Universal Economics.

• Author: Choi, Young Back

* Universal Economics

By Armen A. Alchian and William R. Allen.

Edited by Jerry L. Jordan

Indianapolis, Ind.: Liberty Fund, 2018.

Pp. xxv, 716. $14.50 paperback.

Universal Economics is a successor to the authors' highly regarded economics textbook Exchange and Production: Competition, Coordination, and Control (1969; reprint, Belmont, Calif.: Wadsworth, 1983). It is published under the editorship of Jerry Jordan, former president of the Cleveland Fed, because the work on the book was interrupted with the passing of one of the authors, Armen Alchian, in 2013 at the age of ninety-eight.

Universal Economics is a microeconomics textbook in the sense that it explains the basic principles of how scarcity leads to competition for resources, how resources are allocated through market prices, and how social coordination is achieved through market exchanges. But it is unique among microeconomics textbooks in squarely addressing the indispensable role of property rights, the significance of information (or lack thereof), and the conundrum of teamwork. It is also unique among microeconomics textbooks in incorporating interest rates as essential to capital valuation and profit calculation.

The coverage of Universal Economics is wide ranging. It has forty-two chapters divided into four parts: part 1, "Demand, Exchange, and Property Rights"; part 2, "Specialization, Production, Teams, and Firms"; part 3, "Wealth, Rates of Return, and Risk"; and part 4, "Employment and Inflation." A typical modern microeconomics textbook relegates the topics of part 3 to finance, and the topics of part 4 to macroeconomics, limiting itself to a subset of the topics covered in parts 1 and 2. Such a typical microeconomics textbook leaves out some of the topics that are central to Universal Economics--for example, the role of property rights in enabling exchanges, what difference alternative institutional arrangements make, and market solutions to the problem of shirking and dependencies--relegating them to industrial organization or new institutional economics.

One of the most attractive features of Universal Economics is its step-by-step exposition of economic principles, illustrated with examples in life and, where needed, with simple numerical examples that are fully worked out to delineate implications. For example, "The Saga of Codelandia" (chapter twenty-two) uses the example of a simple production schedule to illustrate some of the most important concepts in...