The Zambian government first committed itself to civil service retrenchment in 1979, in response to growing fiscal deficits and donor pressures. Fairly reliable government statistics from the Monthly Digest of Statistics indicate there were 129,600 public employees that year, in addition to 136,220 parastatal employees. The government's stated commitment to eliminate up to half of the civil service was praised by the World Bank and heavily criticized by the ZCTU, the Zambian Trade Union Federation. A reform package was not put in place until 1986 and it resulted in minor staff removals, through a lowering of the retirement age. In May 1988, a cabinet office task force on restructuring the public service submitted a new action plan calling for a 25 percent reduction in the civil service. The plan was not implemented, but in August 1990 the government contracted a local consulting firm to develop another ambitious retrenchment exercise, under the donor-financed Public Service and Retrenchment Project. Reform efforts continued throughout the 1990s, though to little effect. In November 1993, the government launched the Public Service Reform Program, vowing to cut the civil service by 25 percent within three years, again with support from the donors. The United Nations Development Program (UNDP) financed a team of experts to oversee a plan for retrenchment, reorganization, and upgrading of the civil service. Critics of the government actually blamed civil service retrenchments for the rise in unemployment.

Of the four basic economic problems – resource allocation, income distribution, stability, and growth – economists still have the most to learn about growth. If this were not the case, then it would be difficult to fathom why foreign aid has not been more successful in achieving sustained growth in less-developed countries (LDCs) over the last half century (World Bank 1998). Once the growth process is understood, it should be relatively easy to target aid to achieve the most sustained growth in recipient countries.

Throughout much of the last century, economic analysis has focused on static equilibria, which has done little to foster an understanding of economic growth, a process that requires a dynamic framework where the time path of variables are examined. There is no doubt that economist readers will disagree with my simple characterization of the profession's preoccupation, even obsession, with static models, and will point to an extensive neoclassical literature on growth associated with the analyses of Nobel laureates (for example, Tjalling Koopmans, Simon Kuznets, and Robert Solow) and others (for example, Trevor Swan, Roy Harrod, and Evsey Domar). This literature has enlightened us about some determinants of growth, but it does not adequately explain why some nations grow faster than others or how economic decisions determine a country's rate of growth. Most important, this earlier literature fails to account for the role of individual decisions and the influence of institutions on growth.

Over the last century, economics has become more analytical and quantitatively sophisticated, making it even less accessible to nonspecialists and requiring a greater “entry fee” for those wanting to be professional economists. Even for those interested in just a rudimentary understanding of economics, the cost may seem excessive, as many college students discover when taking courses in the principles of economics. There is no reason that economics needs to be so arcane, because with a little effort on the part of economists it could be made understandable to a wide audience. With its myriad applications to fascinating topics (for example, the internet, the alleviation of poverty, economic development, the adoption of new technologies, and outer space resources), the task of interesting students and making the subject relevant could not be easier.

Too often I read or review articles in which the argument and analysis have been made very complex, when a much simpler and more transparent presentation would serve just as well. Many years ago I worked with a bright junior colleague who gave me a five-page proof for a paper that we were collaborating on. With some thought, I managed to reduce the proof to just one line. When shown the simpler and more intuitive proof, he lost his temper and stormed out of my office, not to return for two days. The paper with the shorter proof was later published in a top journal; and my colleague applied what he had learned and went on to a very successful career.

I have always been fascinated by the interrelationships and interactions among generations. In airports, I enjoy looking at children and parents and seeing how similar they appear in both looks and actions. After my son was born, I closely observed him as a baby and a toddler to discern the innate character that he had inherited from me or my wife. Of course, whenever he did something that epitomized one of our annoying traits, one of us would knowingly glance at the other with raised eye-brows and think, “Yes, he is definitely your son!” As he grew older, it became more difficult to identify the distinction between genotype and phenotype, that is, between his inherited and his environmentally determined characteristics. And just when I became convinced that he displayed a random mix of our collective genetic backgrounds combined with an imitation of our behavior, he would say or do something completely foreign to both my wife and me. I then pondered whether this novel behavior was some atavistic characteristic of a long-lost relative or an innovation all his own.

