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lecture01 - 14.04 Introduction Optimization Parag Pathak...

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14.04: Introduction + Optimization Parag Pathak MIT Department of Economics September 9, 2009
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Materials Please take the syllabus and the reading list Our first recitation will be this Friday. One is scheduled for 9, the other is scheduled for 12.
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Course Description Intermediate microeconomics, emphasizing the application of math to economic problems. Translate ideas of 14.01 (introduction to micro) using mathematics, for later use for estimation, policy design, etc. Move back and forth between econ and math. how to write economic concepts in mathematical languages. how to interpret mathematical results in economic languages. New materials: game theory, uncertainty, asymmetric information, basics of finance.
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Prerequisites 14.01 Math: multivariate calculus; basics of linear algebra (vectors and ma- trices) (i.e., 18.02) 14.04 is a required course for economics majors. Although we will cover applications, 14.03 is intended to have more emphasis on applied topics and empirical work. 14.04 is more mathematically oriented, and aims to serve as a foundation for further course work in economics. If you don’t have the math, you might consider taking 14.03, or waiting to take 14.04 next fall.
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Details Textbook: Nicholson and Snyder, Microeconomic Theory: Basic Principles and Extensions , 10th ed. Lecture notes: Posted on Stellar. 6 Problem sets: Posted online, due 3-4 classes later. 2 Teaching fellows: Felipe Iachan and Luis Zermeno My office hours: Wednesday, 4–5pm, E52-391C, or by appt. Course grading: problem sets (20%), midterms (20% each), final (35%), class participation (5%).
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Tips Read materials before class. Work in small groups on problem sets, but don’t copy! Get clarifications as soon as possible, in class, recitation, office hours. Lectures, recitations, problem sets, office hours are complements, not substitutes. Check Stellar site regularly. Get syllabus, lecture notes, problem sets, answers etc.
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Right now is an exciting time to study economics... “Largest financial crises since the Great Depression” $700 billion Troubled Asset Relief Program for banks $787 billion stimulus package. August unemployment: 9.7% Debates on health care reform, climate change, deficits...
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What do you think economics is? “behavioral” economics, neuroeconomics, freakonomics? Subject matter based definitions i.e. “study of the allocation of scarce resources” Pragmatic definitions “what economists do” i.e. “Economists study prices” Methodology based definitions i.e. optimization, statistical analysis, game theory
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Economics pretty much includes all topics related to human society classic issues: international trade, taxes, economic growth, antitrust plus: crime, marriage, war, laws, media, corruption Lots of opportunity for us to bring our way of thinking to these issues. Indeed, one of most active areas of the subject is to push this frontier
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Economists like to think that discipline follows Popperian methods Stylized facts Hypothesis formation Testing hypothesis Popperian tradition tells you that hypotheses can only be proven false empirically, not proven true. This should keep us humble.
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