Saylor ECON 101 Microeconomics

As my followers will know I have embarked on the excellent (and free !!) courses from Saylor.

http://www.saylor.org/

I'm currently studying Microeconomics. 101

 http://www.saylor.org/courses/econ101/

as I want to expand my limited knowledge about this subject. I've just finished the first three units

The Saylor course\provides a free pdf course book specially commisioned from the course which you can download and also links to various on line videos such as those provided by the Kahn academy  and a few others. The aim of Saylor courses is to utilise  on line resources to provide the equivalent of a college or university education in the subject area at the appropriate level and also to provide some form of assessment usually a two hour final exam. These are slowly being recognised by outside institutions and this trend can only grow.

Here is a review of the first three units 

1) On production possibility curves and their implication for trade. A production possibility curve represents the total amount of goods or time one can spend on a given activity. Suppose for example I can spend 20 hours a week studying and I'm studying either music or maths. I can spend all the time studying maths or all the time studying music. However if I do so I wont progress on maths if I focus solely on music and vice-versa. Suppose I have an exam in both subjects coming up and I decide that an hour studying music will get me 2% extra marks whilst an hour studying maths (as I'm quite good at that already) will only get me 1% extra marks and suppose I can at present average 50% for music and 60% for a maths exam then I have to do a trade off. Clearly I have to spend more time on music than maths. to bump up the marks. There is a greater opportunity cost in maths  as for each hour I spend studying maths I give up 2 marks in the music exam whilst for each hour I spend studying maths I give up only 1% maths.
The study of this leads to some quite interesting results in terms of trade (due to Ricardo) namely that although one country may have an absolute advantage over another in producing two or more goods both countries can expand the amount of goods by specialisation in one form of good. . 

2)  This covered the subject of Supply and Demand and what causes it's shift. Also more contentiously the arguments for abandoning rent controls, or a  minimum wage or taxation are given. On the neo-classical model, (Adam Smith's free hand) the market is generated by each person selfishly pursuing his or own self interests eventually an equilibrium price will emerge where the amount demanded by consumers is equal to the amount suppliers are willing to produce.  In the usual and fairly simplistic way  as prices rise demand falls and as prices rise supply increases and the equilibrium price is at the intersection of the two curves normally represented by two straight lines. 


Setting a floor allegedly interferes with this equilibrium  and causes a shortage in the supply or at least so the argument goes. However this is based on a number of dubious assertions. Namely that there is a stable equilibrium price something impossible when more than one good is considered. It ignores the time delay inherent in a change in price and it would seem to justify a fairly obnoxious right wing agenda.
It's a bit worrying that right wing institutions such as the institute for fiscal studies, have based what is a totally unfair set of policies on a fairly naive view of markets. Fortunately there is an antidote to all this given in this wonderful book  by Stephen Keen

http://www.amazon.com/Debunking-Economics-Revised-Expanded-Dethroned/dp/1848139926

and for a detailed critique of the current state of economic theory it can't be bettered. Although I would prefer a more mathematical account. Stephen Keen was one of the few people to predict the current recession by modelling the economy using ideas from chaos theory . I hope to understand his models a lot better in the coming years watch this space.

Unit 3 continues the effects of supply and demand by studyiong what is called consumer and producer surplus. This is essentially the total area made between the supply and demand curves  and the equilibrium point and the price axis (the y axis). If government taxes goods then the supply curve shifts upwards and the area decreases. Also so it is claimed a band is taken out of the area which is government revenue. But this leads to another area called 'dead weight loss'. The terminology is really quite perjorative first of all we are not just consumers and producers. Secondly all this argument ignores the benefits of taxation in terms of provision of public services, health, public transport etc. It is claimed that as these are 'free' and do not respect private rights these will necessarily be inferior to anything the private sector can produce. Nothing is mentioned of the fact that the private sector rips off people as their concern is profit. But in more general terms the picture of humanity depicted by neo-classical economists  is really quite depressing. Yes we all like a good bargain, but do we have the time to seek out the bargain. Even if you do get a bargain you might not get the quality of goods offered is not likely to be optimum or it might cause you inconvenience. For example I regularly buy books at bargain price from Amazon but about 1 times in 10 I never receive the goods as the company does not use regular mail service but some fly by night courier company who seem incapable of putting their depots in a reasonable place accessible to people after work. I also note that for a government which is allegedly based on free-market principles they have not failed to increase taxes on goods, Perhaps George Osborne should do a course similar to economics 101.

I may have given the impression that I'm not enjoying this course that is wrong. I'm actually enjoying finding out where the arguments that are regularly given in the press and right wing media come from and I always have Stephen Keen to help me take the wilder claims of neo-classical economics with  a pinch of salt. It is worrying that what is essentially an ideology is being presented as scientific fact. The coursre as it stands isn't that mathematical but more meatier courses await.

As far as assessment goes this isn't quite ideal you are referred to tests on a micro-economics book published by Pearson and sometimes this covers topics not covered yet. There will be a final exam which you can take when you feel you are ready. You have to get 70% or over and then you get a certificate,but you can resit as many times as you like with a two week gap. As the course is free (in contradiction to the principles that would seem to underly the ideology of neo-classical economics )  then one can hardly complain and I thank Saylor for saving me £750 and rising in OU fees. I really would recommend people to take up Saylor courses

Next post I'll review the other Saylor course I'm doing namely calculus of a single variable.

Bye for now.