Max U

Case:


If you’re unsure about the basic rules of differentiation, see this handout:

If you’re unsure about using the Lagrangian method, here’s a video overview:

Another good example is here:

Learning Objectives: Analyse alternative indifference curves. Solve a Lagrangian maximisation

Focus on diversity: Joan’s utility function is named after the famous economist Joan Robinson

Incentives matter

Lecture handout: Incentives matter*
Case: Incentive Design, December 2020
Activity: Soviet Planning, June 2022

Textbook Reading: Chapter 1 (Intro and Section 1.1; pp. 5-16)

The aim of this session is to fully understand the power of incentives, which are what economists define as the relationship between the benefits (the value we expect to gain) and the costs (the value we expect to give up) of a decision.

In this lecture we saw how conventional wisdom believes that seatbelts make you safer. But economic wisdom asks how they affect the benefits and costs of being in an accident. The lecture content on seatbelts comes from a great book called “Risk“, by UCL’s John Adams.

Regarding bicycle helmets, here is the New York Times article claiming that “Bicycle Helmets Put You At Risk”. In terms of academic studies, there is some interesting evidence. Schmidt et al (2019) find that wearing helmets reduces the cognitive control of riders, and reduces risk sensitivity. Hoye et al (2020) found that the cyclists under their observation in Denmark who wore helmets did not demonstrate signs of riskier behaviour than those who didn’t, but acknowledged that this may be because their risk compensation is inhibited by the fact that people who wear helmets are more likely to be safety conscious than those who don’t. Indeed given that helmet wearers are systematically more likely to be risk averse, evidence of no difference in actual risk taking may be considered evidence for risk compensation! Finally, the issue is serious and I have no intention of contradicting the claim that if you happen to be in an accident, it is good to have been wearing a helmet. Indeed Olivier and Creighton (2017) looked at 40 studies to conclude that for people who are involved in an accident, helmet use reduced the likelihood of serious and fatal head injuries. I am grateful to an ESCP GMP student for sending me these studies.

In this article, Tom Chivers provides a really good overview of how changing incentives can be more effective than trying to change people’s desires, and therefore technological fixes can be just as important social policy tools as attempting to fix the “root causes”.

Here is short quiz on the effect of taxation.

The economic reforms conducted in China that prompted their integration into the global economy is a perfect example of the power of incentives. For an overview of what happened, see:

The lecture also looked at how coordination might take place without centralised control. This clip of San Francisco in 1906 demonstrates a spontaneous order:

And here’s a video on the concept of “shared space”, and what happens when traffic lights are removed:

This is a great photo essay about “continuous sidewalks” and here’s a video about their usage in the Netherlands:

Learning Objectives: Understand and apply the “Economic Way of Thinking”.

Spotlight on sustainability: A discussion of cycling safety

Course map

This is a list of ~80 minute sessions that I regularly teach across various general management programmes. The links provide access to lecture slides, cases, classroom activities, and additional resources that I make available to students once they’ve taken the class. If you are an instructor you can contact me directly for board plans and further advice. 

As a professional educator one of my main concerns with the prevalence of digital content is the impact it has on a student’s ability to gather, synthesize, and critically engage with content. I try to ensure that all of my live sessions are unique and generate content that requires attention and consideration. For this reason I strongly encourage students to take notes, and debrief with group members, instead of relying on the provision of solutions, punchlines, or board plans at some future date. Part of my responsibility as an instructor is to ensure that you do not finish the course missing any important information. But your responsibility as a student is to be in charge of absorbing what happens in the classroom.

Each session contains learning objectives as well as an assessment of cutting edge theory (c); a focus on diversity (d); and spotlight on sustainability (s). Note that Marginal Revolution University have a series on women economists.

Microeconomics I

  1. Incentives matter (s)
  2. Value creation (c) (d) (s)
  3. Max U (d)
  4. Understanding cost (d)
  5. Cost curves (c)
  6. Economies of scale (s)
  7. Market equilibrium (d)
  8. Auctions (c) (d) (s)
  9. Markets in everything (d)
  10. Price discrimination (c) (d)

Microeconomics II

  1. Competition and the market process
  2. CC Simulation (s)
  3. Platforms (c) (s)
  4. Game theory
  5. Oligopoly
  6. Adverse selection (c) (d) (s)
  7. Signalling (d)
  8. Capital theory (s)
  9. Internal markets
  10. Prediction markets
  11. Corporate entrepreneurship (d)
  12. Market-Based Management (R)

Macroeconomics I

  1. Growth theory (c) (d) (s)
  2. Public finance  (d)
  3. Money and central banking
  4. Central banks and digital transformation (c)
  5. Monetary policy (c) (d) (s)
  6. Fiscal policy (d)
  7. Macro Policy Workshop (d)
  8. Wiggle room (c)
  9. Scenarios

Macroeconomics II

  1. International Trade (d)
  2. International economics/ Josko Joras
  3. Banking crises (c)
  4. Currency crises
  5. Debt crises (d)
  6. Foreign Investment (d)
  7. Behavioural economics
  8. Global Prosperity (d)
  9. Inequality (c) (d)
  10. Stagnation (c) (d)
  11. Progress

An Introduction to Game Theory

“Game Theory”, or the science of strategy, is a big topic that leads in many fascinating directions. This post will provide a basic understanding of what Game Theory is, and how it can be utilised in management situations. In addition to providing my own course material, I have also attempted to tie into some of the amazing resources that already exist.

My advice for you is to watch this video, and then choose one (or more) of the additional readings.

 

Lecture handout: Game Theory*

I like to follow the lecture on Game Theory with an interactive session on Oligopoly.

  • I also utilise the following at the start and end of the Game Theory lecture: Oligopoly Game 42 and “Cheating for a £20”.

Additional readings

Here are some recommendations, depending on your level of interest and time constraints:

But the Game Theorist’s “bible” is Thinking Strategically” by Dixit, A., and Nalebuff, B (Norton, 1993). This is the one book you need to read, re-read, and master.

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Finally, it is great fun to apply Game Theory to popular culture. See Michael Statsny’s discussion of game theory in movies, and a collection of popular cultural references. Here are some of my favourite discussion questions:

I also like these two classic clips from Goldenballs:


Learning Objectives: