READINGS

• Start reading: Robert Heilbroner, The Worldly Philosophers (7th edition), New York: Simon & Schuster, 1999.

What is Economics about? Why study it?

• The past, the future, and the current.
• President Bush on Home Ownership [watch here]
• Scarcity. The Economic Problem. Three Solutions to the Economic Problem.

POWER POINTS [ download here]

READINGS

• [GM] Ch. 1 + 2 +3
• H. Hazlitt, Economics in One Lesson (read chapters up to and including the Blessings of Destruction – p.6-11)
• Six Central Methodological Issues [click here to read]
• Economics as a career [read here]

MEDIA

• Rational self-interest.
• Milton Friedman on Greed [click here to watch]*
• The Virtue of Selfishness & Objectivism [visit Ayn Rand’s institute right here]*
• People respond to incentives.
  • The surprising truth about what motivates us [watch here]*
  • Freakonomics and Incentives [watch here]*
  • Office Space and incentives [watch here]
• Marginal Thinking.
• Rational behavior & marginal thinking in “Harold and Kumar Go to White Castle” [watch here]*
• Utilitarianism.
• Information, Uncertainty, and Speculation.

Basic Economic Lessons

• Opportunity Cost. What is UNSEEN.
  • The Broken Window Fallacy [watch here]*
  • Along Came Poly [watch here]*
  • Friends — “The One with the List” [watch here]*
  • Endangered species [watch here]*

• Mutual gains from trade. [watch here]
• Comparative vs Absolute Advantage
  • Finding You Niche, Economist Feb 27, 2003 [read here]*
  • Krugman on Comparative Advantage [read here]*
  • D. Friedman on Comparative Advantage and The World of Warcraft [read here]*
• Property Rights.
  • The Tragedy of the Commons [read here] [watch here]*
  • Michael Heller on The Tragedy of the Anti-Commons [read here] [watch here]*
  • Wedding Crashers
• Divisions of Labor. Specialization.
  • How I build a toaster — from scratch [watch here]*

Methodological issues. Is economics a science?

• Is Economics a science?
• Testing Economic Theory.
• Hoover, Perez. Three Attitudes Toward Data Mining (2000) [read here]*
• Leamer, Let’s Take the Con Out of Econometrics (1982) [read here]*
• What went wrong with economics? The Economist [read here]*

Pitfalls in (economic) thinking.

• “Money is Wealth” Fallacy.
• 7 Fallacies of Economics [read here]*

Humor

• Mankiew’s Ten Principles of Economics  Translated [watch here]*

Extra Stuff (to be discussed in class)

• The Story of Stuff [watch here]*
• Home [watch here]*
• Summary of the Tragedy of the Commons [read here]*

“Any 20 year-old who isn’t a liberal doesn’t have a heart, and any 40 year-old who isn’t a conservative doesn’t have a brain.” — W. Churchill

POWER POINTS [ download here]

READINGS

• F. Hayek, “The Use of Knowledge in Society” [click here to read]

Economic Systems

• 1948 Propaganda [watch here]*
• Margaret Thatcher on Socialism  [watch here]*
• The Sochi Olympics [watch here]
• China’s Real Estate bubble [watch here]

Communism vs Capitalism

• Characteristics of the Market Economy.

• Protection of private property.
  • The Secret Agreement that Revolutionized China [read here]
  • The Mystery of Capital [buy book here]*
  • The Tragedy of the Commons [watch here]*
• Freedom of enterprise and choice.
  • Arnold on Socialism and Freedom [watch here]*
• Self-interest.
• Competition & The Invisible Hand.
  • The Power of Competition [click here to watch]*
• Markets & Prices.
  • The Power of the Market [watch here]*
  • I, the pencil [read here]*
• Technology & Innovation.
  • How I fell in life with a fish [watch here]*
• Specialization (division of labor)
• Sound money. [watch here]*
• Active, but limited government.

“What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca Cola, and you know that the President drinks Coca Cola, Liz Taylor drinks Coca Cola, and just think, you can drink Coca Cola, too. A coke is a coke and no amount of money can get you a better coke than the one the bum on the corner is drinking. All the cokes are the same and all the cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.” — Andy Warhol

Problems with Capitalism.

• Are the richer getting richer and the poor getting poorer? [see here]*
• E. Frank, The Ideology of the Free Market [click here to read]*
• Bill Gates on creative capitalism [watch here]*

Problems with Communism.

Case studies.

EXTRA CREDIT

• Summary of Hayek’s essay, The Use of Knowledge in Society (above).

