356
The Marginal Productivity Normative Standard 350 The Absolute Income Equality
OFFICE HOURS Normative Standard 353 The Rawlsian Normative Standard 353
“Are the Number of Persons Poverty 354
in Each Fifth the Same?” What Is Poverty? 354 Limitations of the Official Poverty Income Statistics 355 Who Are
358 the Poor? 355 What Is the Justification for Government Redistributing Income? 356
A Reader Asks 359
Chapter Summary 359
CONTENTS xiii
CHAPTER  INTEREST, RENT, AND PROFIT

Interest 361
361
E C O N O M I C S 24/7 Loanable Funds: Demand and Supply 361 The Price for Loanable Funds and the Return
on Capital Goods Tend to Equality 364 Why Do Interest Rates Differ? 364 Nominal
Is the Car Worth Buying?
367
and Real Interest Rates 365 Present Value: What Is Something Tomorrow Worth
Today? 366 Deciding Whether or Not to Purchase a Capital Good 367
Loans for the Poorest of the
Poor Rent 369
368 David Ricardo, the Price of Grain, and Land Rent 369 The Supply Curve of Land Can Be
Upward Sloping 370 Economic Rent and Other Factors of Production 370 Economic
Insuring Oneself Against
Terrorism Rent and Baseball Players: The Perspective from Which the Factor Is Viewed
374 Matters 371 Competing for Artificial and Real Rents 371 Do People Overestimate Their
Worth to Others, or Are They Simply Seeking Economic Rent? 371
OFFICE HOURS
Profit 372
“How Is Present Value Theories of Profit 372 What Is Entrepreneurship? 374 What a Microwave Oven and an
Used in the Courtroom?” Errand Runner Have in Common 374 Profit and Loss as Signals 375
376
A Reader Asks 377
Chapter Summary 377
Part  Market Failure and Public Choice
CHAPTER  MARKET FAILURE: EXTERNALITIES, PUBLIC GOODS, AND

ASYMMETRIC INFORMATION 380
Externalities 380
E C O N O M I C S 24/7 Costs and Benefits of Activities 381 Marginal Costs and Benefits of Activities 381 Social
Switching Costs and Optimality, or Efficiency, Conditions 382 Three Categories of Activities 382 Externalities
Market Failure (Maybe) in Consumption and in Production 383 Diagram of a Negative Externality 384 Diagram of
383 a Positive Externality 385
Want to Lease a Rainforest Internalizing Externalities 387
for $1.6 Million per Year? Persuasion 387 Taxes and Subsidies 388 Assigning Property Rights 388 Voluntary
387 Agreements 389 Combining Property Rights Assignments and Voluntary
Telemarketers, Where Are Agreements 389 Beyond Internalizing: Setting Regulations 390
You? Dealing with a Negative Externality in the Environment 391
391 Is No Pollution Worse Than Some Pollution? 392 Two Methods to Reduce Air
The Right Amount of Pollution 392
National Defense Public Goods: Excludable and Nonexcludable Goods 394
396
Goods 394 The Free Rider 395 Nonexcludable Versus Nonrivalrous 395
Arriving Late to Class, Asymmetric Information 397
Grading on a Curve, and
Asymmetric Information in a Product Market 397 Asymmetric Information in a Factor
Studying Together for the
Midterm Market 398 Is There Market Failure? 398 Adverse Selection 399 Moral Hazard 400
400 A Reader Asks 403
OFFICE HOURS Chapter Summary 403
“It Seems Wrong to Let Key Terms and Concepts 404
Some Business Firms Pay to
Pollute”
402
xiv CONTENTS

CHAPTER  PUBLIC CHOICE: ECONOMIC THEORY APPLIED TO

POLITICS 406
Public Choice Theory 406
E C O N O M I C S 24/7 The Political Market 407
A Simple Majority Voting Moving Toward the Middle: The Median Voter Model 407 What Does the Theory
Rule: The Case of the Predict? 408
Statue in the Public Square Voters and Rational Ignorance 410
409 The Costs and Benefits of Voting 411 Rational Ignorance 412
Are You Rationally More About Voting 414
Ignorant? Example 1: Voting for a Nonexcludable Public Good 414 Example 2: Voting and
412
Efficiency 415
Economic Illiteracy and
Special Interest Groups 416
Democracy
413
Information and Lobbying Efforts 416 Congressional Districts as Special Interest
Groups 417 Public Interest Talk, Special Interest Legislation 417 Special Interest Groups
Inheritance, Heirs, and and Rent Seeking 418
Why the Firstborn Became
King or Queen Government Bureaucracy 420
420 A View of Government 422
“Doesn’t Public Choice Chapter Summary 424
Paint a Bleak Picture of Key Terms and Concepts 425
Politics and Government?”
The Glob al Eco nom y

Part  International Economics and Globalization
CHAPTER  INTERNATIONAL TRADE

International Trade Theory 427
427
E C O N O M I C S 24/7 How Countries Know What to Trade 428 How Countries Know when They Have a
Dividing the Work Comparative Advantage 430
431 Trade Restrictions 432
You’re Getting Better The Distributional Effects of International Trade 432 Consumers’ and Producers’
Because Others Are Getting Surpluses 432 The Benefits and Costs of Trade Restrictions 435 Why Nations Sometimes
Better Restrict Trade 438
433
World Trade Organization (WTO) 441
Offshore Outsourcing, or A Reader Asks 443
Offshoring
439 Chapter Summary 443
OFFICE HOURS Key Terms and Concepts 444
“Should We Impose Tariffs Questions and Problems 444

if They Impose Tariffs?” Working with Numbers and Graphs 445
442
CONTENTS xv
CHAPTER  INTERNATIONAL FINANCE

The Balance of Payments 446
446
E C O N O M I C S 24/7 Current Account 447 Capital Account 450 Official Reserve Account 451 Statistical
Merchandise Trade Deficit, Discrepancy 451 What the Balance of Payments Equals 451
We Thought We Knew The Foreign Exchange Market 453
Thee The Demand for Goods 453 The Demand for and Supply of Currencies 454
452
Flexible Exchange Rates 456
Back to the Futures The Equilibrium Exchange Rate 456 Changes in the Equilibrium Exchange
458 Rate 457 Factors That Affect the Equilibrium Exchange Rate 457
Big Mac Economics Fixed Exchange Rates 460
463
Fixed Exchange Rates and Overvalued/Undervalued Currency 460 What Is So Bad
OFFICE HOURS About an Overvalued Dollar? 461 Government Involvement in a Fixed Exchange Rate
“Why Is the Depreciation System 462 Options Under a Fixed Exchange Rate System 464 The Gold Standard 465
of One Currency Tied to Fixed Exchange Rates Versus Flexible Exchange Rates 466
the Appreciation of Another Promoting International Trade 466 Optimal Currency Areas 467
Currency?”
The Current International Monetary System 469
471
A Reader Asks 472
Chapter Summary 472
CHAPTER  GLOBALIZATION AND INTERNATIONAL IMPACTS

ON THE ECONOMY 475
What Is Globalization? 475
E C O N O M I C S 24/7 A Smaller World 475 A World Economy 476
Should You Leave a Tip? Two Ways to See Globalization 477
477 No Barriers 477 A Union of States 478
Proper Business Etiquette Globalization Facts 478
Around the World International Trade 478 Foreign Exchange Trading 479 Foreign Direct Investment 479
481 Personal Investments 479 The World Trade Organization 480 Business Practices 480
Will Globalization Change Movement Toward Globalization 480
the Sound of Music? The End of the Cold War 481 Advancing Technology 482 Policy Changes 482
486
Benefits and Costs of Globalization 483
How Hard Will It Be to The Benefits 483 The Costs 484
Get into Harvard in 2025?
The Continuing Globalization Debate 486
490
More or Less Globalization: A Tug of War? 487
OFFICE HOURS Less Globalization 487 More Globalization 487
“Why Do Some People International Factors and Aggregate Demand 488
Favor Globalization and Net Exports 488 The J-Curve 489
Others Do Not?”
499 International Factors and Aggregate Supply 492
Foreign Input Prices 492 Why Foreign Input Prices Change 492
Factors That Affect Both Aggregate Demand and Aggregate Supply 492
The Exchange Rate 493 The Role That Interest Rates Play 493
Deficits: International Effects and Domestic Feedback 494
The Budget Deficit and Expansionary Fiscal Policy 495 The Budget Deficit and
Contractionary Fiscal Policy 496 The Effects of Monetary Policy 497
A Reader Asks 500
Chapter Summary 500
xvi CONTENTS

Practical Eco n om ic s
Part  Financial Matters
CHAPTER  STOCKS, BONDS, FUTURES, AND OPTIONS

Financial Markets 503
503
E C O N O M I C S 24/7 Stocks 504

Are Some Economists Poor Where Are Stocks Bought and Sold? 504 The Dow Jones Industrial Average
Investors? (DJIA) 505 How the Stock Market Works 506 Why Do People Buy Stock? 508 How to
507 Buy and Sell Stock 509 Buying Stocks or Buying the Market 509 How to Read the Stock
$1.3 Quadrillion Market Page 510
513 Bonds 512
OFFICE HOURS The Components of a Bond 512 Bond Ratings 514 Bond Prices and Yields (or Interest
Rates) 514 Types of Bonds 515 How to Read the Bond Market Page 515 Risk and Return 517
“I Have Three Questions.”
521 Futures and Options 517
Futures 517 Options 518
A Reader Asks 522
Chapter Summary 522
We b Chapte r
Part  Web Chapter
CHAPTER  AGRICULTURE: PROBLEMS, POLICIES, AND UNINTENDED

EFFECTS 524
Agriculture: The Issues 524
E C O N O M I C S 24/7 A Few Facts 524 Agriculture and Income Inelasticity 525 Agriculture and Price Inelasticity 526
The Politics of Agriculture Price Variability and Futures Contracts 527 Can Bad Weather Be Good for Farmers? 527
528 Agricultural Policies 528
Q&A on U.S. Agriculture Price Supports 529 Restricting Supply 529 Target Prices and Deficiency
531 Payments 530 Production Flexibility Contract Payments, (Fixed) Direct Payments, and
Countercyclical Payments 530 Nonrecourse Commodity Loans 531
OFFICE HOURS
A Reader Asks 534
“Why Don’t Farmers Agree
to Cut Back Output?” Chapter Summary 534
533 Key Terms and Concepts 534
Self-Test Appendix 524
Glossary 538
Index 544
Roger Arnold
Your Partner for Success
Let Roger Arnold’s Economics be your partner for success. With

innovative new pedagogical features, increased coverage of
globalization, easy customization, and fully integrated digital options,
Economics may be your perfect solution. Packed with intriguing pop
culture examples, the text illustrates that economics is both a huge
factor in how the world works, and an integral part of the day-to-day
experiences of the average college student.
What Matters to You in the 9th Edition?

