ISBN : 9780198843207
Bowles and Halliday capture the intellectual excitement, analytical precision, and policy relevance of the new microeconomics that has emerged over the past decades. Drawing on themes of the classical economists from Smith through Marx and 20th century writers - including Hayek, Coase, and Arrow - the authors use twenty-first century analytical methods to address enduring challenges in economics.
The subtitle of the work - Competition, conflict, and coordination - signals their focus on how the institutions of a modern capitalist economy work, introducing students to recent developments in the microeconomics of credit and labor markets with asymmetric information, a dynamic analysis of how firms compete going beyond price taking, as well as bargaining over the gains from exchange, social norms, and the exercise of power.
The new benchmark model proposed by Bowles and Halliday is based on an empirical approach to economic actors and problems. They start from the premise that contracts are incomplete, and that as a result market failures, rather than being a special case illustrated by environmental spillovers, are to be expected in markets for labor, credit, knowledge and throughout the economy. They explain how experiments show that human motivations include ethical as well as other-regarding preferences (rather than entirely self-interested) and explain why the technologies of knowledge-based economies are a source of winner-take-all rather than stable competition. The authors also consider the intrinsic limits of mechanism design and governmental interventions in the economy.
Teaching recent developments in microeconomic theory allows the authors to provide students with the tools to analyze and engage in informed debate on the issues that concern them most: climate change, inequality, innovation, and epidemic spread. Tradeoffs are highlighted by providing models in which capitalism can be seen as an "innovation machine" that raises material living standards on average, while at the same time sustaining levels of inequality that many find to be unfair.
PART I: People, Economy, and Society
1: Society: coordination problems and economic institutions
2: People: preferences, beliefs, and constraints
3: Doing the best you can: constrained optimization
4: Property, power, and exchange: mutual gains and conflicts
5: Coordination failures and institutional responses
PART II: Markets for Goods and Services
6: Production: technology and specialization
7: Demand: Willingness to pay and prices
8: Supply: firms' costs, output, and profit
9: Competition, rent-seeking, and market equilibration
PART III: Markets with Incomplete Contracting
10: Information: contracts, norms, and power
11: Work, wages, and unemployment
12: Interest, credit, and wealth constraints
PART IV: Economic Systems and Policy
13: A risky and unequal world
14: Perfect competition and the invisible hand
15: Capitalism: innovation and inequality
16: Public policy and mechanism design
"Ambitious and exciting! The authors propose a completely new problem-centred approach to teaching microeconomics which gives space to discussion of issues often ignored by undergraduate microeconomics textbooks." - Dr Marco Pelliccia, Associate Professor in Economics, Heriot-Watt University
"The key strength of the content is the refreshing, big-picture way in which the concepts are presented, as well as the care in carrying out the real-world examples used to illustrate the arguments. " - Dr Daniele Tavani, Associate Professor, Colorado State University