Comparing conventional texts with Bowles and Foley: Coordination Conflict and Competition: A text in intermediate microeconomics.
Conventional text
Bowles & Foley
Examples addressed in the text
Consequences: what do students learn?
Complete contracts (and hence
market efficiency) are the
norm; incomplete contracts
(missing markets) the
exception
Individuals are self interested;
preferences are exogenous
Incomplete contracts are the norm; rents are
ubiquitous (people often receive payoffs
superior to their fallback), as are
coordination failures
Labor and credit markets, markets for variable
quality goods including information
… that market failures are the norm,
not the exception, economic actors are
not always price takers, principals often
have power over agents
Other regarding and ethical preferences are
common; people are heterogeneous,
versatile, and plastic
Increasing returns and other kinds of
positive feedbacks are common; multiple
equilibria are a result
Every exchange has both a distribution and
an allocation aspect; people divert
resources from productive uses to enhance
their distributional gains.
Experimental evidence for social preferences; wage
determination with fair wage norms
Comparative static analysis A
single stable equilibrium(the
answer is where the lines
cross)
The norm: multiple equilibria, some
unstable Dynamics are included including
instability and agent-based simulations of
the evolution of institutions and preferences
The few empirical
illustrations concern advanced
economies (often just the
U.S.)
Virtually no mention of the
insights of other disciplines
Each chapter begins with an extended
empirical (often historical) example; these
and other illustrations are drawn from the
entire world.
Frequent reference to the contributions of
psychology, history anthropology,
philosophy computer science and sociology
Economics is a deductive
axiomatic system
Economics is an empirical science subject
to testing and revision
Instability and coordination failures in financial
markets. Dynamic instability of the general
competitive equilibrium model; the evolution of
property rights and norms supporting market
exchange
Poverty in Indian farming, Henry Ford’s 5$ day; the
crop lien system in the ante bellum U.S .South; why
are crop shares 50-50? Herodotus on the “silent
trade” in Africa, the fall of the Berlin wall.
The exercise of power in credit and labor markets,
the fundamental constitutional questions raised by
political and economic philosophers from Hobbes to
Hayek
Experimental economics, development economics,
psychology and economics
Equilibrium requires all
households and firms to be in
equilibrium individually
Economic equilibrium can be achieved as a
statistical balance of dynamically changing
agents
Indeterminacy of competitive market distribution,
evolving patterns of play in complex games
Individuals adjust behavior to
their expectations of outcomes
Individuals adjust behavior to their
expectations of the behavior of other
participants
Financial market fragility, multiple equilibria,
evolutionary dynamics
…that social norms are important for
how an economy works; that economic
incentives may backfire.
…that history, ‘accidents’ and public
policy have long lasting impacts on
economic outcomes
…extreme inequality may be bad
economics: inability to agree on the
distribution of the gains from
cooperation often leads to inefficient
outcomes
.. to think dynamically (the answer is
not always “where the lines cross”)
path dependency and why history
matters; the power of agent based
models.
.. that the job of theory is to understand
the world; and they can see how the
models presented provide often
surprising insights in this regard.
…to be problem oriented rather than
tool driven (not a hammer in search of
a nail); let the question determine the
tools.
Economic propositions like all
scientific investigations, depend on the
interplay of theory and observation
The relation between microfoundations and macro outcomes is
complex and depends on the details of
aggregation
Functioning of the economy depends
on coordination, not on correctness of
forecasts
Constant or decreasing returns
to scale
Allocation and distribution are
separate spheres of analysis;
little attention to the latter.
Environmental and other coordination failures in the
absence of policies to “select” the right equilibrium;
instability of competition; the “weightless economy”
Evidence from experiments and historical examples
of bargaining failures (when the Coase theorem does
not apply); models of the arms race models (war of
attrition) and other bargaining failures.