Office Hours Enhanced Globalization Coverage
This new feature seeks to emulate This chapter has been significantly expanded, revised and
the kinds of questions you bring to “WHAT PURPOSE DOES THE PPF SERVE?”
updated. It now offers a total picture of how globalization
affects the U.S., and how economies interact throughout
Student: the average person can have 1 unit of X and 2 units of Y. Now sup-
Economics instructors after class.

It seems that economists have many uses for the production possibilities pose there is economic growth (shifting the PPF to the right) and the
frontier (PPF). For example, they can talk about scarcity, choice, opportu- economy can now produce more of both goods, X and Y. It produces
nity costs, and many other topics in terms of the PPF. Beyond this, what 200 units of X and 400 units of Y. If the population has not changed
purpose does the PPF serve? (if it is still 100 people), then the average person can now have 2 units
of X and 4 units of Y. The average person is richer in terms of two
Instructor:
the world.
goods, X and Y. If we change things, and let the population grow from
Office Hours explores key concepts

One purpose is to ground us in reality. For example, the frontier (or 100 persons to, say, 125 persons, it is still possible for the average
boundary) of the PPF represents scarcity, which is a fact of life. In other person to have more through economic growth. With a population of
words, the frontier of the PPF is essentially saying, “Here is scarcity. 125 people, the average person now has 1.6 units of X and 3.2 units
Work with it.” One of the important effects of acknowledging this fact of good Y. In other words, as long as the productive capability of the
is that we come to understand what is and what is not possible. For economy grows by a greater percentage than the population, it is pos-
example, if the economy is currently on the frontier of its PPF, produc- sible for the average person to become richer (in terms of goods and
such as how the money supply

ing 100 units of X and 200 units of Y, it follows that it’s possible to get services).
more of X, but it’s impossible to get more of X without getting less of
Y. In other words, the frontier of the PPF grounds us in reality: More of Student:
one thing means less of something else. Just because the economy is producing more of both goods (X and Y),
it doesn’t necessarily follow that the average person is better off in
Student: terms of goods and services, does it? Can’t all the extra output end up
But isn’t this something that we already knew? in the hands of only a few people instead of being evenly distributed
works; the purpose of the PPF; Instructor:

We understand that more of X means less of Y once someone makes
this point, but think of how often we might act as if we don’t know it.
John thinks he can work more hours at his job and get a good grade
on his upcoming chemistry test. Well, he might be able to get a good
across the entire population?
Instructor:
That’s correct. What we are assuming when we say the “average
person” can be made better off is that if we took the extra output and
divided it evenly across the population, then the average person would
Many New Applications
marginal revenue and marginal
grade (say, a 90), but this ignores how much higher the grade could be better off in terms of having more goods and services. By the way,
have been (say, five points higher) if he hadn’t worked more hours at this is what economists mean when they say that the output (goods
his job. The frontier of the PPF reminds us that there are trade-offs in and services) per capita in a population has risen.
life. That is an important reality to be aware of. We ignore it at our
costs; and the purpose of the

own peril.
Student:
I’ve also heard that the PPF can show us what is necessary before the
“average person” in a country can become richer. Is this true? And
what kind of richer do we mean here?
Points to Remember
1. The production possibilities frontier (PPF) grounds us in reality.
It tells us what is and what is not possible in terms of producing
various combinations of goods and services.
2. The PPF tells us that when we have efficiency (we are at a point
on the frontier itself), more of one thing means less of something
The Ninth Edition of Economics
includes many new applications in
else. In other words, the PPF tells us there are trade-offs in life.
Instructor: 3. If the PPF shifts rightward and the population does not change,
We are talking about becoming richer in terms of having more goods then output per capita rises.
THE PPF AND YOUR GRADES
AD/AS framework.
and services. It’s possible for the “average person” to become richer
through economic growth. In other words, the average person in
Y
ou have your own PPF, you just may Or you can spend four hours studying for
society becomes richer if the PPF shifts rightward by more than the
not know it. Suppose you are study- economics and get a C (point 2), leaving you
the proven favorite—Economics

population grows. To illustrate, suppose that a 100-person economy is
ing for two upcoming exams. You two hours to study for math, in which you
currently producing 100 units of X and 200 units of Y. It follows that
49 have only a total of eight hours before you get a D.
have to take the first exam, after which you
What do you need to get a higher grade
will immediately proceed to take the second
in one course without getting a lower
exam. Time spent studying for the first exam
95425_02_ch02_033-052.indd 49 9/29/08 1:57:49 PM grade in the other course? You need more
(in economics) takes away from time that
resources, which in this case is more time.
24/7 features. Here are just a few of

could be spent studying for the second exam
If you have eight hours to study, your PPF
(in math), and vice versa. Also, time studying ©PIXLAND/JUPITER IMAGES
shifts rightward, as in Exhibit 7(b). Now
is a resource in the production of a good grade; less time studying for the
point 5 is possible (whereas it was not possible before you got more
economics exam and more time spent studying for the math exam means
time). At point 5, you can get a C in economics and in math, which
a higher grade in math and a lower grade in economics. For you, the situ-
was an impossible combination of grades when you had less time (a
ation may look as it does in Exhibit 7(a). We have identified four points
Enhanced “Thinking Like an Economist”

PPF closer to the origin).
the applications that are new to the

in the exhibit (1–4) corresponding
to the four combinations of two exhibit 7
grades (one grade in economics and
one grade in English).
Grade in Economics and Time
Grade in Economics and Time

A A
Spent to Earn the Grade
Spent to Earn the Grade

You will notice also that each (8 hrs.)
grade comes with a certain B B

1 1
Ninth Edition, demonstrating

(6 hrs.) (6 hrs.)
amount of time studying. This time
is specified under the grade. C 2 C 2 5
This classic feature now rotates through the narrative along

(4 hrs.) (4 hrs.)
Given the resources you currently
D 3 D 3
have (your labor and time) you can (2 hrs.) (2 hrs.)
PPF1 PPF1 PPF2
achieve any of the four combina-
F 4 F 4
tions. For example, you can spend
Arnold’s emphasis on current events

(0 hr.) F D C B A (0 hr.) F D C B A
six hours studying for economics (0 hr.) (2 hrs.) (4 hrs.) (6 hrs.) (0 hr.) (2 hrs.) (4 hrs.) (6 hrs.) (8 hrs.)
with two new features: Finding Economics and Common

and get a B (point 1), but this Grade in Math and Time Spent Grade in Math and Time Spent
means you study math for zero to Earn the Grade to Earn the Grade
hours and get an F in that course. (a) (b)
Misconceptions. Incorporating Thinking Like an Economist into that are relevant to your lives: Ex Ante
Phrase that means “before,” as in
before a trade.
BEFORE THE TRADE Before a trade is made, a person is said to be in the ex ante
position. For example, suppose Ramona has the opportunity to trade what she has,
$2,000, for something she does not have, a plasma television set. In the ex ante posi-
tion, she wonders if she will be better off with (1) the television set or with (2) $2,000
worth of other goods. If she concludes that she will be better off with the television set
the narrative of each chapter helps to better emphasize the

than with $2,000 worth of other goods, she will make the trade. Individuals will make
a trade only if they believe ex ante (before) the trade that the trade will make them
better off.
40
importance of developing this skill—to view the world through

95425_02_ch02_033-052.indd 40 9/29/08 1:57:40 PM
the lens of economic analysis. • Which is better, a tax rebate or a tax bonus?
• Is economics at work in the plastic surgeon’s office?
CHAPTER 2
Suppose an advance in technology allows more military goods and more civilian goods
Economic Activities: Producing and Trading
exhibit 6
39
• Finding Economics illustrates the • What economic concepts are illustrated in the popular
to be produced with the same quantity of resources. As a result, the PPF in Exhibit 6 shifts
outward from PPF1 to PPF2. The outcome is the same as when the quantity of resources
is increased.
Finding Economics
Economic Growth Within
a PPF Framework
An increase in resources or
an advance in technology can
increase the production capa- economics around us, such as how ABC television series, Lost?
• Is the law of demand at work for iPods?
bilities of an economy, leading
In an Attorney’s Ofﬁce to economic growth and a shift
a technological advance in farming

outward in the production pos-
sibilities frontier.
A n attorney is sitting in his office working. Where is the economics?

