Micro and Macro Economics. Lessons for the Master in Microfinance (CIPSI - Università di Bergamo a.a. 2007-08 and 2009-10)
Lessons for the course in Micro and Macro Economics for the Master in Micro Finance, a.a. 2007-2008 and 2009-2010. ABSTRACT of the Introduction: that the only valid microfoundation is the Neoclassical one is no longer a tenable position (as the asymmetric informations world demonstrates). The most usual hypothesis accepted by the proponents of a rigorous microfoundation procedure is the representative agent, which is in contrast with their very viewpoint. Heterodox economists proposed an analysis in which the macroeconomic dimension always came first with respect to microeconomic dimension. They showed very clearly that the behaviour of the economic system as a whole is not reducible (except under very restrictive conditions) to the sum of its single individual parts. It does mean the impossibility of explaining crucial economic phenomena on the sole basis of microeconomic behaviour. ABSTRACT of the first part of the course: Neoclassical microeconomic theory is closely tied to two important concepts in economics: marginalism and decreasing marginal utility, suggesting that the more we acquire of a given good, the less additional utility we derive from it. Neoclassical economists modelled production theory on consumer theory. The principle of diminishing returns is the carbon copy of the principle of decreasing marginal utility. One of the goals of Neoclassical microeconomics is to analyze market mechanisms that establish relative prices amongst goods and services and allocation of limited resources amongst many alternative uses. The theory of supply and demand usually assumes that markets are perfectly competitive. In many real-life transactions, the assumption fails because some individual buyers or sellers or groups of buyers or sellers do have the ability to influence prices. Quite often -as New Keynesians' studies about asymmetric information show- a sophisticated analysis is required to understand the demand-supply equation of a good. However, the Neoclassical theory works well in simple (and often unrealistic) situations. ABSTRACT of the second part of the course: Before Great Depression of the 30s, comprehensive national accounts, as we know them today, did not exist. Theoretically, the ideas of the British economist John Maynard Keynes, who worked on explaining the Great Depression, were particularly influential. The traditional distinction in Macroeconomics is between two different approaches : Keynesian economics, focusing on demand; and supply-side (or neo-classical) economics, focusing on supply. To introduce students to the debate between the macroeconomic schools I suggest four readings: J.M. Keynes' General Theory of Employment (1937); Milton Friedman' s Nobel Lecture (1976), Robert Lucas' Nobel Lecture (1995) and a Lectio Magistralis by Joseph Stiglitz (2004).

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