ECO 507: Applied Microeconomic Theory
Spring 2013
Professor Tae-Hee Jo
Contact
Information
Office: Classroom Bd. B230
Economics & Finance Department
Buffalo State College
Class Hour
Wednesday 6:00-8:40 PM, CLAS B108
Office Hour
MWF 11:00-11:50, or by appointment
Course
Description
This course examines contending approaches to microeconomic theories and their
applications focusing on the issues including, but not limited to, consumer behavior,
business enterprises’ strategic decision making process, consequences of business activities (e.g. cycles, growth, and welfare), and market governance/regulation. Multiple analytical techniques (mathematical, descriptive, graphical, narrative, historical,
etc) will be employed in order to explain the nature and scope of microeconomic
problems. Students are expected to understand and critically examine theoretical frameworks and arguments so that they can develop analytical skills to deal
with real world problems. Competing explanations and policy suggestions will be
considered—especially, heterodox ideas and approaches are stressed. Throughout
the course students are frequently asked to think about following principal questions: 1) Is the law of demand-supply relevant to the account of real world economic
activities? 2) Are individual consumers rational and sovereign? 3) Is making greater
business profits good for the public? 4) Does the state always serve public interests?
Prerequisites
Although it is not required, a course in intermediate or higher level microeconomics
is highly recommended before taking this course.
Recommended
Textbooks
Phone: (716) 878-6933
E-mail: [email protected]
Web: http://taeheejo.wordpress.com
• Any intermediate or higher-level microeconomics textbooks may be useful to
understand mainstream-neoclassical microeconomic theory.
• Alfred S. Eichner. 1976. The Megacorp and Oligopoly. Cambridge, UK: Cambridge University Press.
• Frederic S. Lee. 1998. Post Keynesian Price Theory. Cambridge, UK: Cambridge
University Press
• Thorstein Veblen. 1899. The Theory of the Leisure Class. New York and London:
Macmillan. Free on-line version: http://cas.umkc.edu/econ/Institutional/
Readings/Veblen/TLC/tlc.htm
• Thorstein Veblen. 1904. The Theory of Business Enterprise. New York: Charles
Scribner’s Sons. Free on-line verion: http://cas.umkc.edu/econ/Institutional/
Readings/Veblen/TBE/tbe.htm
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Grading
Policy
This course will be graded on the college’s approved A-E letter grading scale. The
final grade will be based on the following assignments.1
• Class participation (attendance and discussion): 10%
• Mid-term exam: 30%. March 6.2
• Final exam: 30%. May 15.
• Term paper: 30%. Proposal due on March 13. Paper due on May 8, 6:00 PM.
On-line submission through “Turnitin”3
Academic
Dishonesty
Policy
Students who engage in plagiarism on the term paper and cheating on examinations, multiple submission of the same work, unauthorized collaboration, falsification and/or any other violation of academic integrity will receive an “E” grade in
the course. Read carefully the official policy on academic misconduct at http:
//www.buffalostate.edu/academicaffairs/x607.xml
Course Schedule, Outline, and Reading Lists
Notes on reading materials
Angel: Material placed on Angel
Res: library reserve. Students can borrow reserved books from the library
circulation desk.
Web: search BSC on-line journal database:
http://library.buffalostate.edu/research/articles.php
Online: free on-line materials.
? required reading
If anyone has a problem in getting reading materials, contact the instructor.
Week 1
January 30
Economics: History and Methodology
• History of Economic Thought
• What is economics? Optimal allocation vs. Social Provisioning Process
• Orthodoxy vs. Heterodoxy
• Values, Ideology, Philosophy, and Methodology
• Theory, Models, and Reality
Readings
1. ? Lee, F. S. 2008. Heterodox Economics. In The Palgrave Dictionary of
Economics. Palgrave. [Angel]
2. ? Henry, J. F. 2009. The Illusion of the Epoch: Neoclassical Economics as a
Case Study. Studi e Note di Economia, 14(1): 27-44. [http://www.mps.it/
1
Note that at the graduate level, grades of C or higher are applied toward credit requirements
for a master’s degree. Grades of C- or lower are not used to satisfy degree requirements. Grades of
C- or lower may be repeated. Graduate students are required to maintain a minimum GPA of 3.0
in all graduate coursework.
2
Problem sets will be distributed prior to the exams.
3
Guidelines will be posted separately.
2
NR/rdonlyres/273E7DAC-1017-4BFF-BDF8-83FB5B288B17/35542/2744Henry.
pdf]
3. ? Jo, T.-H. 2011. “Social Provisioning Process and Socio-Economic Modeling,”
The American Journal of Economics and Sociology, 70(5): 1094-1116. [web]
4. ? Jo, T.-H., Lynne Chester, and Mary C. King. 2012. Beyond marketfundamentalist economics: An agenda for heterodox economics to change the
dominant narrative. On the Horizon, 20(3): 155–163 [web]
5. Polanyi, K. 1968. The economy as instituted process. In G. Dalton (ed).,
Primitive, Archaic and Modern Economies: Essays of Karl Polanyi, pp. 139174, Garden City: Doubleday and Co. [Angel]
6. Lawson, T. 2003. Reorienting Economics. London: Routledge. Ch. 1. [Angel]
7. Veblen, T. 1898. Why economics is not an evolutionary science. Quarterly
Journal of Economics 12(4), 379-397. [web]
Week 2
Feb. 6
Microeconomics: Overview
• Neoclassical and Heterodox Microeconomics
• Microfoundations and Macrofoundations
• Agents, Structures, and Causal Mechanisms
• Surplus Approach
Readings
1. ? Lee, F. S. 2010. A heterodox teaching of neoclassical microeconomic theory.