Economic growth shifts
the PPF outward.
Let’s back up and first talk about farmers and a change in technology. During the twentieth century,
• How can we accurately compare GDP between

many farmers left farming because farming experienced major technological advances. Where farm-
Military Goods
ers once farmed with minimal capital equipment, today they use computers, tractors, pesticides, PPF2
may end up resulting in more

cellular phones, and much more. In 1910, the United States had 32.1 million farmers; today there are
PPF1
around 4.8 million farmers. Where did all the farmers go?
Because of technological advancements, fewer farmers were needed to produce food and so many
farmers left the farmers for the cities, where they entered the manufacturing and service industries.
different countries?
0 Civilian Goods
In other words, people who were once farmers (or whose parents and grandparents were farmers)
began to produce cars, airplanes, television sets, and computers. They became attorneys, accoun-
tants, and police officers.
What we learn here is that a technological advancement in one sector of the economy can have
ripple effects throughout the economy. We also learn that a technological advancement can affect attorneys, accountants, or teachers.
• How does the government spend taxpayers’ money?
the composition of employment.
SELF-TEST
(Answers to Self-Test questions are in the Self-Test Appendix.)

1. What does a straight-line production possibilities frontier (PPF) represent? What does a bowed-
outward PPF represent?
2. What does the law of increasing costs have to do with a bowed-outward PPF?
3. A politician says, “If you elect me, we can get more of everything we want.” Under what
condition(s) is the politician telling the truth?
4. In an economy, only one combination of goods is productive efficient. True or false? Explain your answer.
• Common Misconceptions illuminates
EXCHANGE OR TRADE
Exchange (trade) is the process of giving up one thing for something else. Usually, money
is traded for goods and services. Trade is all around us; we are involved with it every day.
Few of us, however, have considered the full extent of trade.
Exchange (Trade)
The process of giving up one thing
for something else.
murky questions like whether one
Periods Relevant to Trade
There are three time periods relevant to the trading process. We discuss these relevant
time periods next. person’s profit is another person’s loss,
95425_02_ch02_033-052.indd 39 9/29/08 1:57:39 PM
and whether the wealthy really pay a

lower percentage of taxes than others.
www.cengage.com/economics/arnold
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communicator, Steven Tomlinson (Ph.D.
Economics, Stanford) walks you through all of the
topics covered in principles of economics in an online
video format. Segments are organized to follow the
organization of the Arnold text and most videos
include class notes that you can download and
quizzes for you to test your understanding.
Find out more at

www.cengage.com/economics/tomlinson.
Arnold’s Study Guide –
Your Partner for Success
Study Guide
Written and updated by Roger Arnold, this thorough Study Guide
helps you to gain a solid understanding of chapter material. The
Study Guide reinforces learning with a list of key concepts and
terms, review questions and problems, short-answer exercises asking
“what is wrong” or “what has been overlooked” in a list of state-
ments, and multiple-choice, true/false, and fill-in-the-blank practice
questions. Reading and completing the Study Guide exercises for
each chapter further explains chapter concepts, assists in the review
of key terms and ideas, and prepares you for testing on the content.
Visit www.ichapters.com to purchase the print Study Guide.
In Appreciation
This book could not have been written and published without the generous expert assistance of many people. A deep debt of
gratitude is owed to the reviewers of the first through eighth editions and to the reviewers of this edition, the ninth.
First Edition Reviewers Eleanor Craig Ken Howard

