Annotated Table of Contents
Economic Episodes in Civics and American Government

Chapter 1
How Can Economics Illuminate Civics? Meet Adam Smith, the Founding Economist
A rich understanding of civics and American government requires an integration of concepts and principles from several disciplines including economics. Adam Smith’s The Wealth of Nations, published in 1776, challenged then-prevailing ideas about what made a nation wealthy. Over the centuries, economists have developed what is known as the “economic way of thinking.” This chapter presents six principles of economic thinking that can be used to analyze behavior in the private and public sectors.
- Primary Source: Reading Adam Smith’s The Wealth of Nations
- Contemporary Connection: Want to Go for a Run?
- Web Quests

Chapter 2
Did Adam Smith Attend the Constitutional Convention?
Adam Smith, the founder of economics, published his famous book The Wealth of Nations in 1776, the same year as the Declaration of Independence. But did he attend the Constitutional Convention 11 years later in 1787? No. Perhaps it is more correct to say that Smith did not physically travel to North America, but his ideas did. They helped the U.S. Constitution shape the conditions of a market economy in the new nation.
- Primary Source: James Madison on the Economic Role of Government
- Contemporary Connection: Africa’s Free Trade Zone
- Web Quests

Chapter 3
Is Economic Freedom the First Civil Liberty?
Economic freedom is different from political freedom. Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasion and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. Economic freedom is more fundamental to human welfare than political freedom.
- Primary Source: Muhammad Yunus Quote from the Film Poverty, Inc.
- Contemporary Connection: Freedom Threatened in Hong Kong
- Web Quests

Chapter 4
Is Economic Freedom Indispensable to Democracy?
As a little girl, Yeonmi Park was indoctrinated to believe she was fortunate and lived better than people in the rest of the world. Yet for much of her childhood she went without food on a regular basis, and she saw bodies in the streets and river from those who starved to death. This chapter explains the vast differences between economic systems that are classified as capitalist, socialist, and communist.
- Primary Source: Excerpt from Capitalism and Freedom
- Contemporary Connection: Economic Freedom in North Korea versus South Korea
- Web Quests

Chapter 5
Why Did Rosa Parks Succeed Years After Homer Plessy Failed?
Homer Plessy fought racial segregation all the way to the Supreme Court, where the Court ruled that “separate but equal” accommodations for African Americans did not violate the equal protection clause of the Fourteenth Amendment years later. Rosa Parks challenged segregation and in 1954, the Supreme Court ruled that “separate but equal” was inherently unequal. The economic power of African Americans had changed over the years largely due to investments in human capital by African American parents.
- Primary Source: Justices Speak Out in 1896 and 1954
- Contemporary Connection: The Supreme Court on Affirmative Action
- Web Quests

Chapter 6
What Are the Economic Statistics Every Citizen Should Know?
Citizens reading a news story or watching cable news are likely to see reports about the state of the economy. The three most commonly reported indicators are real gross domestic product (GDP), the inflation rate, and the unemployment rate. Understanding these statistics helps citizens, business, and government make informed choices. They can also help citizens forecast the outcome of presidential elections.
- Primary Source: Whip Inflation Now
- Contemporary Connection: What Does Facebook “Produce”?
- Web Quests

Chapter 7
What Should Be the Size and Role of the Federal Government in the Economy?
Some economists, like John Maynard Keynes, believe we should use government intervention through fiscal policy (changes in government spending and taxes) or monetary policy (changes in the money supply) to help the economy in times of unemployment or inflation, or to achieve other policy goals. Other economists, such as Friedrich Hayek, believe that government intervention itself causes problems in the economy, and that the economy would be better off with limited intervention. This chapter explores these differing views and examines areas of possible agreement.
- Primary Source: FRED and the U.S. Debt Clock
- Contemporary Connection: What Should Be Government’s Role in Health Care?
- Web Quests

Chapter 8
Public Choice Theory: Why Is Good Politics Often Bad Economics?
Public choice theory studies the behavior of elected and appointed officials in government by applying the economic way of thinking. It explores how individuals in government make choices in light of their regard of costs and benefits, incentives, and competition. It explains how interest groups can provide incentives for elected officials to favor inefficient economic policies.
- Primary Source: The Golden Fleece Award Goes to the Bridge to Nowhere
- Contemporary Connection: The Economics of Solar Panel Subsidies for Homes
- Web Quests

Chapter 9
How Are Taxes Incentives to Businesses and Households?
Taxes are frequently the source of heated debate in a democratic nation. This chapter explains the taxes levied by various levels of government. It addresses issues related to how high taxes should be, deadweight loss, and the fairness of different sorts of taxes. It explains what most economists regard as more efficient ways to levy taxes.
- Primary Source: The Income Tax Is Born
- Contemporary Connection: Should We Establish a Wealth Tax?
- Web Quests