Clearly, each of us possesses a particular identity – a unique mix of genetic code, mimicked behavior, and random innovations. I recognize this better than most people because I am a clone – an identical twin – who grew up with my brother in the same household. Despite our shared genetic makeup and virtually identical environment, we are not the same.

When I think about the notion of rational expectations, I am reminded of a character in a Kurt Vonnegut, Jr., novel who, after becoming “unstuck in time,” is condemned to live and relive his life in random order until his death. In so doing, he is able to know the past and the future, though not perfectly. His omniscience is incomplete because some key factors are not revealed to this hapless character, whose futile efforts are unable to avert a horrible destiny. Ironically, his actions to escape his fate are the very trigger needed to bring it about. Thus, the long-run future is completely determined, even though unanticipated surprises may occur at any instant. With a rational expectations framework, the agents' forecasts of prices and other essential economic variables are correct in the long run, though there are unanticipated short-run surprises along the way.

Rational expectations has come to mean diverse things to different economists. To its critics, the rational expectations hypothesis casts economic agents as being perfectly informed of the likelihood of future events and, thus, capable of maximizing their well-being in the presence of random events – known as shocks. Agents are rational in the sense that they know the underlying model of the economy, which is no easy feat. According to Kenneth Arrow (1978, p. 160), “in the rational expectations hypothesis, economic agents are required to be superior statisticians, capable of analyzing the future general equilibria of the economy.”

In the mid-1970s, I chanced upon a fascinating article by Kagel and associates (1975) that used male albino rats to test some basic properties of demand curves; namely, whether or not animal consumers would abide by a negative substitution effect when the price of one commodity rose relative to another. Apparently, rats enjoy drinking both root beer and Tom Collins mix, even without the alcohol. The subjects had been trained to press a left lever for root beer and a right one for Collins mix. The number of bar presses for an equal quantity of one drink versus the other drink determined the relative prices of the drinks. If, therefore, two presses on the left lever give .05 milliliters (ml) of root beer, while one press on the right one gives .05 ml of Collins mix, then the relative price of root beer in terms of Collins mix is two. The total number of bar presses available to a rat represents his income. With income and prices operationalized, a budget constraint is thus defined. By holding purchasing power constant for a price change in, say, root beer, these researchers isolated the influence of changes in the drinks' relative prices on the purchases of root beer, and, in so doing, identified the substitution effect. As anticipated, the rats displayed a textbook negative substitution effect – they “bought” more of the drink whose price fell, even when the increased purchasing power implied by the price reduction had been removed.

For a moment, imagine yourself in a truly anarchic society with no rules or laws, no protection of property rights, no defense, no publicly provided goods or services, and no taxes. Would this society be paradise or a nightmare? Each morning, if you have not been murdered the night before, you would have a daunting decision: how to divide your time that day among providing for your needs, guarding the fruits of your past labors, and stealing from others. The greater the amount of time devoted to either guarding your “pile” or robbing others, the less would remain for productive activities that augment your overall wealth and that of society. Stealing or watching over your assets uses up scarce resources in an unproductive activity that reduces society's overall well-being. Under the best of circumstances, theft is a zero-sum game.

In this natural anarchic state, there would evolve a collective of individuals – perhaps thugs – who would specialize in providing protection in return for a share of the wealth of those being protected. These guardians would amass weapons to counter threats both within and beyond their society. Some of the additional goods, produced because you now have time released from having to watch over your assets, could pay the protectors. If the value of this tribute were less than the value of these additional goods, then both the protected and the protectors would gain from the arrangement.