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xxi
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IN APPRECIATION xxiii
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I would like to thank Peggy Crane of Southwestern College, who revised the Test Bank, and Jane Himarios of the University
of Texas at Arlington, who revised the Instructor’s Manual. I owe a dept of gratitude to all the fine and creative people I
worked with at South-Western/Cengage Learning. These persons include Jack Calhoun; Alex von Rosenberg; Michael Worls,
Executive Editor for Economics; Jennifer Thomas, Senior Developmental Editor; Kim Kusnerak, Senior Content Project
Manager; John Carey, Senior Marketing Manager; Michelle Kunkler, Senior Art Director; and Sandee Milewski, Senior
Frontlist Buyer.
My deepest debt of gratitude goes to my wife, Sheila, and to my two sons, David, eighteen years old, and Daniel, twenty one
years old. They continue to make all my days happy ones.
Roger A. Arnold
Discovering Diverse Content Through
Random Scribd Documents
forms of her own experience. When she is disorderly, and her
mother or nurse arranges her hair or washes her hands, it is in order
that she may not continue to be disorderly. The child is envisaging
the wind and the rain as a kind of naughty child who can be got to
behave properly by effacing the effects of its naughtiness. In other
words they are both to be deterred from repeating what is
objectionable by a visible and striking manifestation of somebody’s
objection or prohibition. Here, it seems unmistakable, we have a
projection into nature of human purpose, of the idea of
determination of action by end: we have a form of
anthropomorphism which runs through the whole of primitive
thought.
It seems to follow from this that there is a stage in the
development of a child’s intelligence when questions such as, ‘Why
do the leaves fall?’ ‘Why does the thunder make such a noise?’ are
answered most satisfactorily by a poetic fiction, by saying, for
example, that the leaves are old and tired of hanging on to the
trees, and that the thunder giant is in a particularly bad temper and
making a noise. It is perhaps permissible to make use of this fiction
at times, more especially when trying to answer the untiring
questioning about animals and their doings, a region of existence, by
the way, of which even the wisest of us knows exceedingly little. Yet
the device has its risks; and an ill-considered piece of myth-making
passed off as an answer may find itself awkwardly confronted by
that most merciless of things, a child’s logic.
We may notice something more in this early mode of
interrogation. Children are apt to think not only that things behave in
general after our manner, that their activity is determined by some
end or purpose, or that they have their useful function, their raison
d’être as we say, but that this purpose concerns us human creatures.
The wind and the rain came and went in our little girl’s nature-theory
just to vex or out of consideration for ‘mamma’ and ‘Babba’. A little
boy of two years two months sitting on the floor one day in a bad
temper looked up and saw the sun shining and said captiously, ‘Sun
not look at Hennie,’ and then more pleadingly, ‘Please, sun, not look
at poor Hennie’.[40] The sea, when the child C. first saw it, was
supposed to make its disturbing noise with special reference to his
small ears. We may call this the anthropocentric idea, the essence of
which is that man is the centre of reference, the aim or target, in all
nature’s processes. This anthropocentric tendency again is shared by
the child with the uncultured adult. Primitive man looks on wind,
rain, thunder as sent by some angry spirit, and even a respectable
English farmer tends to view these operations of nature in much the
same way. In children this anthropocentric impulse is apt to get
toned down by their temperament, which is on the whole optimistic
and decidedly practical, into a looking out for the uses of things. A
boy, already quoted, once (towards the end of the fourth year)
asked his mother what the bees do. This question he explained by
adding: “What is the good of them?” When told that they made
honey he observed pertinently enough from his teleological
standpoint: “Then do they bring it for us to eat?” This shrewd little
fellow might have made short work of some of the arguments by
which the theological optimists of the last century were wont to
‘demonstrate’ the Creator’s admirable adaptation of nature to man’s
wants.
The frequency of this kind of ‘why?’ suggests that children’s
thoughts about things are penetrated with the idea of purpose and
use. This is shown too in other ways. M. A. Binet found by
questioning children that their ideas of things are largely made up of
uses. Thus, asked what a hat is, a child answered: “Pour mettre sur
la tête”. Mr. H. E. Kratz of Sioux City sends me some answers to
questions by children of five on entering a primary school, which
illustrate the same point. Thus the question, ‘What is a tree?’ brings
out the answers, ‘To make the wind blow,’ ‘To sit under,’ and so forth.
Little by little this idea of a definite purpose and use in this and
that thing falls back and the child gets interested more in the
production or origination of things. He wants to know who made the
trees, the birds, the stars and so forth. Here, though what we call
efficient, as distinguished from final, cause is recognised,
anthropomorphism survives in the idea of a maker analogous to the
carpenter. We shall see later that children habitually envisage the
deity as a fabricator.
All this rage of questioning about the uses and the origin of things
is the outcome, not merely of ignorance and curiosity, but of a
deeper motive, a sense of perplexity, of mystery or contradiction. It
is not always easy to distinguish the two types of question, yet in
many cases at least its form and the manner of putting it will tell us
that it issues from a puzzled and temporarily baffled brain. As long
as the questioning goes on briskly we may infer that a child believes
in the possibility of knowledge, and has not sounded the deepest
depths of intellectual despair. More pathetic than the saddest of
questions is the silencing of questions by the loss of faith.
It is easy to see that children must find themselves puzzled with
much which they see and hear of. The apparent exceptions to rules
don’t trouble the grown-up persons just because as recurrent
exceptions they seem to take on a rule of their own. Thus adults
though quite unversed in hydrostatics would be incapable of being
puzzled by C.’s problem: why my putting my hand in water does not
make a hole in it. Similarly, though they know nothing of animal
physiology they are never troubled by the mystery of fish breathing
under water, which when first noted by a child may come as a sort
of shock. The little boy just referred to, in his far-reaching zoological
interrogatory asked his mother: “Can they (the fish) breathe with
their moufs under water?”
In his own investigations, and in getting instruction from others,
the child is frequently coming upon puzzles of this sort. The same
boy was much exercised about the sea and where it went to. He
expressed a wish to take off his shoes and to walk out into the sea
so as to see where the ships go to, and was much troubled on
learning that the sea got deeper and deeper, and that if he walked
out into it he would be drowned. At first he denied the paradox
(which he at once saw) of the incoming sea going uphill: “But,
mamma, it doesn’t run up, it doesn’t run up, so it couldn’t come up
over our heads?” He was told that this was so, and he wisely began
to try to accommodate his mind to this startling revelation. C., it will
be seen, was much exercised by this problem of the moving mass of
waters, wanting to know whether it came half way up the world.
Probably in both these cases the idea of water rising had its uncanny
alarming aspect.
It is probable that the disappearance of a thing is at a very early
stage a puzzle to the infant. Later on, too, the young mind continues
to be exercised about this mystery. Our little friend’s inquiry about
the whither of the big receding sea, “Where does the sea sim (swim)
to?” illustrates this perplexity. A child seems able to understand the
shifting of an object of moderate size from one part of space to
another, but his conception of space is probably not large enough to
permit him to realise how a big tract of water can pass out of the
visible scene into the unseen. The child’s question, “Where does all
the wind go to?” seems to have sprung from a like inability to picture
a vast unseen realm of space.
In addition to this difficulty of the disappearance of big things,
there seems to be something in the vastness, and the infinite
number of existent things perceived and heard about, which puzzles
and oppresses the young mind. The inability to take in all the new
facts leads to a kind of resentment of their multitude. “Mother,”
asked a boy of four years, “why is there such a lot of things in the
world if no one knows all these things?” One cannot be quite sure of
the underlying thought here. The child may have meant merely to
protest against the production of so confusing a number of objects
in the world. This certainly seems to be the motive in some
children’s inquiries, as when a little girl, aged three years seven
months, said: ‘Mamma, why do there be any more days, why do
there? and why don’t we leave off eating and drinking?’ Here the
burdensomeness of mere multiplicity, of the unending procession of
days and meals, seems to be the motive. Yet it is possible that the
question about a lot of things not known to anybody was prompted
by a deeper difficulty, a dim presentiment of Berkeley’s idealism, that
things can exist only as objects of knowledge. This surmise may
seem far-fetched to some, yet I have found what seem to me other
traces of this tendency in children. A girl of six and a half years was
talking to her father about the making of the world. He pointed out
to her the difficulty of creating things out of nothing, showing her
that when we made things we simply fashioned materials anew. She
pondered and then said: “Perhaps the world’s a fancy”. Here again
one cannot be quite sure of the child-thought behind the words. Yet
it certainly looks like a falling back for a moment into the dreamy
mood of the idealist, that mood in which we seem to see the solid
fabric of things dissolve into a shadowy phantasmagoria.
The subject of origins is, as we know, beset with puzzles for the
childish mind. The beginnings of living things are, of course, the
great mystery. “There’s such a lot of things,” remarked the little
zoologist I have recently been quoting, “I want to know, that you
say nobody knows, mamma. I want to know who made God, and I
want to know if Pussy has eggs to help her make ickle (little) kitties.”
Finding that this was not so, he observed: “Oh, then, I s’pose she
has to have God to help her if she doesn’t have kitties in eggs given
her to sit on”. Another little boy, five years old, found his way to the
puzzle of the reciprocal genetic relation of the hen and the egg, and
asked his mother: “When there is no egg where does the hen come
from? When there was no egg, I mean, where did the hen come
from?” In a similar way, as we shall see in C.’s journal, a child will
puzzle his brains by asking how the first child was suckled, or, as a
little girl of four and a half years put it, "When everybody was a
baby—then who could be their nurse—if they were all babies?" The
beginnings of human life are, as we know, a standing puzzle for the
young investigator.
Much of this questioning is metaphysical in that it transcends the
problems of every-day life and of science. The child is metaphysician
in the sense in which the earliest human thinkers were
metaphysicians, pushing his questioning into the inmost nature of
things, and back to their absolute beginnings, as when he asks ‘Who
made God?’ or ‘What was there before God?’[41] He has no idea yet
of the confines of human knowledge. If his mother tells him she
does not know he tenaciously clings to the idea that somebody
knows, the doctor it may be, or the clergyman—or possibly the
policeman, of whose superior knowledge one little girl was forcibly
convinced by noting that her father once asked information of one of
these stately officials.
Strange, bizarre, altogether puzzling to the listener, are some of
these childish questions. A little American girl of nine years after a
pause in talk re-commenced the conversation by asking: “Why don’t
I think of something to say?” A play recently performed in a London
theatre made precisely this appeal to others by way of getting at
one’s own motives a chief amusing feature in one of its comical
characters. Another little American girl aged three one day left her
play and her baby sister named Edna Belle to find her mother and
ask: “Mamma, why isn’t Edna Belle me, and why ain’t I Edna
Belle?”[42] The narrator of this story adds that the child was not a
daughter of a professor of metaphysics but of practical farmer folk.
One cannot be quite sure of the precise drift of this question. It may
well have been the outcome of a new development of self-
consciousness, of a clearer awareness of the self in its distinctness
from others. A question with a much clearer metaphysical ring about
it, showing thought about the subtlest problems, was that put by a
boy of the same age: “If I’d gone upstairs, could God make it that I
hadn’t?” This is a good example of the type of question: ‘Can he
make a thing done not to have been done?’ which according to
Erasmus was much debated by theologians.[43]
With many children confronted with the mysteries of God and the
devil this questioning often reproduces the directions of theological
speculation. Thus the problem of the necessity of evil is clearly
recognisable in the question once put by an American boy under
eight years of age to a priest who visited his home: “Father, why
don’t God kill the devil and then there would be no more wickedness
in the world?”
All children’s questioning does not of course take this sublime
direction. Along with the tendency to push back inquiry to the
unreachable beginning of things we mark a more modest and
scientific line of investigation into the observable and explainable
processes of nature. Some questions which a busy listener would
pooh-pooh as dreamy have a genuinely scientific value, showing that
the little inquirer is trying to work out some problem of fact. This is
illustrated by a question put by a little boy aged three years nine
months: “Why don’t we see two things with our two eyes?” a
problem which, as we know, has exercised older psychologists.
When this more definitely scientific direction is taken by a child’s
questioning we may observe that the ambitious ‘why?’ begins to play
a second rôle, the first being now taken by the more modest ‘how?’
The germ of this kind of inquiry may be present in some of the early
questioning about growth. “How,” asked our little zoologist, “does
plants grow when we plant them, and how does boys grow from
babies to big boys like me? Has I grown now whilst I was eating my
supper? See!” and he stood up to make the most of his stature.
Clearer evidence of a directing of inquiry into the processes of things
appears in the fifth and sixth years. A little girl of four years seven
months among other questionings wanted to know what makes the
trains move, and how we move our eyes. The incessant inquiries of
the boy Clark Maxwell into the ‘go’ of this thing or the ‘particular go’
of that illustrate in a clearer manner the early tendency to direct
questioning to the more manageable problems to which science
confines itself.
These different lines of questioning are apt to run on concurrently
from the end of the third year, a fit of eager curiosity about animals
or other natural objects giving place to a fit of theological inquiry,
this again being dropped for an equally eager inquiry into the
making of clocks, railway engines, and so on. Yet through these
alternating bouts of questioning we can distinguish something like a
law of intellectual progress. Questioning as the most direct
expression of a child’s curiosity follows the development of his
groups of ideas and of the interests which help to construct these.
Thus I think it a general rule that questioning about the make or
mechanism of things follows questioning about animal ways just
because the zoological interest (in a very crude form of course)
precedes the mechanical. The scope of this early questioning will,
moreover, expand with intellectual capacity, and more particularly
the capability of forming the more abstruse kind of childish idea.
Thus inquiries into absolute beginnings, into the origin of the world
and of God himself, indicate the presence of a larger intellectual
grasp of time-relations and of the processes of becoming.
Our survey of the field of childish questioning suggests that it is by
no means an easy matter to deal with. It must be admitted, I think,
by the most enthusiastic partisan of children that their questioning is
of very unequal value. It may often be noticed that a child’s ‘why?’ is
used in a sleepy mechanical way with no real desire for knowledge,
any semblance of answer being accepted without an attempt to put
a meaning into it. A good deal of the more importunate kind of
children’s questioning, when they follow up question by question
recklessly, as it seems, and without definite aim, appears to be of
this formal and lifeless character, an expression not of a healthy
intellectual activity, but merely of a mood of general mental
discontent and peevishness. In a certain amount of childish
questioning, indeed, we have, I suspect, to do with a distinctly
abnormal mental state, with an analogue of that mania of questions,
or passion for mental rummaging or prying into everything,
“Grubelsucht” as the Germans call it, which is a well-known phase of
mental disease, and prompts the patient to put such questions as
this: “Why do I stand here where I stand?” “Why is a glass a glass, a
chair a chair?” Such questioning ought, it is evident, not to be
treated too seriously. We may attach too much significance to a
child’s question, labouring hard to grasp its meaning, with a view to
answering it, when we should be wiser if we viewed it as a symptom
of mental irritability and peevishness, to be got rid of as quickly as
possible by a good romp or other healthy distraction.[44]
To admit, however, that children’s questions may now and again
need this sort of wholesome snubbing is far from saying that we
ought to treat all their questioning with a mild contempt. The little
questioners flatter us by attributing superior knowledge to us, and
good manners should compel us to treat their questions with some
attention. And if now and then they torment us with a string of
random reckless questioning, in how many cases, one wonders, are
they not made to suffer, and that wrongfully, by having perfectly
serious questions rudely cast back on their hands? The truth is that
to understand and to answer children’s questions is a considerable
art, including both a large and deep knowledge of things, and a
quick sympathetic insight into the little questioners’ minds, and few
of us have at once the intellectual and the moral excellences needed
for an adequate treatment of them. It is one of the tragi-comic
features of human life that the ardent little explorer looking out with
wide-eyed wonder upon his new world should now and again find as
his first guide a nurse or even a mother who will resent the majority
of his questions as disturbing the luxurious mood of indolence in
which she chooses to pass her days. We can never know how much
valuable mental activity has been checked, how much hope and
courage cast down by this kind of treatment. Yet happily the
questioning impulse is not easily eradicated, and a child who has
suffered at the outset from this wholesale contempt may be
fortunate enough to meet, while the spirit of investigation is still
upon him, one who knows and who has the good nature and the
patience to impart what he knows in response to a child’s appeal.
37. Works, vol. iii., p. 396.
38. The first question put by Preyer’s boy was, ‘Where is mamma?’
Die Seele des Kindes, p. 412. (The references are to the third
edition, 1890.)
39. Cf. some shrewd remarks by Dr. Venn, Empirical Logic, p. 494.
40. See note by E. M. Stevens, Mind, xi., p. 150.
41. Illustrations are given by Compayré, op. cit., and by P.

