It is widely believed that standard neoclassical (supply and demand) economics supports free-market conclusions, while behavioral economics (game theory experiments, bounded rationality, Winner’s Curse, imperfect information models, etc.) supports government intervention. Give two counter-examples. Explain your reasoning.
2. Name one concept from this class that you believe will have the largest private benefit to you as either a consumer or a businessperson and explain your answer. Name and explain a concept from this course which you believe would have the largest social benefit if it were widely understood. Finally, has there been any concept discussed in class which you believe may be helpful either privately or socially for students, qua students to understand? Explain.
3. Do you think the provision of public goods is more like a coordination game or a Prisoner’s Dilemma game? Explain your answer, using a game theory matrix. Under what circumstances is public good provision positive-sum and under what circumstances is it zero-sum? Give an example of positive-sum public good provision that is still socially inefficient, and one of zero-sum exchange that manages to be socially efficient.
4. A puzzle: The relationship between education and earnings is well-established; people with higher levels of education earn higher incomes over their lifetimes, much more. Now think about your own education, and be honest: What percentage of the material covered in your college courses is applicable to your current or intended career? For myself, I would say I use around 30% of what I learned in my Econ Ph.D. program, and I am an academic economist! If a high percentage (say, over 70%) of your education applies to your career, then you are off the hook. If so, all you have to do is list the topics covered in two recent courses and explain how you will or have used them in your work (10-12 topics total would do it). If, like most people, the percentage is fairly low, then offer an explanation of why it is that education leads to higher earnings, if so little of it is relevant to one’s intended career path.
5. On foreign aid to developing countries:
a. What are the circumstances under which foreign aid can help a developing country? Explain your answer in 3-4 sentences.
b. How can foreign aid harm a developing country? Explain in 3-4 sentences.
c. What are the problems with sending money as foreign aid? Explain in 2-3 sentences.
d. What are the problems with sending goods as foreign aid? Explain in 2-3 sentences.
6. On international economic development:
a. What do you believe is the key to international economic development, i.e. what is the root cause of sustainable economic growth in poor countries? (2-3 sentences)
b. What do you believe are the necessary conditions for growth, i.e. what conditions MUST already exist for growth to occur? (2-3 sentences)
c. How can the U.S. government best promote economic growth in the developing world? (3-4 sentences)