I think I've asked a few of you which courses you will be doing next year. I would recommend Intermediate Micro, you will be taught some very interesting stuff, especially Game Theory.
The first game you will be shown is the Prisoner's Dilemma, nicely summarized in this post. Lots of people don't like the PD story, mainly because they do not understand it. The point of this story is not that people are selfish or not to be trusted. Rather, the point is that given these payoffs, the equilibrium shown is the only one possible.
As I said in my last post, you are being taught how to get from X, a set of assumptions, to Y, an equilibrium given those assumptions. The PD is a nice introduction to Game Theory because it has a simple solution and an easy to understand narrative.
Other games could just as easily have an equilibrium where it makes sense for everyone to co-operate and there are very simple revisions to the basic PD setup which lead to that outcome. See if you can come up with them yourselves.
Sunday 4 March 2012
Friday 2 March 2012
Social Welfare Functions
Here's an entertaining post on Social Welfare Functions written by my colleague Michael Sanders.
As Economics students, you will frequently hear others claim that the we economists assume all people to be machines, much like Spock. Generally speaking, these people will be dreadlocked Sociology students wearing God-awful hemp jumpers that stink of rolling tobacco, even if they don't smoke. These people misunderstand what Economics does.
Get a philosopher to state their normative assumptions about what is best for society and an economist will show you, using some maths, the implications of those assumptions. The Economics you learn at undergraduate level rarely has much to say about those assumptions themselves, we generally leave that normative stuff to others.
Most models you will learn are generally based on the "If X, then Y" principle. Don't worry too much about the X, the assumptions, worry about the analysis that takes us from X to Y, the equilibrium.
As Economics students, you will frequently hear others claim that the we economists assume all people to be machines, much like Spock. Generally speaking, these people will be dreadlocked Sociology students wearing God-awful hemp jumpers that stink of rolling tobacco, even if they don't smoke. These people misunderstand what Economics does.
Get a philosopher to state their normative assumptions about what is best for society and an economist will show you, using some maths, the implications of those assumptions. The Economics you learn at undergraduate level rarely has much to say about those assumptions themselves, we generally leave that normative stuff to others.
Most models you will learn are generally based on the "If X, then Y" principle. Don't worry too much about the X, the assumptions, worry about the analysis that takes us from X to Y, the equilibrium.
Subscribe to:
Posts (Atom)