Traditional theory uses expected utility to explain gambling and insurance, only to result in numerous contradictory examples. Its reliance on increasing marginal utility also violates basic economic principle. Its inability to reject unfair games or insurance policies is dangerous. This book works out a new theory that is in line with Economics. It maintains the diminishing marginal utility foundation, explains also gambling and shows how to reject unfair games and policies. More importan...

This book unveils the tricks of how Richard Kahn tried to support the optimal tariff theory. He contradictorily assumed away elasticities to derive his optimal tariff as a function of elasticities. He relied on foreign elasticities to force his result positive. When these errors are corrected, Kahn’s tariff can only be zero or negative.

Does Economics have any demand and supply model? The question looks superfluous, and the answer should be definitely positive. E.g., there is one in the tax incidence theory, but in which market is such theory applicable? Is it applicable to international trade? No, for import and export are two different products. Can it be applied to the monopoly theory? No, for everyone knows a monopolist has no supply curve, and it does not have to pay attention to consumer’s demand at all. How about t...

Papers on general equilibrium (GE), e.g., those by Arrow & Debreu (A&D), look formidable. After you have read them, you felt lost. They talked and talked, but you did not know what they were talking about, for there was nothing concrete. After they have defined many axioms, they jumped to the conclusion that there you find general equilibrium. But, basically, they did not even give a definition of what general equilibrium is. When the supply curve of a good intersects its demand curve, the...

You have probably heard of Ricardo’s rent theory, which is a perpendicular line. You may also have heard of the rent gradient function, which is a negative curve. So, which one is the correct rent theory? People may choose to live away from city center because of the lower rent, but why is city center still so crowded? Why do developers construct higher buildings in suburb where rent is lowest? All these questions can only be answered, after the introduction of the spatial variable into ur...

Solow derived a measure of technology. Discarding his wasteful calculation procedure, this book applies a direct method to obtain more accurate results, and to prove that his bragging about the so-called good estimation is shameful cheating. The direct method is then used to derive another, more powerful and meaningful measure of technology that can also shift a production function. This book disproves Solow’s technology in and out.

John Maynard Keynes is the most famous economist after Adam Smith. His best saying is: In the long run we are all dead. He thus recommended spending before it is too late. But such recommendation led to the downfall of many ambitious dictators, like Hitler and Chiang Kai Shek. It also costed half of US stock of gold. Don’t believe it? This book will work out all the ramifications.

Employees usually receive bonus before Christmas. To capture their extra money, many shops offer attractive discount. But why? Shouldn’t the equilibrium price be also higher, when demand is higher? Some economists, e.g., Edward P. Lazear, used a demand function as explanation, which, however, is invalid for two reasons. First, it is not general enough. Secondly, although monopolists would appreciate the knowledge of the demand function for their goods, they aim for its higher price. Instea...

Ronald Jones uses two quantity equations to solve for a quantity equilibrium, and two price equations to solve for a price equilibrium. From these two price and quantity equilibria, he claims to achieve a country’s general equilibrium. Furthermore, with two unrelated country equilibria, he claims to achieve trade equilibrium. That is an ambition too large.

An increase in demand within a capacity limit will lead to a higher equilibrium price. Some economists believe that this equilibrium is traffic congestion. This book corrects such misconception and shows that traffic congestion should only mean excessive demand. Correct understanding will lead to correct solutions.

What is game? What is game theory? What is bargaining? What is risk? What is uncertainty? What is expected utility? What is moral hazard? How to cheat in game or in insurance? This book overturns many traditional views on these issues, and derives new method to play game, to bargain, to cheat and to protect against cheating.

The causal relationship between growth and inequality is complex, and there have been many scholarly works to study this relationship since the seminal work of Kuznets in the 1950s. Few recent studies in this field have shown that the nature of relationship is multifaceted and non-linear. In addition to the intrinsic non-linear nature of the relationship, government and institutions play pivotal role in distributing the benefits of growth to reduce inequality. The responsiveness greatly de...