Lombroso, Psicologia del Bambino, p. 47 ff.
42. Quoted from an article, “Some Comments on Babies,” by Miss

Shinn in the Overland Monthly, Jan., 1894.
43. Froude, Letters of Erasmus, Lect. vii.
44. Cf. Perez, L’Education dès le berceau, p. 45 ff.

IV.
PRODUCTS OF CHILD-THOUGHT.
The Child’s Thoughts about Nature.
We have seen in the previous article how a child’s mind behaves
when brought face to face with the unknown. We will now examine
some of the more interesting results of this early thought-activity,
what are known as the characteristic ideas of children. There is no
doubt, I think, that children, by reflecting on what they see or
otherwise experience and what they are told by others, fashion their
own ideas about nature, death and the rest. This tendency, as
pointed out above, discloses itself to some extent in their questions
about things. It has now to be more fully studied in their sayings as
a whole. The ideas thus formed will probably prove to vary
considerably in the case of different children, yet to preserve
throughout these variations a certain general character.
These ideas, moreover, like those of primitive races, will be found
to be a crude attempt at a connected system. We must not, of
course, expect too much here. The earliest thought of mankind
about nature and the supernatural was very far from being
elaborated into a consistent logical whole; yet we can see general
forms of conception or tendencies of thought running through the
whole. So in the case of this largely spontaneous child-thought. It
will disclose to an unsparing critical inspection vast gaps, and many
unsurmounted contradictions. Thus in the case of children, as in that
of uncultured races, the supernatural realm is at first brought at
most into only a very loose connexion with the visible world. All the
same there is seen, in the measure of the individual child’s
intelligence, the endeavour to co-ordinate, and the poor little hard-
pressed brain of a child will often pluckily do its best in trying to
bring some connexion into that congeries of disconnected worlds
into which he finds himself so confusingly introduced, partly by the
motley character of his own experiences, as the alternations of
waking and sleeping, partly by the haphazard miscellaneous
instruction, mythological, historical, theological, and the rest, with
which we inconsiderately burden his mind.
As was observed in dealing with children’s imaginative activity, this
primitive child-lore, like its prototype in folk-lore, is largely a product
of a naïve vivid fancy. In assigning the relations of things and their
reasons, a child’s mind does not make use of abstract conceptions. It
does not talk about “relation,” but pictures out the particular relation
it wants to express by a figurative expression, as in apperceiving the
juxtaposition of moon and star as mamma and baby. So it does not
talk of abstract force, but figures some concrete form of agency, as
in explaining the wind by the idea of somebody’s waving a big fan
somewhere. This first crude attempt of the child to envisage the
world is, indeed, largely mythological, proceeding by the invention of
concrete and highly pictorial ideas of fairies, giants and their doings.
The element of thought comes in with the recognition of the real
as such, and with the application of the products of young phantasy
to comprehending and explaining this reality. And here we see how
this primitive child-thought, though it remains instinct with glowing
imagery, differentiates itself from pure fancy. This last knows no
restraint, and aims only at the delight of its spontaneous play-like
movements, whereas thought is essentially the serious work of
realising and understanding what exists. The contrast is seen plainly
enough if we compare the mental attitude of the child when he is
frankly romancing, giving out now and again a laugh, which shows
that he himself fully recognises the absurdity of his talk, with his
attitude when in gravest of moods he is calling upon his fancy to aid
reason in explaining some puzzling fact.
How early this splitting of the child’s imaginative activity into these
two forms, the playful and the thoughtful, takes place is not, I think,
very easy to determine. Many children at least are apt at first to take
all that is told them as gospel. To most of them about the age of
three and four, I suspect, fairyland, if imagined at all, is as much a
reality as the visible world. The disparity of its contents, the fairies,
dragons and the rest, with those of the world of sense does not
trouble their mind, the two worlds not being as yet mentally
juxtaposed and dove-tailed one into the other. It is only later when
the desire to understand overtakes and even passes the impulse to
frame bright and striking images, and, as a result of this, critical
reflexion applies itself to the nursery legends and detects their
incongruity with the world of every-day perception, that a clear
distinction comes to be drawn between reality and fiction, what
exists and can (or might) be verified by sense, and what is only
pictured by the mind.
With this preliminary peep into the modus operandi of children’s
thought, let us see what sort of ideas of things they fashion.
Beginning with their ideas of natural objects we find, as has been
hinted, the influence of certain predominant tendencies. Of these
the most important is the impulse to think of what is far off, whether
in space or time, and so unobservable, as like what is near and
observed. Along with this tendency, or rather as one particular
development of it, there goes the disposition already illustrated, to
vivify nature, to personify things and so to assimilate their behaviour
to the child’s own, and to explain the origin of things by ideas of
making and aiming at some purpose. Since, at the same time that
these tendencies are still dominant, the child by his own observation
and by such instruction as he gets, is gaining insight into the ‘how,’
the mechanism of things, we find that his cosmology is apt to be a
quaint jumble of the scientific and the mythological. Thus the boy C.
tried to conceive of the divine creation of men as a mechanical
process with well-marked stages—the fashioning of stone men, iron
men, and then real men. In many cases we can see that a nature-
myth comes in to eke out the deficiencies of mechanical insight.
Thus, the production of thunder and other strange and inexplicable
phenomena is referred, as by the savage, and even by many so-
called civilised men and women, to the direct interposition of a
supernatural agency. The theological idea with which children are
supplied is apt to shape itself into that of a capricious and awfully
clever demiurgos, who not only made the world-machine but alters
its working as often as he is disposed. With this idea of a
supernatural agent there is commonly combined that of a natural
process as means employed, as when thunder is supposed to be
caused by God’s treading heavily on the floor of the sky.
Contradictions are not infrequent, the mythological impulse
sometimes alternating with a more distinctly scientific impulse to
grasp the mechanical process, as when wind is sometimes thought
of, as caused by a big fan, and sometimes, e.g., when heard
moaning in the night, endowed with life and feeling.
I shall make no attempt to give a methodical account of children’s
thoughts about nature. I suspect that a good deal more material will
have to be collected before a complete description of these thoughts
is possible. I shall content myself with giving a few samples of their
ideas so far as my own studies have thrown light on them.
With respect to the make or substance of things children are, I
believe, disposed to regard all that they see as having the resistant
quality of solid material substance.
At first, that is to say after the child has had experience enough of
seeing and touching things at the same time to know that the two
commonly go together, he believes that all which he sees is tangible
or substantial. Thus he will try to touch shadows, sunlight dancing
on the wall, and picture forms. This tendency to “reify,” or make
things of, his visual impressions shows itself in pretty forms, as when
the little girl M., one year eleven months old, “gathered sunlight in
her hands and put it on her face”. The same child about a month
earlier expressed a wish to wash some black smoke. This was the
same child that tried to make the wind behave by making her
mother’s hair tidy; and her belief in the material reality of the wind
was shown by her asking her mother to lift her up high so that she
might see the wind. This last, it is to be noted, was an inference
from touching and resisting to seeing.[45] Wind, it has been well
remarked, keeps something of its substantiality for all of us long
after shadows have become the type of unreality, proving that the
experience of resisting something lies at the root of our sense of
material substance. That older children believe in the wind as a
living thing seems suggested by the readiness with which they get
up a kind of play-tussle with it. That wind even in less fanciful
moments is reified is suggested by the following story from the
Worcester collection. A girl aged nine was looking out and seeing the
wind driving the snow in the direction of a particular town, Milbury:
whereupon she remarked, “I’d like to live down in Milbury”. Asked
why, she replied, “There must be a lot of wind down there, it’s all
blowing that way”.
Children, as may be seen in this story, are particularly interested in
the movements of things. Movement is the clearest and most
impressive manifestation of life. All apparently spontaneous or self-
caused movements are accordingly taken by children, as by primitive
man, to be the sign of life, the outcome of something analogous to
their own impulses. Hence the movements of falling leaves, of
running water, of feathers and the like are specially suggestive of
life. Wind owes much of its vitality, as seen in the facile
personification of it by the poet, to its apparently uncaused
movements. Some children in the Infant Department of a London
Board School were asked what things in the room were alive, and
they promptly replied the smoke and the fire. Big things moving by
an internal mechanism of which the child knows nothing, more
especially engines, are of course endowed with life. A little girl of
thirteen months offered a biscuit to a steam-tram, and the author of
The Invisible Playmate tells us that his little girl wanted to stroke the
“dear head” of a locomotive. A child has been known to ask whether
a steam-engine was alive. In like manner, savages on first seeing the
self-moving steamer take it for a big animal. The fear of a dog at the
sight of an unfamiliar object appearing to move of itself, as a parasol
blown along the ground by the wind, seems to imply a rudiment of
the same impulse to interpret self-movement as a sign of life.[46]
The child’s impulse to give life to moving things may lead him to
overlook the fact that the movement is caused by an external force,
and this even when the force is exerted by himself. The boy C. on
finding the cushion he was sitting upon slipping from under him in
consequence of his own wriggling movements pronounced it alive.
In like manner children, as suggested above, ascribe life to their
moving playthings. Thus, C.’s sister when five years old stopped one
day trundling her hoop, and turning to her mother, exclaimed: “Ma, I
do think this hoop must be alive, it is so sensible: it goes where I
want it to”. Another little girl two and a quarter years old on having a
string attached to a ball put into her hand, and after swinging it
round mechanically, began to notice the movement of the ball, and
said to herself, “Funny ball!” In both these cases, although the
movement was directly caused by the child, it was certainly in the
first case, and apparently in the second, attributed to the object.
Next to movement apparently spontaneous sound appears to be a
common reason for attributing life to inanimate objects. Are not
movement and vocal sound the two great channels of utterance of
the child’s own impulses? The little girl M., when just two years old,
being asked by her mother for a kiss, answered prettily, ‘Tiss (kiss)
gone away’. This may, of course, have been merely a child’s way of
using language, but the fact that the same little girl asked to see a
‘knock’ suggests that she was disposed to give reality and life to
sounds. Its sound greatly helps the persuasion that the wind is alive.
A little boy assured his teacher that the wind was alive, for he heard
it whistling in the night. The ascription of life to fire is probably aided
by its sputtering crackling noises. The impulse, too, to endow so
little organic-looking an object as a railway engine with conscious life
is probably supported by the knowledge of its puffing and whistling.
Pierre Loti, when as a child he first saw the sea, regarded it as a
living monster, no doubt on the ground of its movement and its
noise. The personification of the echo by the child, of which George
Sand’s reminiscences give an excellent example, as also by
uncultured man, is a signal illustration of the suggestive force of a
voice-like sound.
Closely connected with this impulse to ascribe life to what older
folk regard as inanimate objects is the tendency to conceive them as
growing. This is illustrated in the remark of the boy C., that his stick
would in time grow bigger. On the other hand, there is in the
Worcester Collection a curious story of a little American boy of three
who, having climbed up into a large waggon, and being asked, “How
are you going to get out?” replied, “I can stay here till it gets little
and then I can get out my own self”. We shall see presently that
shrinkage or diminution of size is sometimes attributed by the child-
mind to people when getting old. So that we seem to have in each
of these cases the extension to things generally of an idea first
formed in connexion with the observation of human life.
Children’s ideas of natural objects are anthropomorphic, not
merely as reflecting their own life, but as modelled after the analogy
of the effects of their action. Quite young children are apt to extend
the ideas broken and mended to objects generally. Anything which
seems to have become reduced by losing a portion of itself is said to
be ‘broken’. A little boy of three, on seeing the moon partly covered
by a cloud, remarked, “The moon is broken”. On the other hand, in
the case of one little boy, everything intact was said to be mended.
It may be said, however, that we cannot safely infer from such
analogical use of common language that children distinctly think of
all objects as undergoing breakage and repair: for these expressions
in the child’s vocabulary may refer rather to the resulting
appearances, than to the processes by which they are brought
about.
