Essential Microeconomics is designed to help students deepen their understanding of the core theory of microeconomics. Unlike other texts, this book focuses on the most important ideas and does not attempt to be encyclopedic. Two-thirds of the textbook focuses on price theory. As well as taking a new look at standard equilibrium theory, there is extensive examination of equilibrium under uncertainty, the capital asset pricing model, and arbitrage pricing theory. Choice over time is given extensive coverage and includes (...) a basic introduction to control theory. The final third of the book, on game theory, provides a comprehensive introduction to models with asymmetric information. Topics such as auctions, signaling and mechanism design are made accessible to students who have a basic rather than a deep understanding of mathematics. Examples and diagrams are used to illustrate issues as well as formal derivations. (shrink)

Rosenberg applies current thinking in philosophy of science to neoclassical economics in order to assess its claims to scientific standing. Although philosophers have used history and psychology as paradigms for the examination of social science, there is good reason to believe that economics is a more appropriate subject for analysis: it is the most systematized and quantified of the social sciences; its practitioners have reached a measure of consensus on important aspects of their subject; and it encompasses a large number (...) of apparently law-like propositions. (shrink)

Microeconomic Theory is based on lecture notes for a graduate course in microeconomic theory. It covers a broad range of topics, and to some extent the lecture structure is retained in the style of the book. The author provides a clear account of the main ideas in each area concisely, and in some depth of detail. The presentation is at an advanced level and provides succinct coverage of the material in a self contained discussion. Chapters are organized and written independently (...) making it possible to read any chapter without having read earlier material. Each chaper is written on the presumption that the reader has some familiarity with the topics or issues under discussion but would value further discussion, or a second point of view. While much of the material is mainstream, a substantial portion is not available in existing textbooks. The book covers a range of topics appearing in advanced courses in microeconomic theory. Coverage includes such topics as decision theory, strategic and extensive form games, auctions, bargaining, information models, principal- agent problems, signalling and screening games, cooperative games and models of learning. (shrink)

This paper is part of a larger project defending of the foundations of microeconomics against recent criticisms by philosophers. Here, we undermine one source of these criticisms, arising from philosophers' disappointment with the performance of microeconomic tools, in particular game theory, when these are applied to normative decision theory. Hollis and Sugden have recently articulated such disappointment in a sophisticated way, and have argued on the basis of it that the economic conception of rationality is inadequate. We argue, however, (...) that their claim rests upon a misunderstanding of the concept of a game as it is used in microeconomics. (shrink)

Provides a rigorous treatment of some of the basic tools of economic modeling and reasoning, along with an assessment of the strengths and weaknesses of these tools Complements standard texts Covers choice, preference, and utility; ...

This comment on 'Economic theories and their Dueling interpretations' questions the descriptive adequacy of the ‘sociology of economics' proposed by Gilboa, Postlewaite, Samuelson, and Schmeidler (GPSS) (2022). We ask whether economists still perceive the role of microeconomic theory as central as do GPSS. In particular, is present-day economics unified by the principles of maximising, subject to constraints and equilibrium analysis? We argue that this is not the case. GPSS’ appeal to the interpretative flexibility of economic theories appears apologetic, especially the (...) suggestion that theories and models, which once were considered positive descriptions or predictive instruments, are now cast as analytical or methodological exercises. We conclude on a more constructive note, drawing from the recent philosophical discussion of modelling which, quite paradoxically, grants highly idealized and simplified models a more important role than GPSS appear to allow. (shrink)

We summarize the evidence and arguments usually employed against the use of the profit maximization assumption in microeconomic theory, and then pass directly to the methodological arguments. Two arguments are considered. The first summarizes positions which have been taken by various defenders of the "people who think a theory should be given up just because it is false are naive and confused" view. To rebut this view, we develop a scheme for classifying theoretical assumptions and show that the specious plausibility (...) of the argument in question derives from ignoring the distinctions we have drawn. The second argument attempts to show that a better theory is more likely to be attained by continuing the development of the orthodox theory. We show that this view is mistaken and then discuss steps which have been taken to develop a better theory. (shrink)

