Economics (ECO)

Lecturer: Jaime Ruiz-Tagle

Currently attached to the Department of Economics at University of Cambridge, Jaime Ruiz-Tagle is pursuing his research on the distributional effects of wealth accumulation processes and the imperfections of the financial markets.

Graduated from the University of Chile in Santiago with an Economics and Business Management degree, he then went on to pursue his Masters at the same university in Growth and Economics Development. His Master dissertation was in Total Factors Productivity. He later joined his alma mater’s Department of Economics as a junior researcher and lecturer, focusing on Labour Markets, Poverty and Income Distribution.

After obtaining the Fulbright Scholarship and Joint Japan/World Bank Scholarship, he was awarded Distinction for his MPhil in Economics at Cambridge, which subsequently allowed him to pursue his PhD, fully funded by the “Presidente de la República" Chilean Government Scholarship.

Syllabus

These lectures will cover basic aspects of Economics as a Social Science, with special emphasis on the role of Social Policies. The lectures will focus on common used concepts and their application to frequent problems faced by policy makers.

No prior knowledge of economics is required, but participation will be highly encouraged. The students will have to provide "guesses" for the topics covered in the form of brain storms. Then, the discussion will be based on those ideas and lecturer will promote the exchange of ideas among students.

Readings

Below comes a list of general readings and additional resources for the topics that will be covered during the lectures. For each session there is a list of readings that are relevant for the corresponding topic. The students are encouraged to 'scan' the books and articles looking for the topics that are more relevant to their interests. The reading lists are not meant for the students to read them completely, and in the case of the chapters of the books, they are not meant to be read completely neither.

Suggested General Readings:
- Begg, D., S. Fischer, and R. Dornbusch, Economics, 7th Edition. (BFD)
- Lipsey, R.G. and K.A. Chrystal, Economics, 10th Edition. (LC)
- Mankiw, N.G., Macroeconomics, 5th Edition. (M)

Additional Reading Resources
- World Bank, Inequality, Poverty and Socio-economic Performance (http://www.worldbank.org/poverty/inequal/)
- World Bank, The Literature of Poverty: A Collection (http://www.worldbank.org/poverty/povlit/index.htm)

SESSION 1: THE ECONOMIC PROBLEM: UNLIMITED NEEDS AND LIMITED MEANS TO SATISFY THEM.

Markets: agents, demand, supply. Prices: price formation and market equilibrium.

This session will cover the basic concepts in Economics. It will be stated the characteristics that define a problem as economic, and the it will be revised how individuals manage to solve those problems. Being markets the result of the exchange process that occurs because of social interaction, they are relevant not only for the capitalist economies, but also for societies in general. Within markets, it will be revised the role played by prices, both as a result of the exchange process and as the holder of market information.

Readings

- BDF: Ch. 1, 2, 3
- LC: Ch. 1, 2, 3
- M: Ch. 1,2

SESSION 2: COMMON CONCEPTS: GDP, GROWTH, INFLATION, UNEMPLOYMENT, INTEREST RATE, EXCHANGE RATE, EXPORTS, IMPORTS, PER CAPITA INCOME.

This session will cover the most common concepts used in formal and informal economics. The above list is of course non-exhaustive. These concepts are used daily in television, newspapers, magazines, etc., an are part of the argot of the economics science.

Readings

- BDF: Ch. 2, 19, 23, 27, 33
- LC: Ch. 21, 31, 32
- M: Ch. 3, 4, 5, 6

SESSION 3: MARKETS BENEFITS AND MARKET IMPERFECTIONS: EXTERNALITIES, MONOPOLIES, PUBLIC GOODS, INFORMATION ASYMMETRIES.

This session will concentrate in analysing the goodness of the markets for solving economic problems. There is a high degree of agreement among economists about the main market imperfections, although the solution to these imperfections often generate debate. From very opened markets to very regulated markets, the government has a role in economy. It will be revised what are the most commonly agreed roles for governments in market economies.

Readings

- BDF: Ch. 8, 9, 15, 18
- LC: Ch. 10, 11, 12, 19, 20, 33

SESSION 4: THE HOUSEHOLD ECONOMY: LABOUR MARKET PARTICIPATION DECISIONS, INTRAHOUSEHOLD RESOURCE ALLOCATION, EDUCATION DECISIONS.

Inside households there are many decisions that involve economic problems: to get married, to decide the number of children, to decide the number of hours to work, where to live, which school to send the children, to buy a house, to borrow money, and so on. These problems have the particularity that they are very close to everyday life for most individuals, hence involve many intuitive features.

Readings

- BDF: Ch. 10, 11
- Kooreman, P. and S. Wunderink, 1997, The Economics of Household Behaviour
- Neal, D., 2001, The Economics of Family Structure, Working paper / National Bureau of Economic Research ; 8519

SESSION 5: FINANCIAL MARKETS AND HOUSEHOLDS DECISIONS: RISK AND CONSUMPTION SMOOTHING, SAVINGS AND PORTFOLIO CHOICES, ACCESS TO FINANCIAL MARKETS.

Financial markets are well known to affect companies, big investors, and sometimes normal individuals. However, financial markets affect daily life. Households are constantly affected by unexpected variations in their incomes or in their necessary expenditures (health problems). Additionally, many students around the world have to borrow in order to pay for their university studies. Nevertheless, individuals tend to prefer a smooth consumption path, where life standards are not much affected by unexpected events. Then, households constantly make decisions regarding financial markets, though certainly those decisions are affected by the existence and features of those markets. Usually, people will prefer to rely on family and social networks for borrowing money for rainy days, although this tend to be observed for large loan amounts. This session will also re conciliate this facts with the common financial markets ideas.

Readings

- BDF: Ch. 13
- LC: Ch. 13

SESSION 6: POVERTY AND INEQUALITY: DEFINITIONS AND STATISTICAL ANALYSIS, CAUSES AND ALLEVIATION, TAXATION AND REDISTRIBUTION.

This final session will analyse two of the main problems faced by developing countries: poverty and inequality. Definitions and statistical analysis will be introduced, and then the problems will be revised both from the perspective of the households and the whole economy. It will be examined how poverty and inequality can affect not only the less fortunate people, but the society as a whole. Finally, some ideas about poverty alleviation will be studied for developing and developed countries.

Readings

- BDF: Ch. 12, 34, 36
- LC: Ch. 3
- Ferreira, F., 1999, A Brief Overview to Theories of Growth and Distribution (http://www.worldbank.org/poverty/inequal/econ/ferreira.pdf)
- Glewwe, P. and J. van der Gaag, 1988, Confronting Poverty in Developing Countries: Definitions, Information, and Policies, World Bank Living Standards Measurement Study Working Paper 48
- Henninger, N., 1998, Mapping and Geographic Analysis of Poverty and Human Welfare - Review and Assessment, Report prepared for the UNEP/CGIAR Initiative on GIS, World Resources Institute, Washington, D.C

SESSION 7: ASSESSMENT

Two-pages essay on the topic that attracted the most the interest of the student. Although some essay ideas will be suggested, it is expected that the students can explain some particular problem of his/her preference under the scope of the lectures and his/her own experience and insights.