Adam Smith taught us that the division of labor could keep down costs and promote economic efficiency. Thus, one set of workers cuts the wires for the pins, another straightens them, and still another attaches the heads. The ability to exploit gains from this division of labor is limited by the extent of the market; the larger the market, the greater the division of labor. Academia is also characterized by a division of labor where scholars are separated into disciplines; those disciplines are further subdivided into fields and even subfields. This division has both advantages and disadvantages in the pursuit of knowledge. Specialization has allowed scholars to become experts within a narrow range of topics, which in turn has promoted the rapid acquisition of knowledge. In the process, fields and subfields have created their own jargon, terminology, notation, and methods that present an entry barrier to others. Many problems involve relationships derived from multiple disciplines and cannot truly be understood with the tools of a single discipline. For such problems, an interdisciplinary approach is required.

In the study of a renewable resource such as a fishery, economic decisions and forces impinge on both the fishing industry and the biological relationships that influence the supply of fish. Biological forces also constrain economic decisions regarding harvesting the fish in both the short run and the long run. Bioeconomics investigates the interrelationship between an economic and a biological system, so that equilibria and adjustments to disequilibria account for the influences of both systems.

Until the twentieth century, economics treated the internal workings of its three primary agents – the consumer (or household), the firm, and the government – as given, nondescript, and beyond analysis. The standard assumptions in economics have been that: consumers' tastes are given; firms exist to maximize profits; and governments act in the interests of their constituencies. Perhaps the greatest mystery of economic thought is that the discipline chose to ignore for so long how firms and governments come into existence and what determines their true behavior. By not bothering to justify the presence or actions of any of its three essential components, economics rested on a tenuous foundation, open to much criticism. In many ways, it is a wonder that the discipline, sufficiently arrogant to have seen no need to explain the motivation or genesis of its key agents, would have been taken seriously by anyone but other economists! Yet the sheer number of economists and their pivotal positions throughout industry, governments, and other institutions bear testimony to the fact that society has put its faith in economics. Are economists the ultimate con artists to have pulled off this acceptance? No answer will be offered.

This neglect of its three component players has since been addressed by economists, especially during the latter half of the twentieth century. In recent studies, consumers' tastes are allowed to be influenced by the consumption process itself, as in the case of habit formation and addiction.

When teaching economics, I always use examples from literature to illustrate essential economic concepts and principles and to underscore that economics permeates our lives and is a natural part of humankind. From the Bible to great works of literature, economic thinking abounds. I would not be surprised if the map of human DNA uncovers an economic gene. Economics is so ingrained in our thought processes that I sometimes wonder whether the standard Economics 101 with its myriad graphs and equations does more to obfuscate than to enlighten.

The piece of literature that I use when introducing the notion of general equilibrium is “Harrison Bergeron,” a short story by Kurt Von-negut, Jr. (1970). The story begins, “The year was 2081, and everybody was finally equal” (p.7). As the tale goes, everyone is made equal not by natural forces but by a “handicapper general,” whose job is to devise debilitating handicaps so that everyone is reduced to the level of the least agile, dumbest, homeliest, and most inarticulate person. To accomplish this bizarre task, the handicapper puts weights on the agile, implants distracting transmitters in the brains of the gifted, covers the faces of the attractive, and provides impediments to the orators.

On the dubious date of 1 April 1971, after two and a half years of study, I successfully defended my dissertation in economics. Although the 2000–01 academic year marks my thirtieth year of teaching economics since the fall of 1970, I am no less enthusiastic about the subject. To impart my excitement about economics to a fresh group of students is a recurring challenge that I confront most fall semesters as I rush to my large 8 a.m. section of economic principles on the other side of campus. It must be my perverse sense of humor, or else self-punishment, that I would place before myself the supreme challenge of interesting 250–300 students in a large, overheated lecture theater with its uncomfortable seats at such an ungodly hour. As I walk down the aisle to a sea of whispers as the students give me the once-over, I ask myself if I am prepared for this. At the front of the room, I pull up my blue jeans and take a deep breath. I attach the remote microphone to my shirt, switch on the infrared receiver, remove the laser pointer from my pocket, and then my eyes scan the youthful faces before me. Every semester it is the same story: of the 300 or so pairs of eyes, no pair is looking at the same spot, and no pair is looking at me – not a one! From this nadir, I must accomplish my task – to somehow get these students to understand and appreciate the power, importance, and prevalence of economic concepts in the modern-day society that we inhabit.

