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Course Description

Summary

What accounts for the divergence of wealth and poverty of nations and people across the world? Aspects of commodity exchange that are non-contractual and involve externalities influence individual and collective behavior and generate problems of allocation and distribution. This course is for students who want to gain an in-depth understanding of how microeconomic interactions produce inequalities and economic inefficiencies, and, in turn, how the design of institutions can help overcome these problems. We will employ a game theoretic approach to explore topics such as how labor power influences wage contracts, why capitalist firms are more prevalent than owner operated cooperatives, and why lending contracts result in wealth inequalities. We will also examine the institutions of capitalism, particularly the evolution of private property in response to historical circumstances, the distribution of surplus in competitive markets, and the limitations of the Fundamental welfare theorems. Finally, we will consider how incomplete contracts give rise to a well-defined political structure. A strong math background will be helpful but is not required if students are willing to put in the work to learn along the way.