This year I am on sabbatical--which means I do not teach. And I do miss it. Thus, from my perspective at least, this next hour is going to be an hour of pure fun.
I hope it will be an hour of pure fun for you all as well.
As Bob Strom said, right now in this MBA class you are transitioning from studying micro to studying macroeconomics. You are moving away from studying that part of economics where you talk about how the market system works well: how supply balances demand to make the maximum possible amount and value of win-win deals, and how people respond to the incentives they’re given to change their behavior. To the extent that things go wrong in microeconomics--to the extent that when you step back and look at the situation you say "Geewillickers! I really wish this had not happened!"--it is because you wish that you or the market system had not given people the incentives that it in fact did.
Practically everything that goes wrong in micro goes wrong because somewhere in the system some people have what we regard as the "wrong" incentives, and have responded to them. In such a situation you frantically scramble to fix it and correct it. And you do so by finding ways to change public policies so that people in fact have the right incentives.
Micro is somewhere between half and three-quarters of economics.
The other quarter or so of economics is macroeconomics.
Macro is different. Macro deals with the fact that sometimes the economy seems to have some sort of a grand mal epileptic seizure. It freezes up. Something goes mysteriously wrong--and wrong not with an individual firm, or an individual industry, or an individual sector of the labor market, but wrong with pretty much the whole thing. This happened to the US economy in 2008 and 2009.
link
I hope it will be an hour of pure fun for you all as well.
As Bob Strom said, right now in this MBA class you are transitioning from studying micro to studying macroeconomics. You are moving away from studying that part of economics where you talk about how the market system works well: how supply balances demand to make the maximum possible amount and value of win-win deals, and how people respond to the incentives they’re given to change their behavior. To the extent that things go wrong in microeconomics--to the extent that when you step back and look at the situation you say "Geewillickers! I really wish this had not happened!"--it is because you wish that you or the market system had not given people the incentives that it in fact did.
Practically everything that goes wrong in micro goes wrong because somewhere in the system some people have what we regard as the "wrong" incentives, and have responded to them. In such a situation you frantically scramble to fix it and correct it. And you do so by finding ways to change public policies so that people in fact have the right incentives.
Micro is somewhere between half and three-quarters of economics.
The other quarter or so of economics is macroeconomics.
Macro is different. Macro deals with the fact that sometimes the economy seems to have some sort of a grand mal epileptic seizure. It freezes up. Something goes mysteriously wrong--and wrong not with an individual firm, or an individual industry, or an individual sector of the labor market, but wrong with pretty much the whole thing. This happened to the US economy in 2008 and 2009.
link
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