Economics

Incentives economics (also known as economics of information and contract theory) studies interactions between economic agents in the presence of information asymmetries, such as sellers being better informed than buyers about product quality, or workers knowing better than employers the cost of exerting effort in a given task. Incentives economics is part of the core toolkit of modern graduate-level micro- and macroeconomics. This course introduces basic models featuring risk-sharing, private information and moral hazard, and covers a selection of applications among the following: workers compensation, corporate finance, equal pay communes, pricing, insurance, and higher education.

This course focuses on the relationship between violent conflict and economic development. The first half of the course examines the concepts of conflict and development, as well as some associated theories. The second part focuses on the nexus between conflict and development, the cultural dimensions of conflict and development, and concludes with some policy interventions that could be applied to reduce the risk of conflict and accelerate development. Reference is made to some case studies in Sub-Saharan Africa.

This course provides students with a thorough understanding of the functioning of financial markets. It covers topics such as the role of markets and institutions as providers of liquidity, the reasons for price volatility in financial markets, financial fragility, different types of market microstructure, and informational efficiency of financial markets.

In the spring of 2021 the German Institute for Economic Research (DIW) began paying 122 people 1200€ a month, tax free, no strings attached, for three years. The study, which will compare their fortunes to those of a much larger group who also put their hand up to receive the money but were not among the lucky few, aims to contribute empirical evidence to the debate over the merits of a basic income. We will compare the idea of a basic income to other types of government benefits in cash and in kind, and engage with arguments for and against these different benefit types. We will analyze in detail the claim that a basic income would eliminate relative poverty and reduce income inequality by studying income inequality in Germany today. We will look at any data published by the German experiment, and compare its design to that of a two-year trial carried out in Finland in 2017–18. In this way the course will serve as an introduction to research methods in social policy. By the end of the semester you will have gained an overview of tax–transfer systems and of their role in reducing income inequality, and you will be in a position to engage in an informed way in debate over the promise of a basic income.

This course introduces students to the field of behavioral economics. Students explore the reasons why people make irrational decisions; how people decide quickly; why people make mistakes in risky situations; their tendency to procrastination and short-termism; and how people can be affected by social influences, personality, mood, and emotions. Students explore how behavioral economics could help policy-makers to understand the people behind their policies, and facilitate the design of more effective policies.

This course examines the traditional economic theory which assumes that economic agents are fully rational with unlimited cognitive abilities and willpower and considers how individuals frequently and systematically make decisions in contradiction with these standard presumptions. Against the background of this finding the course discusses the shortcomings of traditional theories in economics and finance; how new concepts and theories in behavioral finance and behavioral economics address these shortcomings; how these new theories relate to the traditional theories; what are their strengths and limitations; and how the new behavioral presumptions in behavioral finance and economics change the predictions of classical economic theories. 

This course deals with the theory and practice of international macroeconomics and finance. The objective is to provide a theoretical framework to think about a wide variety of current issues in international finance: current account deficit, global imbalances, exchange rate determination, monetary policy in an open economy setting, and global financial crisis in 2008.

International Economics dominates the public debate. Has globalization helped or hurt the citizens of developed and emerging nations? What will be the consequences of Brexit for Great Britain and for the EU? Will there be a “trade war” between the United States and China, and what would its consequences be? Is the Euro-Dollar exchange rate too low or too high, and what should the European Central Bank do about it? Getting the answers right is important for policymakers, for economic experts in government and in the private sector, and also for any interested citizen. International Economics gives no ready-made answers to these questions, but it gives us important tools to think about them. The course aims to give students an overview of this framework and show them how it can help us to better understand the world we live in. The course discusses topics including the world economy since the Industrial Revolution; the theory of comparative advantage; the role of resources for trade; the effects of trade and migration on the income distribution; economies of scale and trade; exporters, multinational firms, and offshoring; trade policy; the balance of payments and the true meaning of trade deficits; exchange rates; international capital flows and international financial crises. In order to successfully follow this course, students should be familiar with basic microeconomic concepts such as budget sets, indifference curves, consumer and producer surplus, and marginal cost. They should also be at ease with simple mathematical tools such as derivatives and solution methods for linear equation systems.

This course covers the economic causes of environmental and resource problems. Economic theory is applied to environmental questions associated with resource exploitation; the problem of externalities and their management through various economic institutions, economic incentives and other instruments and policies. Means of analyzing the economic implications of environmental policy are also discussed as well as the valuation of environmental quality, assessment of environmental damages, and tools needed for the evaluation of projects such as cost-benefit analysis, and environmental impact assessments. Selected topics on international environmental issues will also be discussed.

This course introduces the theory of financial economics. The major topics of modern finance will be covered in a rigorous way but with no claim to generality. The course assumes standard knowledge of microeconomics, calculus, and probability theory. 

The first part of the course (Weeks 1-2) is a refresher on the basic economic concepts used throughout the course, such as expected utility, choice under uncertainty, or competitive equilibrium. The second part (Weeks 3-6) covers standard portfolio-choice problems and equilibrium asset-pricing models such as the mean-variance model, CARA-normal model and the CAPM. The third part (Week 7) studies a basic market microstructure model with asymmetric information (Glosten-Milgrom model).