Chapter 9 pg. 108-111

The chapter begins by introducing how the Modern Movement and the Keynesian Revolution affected modern economics, and a few major, influential economists of the era. During this movement economists began changing their outlook about which questions concerning the long-term were most important and most likely to be answered. This was an era filled with economic advancements and remarkable economic minds. Paul Samuelson is one of the greatest contributors to modern economics. He is famous for writing the textbook Economics: An Introductory Analysis that explained Keynesian theory and how to think about economics. Another is the man responsible for drawing Samuelson to Harvard, Edward Chamberlin. Chamberlin had a prominent understanding of the economic growth during the Roaring Twenties. Due to the "steady stream of new products and new methods" entering the market, the economy was experiencing the effects of what Chamberlin labeled monopolistic competition.(p.109) At the same time, Joan Robinson was studying similar effects in England, but she refered to this as imperfect competition. Allyn Young (mentioned in Mitch's post Ch. 7 p. 84-88) studied the "selling expenses" of monopolistic competition. These are the expenses aquired while convincing customers to purchase a product.

The book uses the example of pin makers to explain how monopolistically competitive markets develop. Initially, sellers will sell as many pins as they can make, at whatever price the customers will pay. Eventually, sellers will naturally learn how to produce in more cost efficient ways. For example, producers will buy wire in bulk at lower costs, invest in new machinery, hire salesmen, contract with retailers for shelf space, use advertising to increase sales, and even hire engineers to discover the most efficient manufacturing methods. By producing at minimal cost and taking advantage of new sales techniques, the first pin makers had the opportunity to take control of the market.