International Journal of Economics and Education. 1(3): 203-235 [Angel]
2. ? Lee, F. S. and Keen, S. 2004. The Incoherent Emperor: A Heterodox
Critique of Neoclassical Microeconomic Theory. Review of Social Economics
62(2): 169-199. [web]
3. ? Lee, F. S. and Jo, T.-H. 2011. Social Surplus Approach and Heterodox
Economics. Journal of Economic Issues, 45(4): 857-875 [web]
4. Jo. T.-H. and F. S. Lee. 2013. In Defense of Post Keynesian and Heterodox
Microfoundations. unpublished working paper
5. Lee, F. S. 2011. Heterodox Microeconomics and the Foundation of Heterodox Macroeconomics. MPRA Working Paper 30491. [http://mpra.ub.
uni-muenchen.de/30491]
6. Veblen, T. 1909. The Limitations of Marginal Utility. Journal of Political
Economy 17(9), 620-636. [web]
7. Rosenberg, A. 2001. The metaphysics of microeconomics. In The economic
world view: Studies in the Ontology of economics, edited by Uskali Mäki, 174188. Cambridge, UK: Cambridge University Press. [Angel]
Week 3
Feb. 13
Theories of The Business Enterprise
• Neoclassical theory of the firm
• Heterodox theories of the business enterprise
Readings
3
1. ? Jo, T.-H. 2011. “Heterodox Critiques of Corporate Social Responsibility,”
MPRA Working Paper 35367 [http://mpra.ub.uni-muenchen.de/35367/]
2. ? Veblen. 1904. Theory of Business Enterprise; Chs. 1, 2, and 3. [online: see
the link above]
3. ? Eichner, A.S. 1976. The Megacorp and Oligopoly. Cambridge: Cambridge
University Press; chs.1 and 2. [Angel]
4. Coase, R.H. 1937. The Nature of the Firm. Economica 4(16): 386-405. [web]
5. Granovetter, M. 1995. Business Groups. In Handbook of Economic Sociology,
edited by N. Smelser and R. Swedberg. Princeton: Princeton University Press.
[Angel]
Week 4
Feb. 20
Production and Costs I: Orthodoxy
• Neoclassical theory of production and costs
• Duality: Profit maximization and Cost minimization
• Law of Supply
Readings
1. ? See any intermediate/advance microeconomics textbook
Week 5
Feb. 27
Production and Costs II: Heterodoxy
• Business Enterprise in the monetary production economy
• Cost accounting
Readings
1. ? Lee, F.S and Jo, T-H.. 2010. Heterodox Production and Cost Theory of
the Business Enterprise. MPRA Working paper 27635. [http://mpra.ub.
uni-muenchen.de/27635]
2. ? Lee, F.S. 1986. Post Keynesian View of Average Direct Costs: A Critical Evaluation of the Theory and the Empirical Evidence. Journal of Post
Keynesian Economics 8(3): 400-424. [web]
3. ? Eichner, A.S. 1976. The Megacorp and Oligopoly, Ch.2. The Nature of
Megacorp. Cambridge University Press. [Angel]
4. Stevenson, R. E. 1987. Institutional Economics and the Theory of Production.
Journal of Economic Issues, 21.4: 1471-1493. [web]
Week 6
March 6
Midterm Exam
Week 7
Mar. 13
Consumer Behavior and Demand I: Orthodoxy
• Homo Economicus and rational individuals
• Utility maximization
• Market demand
• Law of Demand
Readings
4
1. ? See any intermediate/advance neoclassical textbook.
Week 8
Mar. 20
Consumer Behavior and Demand II: Heterodoxy
• Homo Socialis and embedded individuals
• Heterodox Principles of consumption behavior
• Social formation of preference and needs
• Consumerism
Readings
1. ? Veblen. T. 1898. The Theory of Leisure Class; ch.4 (Conspicuous consumption) [online]
2. ? Trigg, Andrew. 2001. “Veblen, Bourdieu, and Conspicuous Consumption.”
Journal of Economic Issues, 35 (1): 99-115. [web]
3. ? Todorova, Zdravka. 2009. “Households in a Pecuniary Culture: Looking through the Prism of the Veblenian Dichotomy”, Ch. 4 of Money and
Households in a Capitalist Economy, Edward Elgar (p. 87 – 116). [http://
heterodoxnews.com/micro/Readings_files/money%26households-CC.pdf]
4. Granovetter, M. 1985. Economic Action and Social Structure: The Problem
of Embeddedness. American Journal of Sociology 91(November): 481-510.