POWER POINTS [ download here]

READINGS

• [GM], Ch. 4
• H.Hazlitt, “How the Price System Works” [click here to read] (read section 2)
• Ed Lotterman, Anti-gouging activities are bad policy [click here to read]

Introduction

• Origins of the idea. From Smith to Marshall to today.
• Chocolate [watch here] [website] *
• Coffee [watch here] *

Demand & The Law of Demand

Shifts in Demand & Change in Quantity Demanded

• Hula Hoops [watch here]

Supply & The Law of Supply

Shifts in Supply

• The Crisis of Credit Visualized [watch here]

Markets and Prices

• Market Equilibrium

• Finding Equilibrium Price & Quantity (algebraic example)

Case Studies

• Oil prices
  • OPEC’s website [visit here]*
  • BBC article on oil prices [read here]*
  • Bush on oil prices [watch here]*
  • Energy independence[watch here]*

The Fallacy of Supply and Demand

• Are people like ducklings?
• The Fallacy of Supply and Demand [read] and [watch]*

POWER POINTS [ download here]

READINGS

• [GM], Ch. 6-8
• H. Hazlitt, Government Price-Fixing [and] Rent Control  [click here to read]
• S. Dubner, Human Organs for Sale, Legally…in Which Country? [click here to read]
• J. Stossel, Confessions of a Welfare Queen [read here]
• Howard Zinn, Economic Justice: The American Class System [read here]

Consumer and Producer Surplus

• The Water-Diamond Paradox
• Gains from trade in “Just Go With It”  [watch here]*

Welfare (deadweight) Loss

• Underproduction
• Overproduction
• Taxation

Government Price Fixing

Price Floors

• The minimum wage law [watch here – Can you see the fallacy in his argument?]
• Mythology of the minimum wage [read here]*
• What’s the minimum wage in your state [click here to check]* + minimum wage by country [read here]*

Price Ceiling

• How Rent Control Drives Out Affordable Housing [watch here] [click here to read]*
• Anti-gauging laws [watch here]

Price Support

• Agricultural subsidies
• Evaluation of the Dairy Price Support Program [read here]*
• Wal-Mart subsidy watch website: [click here to visit]*

Should we legalize the market for human organs? or prostitution? or drugs?

• Are we worth more dead than alive [explore here]

Politics and Free Markets

POWER POINTS [ download here]

READINGS

• [GM], Ch. 5
• S. Skeel, What if we Legalized Drugs? [read here]

What is elasticity?

Price elasticity of demand

• Price elasticities of demand for various goods [see here]*

Algebraic Examples

Elasticity and Total Revenue

• Why farmers don’t always like good weather.

Determinants of Elasticity

Substitutes and Complement Goods

Tax Incidence (Who pays the tax?)

Should we legalize the market for drugs?

• CannaBiz: The Secret Economy of Marijuana [watch here]*
• The 20 most dangerous drugs [watch here]*
• Milton Friedman’s argument against drug regulation [watch here]*
• Lobbying and Drugs [read here]*

POWER POINTS [ download here]

READINGS

• [GM], Ch. 21
• Baxandall, Diminishing Marginal Utility and the Utility of Diminishing Marginal Inequality [click here to read]

Introduction

• Benjamin Wallace on the price of happiness [watch here]*

The Law of Diminishing Marginal Utility

Total vs marginal utility
Utility Analysis
Assumptions
The Budget Constraint
Indifference Curves

The Marginal Rate of Substitution

The Tangency Condition

Implications for Economic Efficiency

POWER POINTS [download here]

READINGS

• Kahneman Nobel Price Lecture [read here]
• A. Durning, The Dubious Rewards From Consumption [read here]
• The Economist. The tyranny of choice [read here]
• D.Futrelle , Can Money Buy Happiness? [read here]

VIDEOS

• Philosophy: A Guide to Happiness [watch here]*
• The Paradox of Choice [watch here]*
• The Monty Hall problem [watch here] [play here]*
• Prospect Theory [watch here] [and here] [ and here]*
• Adbusters anti-consumption ads compilation (8min) [watch here]*
• Lasn Interview (5min) [watch here]*

ADDITIONAL RESOURCES

• Daniel Ariely [visit website]*
• Adbusters (culturejammers) website [visit here]*
• Culture Jam [read book]*

EXTRA CREDIT

• 1. Kahneman, D. & R. Thaler. (2006). Anomalies: Utility Maximization and Experienced Utility. The Journal of Economic Perspectives, pp. 221-234 [download here] : What is the difference between experienced and expected utility? What are the four main areas that the authors discuss in which people commit systematic mistakes in their decision-making? Provide examples.
• 2. MIT Video. Neuroeconomics [watch here] : What are the three case studies that Prelec uses to demonstrate violations of rationality? What can we learn about the brain from his experiments?
• 3. Kahneman & Tversky (1979) Prospect Theory: An analysis of decision under risk. Econometrica. P.263-292 [read here] : What are the main conclusions of Kahneman and Tversky? How did they reach them?
• 4. TED Video: Nic Marks: The Happy Planet Index [watch here]: Nick Marks argues that we need new measures of socio-economic performance. Summarize his talk and discuss whether you agree with him or not.
• 5. Herbert Simon’s Nobel Lecture [read here]: Are people utility “maximizers” according to Herbert Simon? What is Simon’s idea of “bounded rationality” and how does it help us redefine economic theory?
• 6. The paradox of choice [watch here]:  Barry Schwartz argues that the official dogma of all western industrial societies is that maximizing welfare requires more freedom, and more freedom means living in a world with more choices. But, according to Schwartz, more choices can also be bad. How can more choice lead to lower personal satisfaction? Do you agree with Barry Schwartz? And would you rather live in a world with more choice or less choice?

