Monday, March 14, 2016

If I was to teach Econ 101 ...

I had today off, so I started to write up a draft outline of what a set of lecture notes for teaching an introductory economics course would look like in the counterfactual world where the information transfer framework takes over all of economics.

I. Introductory history
Adam Smith**
Diagrammatic approaches**, marginalism** and Alfred Marshall**

II. Principles of economics and supply and demand
Principles of economics
Basics of supply and demand curves (e.g. like these notes [pdf]**)

III. Opportunity sets and demand curves
Demand curves from state space properties (Becker, monkeys)

IV. Production possibilities and supply curves
Production possibilities (trade-offs, diversity)
Supply curves and production possibilities

V. Price mechanism
Hayek on the price mechanism**
The price system as a communication channel (utility, Stiglitz)

VI. Allocation and information
Economic allocation problem
Information theory 101 and information equilibrium (Fisher, Fielitz and Borchardt**)
Information, knowledge and the EMH

VII. Information equilibrium
update 23 Apr 2017Overview of information equilibrium concepts
General and partial equilibrium solutions to IE condition (taken from the paper)
update 23 Apr 2017Relationship of general and partial equilibrium (scope conditions)
Power laws
Time series

VIII. Partial information equilibrium
Interpreting supply and demand curves
Minimum wage

IX. Non-ideal information transfer
Physical systems
Aside: information transfer traffic model (traffic jams)
Supply and demand

X. Entropy
Entropy and the Walrasian auctioneer
Entropy and supply and demand
Price shocks and non-ideal information transfer
Wicksellian roundabout
update 23 Apr 2017Ensembles and partition functions
update 23 Apr 2017Example: ensemble of labor markets
Economic potentials/statistical economics (herehere)

XI. Macroeconomics, part 1
AD-AS model
IS-LM (low inflation, generally)
"Quantity theory of labor"
Labor and capital model
update 22 Jan 2017: Dynamic employment equilibrium
update 23 Apr 2017: More dynamic equilibrium

XII. Macroeconomics, part 2
Babysitting co-op
Macro stickiness versus micro stickiness (Calvo as entropic force)
Emergent representative agent

XIII. Macroeconomics, part 3
DSGE form
Interest rate dynamics (and this and this)
Employment shocks and nominal shocks
(Changing) Phillips curve (here, here)

XIV. Growth
Price revolution
Issues with extrapolating growth to the past (here, here)
Solow model (herehere and here)

XV. Money
As information mediation
Paradox of fiat money (solved)

XVI. Utility
Utility maximization versus information equilibrium
Utility maximization, matching and information equilibrium

XVII. Microeconomics
Asset pricing equation (Cochrane)
Stochastic processes and information equilibrium
Stock value versus book value

XVIII. Behavioral economics
Prediction markets
Excess volatility, "momentum", yield curve slope
Value premium
Endowment effect


There is also a presentation giving a general overview of information equilibrium here.


Updated 22 January 2017 and 23 April 2017 (see above).


** Reference material -- links aren't to this blog (all other links are).


  1. Nice! I asked you about this once and you gave a brief reply, but this a much more complete answer.

    " the counterfactual world where the information transfer framework takes over all of economics."

    Lol! Nice positive attitude.

    BTW, I didn't realize the sad story of Boltzmann's demise. It seems weird he had peers telling him they didn't believe in atoms... I figured the chemists had that pretty well nailed down by the time he started his career.

    1. Almost as depressing as Georg Cantor's life. Or Goedel's.

  2. BTW, Brian Romanchuk did another post with you figuring in the body of it.

    1. If it is this post:

      then it still misses the point. He is talking about sampling error. That does affect all finite difference models, but isn't what I am talking about.

      I was talking about the first finite difference not nailing down the curvature without auxiliary assumptions (the graphic is here). This only affects models of the type that specify dynamics via a single finite difference (such as G&L's SIM). You could specify a second derivative -- which would push the assumed implicit time scale to a higher order derivative.

      It's not the discreteness of those red curves in the graphic (sampling error), but the fact that an infinite number of them go through the two end points (therefore the blue curve is an implicit assumption).

    2. Yep, that's the one. I didn't realize the "discreteness" (in time?) of your red curves was on purpose.

    3. Yes, in time. And yes, on purpose.

  3. BTW, when I asked you before about this (the topic of your post here) I think you mentioned Irving Fisher and Gary Becker... I ran that past Nick Rowe and he dismissed that out of hand, sounding a little annoyed... "No! Just a normal intro text... Mankiw or Krugman... doesn't matter!" (paraphrasing) :D

    I asked John Handley what he read to get up to speed... he just said papers and slides he found online: no books.

    1. If I was to try and learn Econ, I'd start with an intro text. I did eventually read both Mankiw and Krugman.

      I started with Romer's grad text though. I figured Econ grad school admitted students that weren't Econ undergrads (e.g. Noah Smith was a physics undergrad) so it would be fine to start at the grad school level.

  4. Say, maybe what you need to get your econ course off to a good start is a little name recognition. Do you suppose "Trump University" might be interested? ;)

    I bet you could garner 100% student satisfaction.