Philosophy of Economics

Jurgen¨ Landes juergen [email protected] jlandes.wordpress.com Room 129 Winter Term 2017

Summary

We all are economic actors and exchange goods or services for money on a daily basis. In this course we will look at basic philosophical questions relating to economics. We shall be interested in - among other topics - rational actions and rational actor models, human well-being and game theory.

Assessment

REGISTRATION FOR EXAMS AND TERM PAPERS IN THE CURRENT WIN- TER TERM: Please, register for this course via the LSF system by FEBRUARY 9, 2018.

Assessment: 50% presentation, 50% essay. Topic of presentation and essay are chosen by the student. It makes sense to present and write on the same topic.

Presentations are mainly assessed with respect to the communication of ideas / concepts / arguments. Please format as .pdf-files.

Deadline for essay submission: Friday, 16. Mar. 2018. No references = No marks = FAIL. Essays should be around 10 pages (20,000 characters), clearly structured, contain a well-argued for original philosophical claim, and refer to relevant literature.

1 When sending the essay please also provide instructions how your grades are recorded (email to a coordinator, paper certificate, online system, etc.). An essay is submitted, AFTER I confirm the receipt via email. After I confirm the submission, it will still take me some time before I read and graded your work.

2 Week by Week

Week 1: Introduction Suggested Readings: Any introduction on the philosophy of economics, e.g., [Reiss, 2013, Chapters 1 & 8].

Week 2: Decision Making a` la Savage – Rational Actions Suggested Readings: Savage[1972], SEP on Decision Theory, Section 1 of SEP on Descriptive Decision Theory, http://www.econ2.jhu.edu/people/Karni/savageseu.pdf.

Week 3: Prospect Theory Suggested Readings: Section 2 of SEP on Descriptive Decision Theory, Kahne- man and Tversky[1979], [Reiss, 2013, Chapter 15, pp. 279].

Week 4: Nash Equilibria Suggested Readings: Chapters 2 and 3 of http://home.ku.edu.tr/ lkockesen/teaching/econ333/lectnotes/uggame.pdf.

Week 5: Why Economics Needs Philosophy Suggested Readings: Presentation, Slides, Correlation – Association Start thinking about an essay topic and read with that in mind.

Week 6: Evidence Based Policy Suggested Readings: [Reiss, 2013, Chapter 11], Hill[1965].

Week 7: Auctions Suggested Readings: Roth[2002], Klemperer[2002a,b], Vickrey[1961], Jehiel et al.[1996], Krishna [2002] Selling pens: Link 1, Link 2 and Link 3.

Week 8: Industrial (R)evolutions – They took our jobs! Will automation take away all our jobs? Link 1, Link 2

Week 9: No class – Tell your friends!

Week 10: Backwards Induction Suggested Readings: Aumann[1995, 1998], Baltag et al.[2009], Broome and Ra-

3 binowicz[1999], Rabinowicz[1998]. Pirate Game: Wiki on the Pirate Game, Stewart[1999] (see https://omohundro.files.wordpress.com/2009/03/stewart99 a puzzle for pirates.pdf.

Week 11: Creative Markets Please, prepare Buchanan and Vanberg[1991].

Week 12: Welfare Suggested Readings: as much as possible of [Reiss, 2013, Part III].

Week 13: Ethics and Pharma Research Guest lecture by Alexander Chrisitan.

Week 14: Student Presentations

Week 15: Student Presentations

References

Robert J. Aumann. Backward Induction and Common Knowledge of Ratio- nality. Games and Economic Behavior, 8(1):6–19, 1995. doi: 10.1016/ S0899-8256(05)80015-6.

Robert J. Aumann. On the Centipede Game. Games and Economic Behavior, 23 (1):97–105, 1998. ISSN 0899-8256. doi: 10.1006/game.1997.0605.

Alexandru Baltag, Sonja Smets, and Jonathan Zvesper. Keep ’hoping’ for ra- tionality: a solution to the backward induction paradox. Synthese, 169: 301–333, 2009. ISSN 0039-7857. doi: 10.1007/s11229-009-9559-z. URL http://dx.doi.org/10.1007/s11229-009-9559-z.

John Broome and Wlodek Rabinowicz. Backwards induction in the centipede game. Analysis, 59(4):237–242, 1999. doi: 10.1093/analys/59.4.237.

James M. Buchanan and Viktor J. Vanberg. The Market as a Creative Process. Economics and Philosophy, 7(2):167186, 1991. URL http://dx.doi. org/10.1017/S0266267100001383.

4 Austin Bradford Hill. The Environment and Disease: Association or Causation? Proceedings of the Royal Society of Medicine, 58(5):295–300, 1965.

P Jehiel, B Moldovanu, and E Stacchetti. How (not) to sell nuclear weapons. American Economic Review, 86(4):814–829, 1996. URL http://www. jstor.org/stable/2118306.

Daniel Kahneman and Amos Tversky. Prospect theory: An analysis of decision under risk. Econometrica, 47(2):263–292, 1979. ISSN 00129682. URL http: //www.jstor.org/stable/1914185.

Paul Klemperer. What really matters in auction design. Journal of Eco- nomic Perspectives, 16(1):169–189, 2002a. ISSN 0895-3309. doi: 10.1257/ 0895330027166.

Paul Klemperer. How (not) to run auctions: The European 3G telecom auctions. European Economic Review, 46(4-5):829–845, 2002b. URL http://dx. doi.org/10.1016/S0014-2921(01)00218-5.

Vijay Krishna. Auction Theory. Academic Press, 2002.

Wlodek Rabinowicz. Grappling With the Centipede: Defence of Backward Induc- tion for BI-Terminating Games. Economics and Philosophy, 14(01):95–126, 1998. doi: 10.1017/S0266267100004958.

Julien Reiss. Philosophy of Economics. Routledge, 2013.

Alvin E. Roth. The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics. Econometrica, 70(4):1341–1378, 2002. URL http://dx.doi.org/10.1111/1468-0262.00335.

Leonard Jimmie Savage. The Foundations of Statistics. Dover Publications, 2nd edition, 1972.

Ian Stewart. A Puzzle for Pirates. Scientific American, 280:98–99, 1999. URL https://omohundro.files.wordpress.com/2009/ 03/stewart99_a_puzzle_for_pirates.pdf.

William Vickrey. Counterspeculation, Auctions, and Competitive Sealed Tenders. Journal of Finance, 16(1):8–37, 1961. URL http://www.jstor.org/ stable/2977633.

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