Monetary Economics and the Global Economy
An intermediate level course in macroeconomics, with a particular emphasis on monetary and international aspects. The goal is to provide a coherent framework for analyzing macro events (e.g. recessions, inflation) and policy and thereby better understand the environment in which households, firms, governments and financial intermediaries operate.
The course is structured into the following parts: measurement, long-run economic performance, business cycles and macroeconomic policy, and institutions. The first part discusses how economists gauge the performance of the economy as a whole, with an additional emphasis on economic indicators that are useful in the real-time analysis of the impact of macroeconomic events/news on the financial markets. The second and third parts discuss the structure of the national economy by focusing on three major sectors and relating their decisions to the circular flows of income and expenditures in the aggregate economy, and how movement in those sectors determine the short-run fluctuations and relate to long-run economic performance. Finally, we discuss the institutions that make decisions for the economy, and this section will focus mainly on the Federal Reserve Bank and its policies. Throughout the course, the material is applied to better understand general issues such as cyclical fluctuations, economic growth and stabilization role of monetary and fiscal policy, as well to specific topics such as the recent financial crisis, global imbalances, demographic aging, or the recent European debt crisis. At the end of the semester, we apply foundational and empirical knowledge to review several global economic events.
Behavioral Economics
Behavioral economics has three basic propositions: People are not fully rational, they are not fully self-interested, and they don’t have full self-control. These propositions are not news to anyone other than economists, who are prone to utter statements such as “Assume that an individual can look infinitely into the future, and induce backwards.” Our aim in this class is to refute such assumptions, statements or theorems that you’ve learned so far in other classes (sorry about that).
Our methodology in this class will be experimentation. Before experiments, economists tried to understand the world by formulating elaborate, mathematical models, and then fitting empirical data to those models to prove their validity. This is one way to look at problems. Another approach is to build controlled environments so we can tweak variables and see how people respond to changing incentives. Experimentation is a rather new area in economics (about 30 years of history) in which observation of behavior takes place in the laboratory or in the field. Participants engage in a market activity, or make decisions under risk and uncertainty, or bargain for a desirable outcome. Experimental economics allows you to play with incentives, and see how people respond to changing environments.
In this class, we will go over many experiments, and also be participants in experiments ourselves. By being in the shoes of the decision-maker, we will be able to see how people take risk, how they (mis)manage their time, or how they behave in economic situations, from bilateral bargaining to social dilemmas.
Experimental Economics
Before experiments, economists tried to understand the world by formulating elaborate, mathematical models, and then fitting empirical data to those models to prove their validity. This is one way to look at problems. Another approach is to try to understand how things occur in real life. Experimentation is not meant to replace traditional methods but to complement them by providing novel insights. It is a rather new area in economics (about 30 years of history) in which observation of behavior takes place in the laboratory. Participants are real people in laboratory settings, engaging in a market activity, or making decisions under risk and uncertainty, or allocating resources.
In this class, we will go over many experiments, and also be participants in experiments ourselves. The reading list is described below in detail. We will first introduce history and basics in experimentation. Second, we’ll talk about individual decision-making; third, we will talk about social interaction, and fourth, we will talk about market outcomes. In this process where we observe behavior from the individual to the market, we will have the chance to discuss the power and weakness of markets. We will end the semester by discussing extensions; and the shortcomings and the future of experimentation as a method.
In about 10 of our classes, we will start our session with an experiment. We’ll play a game, and then go over the economic principle behind the game. By being in the shoes of the decision-maker, you will be able to see how people take risk, how they (mis)manage their time, or how they behave in economic situations. In classes that don’t start with experiments, you will do the readings before coming to class, and I will ask one of you to start the discussion by providing the intuitive reasoning behind the readings
Labor Economics
Labor economics studies how labor markets work; and our interest in the labor market arises both from our personal involvement in it, as well as from the many social policy issues that concern the labor market experiences of different group of workers. On the personal front, how we do in the labor market helps determine our wealth, the types of goods we can afford to consume, and our labor-leisure decision. On the social front, studies in this particular market informs policy makers regarding the following questions, all of which will be discussed during the semester:
Why did the labor force participation of women rise steadily throughout the past century in many industrialized countries?
