Subjects

This course introduces students to the fundamental principles of economic reasoning and problem-solving, with a special emphasis on statistical and probabilistic thinking. Complementing the content covered in the Principles of Political Economy sequence, we will explore rationalist approaches to decision-making, strategic interactions, and complex social phenomena.

Students will develop critical thinking and analytical skills needed to apply economic concepts to real-world issues, while also gaining a deeper understanding of how statistical and probabilistic reasoning can inform economic analysis. The course covers topics such as game theory, Bayesian reasoning, and mechanism design, while also recognizing the bounds of human rationality.

By emphasizing statistical and probabilistic reasoning alongside traditional economic concepts, this course aims to equip students with a toolkit for tackling complex problems and making sound judgments in the face of uncertainty, while also fostering an appreciation for the interdisciplinary nature of modern economic thinking.

Last update: Špecián Petr, Ing., Ph.D. (13.09.2024)

Understand the core principles of economic reasoning, including rational choice theory, strategic interactions, and market dynamics, with a focus on statistical and probabilistic thinking.
Apply game theoretic concepts to understand and analyze human behavior in various spheres of life.
Use Bayesian reasoning to update beliefs in light of new evidence and make sound decisions in the face of uncertainty.
Explore the role of institutions, incentives, and information in shaping human behavior and design mechanisms to align individual and social objectives.
Develop critical thinking, logical reasoning, and evidence-based argumentation skills, and apply them to real-world problems, while appreciating the interdisciplinary nature of modern economic thinking.

Last update: Špecián Petr, Ing., Ph.D. (17.06.2024)

Final Exam (40%): A comprehensive exam with multiple choice and open-ended questions, testing students' understanding of key concepts, theories, and applications covered throughout the course.
Seminar Participation (20%): Active contribution to seminar discussions, including asking questions, offering insights, responding to peers' comments, and engaging in critical analysis of the readings.
Economic Fallacy: Expose and Refute (15%): Students will identify a common economic fallacy, misconception, or flawed argument in popular media or public discourse. They will write a short essay exposing the fallacy, explaining its logical flaws, and refuting it using the economic reasoning tools and concepts learned in the course.
Institutional Reform Group Project (25%): In small groups, students will identify a real-world institutional or organizational problem related to the course themes (e.g., collective action, information asymmetry, misaligned incentives). They will analyze the problem using the frameworks and tools learned in the course and propose a mechanism design solution to address it. The project will include a written report and a group presentation.

Last update: Špecián Petr, Ing., Ph.D. (17.06.2024)

Introduction

What is Economic Reasoning?
- Readings: Mankiw, "Principles of Economics, Ch. 1 (excerpt); Rodrik, “Economics Rules” (excerpt)

Chapter 1: The (Neo)Rationalist Approach

Rational Choice Theory: Preferences, Maximizing, Equilibria
- Becker, "The Economic Approach to Human Behavior” (excerpt); Yudkowsky, "Rationality: From AI to Zombies" (excerpt)
Information Economics: Information, Knowledge, Rational Ignorance
- Readings: Stigler, "The Economics of Information" (excerpt); Caplan "The Myth of the Rational Voter" (excerpt)
Rationality's Bounds: The Quirks and Flaws of Reason
- Readings: Kahneman, "Thinking, Fast and Slow" (excerpt); Thaler, "Misbehaving: The Making of Behavioral Economics" (excerpt)

Chapter 2: Strategic Thinking

The Game of Life: Thinking Strategically
- Readings: Dixit and Nalebuff, "Thinking Strategically" (excerpt); Osborne, "An Introduction to Game Theory" (excerpt)
Static Games, Dynamic Games, and Their Equilibria: Understanding Strategic Interactions
- Readings: Dixit and Skeath, "Games of Strategy" (excerpt); Schelling, "The Strategy of Conflict" (excerpt)
Cooperation, Collective Action, and Social Dilemmas
- Readings: Ostrom, "Governing the Commons" (excerpt); Bowles and Gintis, "A Cooperative Species" (excerpt)

Chapter 3: Statistical & Probabilistic Reasoning

Decision-Making under Uncertainty
- Readings: Taleb, "Fooled by Randomness" (excerpt); Page, "Model Thinker" (excerpt).
Updating Beliefs: Bayes’ Rule and Its Applications
- Readings: Gigerenzer, "Risk Savvy" (excerpt); Chivers, "Everything is Predictable" (excerpt)
Forecasting: Predicting the Future with Probabilistic Models
- Readings: Tetlock and Gardner, "Superforecasting” (excerpt); Silver, "The Signal and the Noise" (excerpt)

Chapter 4: Thinking through the Lens of Institutions

Mechanism Design: Designing Rules for Strategic Interactions
- Readings: Roth, "Who Gets What—and Why: The New Economics of Matchmaking and Market Design" (excerpt); Weyl and Posner, "Radical Markets" (excerpt)
Prediction Markets: Harnessing the Wisdom of Crowds
- Readings: Alexander, "Prediction Markets FAQ"; Landemore, "Democratic Reason” (excerpt)

Last update: Špecián Petr, Ing., Ph.D. (13.09.2024)