Clearer evidences of this reflexion on to nature of the
characteristics of his own life appear when a child begins to
speculate about mechanical processes, which he invariably conceives
of after the analogy of his own actions. This was illustrated in
dealing with children’s questions. We see it still more clearly
manifested in some of their ideas. One of the most curious instances
of this that I have met with is seen in early theorisings about the
cause of wind. One of the children examined by Mr. Kratz said the
tree was to make the wind blow. A pupil of mine distinctly recalls
that when a child he accounted for the wind at night by the swaying
of two large elms in front of the house and not far from the windows
of his bedroom. This reversing of the real order of cause and effect
looks silly, until we remember that the child necessarily looks at
movement in the light of his own actions. He moves things, e.g., the
water, by his moving limbs; we set the air in motion by a moving
fan; it seems, therefore, natural to him that the wind-movements
should be caused by the pressure of some moving thing; and there
is the tree actually seen to be moving.
So far I have spoken for the most part of children’s ideas about
near and accessible objects. Their notions of what is distant and
inaccessible are, as remarked, wont to be formed on the model of
the first. Here, however, their knowledge of things will be largely
dependent on others’ information, so that the naïve impulse of
childish intelligence has, as best it may, to work under the limitations
of an imperfectly understood language.
It is perhaps hardly necessary to remind the reader that children’s
ideas of distance before they begin to travel far are necessarily very
inadequate. They are disposed to localise the distant objects they
see, as the sun, moon and stars, and the places they hear about on
the earth’s surface as near as possible. The tendency to approximate
things as seen in the infant’s stretching out of the hand to touch the
moon lives on in the later impulse to localise the sky and heavenly
bodies just beyond the farthest terrestrial object seen, as when a
child thought they were just above the church spire, another that
they could be reached by tying a number of ladders together,
another that the setting sun went close behind the ridge of hills, and
so forth. The stars, being so much smaller looking, seem to be
located farther off than the sun and moon. Similarly when they hear
of a distant place, as India, they tend to project it just beyond the
farthest point known to them, say Hampstead, to which they were
once taken on a long, long journey from their East End home. A
child’s standard of size and distance is, as all know who have
revisited the home of their childhood after many years, very different
from the adult’s. To the little legs unused as yet to more than short
spells of locomotion a mile seems stupendous: and then the half-
formed brain cannot yet pile up the units of measurement well
enough to conceive of hundreds and thousands of miles.
The child appears to think of the world as a circular plain, and of
the sky as a sort of inverted bowl upon it. C.’s sister used on looking
at the sky to fancy she was inside a blue balloon. That is to say he
takes them to be what they look. In a similar manner C. took the
sun to be a great disc which could be put on the round globe to
make a ‘see-saw’. When this ‘natural realism’ gets corrected, children
go to work to convert what is told them into an intelligible form.
Thus they begin to speculate about the other side of the globe, and,
as Mr. Barrie reminds us, are apt to fancy they can know about it by
peeping down a well. When religious instruction introduces the new
region of heaven they are apt to localise it just above the sky, which
to their thought forms its floor. Some genuine thought-work is seen
in the effort to harmonise the various things they learn by
observation and instruction about the celestial region into a
connected whole. Thus the sky is apt to be thought of as thin, this
idea being probably formed for the purpose of explaining the shining
through of moon and stars. Stars are, as we know, commonly
thought of by the child as holes in the sky letting through the light
beyond. One Boston child ingeniously applied the idea of the
thinness of the sky to explain the appearance of the moon when one
half is bright and the other faintly illumined, supposing it to be half-
way through the partially diaphanous floor. Others again prettily
accounted for the waning of the moon to a crescent by saying it was
half stuck or half buttoned into the sky.
The movements of the sun and other heavenly bodies are similarly
apperceived by help of ideas of movements of familiar terrestrial
objects. Thus the sun was thought by the Boston children half-
mythologically, half-mechanically, to roll, to fly, to be blown (like a
soap bubble or balloon?) and so forth. The anthropocentric form of
teleological explanation is apt to creep in, as when a Boston child
said charmingly that the moon comes round when people forget to
light some lamps. Theological ideas, too, are pressed into this
sphere of explanation, as in the attribution of the disappearance of
the sun to God’s pulling it up higher out of sight, to his taking it into
heaven and putting it to bed, and so forth. These ideas are pretty
obviously not those of a country child with a horizon. There is rather
more of nature-observation in the idea of another child that the sun
after setting lies under the trees where angels mind it.
The impressive phenomena of thunder and lightning give rise in
the case of the child as in that of the Nature-man to some fine
myth-making. The American children, as already observed, have
different mechanical illustrations for setting forth the modus of the
supernatural operation here, thunder being thought of now as God
groaning, now as his walking heavily on the floor of heaven (cf. the
old Norse idea that thunder is caused by the rolling of Thor’s
chariot), now as his hammering, now as his having coals run in—
ideas which show how naïvely the child-mind humanises the Deity,
making him a respectable citizen with a house and a coal-cellar. In
like manner the lightning is attributed to God’s burning the gas
quick, striking many matches at once, or other familiar human
device for getting a brilliant light suddenly. So God turns on rain by a
tap, or lets it down from a cistern by a hose, or, better, passes it
through a sieve or a dipper with holes.[47] In like manner a high wind
was explained by a girl of five and a half by saying that it was God’s
birthday, and he had received a trumpet as a present.
Throughout the whole region of these mysterious phenomena we
have illustrations of the anthropocentric tendency to regard what
takes place as designed for us poor mortals. The little girl of whom
Mr. Canton writes thought “the wind, and the rain and the moon
‘walking’ came out to see her, and the flowers woke up with the
same laudable object”.[48] When frightened by the crash of the
thunder a child instinctively thinks that it is all done to vex his little
soul. One of the funniest examples of the application of this idea I
have met with is in the Worcester Collection. Two children, D. and K.,
aged ten and five respectively, live in a small American town. D.,
who is reading about an earthquake, addresses his mother thus:
“Oh, isn’t it dreadful, mamma? Do you suppose we will ever have
one here?” K., intervening with the characteristic impulse of the
young child to correct his elders: “Why, no, D., they don’t have
earthquakes in little towns like this”. There is much to unravel in this
delightful childish observation. It looks to my mind as if the
earthquake were envisaged by the little five-year-old as a show, God
being presumably the travelling showman, who takes care to display
his fearful wonders only where there is an adequate body of
spectators.
Finally, the same impulse to understand the new and strange by
assimilating it to the familiar is, so far as I can gather, seen in
children’s first ideas about those puzzling semblances of visible
objects which are due to subjective sensations. As we shall see in
C.’s case the bright spectra or after-images caused by looking at the
sun are instinctively objectived by the child, that is regarded as
things external to his body. Here is a pretty full account of a child’s
thought about these subjective optical phenomena. A little boy of
five, our little zoologist, in poor health at the time, “constantly
imagined he saw angels, and said they were not white, that was a
mistake, they were little coloured things, light and beautiful, and
they went into the toy-basket and played with his toys”. Here we
have not only objectifying but myth-building. A year later he
returned to the subject. “He stood at the window at B. looking out at
a sea-mist thoughtfully and said suddenly, ‘Mamma, do you
remember I told you that I had seen angels? Well, I want now to say
they were not angels, though I thought they were. I have seen it
often lately, I see it now: it is bright stars, small bright stars moving
by. I see it in the mist before that tree. I see it oftenest in the misty
days.... Perhaps by-and-by I shall think it is something in my own
eyes.’” Here we see a long and painstaking attempt of a child’s brain
to read a meaning into the ‘flying spots,’ which many of us know
though we hardly give them a moment’s attention.
What are children’s first thoughts about their dreams like? I have
not been able to collect much evidence on this head. What seems
certain is that to the simple intelligence of the child these
counterfeits of ordinary sense-presentations are real external things.
The crudest manifestation of this thought-tendency is seen in taking
the dream-apparition to be actually present in the bedroom. A boy in
an elementary school in London, aged five years, said one day:
“Teacher, I saw an old woman one night against my bed”. Another
child, a little girl, in the same school told her mother that she had
seen a funeral last night, and on being asked, “Where?” answered
quaintly, “I saw it in my pillow”. A little boy whom I know once asked
his mother not to put him to bed in a certain room, “because there
were so many dreams in the room”. In thus materialising the dream
and localising it in the actual surroundings, the child but reflects the
early thought of the race which starts from the supposition that the
man or animal which appears in a dream is a material reality which
actually approaches the sleeper.
The Nature-man, as we know from Professor Tylor’s researches,
goes on to explain dreams by his theory of souls or ‘doubles’
(animism). Children do not often find their way to so subtle a line of
thought. Much more commonly they pass from the first stage of
acceptance of objects present to their senses to the identification of
dreamland with the other and invisible world of fairyland. There is
little doubt that the imaginative child firmly believes in the existence
of this invisible world, keeps it apart from the visible one, even
though at times he may give it a definite locality in this (e.g., in C.’s
case, the wall of the bedroom). He gets access to it by shutting out
the real world, as when he closes his eyes tightly and ‘thinks’. With
such a child, dreams get taken up into the invisible world. Going to
sleep is now recognised as the surest way of passing into this
region. The varying colour of his dreams, now bright and dazzling in
their beauty, now black and terrifying, may be explained by a
reference to the division of that fairy world into princes, good fairies,
on the one hand, and cruel giants, witches, and the like, on the
other.
We may now pass to some of children’s characteristic ideas about
living things, more particularly human beings, and the familiar
domestic animals. The most interesting of these I think are those
respecting growth and birth.
As already mentioned, growth is one of the most stimulating of
childish puzzles. A child, led no doubt by what others tell him, finds
that things are in general made bigger by additions from without,
and his earliest conception of growth is, I think, that of such
addition. Thus, plants are made to grow, that is, swell out, by the
rain. The idea that the growth or expansion of animals comes from
eating is easily reached by the childish intelligence, and, as we
know, nurses and parents have a way of recommending the less
attractive sorts of diet by telling children that they will make them
grow. The idea that the sun makes us grow, often suggested by
parents (who may be ignorant of the fact that growth is more rapid
in the summer than in the winter), is probably interpreted by the
analogy of an infusion of something into the body.
In carrying out my inquiries into this region of childish ideas, I
lighted quite unexpectedly on the queer notion that towards the end
of life there is a reverse process of shrinkage. Old people are
supposed to become little again. The first instance of this was
supplied me by the Worcester Collection of Thoughts. A little girl of
three once said to her mother: “When I am a big girl and you are a
little girl I shall whip you just as you whipped me now”. At first one
is almost disposed to think that this child must have heard of Mr.
Anstey’s amusing story Vice Versâ. Yet this idea seems too
improbable: and I have since found that she is not by any means the
only one who has entertained this idea. A little boy that I know,
when about three and a half years old, used often to say to his
mother with perfect seriousness of manner: “When I am big then
you will be little, then I will carry you about and dress you and put
you to sleep”.
I happened to mention this fact at a meeting of mothers and
teachers, when I received further evidence of this tendency of child-
thought. One lady whom I know could recollect quite clearly that
when a little girl she was promised by her aunt some treasures,
trinkets I fancy, when she grew up; and that she at once turned to
her aunt and promised her that she would then give her in exchange
all her dolls, as by that time she (the aunt) would be a little girl.
Another case narrated was that of a little girl of three and a half
years, who when her elder brother and sister spoke to her about her
getting big rejoined: “What will you do when you are little?” A third
case mentioned was that of a child asking about some old person of
her acquaintance: “When will she begin to get small?” I have since
obtained corroboratory instances from parents and teachers of infant
classes. Thus a lady writes that a little girl, a cousin of hers aged
four, to whom she was reading something about an old woman,
asked: “Do people turn back into babies when they get quite old?”
What, it may be asked, does this queer idea of shrinkage in old
age mean? By what quaint zig-zag movement of childish thought
was the notion reached? I cannot learn that there is any such idea in
primitive folk-lore, and this suggests that children find their way to it,
in part at least, by the suggestions of older people’s words. A child
may, no doubt, notice that old people stoop, and look small, and the
fairy book with little old women may strengthen the tendency to
think of shrinkage. But I cannot bring myself to believe that this
would suffice to produce the idea in so many cases.
That there is much in what the little folk hear us say fitted to raise
in their minds an idea of shrinking back into child-form is certain.
Many children must, at some time or another, have overheard their
elders speaking of old feeble people getting childish; and we must
remember that even the attributive ‘silly’ applied to old people might
lead a child to infer a return to childhood; for if there is one thing
that children—true unsophisticated children—believe in it is the all-
knowingness of grown-ups as contrasted with the know-nothingness
of themselves. C.’s belief in the preternatural calculating powers of
Goliath is an example of this correlation in the child’s consciousness
between size and intelligence.[49]
But I suspect that there is a further source of this characteristic
product of early thought, involving still more of the child’s
philosophizing. As we have seen, a child cannot accept an absolute
beginning of things, and we shall presently find that he is equally
incapable of believing in an absolute ending. He knows that we
begin our earthly life as babies. Well, the babies must come from
something, and when we die we must pass into something. What
more natural, then, than the idea of a rhythmical alternation of
cycles of existence, babies passing into grown-ups, and these again
into babies, and so the race kept going? Does this seem too far-
fetched an explanation? I think it will be found less so if it is
remembered that according to our way of instructing these active
little brains, people are brought to earth as babies in angels’ arms,
and that when they die they are taken back also in angels’ arms.
Now as the angel remains of constant size,—for this their pictures
vouch—it follows that old people, when they are dead at least, must
have shrivelled up to nursable dimensions; and as the child, when he
philosophizes, knows nothing of miraculous or cataclasmic changes,
he naturally supposes that this shrivelling up is gradual like that of
flowers and other things when they fade.[50]
I am disposed to think, then, that in this idea of senile shrinkage
we have one of the most interesting and convincing examples of a
child’s philosophizing, of his impulse to reflect on what he sees and
hears about with a view to systematise. Yet the matter requires
further observation. Is it thoughtful, intelligent children, who
excogitate this idea? Would it be possible to get the child’s own
explanation of it before he has completely outgrown it?[51]
The origin of babies and young animals furnishes the small brain,
as we have seen, with much food for speculation. Here the little
thinker is not often left to excogitate a theory for himself. His
inconvenient questionings in this direction have to be firmly checked,
and various and truly wonderful are the ways in which the nurse and
the mother are wont to do this. Any fiction is supposed to be good
enough for the purpose. Divine action, as remarked above, is
commonly called in, the questioner being told that the baby has
been sent down from heaven in the arms of an angel and so forth.
Fairy stories with their pretty conceits, as that of the child Thumbkin
growing out of a flower in Hans Andersen’s book, contribute their
suggestions, and so there arises a mass of child-lore about babies in
which we can see that the main ideas are supplied by others, though
now and again we catch a glimpse of the child’s own contributions.
Thus according to Stanley Hall’s report the Boston children said,
among other things, that God makes babies in heaven, lets them
down or drops them for the women and doctors to catch them, or
that he brings them down a wooden ladder backwards and pulls it
up again, or that mamma, nurse or doctor goes up and fetches them
in a balloon. They are said by some to grow in cabbages or to be
placed by God in water, perhaps in the sewer, where they are found
by the doctor, who takes them to sick folks that want them. Here we
have delicious touches of childish fancy, quaint adaptations of fairy
and Bible lore, as in the use of Jacob’s ladder and of the legend of
Moses placed among the bulrushes, this last being enriched by the
thorough master-stroke of child-genius, the idea of the dark,
mysterious, wonder-producing sewer. In spite too of all that others
do to impress the traditional notions of the nursery here, we find
that a child will now and again think out the whole subject for
himself. The little boy C. is not the only one I find who is of the
opinion that babies are got at a shop. Another little boy, I am
informed, once asked his mamma in the abrupt childish manner,
“Mamma, vere did Tommy (his own name) tum (come) from?” and
then with the equally childish way of sparing you the trouble of
answering his question, himself observed, quite to his own
satisfaction, “Mamma did tie (buy) Tommy in a s’op (shop)”. Another
child, seeing the announcement “Families Supplied” in a grocer’s
shop, begged his mother to get him a baby. This looks like a real
childish idea. To the young imagination the shop is a veritable
wonderland, an Eldorado of valuables, and it appears quite
reasonable to the childish intelligence that babies like dolls and other
treasures should be procurable there.
The ideas partly communicated by others, partly thought out for
themselves are carried over into the beginnings of animal life. Thus,
as we have seen, one little boy supposed that God helps pussy to
have “’ickle kitties,” seeing that she hasn’t any kitties in eggs given
her to sit upon.
Psychological Ideas.
We may now pass to some of the characteristic modes of child-
thought about that standing mystery, the self. As our discussion of
the child’s ideas of origin, growth and final shrinkage suggests, a
good deal of his most earnest thinking is devoted to problems
relating to himself.
The date of the first thought about self, of the first dim stage of
self-awareness, probably varies considerably in the case of different
children according to rapidity of mental development and
circumstances. The little girl, who was afterwards to be known as
George Sand, may be supposed to have had an exceptional
development; and the accident of infancy to which she refers as
having aroused the earliest form of self-consciousness was, of
course, exceptional too. There are probably many robust and dull
children, knowing little of life’s misery, and allowed in general to
have their own way, who have but little more of self-consciousness
than that, say, of a young, well-favoured porker.
The earliest idea of self seems to be obtained by the child through
an examination by the senses of touch and sight of his own body. A
child has been observed to study his fingers attentively in the fourth
and fifth month, and this scrutiny goes on all through the second
year and even into the third.[52] Children seem to be impressed quite
early by the fact that in laying hold of a part of the body with the
hand they get a different kind of experience from that which they
obtain when they grasp a foreign object. Through these self-
graspings, self-strikings, self-bitings, aided by the very varied, and
often extremely disagreeable operations of the nurse and others on
the surface of their bodies, they probably reach during the first year
the idea that their body is different from all other things, is ‘me’ in
the sense that it is the living seat of pain and pleasure. The growing
power of movement of limb, especially when the crawling stage is
reached, gives a special significance to the body as that which can
be moved, and by the movements of which interesting and highly
impressive changes in the environment, e.g., bangs and other
noises, can be produced.
It is probable that the first ideas of the bodily self are ill-defined.
It is evident that the head and face are not known at first as a
visible object. The upper limbs by their movement across the field of
vision would come in for the special notice of the eye. We know that
the baby is at an early date wont to watch its hands. The lower
limbs, moreover, seem to receive special attention from the exploring
and examining hand.
There is some reason to think, however, that in spite of these
advantages, the limbs form a less integral and essential part of the
bodily self than the trunk. A child in his second year was observed to
bite his own finger till he cried with pain. He could hardly have
known it as a part of his sensitive body. Preyer tells us of a boy of
nineteen months who when asked to give his foot seized it with both
hands and tried to hand it over. A like facility in casting off from the
self or alienating the limbs is illustrated in a story in the Worcester
Collection of a child of three and a half years who on finding his feet
stained by some new stockings observed: “Oh, mamma! these ain’t
my feet, these ain’t the feet I had this morning”. This readiness to
detach the limbs shows itself still more plainly in the boy C.’s
complaining when in bed and trying to wriggle into a snug position
that his legs came in the way of himself. Here the legs seem to be
half transformed into foreign persons; and this tendency to personify
the limbs seems to be further illustrated in Laura Bridgman’s pastime
of spelling a word wrongly with one hand and then slapping that
hand with the other.
Why, it may be asked, should a child attach this supreme
importance to the trunk, when his limbs are always forcing
themselves on his notice by their movements, and when he is so
deeply interested in them as the parts of the body which do things?
I suspect that the principal reason is that a child soon learns to
connect with the trunk the recurrent and most impressive of his
feelings of comfort and discomfort, such as hunger, thirst, stomachic
pains and the corresponding reliefs. We know that the “vital sense”
forms the sensuous basis of self-consciousness in the adult, and it is
only reasonable to suppose that in the first years of life, when it fills
so large a place in the consciousness, it has most to do with
determining the idea of the sentient or feeling body. Afterwards the
observation of maimed men and animals would confirm the idea that
the trunk is the seat and essential portion of the living body. The
language of others too by identifying ‘body’ and ‘trunk’ would
strengthen the tendency.
About this interesting trunk-body, what is inside it, and how it
works, the child speculates vastly. References to the making of bone,
the work of the stomach, and so forth have to be understood
somehow. It would be interesting to get at a child’s unadulterated
view of his anatomy and physiology. The Worcester Collection
illustrates what funny ideas a child can entertain of the mechanism
of his body. A little girl between five and six thought it was the little
hairs coming against the lids which made her sleepy.
At a later stage of the child’s development, no doubt, when he
comes to form the idea of a conscious thinking ‘I,’ the head will
become a principal portion of the bodily self. In the evolution of the
self-idea in the race, too, we find that the soul was lodged in the
trunk long before it was assigned a seat in the head. As may be
seen in C.’s case children are quite capable of finding their way,
partly at least, to the idea that the soul has its lodgment in the head.
But it is long before this thought grows clear. This may be seen in
children’s talk, as when a girl of four spoke of her dolly as having no
sense in her eyes. Even when a child learns from others that we
think with our brains he goes on supposing that our thoughts travel
down to the mouth when we speak.
Very interesting in connexion with the first stages of development
of the idea of self is the experience of the mirror. It would be absurd
to expect a child when first placed before a mirror to recognise his
own face. He will smile at the reflexion as early as the tenth week,
though this is probably merely an expression of pleasure at the sight
of a bright object. If held in the nurse’s or father’s arms to a glass
when about six months old a baby will at once show that he
recognises the image of the familiar face of the latter by turning
round to the real face, whereas he does not recognise his own. He
appears at first and for some months to take it for a real object,
sometimes smiling to it as to a stranger and even kissing it, or, as in
the case of a little girl (fifteen months old), offering it things and
saying ‘Ta’ (sign of acceptance). In many cases curiosity prompts to
an attempt to grasp the mirror-figure with the hand, to turn up the
glass, or to put the hand behind it in order to see what is really
there. This is very much like the behaviour of monkeys before a
mirror, as described by Darwin and others. Little by little the child
gets used to the reflexion, and then by noting certain agreements
between his bodily self and the image, as the movement of his
hands when he points, and partly, too, by a kind of inference of
analogy from the doubling of other things by the mirror, he reaches
the idea that the reflexion belongs to himself. By the sixtieth week
Preyer’s boy had associated the name of his mother with her image,
pointing to it when asked where she was. By the twenty-first month
he did the same thing in the case of his own image.[53]
An infant will, we know, take a shadow to be a real object and try
to touch it. Some children on noticing their own and other people’s
shadows on the wall are afraid as at something uncanny. Here, too,
in time the strange phenomenon is taken as a matter of course and
referred to the sun.
We are told that the phenomena of reflexions and shadows, along
with those of dreams, had much to do with the development, in the
early thought of the race, of the animistic conception that everything
has a double nature and existence. Do children form similar ideas?
We can see from the autobiography of George Sand how a clever
girl, reflecting on the impressive experience of the echo, excogitates
such a theory of her double existence; and we know, too, that the
boy Hartley Coleridge distinguished among the ‘Hartleys’ a picture
Hartley and a shadow Hartley. C.’s biography suggests that being
photographed may appear to a child as a transmutation, if not a
doubling, of the self. But much more needs to be known about these
matters.
The prominence of the bodily pictorial element in the child’s first
idea of self is seen in the tendency to restrict personal identity within
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Microeconomics 9th Edition Roger A. (Roger A. Arnold)

