The first part of the course is focused on a key foundational question in Economics. Rational choice theory, the core of the economic approach to human behavior, has become an influential approach in all of the social sciences. What makes individual actions rational? Rational choice theory offers a very simple answer: actions are rational if they reflect the maximizing of a consistent preference ordering. This theory, as it has been developed over many years, is now very detailed and complicated. One measure of the success of rational choice theory, perhaps, is for how long it has been able to withstand criticism. Recent developments, especially in behavioral economics, however, have succeeded in putting the standard model under pressure. In this course, we will present the theory of rational choice and also examine different objections to the standard model of rational choice. We shall consider the relationship between instrumental rationality, Homo Economicus and formal utility theory, including different conceptions of the notion of a preference and utility functions.
The course will provide a critical introduction to Game Theory. A game is any decision problem where the outcome depends on the actions of more than one agent, as well as perhaps on other facts about the world. Game Theory is the study of what rational agents do in such situations. Topics include extensive and normal form games; equilibrium concepts, such as the Nash equilibrium and backward induction; and analyses of specific games such as the Prisoner's Dilemma, the Stag Hunt, the Battle of the Sexes and pure coordination games. This course will not only introduce students to rational choice theory and game theory, but also discuss to what extent these mathematical theories explain social interactions.
The second part of the course will introduce students to the ways in which economic analysis has been applied to issues in social and political philosophy. The main topic in this part of the course is Social Choice Theory. We will examine both the formal aspects of social choice and their applications to democracy. The course will focus on May's theorem and Arrow's famous impossibility theorem, though we shall consider more general questions concerning voting paradoxes and strategic voting. Arguments as to whether Arrow's theorem is relevant to understanding real world democracy will be another important focus. In addition, we will discuss ethical issues that arise in Economics. Topics include (time permitting) welfare economics; interpersonal comparison of utilities; Harsanyi's Theorem; and the Coase Theorem.