Economics without Preferences lays out a new microeconomics – a theory of choice behavior, markets, and welfare – when agents lack the preferences and marginal judgments that economics normally relies on. Agents without preferences defy the rules of the traditional model of rational choice but they can still systematically pursue their interests. The theory that results resolves several puzzles in economics. Status quo bias and other anomalies of behavioral economics shield agents from harm; they are expressions rather than violations (...) of rationality. Parts of economic orthodoxy go out the window. Agents will fail to make the fine-grained trade-offs between options ingrained in conventional economics, leading market prices to be volatile and cost-benefit analysis to break down. This book provides policy alternatives to fill this void. Governments can spur innovation, the main benefit markets can deliver, while sheltering agents from the upheavals that accompany economic change. (shrink)

This is the first full-length survey of current work which examines the compatibility of microeconomics and macroeconomics. Its particular distinction is that it makes accessible, to non-specialists, those extensive modern refinements of general equilibrium theory which are linked to macroeconomics and monetary theory. Part I traces the development and interlocking nature of two scientific research prgrams, macroeconomics and neo-Walrasian analysis. The five chapters in this part examine general equilibrium theory, Keynes' contribution, the 'neoclassical synthesis', and the Clower–Leijonhufvud contributions to (...) questions of systemic coordination. The four chapters of Part II place recent work on the micro-foundations of macroeconomics within a taxonomic scheme of Walrasian equilibrium, Walrasian disequilibrium, Edgeworthian equilibrium, and Edgeworthian disequilibrium. Part III, a single chapter, provides an overview of the subject and ventures some conclusions. (shrink)

There is a very apparent conflict between economists and ethicists over the moral standards that should be applied to the managers of business firms. The view of most economists is that moral standards in business are not relevant, beyond the normal personal obligations to speak the truth and observe the law, because profit maximizing behaviour, under market and resource constraints, leads inexorably to social welfare optimization. The opposing view of most humanists is that modern markets are not competitive enough to (...) be constraining, that profit maximization often leads to social harm, and that welfare benefits are unjustly distributed. The article examines the moral constructs in microeconomic theory and the ethical objections to that theory at both the pragmatic and theoretic levels, and concludes that inappropriate assumptions about the nature and worth of human beings in the economic paradigm require the use of moral standards for business decisions and actions. (shrink)

It would be very difficult to discuss the question concerning the hypothesis of omniscience in microeconomics without relating this hypothesis to the more fundamental hypothesis of rationality (usually referred to as rationality principle or postulate) which is at the base of the very idea of an economic theory and even social sciences. Indeed omniscience is a quality which was typically attributed to homo oeconomicus whose essential characteristic is to be perfectly "rational". This association between omniscience and rationality goes back (...) to the marginalist revolution which progressively brought economists to model economic agents as rational calculators who make each decision by systematically maximizing their utility through the standard application of more or less sophisticated mathematical methods. But since the very idea of such a maximization has no meaning if all relevant parameters and variables are not carefully taken into account, it became relatively common to associate omniscience (the required knowledge of such parameters and variables) and rationality (the disposition to make decisions which tend to maximize the degree of success in reaching a goal). (shrink)

Principles of Behavioral Economics, written by an acknowledged leader in the field, provides a comprehensive introduction to one of the most exciting areas of modern economics. It demonstrates how models of economic theory can be enriched by using interdisciplinary insights from psychology, sociology, evolutionary biology, and neuroscience to build the basis for a more empirically supported set of economic principles. Unique in its level of rigor and lucidity, the book highlights the important link between theoretical and empirical economics by demonstrating (...) the usefulness of a range of data sources such as observational data, lab data, survey data, and neuroeconomic data. This field-defining textbook argues that behavioral economics is not just a supplement to mainstream economics. Taking behavioral economics seriously requires a total rethink, and eventual transformation, of every area of economics. (shrink)

This book presents Ariel Rubinstein's lecture notes for the first part of his well-known graduate course in microeconomics.