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Preface xvii Part 5 Market Failure and Public Choice

Chapter 10 Monopolistic Competition, Oligopoly, and Game

Chapter 11 Government and Product Markets: Antitrust and Glossary 538

Part 4 Factor Markets and Related Issues

A n Intr oduc tion t o E c onom ic s

CHAPTER  WHAT ECONOMICS IS ABOUT

E C O N O M I C S 24/7 Goods and Bads 1 Resources 2 Scarcity and a Definition of Economics 2

APPENDIX A: WORKING WITH DIAGRAMS 19

APPENDIX B: SHOULD YOU MAJOR IN ECONOMICS? 27

CHAPTER  ECONOMIC ACTIVITIES: PRODUCING AND TRADING

CHAPTER  SUPPLY AND DEMAND: THEORY

E C O N O M I C S 24/7 What Is Demand? 54

CHAPTER  SUPPLY AND DEMAND: APPLICATIONS

CHAPTER  ELASTICITY 113

A Reader Asks 137

CHAPTER  CONSUMER CHOICE: MAXIMIZING UTILITY AND

APPENDIX C: BUDGET CONSTRAINT AND INDIFFERENCE CURVE ANALYSIS 158

CHAPTER  PRODUCTION AND COSTS

Part  Product Markets and Policies

CHAPTER  PERFECT COMPETITION

Chapter Summary 220

CHAPTER  MONOPOLY 223

CHAPTER  MONOPOLISTIC COMPETITION, OLIGOPOLY, AND

Key Terms and Concepts 270

CHAPTER  GOVERNMENT AND PRODUCT MARKETS: ANTITRUST AND

Part  Factor Markets and Related Issues

CHAPTER  FACTOR MARKETS: WITH EMPHASIS ON THE LABOR

CHAPTER  WAGES, UNIONS, AND LABOR

CHAPTER  THE DISTRIBUTION OF INCOME AND POVERTY

CHAPTER  INTEREST, RENT, AND PROFIT

Part  Market Failure and Public Choice

CHAPTER  MARKET FAILURE: EXTERNALITIES, PUBLIC GOODS, AND

Questions and Problems 404

CHAPTER  PUBLIC CHOICE: ECONOMIC THEORY APPLIED TO

The Glob al Eco nom y

CHAPTER  INTERNATIONAL TRADE

OFFICE HOURS Key Terms and Concepts 444

“Should We Impose Tariffs Questions and Problems 444

CHAPTER  INTERNATIONAL FINANCE

CHAPTER  GLOBALIZATION AND INTERNATIONAL IMPACTS

Key Terms and Concepts 501

CHAPTER  STOCKS, BONDS, FUTURES, AND OPTIONS

E C O N O M I C S 24/7 Stocks 504

CHAPTER  AGRICULTURE: PROBLEMS, POLICIES, AND UNINTENDED

Let Roger Arnold’s Economics be your partner for success. With

What Matters to You in the 9th Edition?