What is the impact of immigration on the wage and employment opportunities of native-born workers?
Do minimum wages increase the unemployment rate of less-skilled workers?
What is the impact of occupational safety and health regulations on employment and earnings?
Are government subsidies of investments in human capital an effective way to improve the economic well-being of disadvantaged workers?
Why did wage inequality in the US rise so rapidly after 1980?
What is the impact of affirmative action programs on the earnings of women and minorities?
What is the economic impact of unions, both on their members and on the rest of the economy?
Do generous unemployment insurance benefits lengthen the duration of spells of unemployment?
Why did the unemployment rate in the US begin to approach the typically higher unemployment rate of European countries after 2008?
Managerial Economics
This course introduces you to “managerial economics” which is the application of microeconomic theory to managerial decision-making. Microeconomic theory is a remarkably useful body of ideas for understanding and analyzing the behavior of individuals and firms in a variety of economic settings. The goal of the course is for you to understand this body of theory well enough so that you can effectively analyze managerial (and other) problems in an economic framework.
While this is a “tools” course, we cover many real-world applications, particularly business applications, so that you can witness the usefulness of these tools and acquire the skills to use them yourself. We depart from the usual microeconomic theory course by giving more emphasis to prescription: What should a manager do in order to achieve some objective? That course deliverable is to be compared with description: Why do firms and consumers act the way they do? The latter is still prominent in this course because only by understanding how other firms and customers behave can managers determine what is best for them to do.
The first major task in the course is the development of the theory of supply and demand underlying the competitive model, which serves as the benchmark for evaluating other market structures. Outside of the purely competitive context, an understanding of demand is essential to many firm decisions including pricing, marketing, and product positioning. The concept of supply and the supply curve provides a valuable framework for thinking about firms’ costs and investment decisions. After presenting the competitive model, we turn to other market structures more like those encountered by real-world firms such as monopoly and oligopoly.
Art Markets
We’ll analyze art from the point of view of an economist (main premise), and we will understand the economy through the point of view of artworks.
Economics of Art: This course uses the perspectives and tools of economics to analyze questions arising in connection with culture and the arts. What economic forces influence the creation, presentation, preservation and ownership of art? Should support for the arts be provided through private patronage, philanthropy, or public sector support (i.e. taxes)? How does the mechanism of support for art affect the productivity and creativity of the artist? Does art make a good investment for an individual? If so, why do art museums require donations and public support? What are the impacts on economic vitality and local economic development of cultural and arts organizations? When these impacts arise, how can (or should) they be used for public policy?
Art of Economics: Here we will discuss art forms that arise from different economic systems. Our focal points will include the role of art as a tool for economic policy; the role of censorship; culture and economic development. In this section we will also create some art projects that represent economic concepts
Introduction to Economics for Business Students
Economics is the study of how society allocates its scarce resources.
Microeconomics is the study of the behavior of households and firms, whose collective decisions determine how resources are allocated in a free market economy. We will study when markets are likely to produce “efficient” outcomes, and when government intervention may improve on or harm the competitive market outcome. We will use economic theory to analyze issues like a gas tax to change reliance on oil, minimum wages to increase salaries of the working poor, and government subsidies to increase education.
Macroeconomics is the study of the economy as a whole. We will understand how the size of the US economy is determined, how unemployment is measured, how inflation affects life. We will look at policy options that the government and the Federal Reserve Bank face, and discuss pros and cons of their actions.
Economic arguments are often used in debates about government policies, discussion of business strategies, and many of life’s other arenas. The goal of the course is to teach you to “think like an economist,” which I hope will help you to understand the world around you, make better economic decisions in your own life, and be a more informed citizen and voter.