POWER POINTS [download here]

READINGS

• [GM], Ch. 13
• H. Hazlitt, The Function of Profits [read here]

Firm’s Objectives

• Implicit vs Explicit Costs
• Economic vs Accounting Profit [Khan Academy]

Are profits good or bad?

• Profits of Fortune 500 companies [see here]
• Why have corporate profits increased [read here] [data]
• Whole Foods CEO on Morality and Capitalism [watch here]
• The Weed Trail [read here]
• A Marxist View by Richard Wolff [watch here]

Production, Average & Marginal Product [Khan Academy]

• Trade-off between marginal products of labor and capital in Wasabi Sushi Restaurant [watch here]

The Law of Diminishing Marginal Returns

Costs in the Short Run

Short vs Long Run, Fixed vs Variable, Total, Average & Marginal Cost [Khan Academy]

Costs in the Long Run

• Our daily bread [watch here][whole documentary]
• Technology [watch here]
• Entrepreneurship [see here]

International Trade and Economies of Scale

• Paul Krugman’s Nobel Prize lecture [watch here]

EXTRA CREDIT

Watch Richard Wolff’s video on “Capitalism Hits the Fan” and summarize his major points. Are profits good or bad according to him? Do you agree with him? [watch here]

POWER POINTS [download here]

READINGS

[GM], Ch.14

Conditions for Perfect Competition [Khan Academy tutorial]

• I love Lucy [watch here]

Profit Maximization & Short Run Equilibrium

• Marginal cost in Two and a half men [watch here]

Shutdown Decision

Sunk Costs

Short-Run Supply Curve

Long-Run Equilibrium

Efficiency

• Competition and Health Care [watch here]
• Health Care in Cuba [watch here]

POWER POINTS [download here]

READINGS

[GM], Ch.15

Is Small Beautiful, Is Bigger Better? [read here]

What is monopoly?

What creates monopolies?

• Milton Friedman on Monopoly [watch here]
• Atlanta Street Vending Monopoly [watch here]
• The most dangerous monopoly [watch here]

Natural monopolies

Legal restrictions

• Michael Jackson’s patent [watch here]*
• 20% of our genes are now patented [read here]*

Economies of scale

Control of essential resources

• Panda cam [panda cam]*
• Dwight restrict the supply of dolls [watch here]*

Technical superiority

• Intel ad [watch here]*

Deliberately created barriers

Price, MR, and Demand

Profit maximization

The welfare cost of monopolies

Drawbacks

Why the DWL may be higher?

• Government vs  entrepreneurs [watch here]*
• Opening a lemonade stand [watch here]*

Why smaller?

• Price Discrimination [Khan Academy tutorial]

• Paper Moon [watch here]

Regulation and Entrepreneurship

• Entrepreneurship game

POWER POINTS [download here]

READINGS

[GM], Ch.16 & 17

Introduction [Khan Academy]

What is monopolistic competition?

• Life lessons from an ad man [watch here]
• King of Queens  [watch here]

MC in the short run & long-run [Khan Academy]

MC and DWL

• AT&T Consolidations [watch here]

Advertising – good or bad?

Brand names

• Brand names and the American Gangster [watch here]

What should we think about chain stores? [watch here]

What is oligopoly?

Duopoly example

Competition, monopoly, and cartels [Khan Academy]

The prisoner’s dilemma game

Public Policy

The Microsoft case

POWER POINTS [download here]

READINGS

• [GM], Ch. 10 & 11
• Blaise Pascal, The Wager [read here]
• P.Singer, The Prisoner’s Dilemma [read here]
• N.Angier, Why Are We So Nice? [read here]

More on game theory: Coordination & cooperation games

•  A Beautiful Mind (Adam Smith was wrong) [watch here]*
•  Split or Steal [watch here]*
• Game Theory in “the Dark Knight” [watch here]
• The Prisoner’s Dilemma in the Bachelor [watch here]

Public goods

• Free riding in the Wedding Crashers [watch here]

Externalities

• Positive externality from education [watch here]

The Coase Theorem

Common resources & the tragedy of the commons

Public policy

• Money in politics [explore here]
• How government spends our money [watch here]*
• Global Public Debt [check here]*
• Political contributions [check here]*

EXTRA CREDIT

Read and summarize ch.1 from Regulation: A Primer [read here]

READINGS

• Peter Sims (2011). Little Bets: How Breakthrough Ideas Emerge from Small Discoveries. Simon & Schuster [buy here]

MEDIA

•  Elon Musk: How I Became the “Iron Man” [watch here]
• Not Business as Usual [watch here]
• Mark Cuban: How I Became a Millionaire [watch here]
• 8 Secrets to Success [watch here]
• The Happy Secret to Better Work [watch here]
• How We Made Our Millions [watch here]