Chapter 10
Can the President Really Fix the Economy?
The media and political pundits often say that presidents get too much credit when the economy does well and too much blame when it slumps. While the president has a huge influence on economic policy, that policy is subject to checks and balances, including Senate confirmation of appointees, Congress’s control over the budget, and the Fed’s independence.
- Primary Source: Presidents and the Economy
- Contemporary Connection: Fiscal Policy in a Pandemic
- Web Quests

Chapter 11
How Does the Supreme Court Shape the Rules of the Game?
The Supreme Court sits at the top of the entire federal court system. It is the final judge regarding the legal rules of the economic game. This court is the guardian of rule of law, which is critical to the success of a market economy. The Supreme Court makes the final decisions regarding the economic rules of the game in two key areas: regulation, which includes interstate commerce, and competition.
- Primary Source: Kelo v City of New London
- Contemporary Connection: Is Big Tech too Powerful?
- Web Quests

Chapter 12
Monetary Policy and the Federal Reserve
Every economically developed nation has a central bank. The central bank of the United States is called the Federal Reserve or the “Fed.” The Fed has a unique structure, the result of years of study and legislative compromises. Congress established a “dual mandate” for the Fed. This requires the Fed to both maintain price stability in the economy (that is, keep inflation low and stable) and to work for maximum employment of the country’s citizens.
- Primary Source: Alexander Hamilton Visits Broadway
- Contemporary Connection: Cryptocurrencies
- Web Quests

Chapter 13
How Do the 50 State Governments Encourage Innovation?
The Constitution lays out a system of federalism in which power is shared between the federal government and the 50 state governments. This federal system of government allows states to experiment with new policies that may turn out to be a model for others. Elections are a well-established method for voters to express their preferences. People, however, can also express preferences through their location choices. They can “vote with their feet” by moving away from state or local governments they dislike.
- Primary Source: Economic Freedom in the States
- Contemporary Connection: Publicly Financed Sports Stadiums
- Web Quests

Chapter 14
Why Do Citizens Vote? The Economics of Voting and Elections
Many people consider voting to be their most important duty as a citizen. Well-informed voters know the candidates and the issues and cast their ballots accordingly. But voting comes with costs and benefits. Public choice economists suggest that there are weak incentives for voters to become well informed. This results in “rational ignorance.” As a result, voters tend to use short cuts such as party affiliation to make decisions about candidates.
- Primary Source: The Case of the Hanging Chads
- Contemporary Connection: The Costs and Benefits of the Electoral College
- Web Quests

Chapter 15
How Do Mass Media and Social Media Affect What You Know about Government and the Economy?
Like representative government, the media are intermediaries between citizens and current events. Media platforms include many forms of mass media that go for large audiences, such as television, newspapers, and websites. Today younger voters often favor widespread social media platforms over other forms of news media. Most media organizations are different from government because they are profit-seeking organizations. Economics helps explain how changes in media coverage involving shifts from an objective model to a narrative model may lead to increasing voter polarization. Savvy citizens should be on the lookout for the “blind spots” in economic and political news coverage.
- Primary Source: Dewey Defeats Truman
- Contemporary Connection: Coverage of Minimum Wage Legislation
- Web Quests

Chapter 16
What Is Free about Free Trade Agreements?
One area of fundamental agreement among economists is the benefits of free trade. Beginning with Adam Smith, economists on the political left and right have strongly favored international free trade. Economists like David Ricardo use the concept of comparative advantage to explain why the benefits of free trade outweigh the costs. While the U.S. Department of State historically has been responsible for negotiating trade agreements, today many agencies are involved. Today’s free trade agreements do increase free trade, but trade agreements such as the USMCA always come with trade restrictions as well.
- Primary Source: USA Free Trade Agreements
- Contemporary Connection: NAFTA to the USMCA
- Web Quests

Chapter 17
What Is Civil Society? What Role Might You Play?
Civil society comprises organizations that are largely distinct from government or business. Civil Society includes the thousands of voluntary organizations including private schools and universities, advocacy groups, charitable organizations, professional associations, religious organizations, cultural institutions, and more. Most economists agree that a democratic system is not sustainable without a well-functioning civil society.
- Primary Source: Charitable Giving in the United States and Around the World
- Contemporary Connection: Your Role in Today’s Civil Society
- Web Quests

Chapter 18
A Citizen’s Guide to Financial Independence
As a citizen you may cast votes and engage with elected officials to seek change. If you are able to move toward financial independence, then you can have a direct effect on your own life without having to win anybody’s political support. Three simple rules for becoming financially independent are: 1. Start investing early to take advantage of compounding interest. 2. Buy and hold stocks for the long term rather than jumping in and out of markets. 3. Diversify your investments so you don’t put all of your eggs in one basket.
- Primary Source: An Online Compound Interest Calculator by the SEC
- Contemporary Connection: Choosing Your Career Path
- Web Quests

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