In recent years, the project of providing microeconomic foundations for macroeconomics has taken on new urgency. Some philosophers and economists have challenged the project, both for the way economists actually approach microfoundations and for more general anti-reductionist reasons. Reductionists and anti-reductionists alike, however, have taken it to be trivial that the macroeconomic facts are exhaustively determined by microeconomic ones. In this paper, I challenge this supposed triviality. I argue that macroeconomic properties do not even globally supervene on microeconomic ones. This (...) is simply a consequence of the difference in the explanatory goals of the respective fields, which implicitly carve out the microeconomic property set in such a way that it underdetermines macroeconomic properties. It means, however, that microeconomics-based foundations for macroeconomics are inadequate in principle. (shrink)

A central concern of economics is how society allocates its resources. Modern economies rely on two institutions to allocate: markets and governments. But how much of the allocating should be performed by markets and how much by governments? This collection of readings will help students appreciate the power of the market. It supplements theoretical explanations of how markets work with concrete examples, addresses questions about whether markets actually work well and offers evidence that supposed "market failures" are not as serious (...) as claimed. Featuring readings from Hayek, William Baumol, Harold Demsetz, Daniel Fischel and Edward Lazear, Benjamin Klein and Keith B. Leffler, Stanley J. Liebowitz and Stephen E. Margolis, and John R. Lott, Jr., this book covers key topics such as: • Why markets are efficient allocators • How markets foster economic growth • Property rights • How markets choose standards • Asymmetric Information • Whether firms abuse their power • Non-excludable goods • Monopolies The selections should be comprehended by undergraduate students who have had an introductory course in economics. This reader can also be used as a supplement for courses in intermediate microeconomics, industrial organization, business and government, law and economics, and public policy. (shrink)

My philosophical case study concerns textbook presentations of the theory of demand. Does this theory contain anything more than just a collection of tautologies? In order to determine its empirical content, it must be viewed holistically. But then, the theory implies false factual claims. We can avoid this result by embracing the theory’s normative character. The resulting consequences will be illuminated with the new autodetermination thesis recently proposed in the philosophy of physics by Oliver Timmer. Applying his ideas to the (...) theory of demand reveals that the statements of this discipline simultaneously concern both values and facts. (shrink)

The study of economics has been a going concern among philosophers for the better part of twenty years without very many people even noticing that economics has a metaphysics. Indeed, among economists the term ‘metaphysical’ is probably an epithet of opprobrium, employed to suggest that a claim is untestable or otherwise without cognitive significance. Philosophers of economics will admit to the existence of an epistemology of economics—the study of the nature, extent and justification of economic knowledge. But even this is (...) controversial among some economists. The notion that economics might have a metaphysics as well as an epistemology will be scoffed at by those economists doubtful about the enterprise of the philosophy of economics altogether. Nevertheless, philosophers of economics should have no trouble identifying a metaphysics in some of the theoretical commitments of economics. (shrink)

The allocation of healthcare resources takes place at two distinct levels. At the macroeconomic level, policymakers decide on budgets, staffing, cost‐effectiveness thresholds, clinical guidelines and insurance payments; at the microeconomic level, healthcare professionals decide on whom to treat, what the appropriate treatment is, how much time and effort should each patient receive and how urgent the need for care is. At both levels, there is a constant social need for just allocation. Policymakers are mostly guided by abstract principles of justice, (...) thinking in terms of groups of patients, epidemiological data, impersonal statistics and economic costs. On the other hand, healthcare professionals understand the need for justice at a more personal level, as they interact with patients and, in a sense, put theory into practice. Nurses hold a unique position in healthcare systems, as, traditionally, they are closer to patients than other health professionals. This means that they have a firsthand view of the effect that their decisions have on specific patients and, therefore, nurses tend to get more influenced by their personal feelings, values and beliefs at the microeconomic level. This presentation shall examine the gap between abstract macroeconomic and concrete microeconomic health resources allocation decisions, with a particular emphasis on the role of the nurse. (shrink)