[Angel]
5. Migone, A. 2007. Consumerism: Patterns of Consumption in Contemporary
Capitalism. Review of Radical Political Economy 39(2): 173-200. [Angel]
6. Drakopoulos, S. A. 1994. Hierarchical Choice in Economics. Journal of Economic Surveys 8(2): 133-153. [Angel]
Week 9
Mar. 27
Spring Break
Week 10
Apr. 3
Pricing and Price
• Price and Pricing
• Scarcity and Reproducing
• Pricing mechanisms
Readings
1. Lee, F.S. 1998. Post Keynesian Price Theory. Cambridge, UK: Cambridge
University Press. [Res]
2. ? Lee, F. S. 1996. Pricing, the Pricing Model and Post-Keynesian Price Theory. Review of Political Economy 8 (January): 87 - 99. [web]
3. ? Melmies, J. 2010. New-Keynesians Versus Post-Keynesians on the Theory
of Prices. Journal of Post Keynesian Economics, 32(3): 445-465. [Angel]
4. Eichner, A. 1976. The Megacorp and Oligopoly. Cambridge: Cambridge University Press; ch. 3. [Angel]
Week 11
Apr. 10
No Class (conference)
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Week 12
Apr. 17
Investment and Financing
• Strategic business decisions
• Connections: Pricing, Price, Financing, and Investment
Readings
1. ? Jo, T.-H. 2012. “Financing Investment under Fundamental Uncertainty and
Instability: A Heterodox Microeconomic View,” MPRA Working Paper 39582
[http://mpra.ub.uni-muenchen.de/39582]
2. ? Moss, S. 1981. An Economic Theory of Business Strategy. New York: John
Wiley and Sons; ch. 3. [Angel]
3. ? Harcourt, G. C. and P. Kenyon. 1976. Pricing and the Investment Decisions.
Kyklos: 449-477. [web]
Week 13
Apr. 24
Markets and Industry
• Market competition: perfect competition, oligopoly, and monopoly
• Self-adjusting market, Market Failure, and Government failure
• Market governance, Market regulation, and Industrial policy
Readings
1. ? Jo, T.-H. 2013. Saving Private Business Enterprises: A Heterodox Microeconomic Analysis of Market Governance and Market Regulation. American
Journal of Economics and Sociology, 72(2): April [web]
2. ? Jo, T.-H. 2013. Uncertainty, Instability, and the Control of Markets. Unpublished working paper. [Angel]
3. ? Lee, F. S. 2011. Old controversy revisited: pricing, market structure, and
competition. MPRA Working Paper 30490. [http://mpra.ub.uni-muenchen.
de/30490]
4. ? Fligstein, N. 1996. Markets as Politics: A Political-Cultural Approach to
Market Institutions. American Sociological Review 61: 656-673. [jstor]
5. Howe, M. 1972-73. A Study of Trade Association Price Fixing. Journal of
Industrial Economics 21: 236-256. [web]
6. Groenewegen, J. 2004. Who Should Control The Firm? Insights From New
and Original Institutional Economics. Journal of Economic Issues, vol. 38,
353-361. [web]
Week 14
May 1
Microfoundations of Macroeconomics
• The principle of effective demand
• Business Enterprise, Business Cycles, and Economic Growth
• Stagnation Thesis
• Financial Instability Hypothesis
Readings
1. ? Lee, F. S. 2011. Heterodox Microeconomics and the Foundation of Heterodox Macroeconomics. MPRA Working Paper 30491. [http://mpra.ub.
uni-muenchen.de/30491].
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2. ? Jo, T. 2011. A Heterodox Microfoundation of Business Cycles. In Heterodox
Analyses of Financial Crisis and Reform, edited by J. Leclaire, T. Jo, and J.
Knodell. Edward Elgar. [Angle]
3. ? Eichner, A. 1976. The Megacorp and Oligopoly. Cambridge: Cambridge
University Press. Ch. 6. Micro and macro. [Angel]
4. ? Minsky, H. 1992. The Financial Instability Hypothesis. Working paper #72,
The Jerome Levy Economic Institute. [Angel]
Week 15
May 8
Social Welfare and Social Control
• Welfare and Pareto Efficiency
• Surplus Approach
• Social control and social policy
Readings
1. ? Jo, T.-H. 2012. Welfare Economics. In Elgar Companion to Post Keynesian
Economics, edited by J.E. King. 2nd edition, pp. 593–598. Edward Elgar.
[Angel]
2. ? Henry, J. F. 2009. Welfare in Historic Context: Protection of People against
the Market, or Protection of the Market against People? Paper presented at
the AFIT Conference, April. [Angel]
3. Veblen. 1904. The Theory of Business Enterprise. Ch. 7. [online]
4. Eichner, A. 1976. The Megacorp and Oligopoly. Cambridge: Cambridge University Press; ch. 8. [Angel]
Week 16
May 15
Final Exam.
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