With the Velvet Revolution in Czechoslovakia, the world awoke in November 1989 to a monumental economic experiment – once never dreamed possible – involving the engineering of a transformation from a command economy to a market-based one. An entire economic system of coordination needed to be replaced by a vastly different system based on the pursuit of profits, price signals, and independent actions. A socialist economy is characterized by state ownership of enterprises, central control of production, and trade by state agreements, while a market economy is characterized by private ownership of enterprises, decentralized market coordination of production, and international trade by private agents. If Czechoslovakia had been the only economy confronting such a transition, the problem might have been less poignant, but other countries quickly rejected socialism, including East Germany, Romania, Yugoslavia, Poland, Hungary, Bulgaria, and the fifteen former Soviet republics. In 1996, there were twenty-nine transition countries attempting to transform their Soviet-based planned economic systems to a market economy. Still other communist regimes (for example, China, Cuba, and Vietnam) are currently experimenting with market reforms.

Peter Murrell (1996, p. 31) aptly describes the transition attempted from 1990 to 1996 as “the most dramatic episode of economic liberalization in economic history.” The transition involved freely fluctuating prices, trade liberalization, enterprise reform (including privatization), the creation of a social safety net, and the construction of the legal and institutional framework of a market economy.

Open any modern-day textbook in economics and you will see game boxes and game trees used to explain the strategic interaction among diverse economic agents. It matters not whether it is a macroeconomics text addressing policy making, or a public finance text analyzing how people voluntarily contribute to a public good. This methodological revolution has swept economics during the last two decades. When I completed my doctorate in 1971, game theory had barely been mentioned, and when it had been discussed, the reference had usually been disparaging. My first exposure to this tool came in the early seventies when, as an assistant professor at Arizona State University, I took mathematics classes from Albert Tucker and Evar Nering. These great mathematicians had been at Princeton University during the days when game theory was being developed as a mathematical tool for the social sciences. There had been high hopes during the 1940s and early 1950s that this development would provide all of the social sciences with a unifying theoretical base, from which great insights would spring. A driving force behind this development was a brilliant mathematician – perhaps the brightest of the twentieth century – named John von Neumann. This self-absorbed, totally focused individual first developed his game-theoretic ideas in papers published in 1928 and 1937. His quickness and brilliance were legendary, but then so was his single-minded dedication to his work. Albert Tucker, his ex-colleague at Princeton, once illustrated von Neumann's consuming and humorless focus with the following story. Von Neumann had come to Tucker for a name for John's latest monograph on an esoteric geometry that contained no points.

I once had a friend who owned a house beside a stream. Unlike his neighbors' houses, plagued by mice and rats, his house had been rodent-free during his ten-year occupancy. His neighbors thought him dishonest when he would reply to their incessant complaints about rats that he had never seen a single rodent in his house. On the day before he was to sell his house, he was awakened in the middle of the night by a weird sound coming from the attic. Thinking that he would come face to face with his first rat, he went with a flashlight to inspect the attic. When he opened the trap door and stuck in his head, he let out a scream and dropped the light. The ten-year-old mystery had been solved – a large beady-eyed snake stared at him with a rat in its coils. My friend faced a real dilemma: should he tell the prospective buyer about the snake, or try to rid the house of the reptile, or just be quiet about it? He chose silence, as the other options could either jinx the sale or be very costly. He reasoned that the snake was harmless and served a very useful purpose. So he said nothing, and the house and the snake were sold together. This rather bizarre, but true, story represents an instance of asymmetric information, where one party to a transaction is more informed than the other party.