Economics for Economic Historians

Michaelmas term 2011

Anthony Hotson, Wolfson College
Michelle Sikes, Lincoln College and History Faculty.  Michelle's webpage is HERE.

OBJECTIVES

Probably more than any other social science, economics appears inaccessible to anyone not familiar with its language and method.  Yet it remains a dynamic, versatile, and useful approach to the study of social behaviour.  The aim of this course is to introduce researchers to the principles and basic concepts of economics, in particular microeconomics and macroeconomics, and to demystify the jargon used in the discipline.  Over nine sessions, we will explore various elements in the economist’s ‘toolbox’, placing a special emphasis on how these elements are applied to describe and understand the real world.  This course has been designed to complement the Economic and Social History MSc/MPhil core courses, including a lesson on game theory based on the What Happened and Why reading list.

This course does not assume or require that any prior knowledge of economics or maths. It is therefore particularly suited for graduate students who have not previously studied economics and who are interested in gaining a working knowledge of the main concepts in the field.  Students with some knowledge of economics, however, might also find it useful for reviewing concepts or clarifying ideas.

COURSE ARRANGEMENTS AND EVALUATION

The course consists of nine (9) sessions of two hours each (with a ten-minute break), taking place:

• Thursdays, 9.00–11.00 in the Rees Davies Seminar Room, History Faculty (Old High School for Boys), George Street
• Weeks 0 to 8 in Michaelmas term

Assessment for this course will take the form of a pass-fail five to ten-minute presentation in Week 9 of Michaelmas term. The presentation will take place in the afternoon on Monday, 5 December.  The presentation will use visual materials as appropriate (i.e. one or two PowerPoint slides, maps, etc.). The purpose of the assessment is for self-monitoring and will serve as good training for academic or commercial life.  It has no effect on degree results.

BIBLIOGRAPHY

There is no set textbook for the course as the topics to be discussed are covered by a range of good textbooks on economics.  However, it will be useful for you to select one or two textbooks from among the options listed below, which then can serve as a resource and a reference throughout the course. Potential options include:

• Parkin, Michael, Melanie Powell, and Kent Matthews, Economics – 4^th Edition (Addison Wesley, 2000)
• Mankiw, Gregory, Principles of Economics – 3rd Edition (Thomson/South-Western, 2003)
• Pindyck, Robert and Daniel Rubinfeld, Microeconomics – 6th Edition (Pearson Education, 2005)
• Begg, David, Stanley Fischer and Rudiger Dornbusch, Economics – 7th Edition (McGraw-Hill, 2002)
• Stiglitz, Joseph and Carl Walsh, Economics – 3rd Edition (Norton, 2002)

(NOTE: These textbooks not only have many updated editions but also alternative editions – American, European, international – with various alternative co-authors.  All of them are generally pretty similar to each other and can be used interchangeably.)

Any student interested in a deeper knowledge of microeconomics should approach the standard reference at intermediate level:

• Varian, Hal, Intermediate Microeconomics: A Modern Approach (Norton, 2003)

For macroeconomics, the following books are particularly useful:

• Mankiw, Gregory, Macroeconomics (Worth, 2009).
• Sachs, Jeffrey and Felipe Larrain, Macroeconomics in the Global Economy (Prentice Hall, 1993).

Other books not mentioned here might also work.  Do not hesitate in contacting us if you have any doubt.

OPTIONAL PRE-COURSE READING

·         Taleb, Nassim Nicholas, The Black Swan, The Impact of the Highly Improbable (Penguin, 2007).

o   Bodleian Call Number: M10.G00709, Nuffield College Library Call Number: Q 375.T, Social Sciences Library Call Number: Q375.TAL

·         Eichengreen, Barry, Globalizing Capital: A History of the International Monetary System (Princeton, 2008).

o   Bodleian Call number: M08.E13918

·         Rajan, Raghuram, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton, 2010).

o   Nuffield College Call Number: HC 110.I5.R, Social Science Library Call Number: HC110.I5.RAJ 2010

·         Paulson, Hank, On The Brink (Headline, 2010).

There is no need to read everything listed above; however, these books are suggested because they are topical and illustrate the wide range of applications for economic concepts.

CLASS SCHEDULE

As mentioned above, the course will provide an overview of the basic concepts and ideas in economics. After an introductory class, the first half of the course will deal with microeconomics, and the second with various topics in macroeconomics.  These are some of the topics we will discuss:

Introduction

Week 0
Basic concepts in economics
Scarcity; households, firms and governments; economics approach; microeconomics and macroeconomics.

Quantitative data and graphical analysis
Curves, slopes and elasticities; budget constraint; supply, demand and price mechanism; preferences and utility function.

Microeconomics

Part I: Choice, technology and price mechanism

Week 1

Individual choice and demand
Consumption possibilities; preferences and indifference curves; substitutes and complements; choice and utility maximisation; demand; income, substitution and price effects.

Firm behaviour and supply
Firms and market structure; technology; returns to scale; cost curves; profit maximisation and cost minimisation; supply; firm supply and industry supply; perfect competition.

Week 2

Supply and demand in action
Market mechanism; equilibrium in a market economy; general equilibrium.

Sellers and buyers with market power
Monopoly and profit maximisation; inefficiency of monopoly; deadweight loss; price discrimination; natural monopolies; rent-seeking; price regulation; monopsony.

Part II: Topics in social interaction

Week 3

Issues in non-cooperation
Non-cooperative behaviour; duopoly, oligopoly and monopolistic competition; game theory; Nash equilibrium; repeated and sequential games; games of coordination, competition and commitment.

Issues in exchange
Robinson Crusoe; Friday and the gains from trade; Edgeworth box diagram; Pareto efficiency; economic efficiency and equilibrium; welfare.

Week 4

Issues in market failure
Market failure and inefficiency; positive and negative externalities; correcting externalities; tragedy of the commons; public goods; the role of the State.

Issues in information
Imperfect information; risk and uncertainty; signalling; moral hazard and adverse selection; principal-agent problem.

Macroeconomics

Part I: Basic concepts and ideas

Week 5

The economy as a whole
Microeconomics vs. macroeconomics; GDP, unemployment and inflation; real and nominal variables; business cycles; aggregate supply and demand.

Approaches to macroeconomics
Macro-models; short, medium and long run; Consumption; Savings and Investment.

Part II: Output determination and Public Policy

Week 6

Macroeconomic policy (in the short run)
Aggregate demand and the Keynesian multiplier; IS-LM framework; macroeconomic policy in a closed economy

Macroeconomic policy in an open economy
Mundell-Fleming framework; macroeconomic policy

Part III: Labour Economics and the public sector

Week 7

Labour Market and Unemployment
Debates on unemployment; classical view on labour and unemployment; Keynesian view of full-employment

Current account and the public sector
Saving, investment and current account; fiscal budget; public deficit; public-private sector interaction; Ricardian equivalence; tax smoothing

Part IV: Monetary economics

Week 8

Money demand and supply
What is money?; money supply and demand; banks and financial markets; monetary policy; interest rate determination; expectations.

Exchange rate, prices and inflation
Exchange rate systems; prices, wages and unemployment; the Phillips curve.