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Econ434EssayA - Miscellaneous Essay Questions History of...

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Miscellaneous Essay Questions History of Economic Thought Essay Questions 1. Briefly describe the major fundamental shortcoming of theories of price determination in England prior to roughly 1870, and explain what caused this failure. 2. Briefly outline the major arguments of at most four different theories about the source of property rights. 3. Explain how Pareto optimality applies to (a) global [economy-wide] production and distribution, (b) allocation in consumption for the individual. (c) productive (technical) efficiency within and between production processes, and (c) distributive efficiency (allocation between consumers). 4. Briefly identify the basic motives economic theorists conventionally assume when attempting to explain human behavior. (I.e., describe homo economicus .) (a) Human behavior is motivated by self-interest. (A) Individuals maximize their personal satisfaction (B) Firms maximize profits. (b) People are rational and forward looking. (c) People are risk averse. 5. Now differentiate this “economic” explanation of behavior from theories developed by two of the following groups of thinkers: (a) sociologists. (b) medieval scholastics. (c) cognitive psychologists. (d) evolutionary biologists. (e) cultural anthropologists. (f) behavioral psychologists. (g) sociobiologists. (h) eugenicists. (a) Sociologists: Humans are social animals who seek class, status, and power. (b) Medieval scholastics: The purpose of our lives is to follow the will of God. (c) Cognitive psychologists: Humans have bounded rationality, bounded self-interest, and bounded willpower. (d) Evolutionary biologists: Survival of the fittest. The Territorial Imperative . (e) Cultural anthropologists: .Institutions, rituals, and myths are important determinants of behavior. (f) Behavioral psychologists: We are programmed (e.g., Pavlov and Skinner) (g) Sociobiologists: Our purpose on earth is to ensure the 1
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survival of our genes across generations. (h) Eugenicists: Human potential is limited by the genes with which we are endowed. 6. Provide an example that illustrates David Ricardo’s theory of comparative advantage, and identify more modern and comprehensive sources of potential gains from international trade. 7. Identify three major advances in economic theory in the middle of the nineteenth century that hinged on the application of calculus to economic problems. (a) A.A. Cournot used calculus to identify MR=MC as a requirement for profit maximization. (b) Cournot also developed equations for demand and supply curves by taking the partial derivatives of demand and supply functions, respectively, with respect to price. (c) Jules Dupuit identified MU = P = MSB = MSC as a condition necessary for maximizing economic efficiency in the construction of a good produced under conditions of extreme economies of scale (ex: a bridge) (d) Dupuit also illustrated how price discrimination is a possible solution to inefficiencies associated with persistent economies of scale.
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