What Daniel Hausman has called 'the simple criticism of economic theory' affirms that neoclassical microeconomic models include false statements, and therefore economists cannot rationally accept such models. Hausman considers, but rejects, the modal view of economic models as a defense of neoclassical theory against the simple criticism. I attempt to show that, on the contrary, the modal view can be used to defend neoclassical micro theory. The modal view distinguishes theoretical from applied economic models. Theoretical models afford true descriptions of (...) hypothetical economic agents, whereas applied models contain true or false statements about some real world situation. Relying on the modal view, I argue that the simple criticism is not well-founded, whether it concerns theoretical or applied models. (shrink)

What Daniel Hausman has called “the simple criticism of economic theory”1 is succinctly conveyed by the following passage: “We know full well not only that commodities are not infinitely divisible (which is only intended as a simplification), but businessmen do not always attempt to maximize profits and that the preferences of consumers are not always transitive. ‘Businessmen maximize profits’ and ‘a consumer’s preferences are transitive’ are fundamental economic ‘laws’. How can economists rationally accept a theory which is so full of (...) falsehoods?” (1981a, p. 382). In a recent paper Hausman considers several defenses of neoclassical microeconomics against the simple criticism. One of them is the modal view which Hausman initially characterizes in the, following admittedly vague and ambiguous manner: “Microeconomic general statements are modal (counter-factual) claims. (shrink)

Most philosophical accounts of the foundations of economics have assumed that economics is intended to be an empirical science concerned with human behaviour, though they have, of course, differed over the extent to which it has been or can be successful as such an enterprise. A prominent source of dissent against this consensus is Alexander Rosenberg. In his recent book, Rosenberg summarizes and completes his statement of a position that he has been developing for some time. He argues that although (...) economists evaluate one another's work according to shared and rigorous standards of adequacy, these standards are strictly internal, like those of mathematics, instead of being derived from discoveries about contingent relationships between theoretical statements and empirical facts. Economics, that is to say, is essentially conceptual rather than empirical inquiry. In the following discussion, I will provide grounds for resisting Rosenberg's conclusion. The point of this criticism, however, is not mainly negative. Most of the historical preoccupations of the philosophy of economics, like those of the philosophy of science in general, have been epistemological. Careful attention to Rosenberg's argument, however, redirects our attention to ontological questions about the objects of economics, and this redirection, I will maintain, is to be welcomed. I will argue that while the majority of philosophers of economics is correct, as against Rosenberg, in regarding economics as an empirical science, the conventional view as to the identity of its empirical objects should be substantially revised under the pressure of Rosenberg's criticisms. My critical analysis of the implications of Rosenberg's work for the ontological commitments of economics is intended to furnish one line of argument towards my own conception of the objects of economics. This conception, which is still preliminary in many respects, will be briefly sketched toward the end of the present paper; a detailed account of it is given in Ross and LaCasse. (shrink)

This paper examines the relationship between modern theories of microeconomics and macroeconomics and, more generally, it evaluates the prospects of theoretically reducing macroeconomics to microeconomics. Many economists have shown strong interest in providing "microfoundations" for macroeconomics and much of their work is germane to the issue of theoretical reduction. Especially relevant is the work that has been done on what is called The Problem of Aggregation. On some accounts, The Problem of Aggregation just is the problem of reducing (...) macroeconomics to microeconomics. I show how to separate these problems and then try to determine to what extent particular kinds of solutions to The Problem of Aggregation succeed in reducing macroeconomics to microeconomics as well. I argue that reduction is not possible by this means given the current state of microeconomics. I also describe how reduction may be possible by means of (dis)aggregation if microeconomics is supplemented in a certain way with the results of experimental research on individual economic agents. (shrink)

Whether economics warrants public trust depends on the extent to which assertions by economists can be deemed credible. Three examples from microeconomics are examined to assess how the discipline performs in this regard. First, a purely theoretical argument with broad conceptual implications: a quasi-evolutionary argument for rational choice based on the notion of money pumps. Second, a modelling-related claim with significant social implications: economists’ objection to minimum wages based on a simple supply-demand model. Third, methodological choices with implications for (...) all empirical work in microeconomics: the recent proclamation of a ‘credibility revolution’ in applied microeconomics through the use of experimental and quasi-experimental methods. These are assessed against proposed criteria for credibility: epistemic validity, epistemic reliability, and epistemic reflexivity. On the basis of the performance of the discipline against these criteria on the examples considered, I conclude that public distrust of economics and economists can be well-founded. (shrink)

