AECO 13A00 - Introduction to Economic reasoning: principles of Economics

The Economics course at the undergraduate level is an introduction to the main contemporaneous issues in economics. Its objectives are: to introduce the core concepts and debates (both theoretical and empirical) that structure the discipline; to introduce quantitative methods for students who want to deepen their knowledge of economics; and to allow for a first specialization in some topics. This course enables every student, even those who do not want to pursue economic studies, to have a good understanding and intuition of economic mechanisms and a good knowledge of historical facts, political-economy debates, and economic institutions. We will show that economic reasoning enables to better understand the current debates and challenges facing our societies, including in their political and social dimension (e.g., globalization, development, inequalities, unemployment, crises, finance...). The economics course also offers a rigorous theoretical toolbox for the analysis of recent empirical research. The lectures and tutorials are consistent with the “CORE Economics” teaching project. Students are invited to register on the eBook platform that displays all the pedagogical material in an interactive form. The Moodle website of this course contains all the material, pedagogical tools and problem sets of the tutorials. The goal is to provide students with the empirical and conceptual knowledge that is necessary to understand the economy. We focus in particular on six important questions: 1. What are the main issues in economics? • How can we explain the wealth and poverty of nations and individuals? • What are the sources of economic growth and innovation? • How can we explain the persistence of unemployment, inflation, recessions and financial crises? 2. What are the foundations of individual choices and social interactions? 3. How can public policies foster social progress? • Why does unemployment persist and why do inflation and deflation matter? • What are the best policies to stimulate growth? • Which policies enable to fight poverty and inequalities? • Can fiscal and monetary policies stabilize the economy? • What should be the ethical criteria in public policy decisions? 4. Who are the main economic agents? • Individuals: how do selfish, altruistic and ethical aspects of human behavior affect the economy? How does this affect their decisions as workers, wage earners, consumers and savers? • Firms: what shapes the organization and behavior of firms? What is the role of competition? • Institutions: how do institutions work? How do they contribute to economic development? 5. What can markets do? (and what are they not able to do?) • How do societies coordinate their economic activities? • How do markets work, what are the sources of market failures? • What is the role of the government in regulating markets and redistributing resources? • Why are labor and credit markets different from other markets of goods and services? • What are the costs and benefits of the global circulation of goods, capital and individuals? 6. How do economists produce knowledge? • Is economics a science, and what does that mean? • History of economic thought: what are the main debates, why do some disagreements persist? • How are economic theories assessed?

Mauro NAPOLETANO,Christian VEZIL,Francesco TONI,Riccardo SOMMARIVA

Cours magistral et conférences

English

Spring 2024-2025

The final exam (3 hours, common to all students) accounts for 1/3 of the final grade; a continuous assessment accounts for the remaining 2/3.

The different pedagogical resources of the lectures (slides, videos of the lectures) and of the tutorials (problem sets, readings) will be accessible on Moodle in September. The video of the lecture will be online two days after the lecture. It will be divided into chapters a few days later. The lectures and the problem sets that will be corrected during the tutorials are all based on this online textbook. It is mandatory to read the relevant CORE sections before each lecture. The units/sections for each lecture are mentioned in the outline below. All the questions of the problem sets come from CORE so it is necessary to read the relevant sections to be able to complete the problem sets. OUTLINE OF THE LECTURES Session / Readings from CORE 1 Introduction to economics: Thinking like an economist What is economics? What are the big issues in economics: macro stylized facts (growth), and how do economists tackle microeconomic issues (causality) Unit 1 (Except 1.8; 1.10 Concepts : Capitalism and markets; growth, technology and and 1.11) innovation; inequalities and the State No tutorial 2 Long-term growth The capitalist revolution. Innovation and technological progress. Why are some countries richer than others? Institutions 1.10 and Unit 2 Concepts : economic growth, institutions and production function Tutorial: session 1 3 Resources and economic decisions Concepts : indifference curves; choice under constraints; income and substitution effects Unit 3 Tutorial: session 2 4 Social interactions and institutions Concepts : social dilemma and game theory; social preferences: Unit 4 altruism and reciprocity; Nash equilibrium (e.g. climate change); (Exc 4.6 to 4.12) Pareto efficiency; efficiency and equity; institution and surplus Unit 5 distribution; inequalities (Exc 5.5 to 5.11) Tutorial: session 3 5 Firms, consumers and markets Firms: structure and organization; employment contract and incentives; model of the wage curve. Example: the role of unions Unit 6 (Exc 6.6 to 6.10) Firms and consumers: price setting (cost function, profit Unit 7 maximization); gains from trade and surplus; price elasticity (Exc 7.4 to 7.12) Unit 8 Competitive markets: supply and demand curves; price setting (Exc 8.6 to 8.10) and market entry; gains from trade and market efficiency Tutorial: sessions 4 and 5 6 Market failures Unit 11 Concepts : disequilibrium and rationing (e.g. financial and labor markets); market failures; public economics and the role of the public sector. Example: economics of innovation (Exc 11.1 to 11.4, 11.9, 11.10) Unit 12 (Exc 12.6 to 12.7) Tutorial: session 5 7 Financial market and labor market Financial market : lending, borrowing, investment; financial assets; banking system; market failures money and Unit 10 (Exc 10.5 to 10.12) Labor market: market failures; job creations and destructions; Beveridge curve; institutions and performance of the labor market 14.3 Unit 16 (Exc 16.4 to 16.8) Tutorial: session 6 8 Economic fluctuations, unemployment and fiscal policy Unit 13 Concepts : origins of economic fluctuations; aggregate demand (Exc 13.5 to 13.7) and 45° line; principle of the multiplier; fiscal policies; Unit 14 fluctuations and unemployment (Exc 14.3, 14.8 to 14.10) Tutorial: session 7 9 Economic fluctuations, inflation and monetary policy Concepts : inflation and Phillips curve; inflation, aggregate demand and unemployment; monetary policy; central banks Unit 15 Tutorial: session 8 10 The Nation in the world economy Concepts : international trade; international economics; economic policy in an open world; European Union Unit 18 Tutorial: session 9 11 Inequalities and social justice Unit 19 Tutorial: session 10 12 The Great Depression, the golden age and the financial crisis Unit 17 Tutorial: session 11