This course surveys non-cooperative game theory at the level of Steve Tadelis' book. Students are given a self-graded math skills pre-test before the first day. Conditioning and Bayes rule seems to be tricky for students, and unfortunately they don't appear in class until after the drop date. The evidence from those students who persevere having not done well on the test is that the test is a good screen. Of course it may be too good. Regrettably, I cannot observe the false positives.

Despite what behavioral economists will say, economics is not applied psychology. Despite what so-called applied microeconomists say, treatment effect studies are mere engineering problems of negligible durability and only transitory interest. The fundamental economic questions are concerned with the social organization of exchange among diverse, heterogeneous economic actors, and its consequences. Much more than game theory, burdened as it is by intersubjective beliefs, general equilibrium theory provides a modeling framework to address these questions.

Many associate with Adam Smith the beginning of the economic analysis of markets. Nothing could be further from the truth. The French physiocrats were active two decades before The Wealth of Nations first appeared. Quesnay's tableaux may be the first attemps to model an economic system, but the the issues themselves were of interest to the Greek philosophers. Aristotle distinguished use versus exchange value, and both he and, before him, Democritus, extolled the virtues of private property for its incentive effects. Even Smith's invisible hand is a response to Mandeville who wrote some 70 years earlier, “Every Part was full of Vice / Yet the whole Mass a Paradise.”

The paradigm for classical general equilibrium theory is attributed to Walras, who most successfully raised the problem of simultaneous price determination in multiple markets. His approach reached its apotheosis in the papers of Arrow and Debreu, Mckenzie, and Gale. It could be said that this work provides a definitive answer to the distinction between value in use and value in exchange first raised by the ancient Greeks, thereby closing a 2400-year research program.

We will begin with Ricardo, whose 1817 Principles provide the first equilibrium model which looks somewhat modern. Subsequently we will briefly visit Hecksher-Ohlin-Vanek, and then survey modern equilibrium theory, which takes a quite different approach to the problem of value than that offered by Ricardo and Smith. But as powerful as they may seem, these analyses are limited by a hidden assumption: that goods of a type are perfect substitutes. This is true for coils of 16 gauge speaker wire, #4 machine screws, and (arguably) crates of US No. 2 grade tomatoes. It does not hold for pediatricians, patent attorneys and programmers. Extending Walrasian insights to markets with imperfectly substitutable commodities will also be taken up.

Students beware! According to Nobelist George Stigler, “The corpus of economic analysis can be turned to a thousand contradictory ends. But by and large it is not: my thesis is that the professional study of economics makes one politically conservative.” To the extent that the claims of his self-congratulatory essay (QJE 1959) have any validity, surely it is due in part to the welfare theorems which provide the argument that competitive markets are “efficient” (although, curiously, Stigler does not mention them). In fact they are another instanceof the same kind of duality that describes the relationship between utility and expenditure functions, technologies and profit functions. These too will be discussed, and the limits of welfare economics as a theory of distributive justice will be examined.

The easiest place to understand duality is in linear models. Thus our study of resource allocation will begin with a survey of linear programming, which is an incredibly useful tool in its own right for both equilibrium and game theory.

I have had the privilege of teaching decision theory together with Joe Halpern bi- or tri-yearly since the turn of the century. We begin with decision theory as it looked in the early 1950s, when a number of decision rules competed for attention. We move on to expected utility theory, rank-dependent EU and CEU, and then Savage. We discuss causal decision theory. We conclude with social decision-making and, dare I say it, ethics. Along the way we take up examples, applications from economics and computer science. Most fun, we debate with each other, which is a way of exploring the different needs to which economics and computer science put decision theory.