Bard MBA

Economics for Decision Making

Fall, 2012
3 Credits

Objectives:
The key learning objectives for the course are to understand:
  • The power and the limits of markets to promote sustainability
  • Managing the commons
  • Key micro-economic market models
  • The cost and demand structure of the firm, and profit-maximizing decision-rules
  • Ecological and neoclassical economic frames, outcomes and policies
  • Information economics: asymmetries, moral hazard, contracts, make-buy decisions

Student Outcomes:
The class is designed to provide students with the useful tool-kit that economics provides for understanding both the business firm and the market environment. At the same time, students will constantly confront the limits of the market to deliver sustainable outcomes. Students will also understand the ways in which poor economic analysis is often influenced by, and used to support, political ideology.

Texts
  • Frank, Robert, Microeconomics and Behavior, McGraw Hill, 2010.
  • Goodstein, Eban, Economics and the Environment, Wiley, 2010.
  • Stiglitz, Joseph, Amartya Sen, and Jean-Paul Fitoussi, Mismeasuring Our Lives, New Press, 2010.
  • Additional readings TBD, including selections from:
    • Heilbroner, Robert, The Worldy Philosphers, Touchstone, 1995.

Grading
The course will be a combination of lectures, case studies, group discussions, and student projects. Active participation in class discussions will be essential. Grading will be determined by participation in in-class exercises, group presentations, completion of homework, and multiple exams.
Course Outline:
The Bard MBA curriculum is modular, with each module topic corresponding to a residency. The outline below provides the Economics for Decision Making set of topics for each of the semester’s modules, with each set of topics corresponding to three to four weeks of conventional instruction.

Module

Topics

Orienting for Sustainable Business

The Evolution of Economic Thought: This session lays out the history of economic thought, from the mercantilists through to the present day, emphasizing the interplay between the development of the market system and its analysts, and the tension between economics as a social science and economics as an ideology.

Foundations of a Shared Planet

Market Fundamentals. We begin framing the economic question of sustainable development on a finite planet. Then we will review the fundamentals of market interaction: supply, demand, elasticity. Because markets require access to the commons, externalities arise. We conclude with strategies for managing the commons—regulation, taxes, cap-and-dividend.

Stakeholders and Communication

Production Theory and Market Structure. Here we review the short and long run cost structure of the firm—determined by the productivity of labor and the availability of capital. We illustrate the standard model of profit-maximizing behavior under different market, and thus firm-demand, structures, illuminating pressures to externalize costs.

Frames for Decision Making

Neoclassical and Ecological Economics. This section of the course covers the economics of sustainability, focusing on how resource limits are understood by different economic models. We will also explore, and attempt to reconcile, economic and scientific perspectives on the prospects for business-as-usual growth across the 21st century.

The New Information Landscape

Economics of imperfect information. Since the 1970’s, much economic theory has focused on individual and firm behavior in the face of imperfect information. We will lay a foundation for future agency and governance discussions, looking at asymmetric information, moral hazard, contracting, and make-buy decisions.