By examining the development of economics in the 20th century, this book argues that the breakthroughs of post WWII general equilibrium theory and its rejection of utilitarianism and marginal productivity have been misunderstood. Mandler maintains that although earlier neoclassicism deserved criticism, current theory does not adequately address the problems the discarded concepts were designed to solve, and that intractable dilemmas therefore appear.

Mandler argues that post WWII general equilibrium theory, with its rejection of utilitariansim and marginal productivity, does not adequately address the problems earlier neoclassicism - however flawed it may have been - was designed to solve.

Most philosophical accounts of the foundations of economics have assumed that economics is intended to be an empirical science concerned with human behaviour, though they have, of course, differed over the extent to which it has been or can be successful as such an enterprise. A prominent source of dissent against this consensus is Alexander Rosenberg. In his recent book, Rosenberg summarizes and completes his statement of a position that he has been developing for some time. He argues that although (...) economists evaluate one another's work according to shared and rigorous standards of adequacy, these standards are strictly internal, like those of mathematics, instead of being derived from discoveries about contingent relationships between theoretical statements and empirical facts. Economics, that is to say, is essentially conceptual rather than empirical inquiry. In the following discussion, I will provide grounds for resisting Rosenberg's conclusion. The point of this criticism, however, is not mainly negative. Most of the historical preoccupations of the philosophy of economics, like those of the philosophy of science in general, have been epistemological. Careful attention to Rosenberg's argument, however, redirects our attention to ontological questions about the objects of economics, and this redirection, I will maintain, is to be welcomed. I will argue that while the majority of philosophers of economics is correct, as against Rosenberg, in regarding economics as an empirical science, the conventional view as to the identity of its empirical objects should be substantially revised under the pressure of Rosenberg's criticisms. My critical analysis of the implications of Rosenberg's work for the ontological commitments of economics is intended to furnish one line of argument towards my own conception of the objects of economics. This conception, which is still preliminary in many respects, will be briefly sketched toward the end of the present paper; a detailed account of it is given in Ross and LaCasse. (shrink)

Brief cases written as multiple choice questions can provide the basis for a classroom game based on business ethics. This teaching note describes the organization of such a game and provides five sample cases.

ABSTRACTIn this polemical book, Francesco Boldizzoni argues that economic history is so moribund as to require resurrection. He maintains that economic history has been converted into a subfield of economics and has embraced the antihistorical and a priori intellectual style of mainstream economics departments: it has, in effect, ceased to be a form of history. Boldizzoni hopes to force a recognition of contemporary economic history's bankruptcy and to show the way toward a revitalization.He criticizes both economic history as retrospective econometrics, (...) as in the work of Robert Fogel, and economic history as a branch of the new institutional economics, as in the work of Douglas North. Boldizzoni suggests that economic history should return to the sort of research and models that prevailed earlier in its own history—models based on induction from observed economic life rather than on deduction from the theories of contemporary microeconomics. He particularly singles out the work of Witold Kula, Moses Finley, and the Annales historians for emulation, but also praises the perspectives of economic sociology and economic anthropology.Boldizzoni's call for a return to a more inductive form of economic history is welcome, and his discussions of his heroes should remind us that economic history was once a vibrant and creative part of the history profession. But the book's advice is more useful for historians working on premodern than on modern economic life. The claim that self‐governing markets and interest‐maximizing individual actors are pure figments of economists' imaginations seems far less certain for recent than for premodern times. And his insistence that each society has its own distinct form of economic life that must be discovered inductively leaves unconceptualized the world‐spanning forces of capitalist development that increasingly shape societies everywhere. Boldizzoni's critique and his positive suggestions are certainly valuable, but he by no means supplies a sufficient recipe for economic history's resurrection as a vibrant field. (shrink)