Topics to be covered include the methods of conceptualizing social interactions in market economies, the notions of (un)bounded rationality, choice and demand, production and supply, marginal analysis/pricing, self-organization of economies, coordination failures, the ideal-type competitive markets, and its limitations, and the role of power in workplace and market. Though any form of familiarity with mathematical notations, basic algebra, and a little calculus is desirable, there is no prerequisite for the class. All of the mathematics and programming required for the course are covered in lectures, readings, and assignments.
Week 1 – Introduction
The first week introduces a broad range of the key topics and themes that will be treated in the course. For example, it demonstrates the importance of approaching economics through an empirical lens, and it introduces themes such as long-term economic growth and its environmental impacts, inequality and causality.
Please read UNIT 1 here and watch the video here Why Economics Needs Facts which explains Thomas which explain why data is fundamental to economics.
Week 2 – Economic models: How to see more by looking at less
This is a hybrid lecture with elements that traditionally feature in both microeconomics and macroeconomics. We introduce the basic idea of a model, including the ceteris paribus assumption, in this lecture, as well as the important concepts of incentives related to relative prices and economic rents.
Please read UNIT 2 here and watch the video here Economic Growth and Creative Destruction.
Week 3 – Economic decision making and Incentives
In this lecture, the central example illustrating these concepts is the incentive to innovate, which is used to introduce production functions, isocosts and diminishing average productivity.
Although the motivating example in the lecture is the growth associated with the industrial revolution, which is an aggregate phenomenon related to changes in GDP, the bulk of the unit contains basic economic ideas that would be central to a microeconomics course. The big question of why the industrial revolution started in England in the eighteenth century keeps the students motivated.
Please read UNIT 3 here and watch the video here Why do we work so hard? by Juliet Schor.
Week 4 – Interactions between economic actors: Games and strategic interactions
This lecture introduces game theory, motivated in part by new results from behavioural economics. Game theory appears much earlier than in traditional micro texts because The Economy uses Nash equilibrium and interaction between economic actors throughout, and so the material must be covered at this stage. The lecture uses behavioral evidence and discusses altruistic preferences. This is also non-standard, but it balances the traditional emphasis on self-regarding behaviour in economics, which we employed in the model in Week 3.
Please read UNIT 4 here and watch the show here Golden Balls.
Week 5 – Interactions between economic actors: Power, exchange and institutions
This lecture on power, property and bargaining examines exchange, production and allocation where there is more than one individual. It also teaches how we can evaluate exchanges using to the Pareto criterion, fairness, and inequality. In traditional microeconomics texts, we traditionally have used Edgeworth Boxes in pure exchange equilibrium. This concept abstracts from power and focuses on efficiency. The Economy does not use models like this, but the central component of a Pareto efficiency curve, and the way that the distribution of surplus is related to power relationships and institutions, is their analogue. Once again, these concepts are introduced earlier than in many traditional texts in microeconomics, because of their relevance to subsequent material.
Please read UNIT 5 Sections 5.1-5.9 here .
Week 6 – Interactions between economic actors: The labour market and incomplete contracts
The lecture begins the analysis of the labour market. Since the syllabus began by concentrating on human interactions (for example games in Week 4, and exchange and production in Week 5), it makes sense to develop the employment relationship before considering goods production, and firm and industry analysis.
The first principal-agent problem is introduced in this lecture.
The Lecture’s treatment of the labour market involves incomplete information in a labour discipline model, with a wage-setting firm. This model is consistent with the firm hiring up to the point where the marginal product of labour (or marginal revenue product) is equal to the wage, but this is not mentioned explicitly in CORE (though it could easily be without causing problems).
This is a substantial revision of the traditional microeconomic approach, and it ensures that students understand unemployment is a structural feature of real economies, and that the labour market they learn about in microeconomics is analytically the same as the one that will be used in their macroeconomics course to model involuntary unemployment in equilibrium, and from which Phillips curves are derived.
Please read UNIT 6 here and watch the video here You can’t outsource responsibility by Richard Freeman.
Week 7 – Firms and markets I
This lecture most closely resembles the microeconomics of firms and markets in traditional texts. It introduces demand functions, cost functions and the determination of market prices, and standard tools such as consumer surplus and elasticity. But, though the material is familiar, we begin with price-making firms selling differentiated goods, and arrive at perfect competition in Week 8 as a limiting case rather than a benchmark.
Please read UNIT 7 here .
Week 8 – Firms and markets II
The lecture begins with price-making firms selling differentiated goods, and arrive at perfect competition as a limiting case rather than a benchmark.
Please read UNIT 8 here and watch the video here Fishing for perfect competition by Kathryn Graddy.
Mid-term Exam.
Week 9 – Intertemporal choice
The main theme in this lecture is a familiar model of intertemporal consumption, using a two-period framework. Usually, micro treats this model as an intertemporal extension of the choice problem discussed in Week 3. The danger with this approach is that it tends to elevate the model of choice above the economic phenomena which the models are introduced to address.
This motivation for the model comes from contrasting the opportunities available to two individuals facing a problem of intertemporal substitution, when they have contrasting endowments. One has income this period, and none next period, and the other has no income now, but income next period. The lecture highlights the parallel structure of the principal-agent problems in the labour and credit markets.
Please read UNIT 10 Sections 10.1-10.9 here and watch the video here The Remote Repo Man by New York Times.
Week 10 – Market dynamics and market performance I
This lecture considers how out-of-equilibrium rents drive economic activity, providing an intuitive explanation of how the supply and demand framework functions to generate equilibrium prices. This replacing the sometimes-puzzling explanation usually offered of how price-taking agents could equilibrate a market in excess supply or excess demand.
Please read UNIT 11 Sections 11.1-11.6 here and watch the video here Market Disequilibrium Rajiv Sethi.
Week 11 – Market dynamics and market performance II
This lecture continues considering how out-of-equilibrium rents drive economic activity, providing an intuitive explanation of how the supply and demand framework functions to generate equilibrium prices. This replacing the sometimes-puzzling explanation usually offered of how price-taking agents could equilibrate a market in excess supply or excess demand.
Please read UNIT 11 Sections 11.7-11.12 here .
Week 12 – Market performance and failure I
This lecture investigates market failure and policy responses to it, bringing the many different cases of external effects together under a unified umbrella of incomplete contracts.
Please read UNIT 12 Sections 12.1-12.5 here .
Week 13 – Market performance and failure II
This lecture continues investigating market failure and policy responses to it, bringing the many different cases of external effects together under a unified umbrella of incomplete contracts.
Please read UNIT 12 Sections 12.6-12.10 here and watch the video here Why we shouldn’t trust markets with our civic life by Michael Sandel.
Week 14 – Review & Final Exam
In this lecture Intertemporal substitution models, market dynamics, performance, and failure which are discussed in Weeks 9-13 are reviewed.
Final exam!
