This page provides information about the fall 2002 offering of ECON 4200 and ECON 4900 and current research.
Last modified: Sep. 2, 2002
Alice Nakamura and others have developed a non-profit web site with information on jobs for graduating students:
The prize was shared between Daniel Kahneman and Vernon Smith. For students in 4900, both winners have been active in what the Watson text describes as behavioral game theory (See his aside on p. 92). The prize winners’ work is briefly described at http://www.nobel.se/economics/laureates/2002/public.html (Click on information for the public towards top right corner).
Solow makes many informative comments on economic growth. His views on globalization are also interesting. The interview appears at: http://minneapolisfed.org/pubs/region/02-09/solow.cfm .
FF: It’s complicated because neoclassical economics has evolved over time to some extent. The most important element of human behaviour that the classical economic paradigm had a hard time accounting for was norms. In the last generation there has been a lot of work in economics on norms. Now there is a whole branch of institutional economics devoted to elaborating on a theory of norms. That's a big improvement. Douglas North was really onto something important, and he opened everyone else's eyes to this whole realm of economic behaviour that neo-classical economics before him had pretty much ignored.
I would say that there is still something limited in economists’ approach to understanding how norms are generated because they still depend on this rational utility maximiser model, and then use game theory to understand how norms develop. That explains how some norms come to be, but in other cases they come from religion, or inherited tradition, or some other source that does not have a rational utility maximising explanation. That's the weakness in the neo-classical paradigm—not that it ignores norms but it doesn't really have, and I would argue can't really have, a theory of norm generation that's adequate.
The other really big problem that's commonly recognised by economists is that microeconomic theory, something like price theory, is well established and has good predictive power, but there are really big problems in macroeconomics when you scale things up to the level of entire societies. I think that's reflected in the failure to predict the Asian crisis, and just to foresee a lot of events at the macroeconomy level. I think there's a simple reason for this—economies are just too complicated. When you scale things up to that level, you have all these political and cultural factors that operate to affect economic decision-making. There's this heroic attempt to use game theory to model politics and behaviours at that level, but I predict they'll beat their heads against that wall for maybe another generation until these rational choice economists who now have tenure have retired.
The full interview appears in Policy Spring (September/Novermber) http://www.cis.org.au/Policy/Spring02/polspring02-5.htm
There is a tendency to lump all international initiatives together and either praise or condemn the package. It is true that all of the initiatives—granting of long-term aid by national governments and the World Bank, financing responses to balance-of-payments crises through consortia and the IMF, or liberalizing trade regionally or internationally require a well-structured program and a constructive response from participating countries to be effective. The challenges for structure and the damages caused by corrupt domestic governments vary considerably across the diverse responsibilities of these policies. Easterly, who worked as a research economist at the World Bank for a number of years, writes provocatively on the bureaucratic cartelization of national aid programmes. The following abstract (with a link to his paper) starkly spells out his conclusions: Easterly abstract.htm
Larry Willmore is a Carleton Ph.D. in economics that has worked at the United Nations for many years. Larry sends out an email “thought of the day,” which contains a quotation, posting or a section of a recent article. He reports that people either hate or like his choices. With Larry’s permission I will occasionally post his brief missives as they may be of interest to economics students in our programmes.
Some of the questions at the end of the chapters in our text have sketches to answers at the back of the book. For the others, there is an answer booklet circulating. Casey Warman, our TA, has made a copy available in the Economics reading room on the 8th floor of the Loeb. By the way, Casey’s email address is firstname.lastname@example.org or email@example.com .
Discontent with our current approach to examining decision making under uncertainty is pervasive. Much of that is due to experimental evidence about choices that contradict expected utility (Some examples will be discussed in class). Other work, such as a paper of Rabin and Thaler that drew the attention of the Economist magazine (August 9, 2001) Economist_decision_making_uncertainty_9au1.htm, discusses logical implications of standard working assumptions in applying the current theory that the authors believe have no credibility.
The web site http://www.longbets.org/bet/recorded intermediates wagers on a number of interesting topics. An article discussing this web site appeared in the New York Times on September 1 of this year Longbets_com article on wagers NYT 1sp2.htm.
Suggestion: It would be helpful if you brought the questions in the illustrative problems set #3 to class as I will be using the problems in the lectures.
The test will be held in room 240 TB, which is close to the room in which we originally met. It will begin shortly after 2:30 and last for two hours. It will cover Chapters 13, 15, 16, 19, 22 to 29 and the class discussions (Note the inclusion of Ch. 27 on trade with incomplete information).
The topics and notes sets will be posted in both HTML and in Word format. I prepare them in Word and then save them as HTML files but in the process symbols, subscripts and some of the math occasionally gets reformatted or garbled. The Word files should allow you to download a copy that is not affected by this problem. With the first set I don’t notice any distortions but will continue to put both up for the time being.