Economics

Economics is the study of the allocation of scarce resources. The subject of this course is microeconomics, which examines the decision making of individuals and firms with regard to consumption, production, and allocation of good and services in a market system. We examine the benchmark "perfectly competitive" market setting as well as market settings that are not perfectly competitive. We discuss the appropriate role of government in addressing these "market failures". Two one-hour lectures, and one precept.

The theory, and some of the evidence, of how and why national economies fluctuate, with periods of boom and bust, and periods of high and low inflation. Substantial emphasis is given to fiscal policy and monetary policy and the ensuing recessions in the US and abroad. Attention is also paid to international economic issues and to problems of economic growth. Special attention will be paid to the effects and implications of the pandemic and its aftermath for the economy and for policy. Two lectures, one precept.

An introduction to probability and statistical methods for empirical work in economics. Descriptive statistics, probability, random variables, sampling, estimation, confidence intervals, hypothesis testing, introduction to the regression model. The class uses STATA as statistical software package. Prerequisite: MAT 103. Two 90-minute classes, one precept.

This course builds on your knowledge of microeconomics from ECO 100. The general themes are (1) choices made by individual consumers and firms, (2) equilibrium from the interaction of these choices in markets or similar institutions, and (3) the role of government policy in improving economic outcomes. In each case, the analysis will be more in depth than it was in ECO 100. Some new concepts and techniques will be developed, especially for studying behavior under uncertainty, and strategic interactions (game theory). Prerequisites: 100, MAT 175 or equivalent. Two 90-minute lectures, and one precept.

The determinants of national income, unemployment, inflation, interest rates and exchange rates. Includes analyses of business cycles, monetary and fiscal policies, consumption, investment, economic growth, and issues in international monetary macroeconomics. Two lectures, one precept. Prerequisites: ECO100 and ECO101.

The objective of this course is to prepare students for basic empirical work in economics. In particular, topics will include basic data analysis, regression analysis, testing, and forecasting. Students will be provided with the opportunity to use actual economic data to test economic theories. Prerequisites: 100 or 101, and 202, or ORF 245; MAT 103 or equivalent. Two 90-minute classes and one precept.

Topics include consumer and firm behavior, market equilibrium, efficiency, an introduction to game theory, and information economics. Uses multivariable calculus and linear algebra to treat the topics in greater depth and to better prepare for advanced courses. Prerequisites: MAT 201 or ECO 201, or instructor permission. Two lectures, one precept.

This course examines the determinants of economic growth, business cycle fluctuations, and the conduct of monetary and fiscal policy. The first part of the course develops a framework for the analysis of households' consumption and savings behavior and firms' production decisions, and uses that to analyze long-run growth and financial crises. The second part of the course extends that analysis to examine business cycle fluctuations, including inflation, unemployment. Current issues in macroeconomic and financial policy are discussed throughout. Prerequisites: MAT 201 or ECO 201, or instructor permission. Two lectures, one precept.

Statistical analysis of economic data. The two-variable regression model, multiple regression. Techniques for dealing with violations of the regression model's assumptions, including autocorrelation, heteroscedasticity, specification error, and measurement error. Dummy variables, discrete-choice models, time series models, and forecasting. Introduction to simultaneous equations. Estimation and testing of economic models will be an important part of the course. Prerequisites: MAT 201 or equivalent and ECO 202 or equivalent or instructor permission. MAT 202 is recommended. Two 90-minute lectures, one precept.

This course provides hands-on experience in econometric analysis designed to help students to acquire the skills necessary to carry out their own empirical analyses in economics. Various aspects of empirical research in economics will be covered, including development of testable economic models, appropriate use of data, identification and causal inference, and specification and techniques for estimation of econometric models. Prerequisites: 302 or 312; and calculus. Two lectures, one precept.

By extending ECO 300-level macroeconomics, we develop alternative macroeconomic frameworks with financial frictions to understand business cycles, financial crises and public policy. The lecture begins with a historical overview of financial crises and basic financial accelerator models which emphasizes the interaction between borrowing constraint, asset prices and aggregate production. We then introduce financial intermediaries and government to study banking crisis, credit policy and macro prudential policy. Two 90-minute lectures, one precept.

The microeconomic theory of individual decision making under uncertainty and economic interaction under asymmetric information. Topics include expected utility, value of information, risk-sharing in insurance and asset markets, contracting with moral hazard and adverse selection, and auctions. Applications include health insurance and finance. Prerequisites: 300, MAT 175 or equivalent, and basic probability. Two lectures, one precept.

An economic analysis of the structure of markets and of corporate behavior. The development and interpretation of public policies, including antitrust legislation and direct regulation related to market structure, corporate mergers, restrictive and discriminatory practices, advertising, and research and development. Two lectures, one class. Prerequisites: 300 or 310, and MAT 175 or equivalent.

An introduction to the economics of law. Application of price theory and welfare analysis to problems and actual cases in the common law -- property, contracts, torts -- and to criminal and constitutional law. Topics include the Coase Theorem, intellectual property, product liability, deterring crime, incarceration as punishment, and social choice. Prerequisite: ECO 100. Two 90-minute lectures.

Using applied microeconomic theory and case studies, this course examines the impact of digital technology on markets. In a connected market, information is freely and instantly available to all participants. We ask how these features affect the way markets function. Topics include the economics of platform markets and multisided markets, the impact of the internet on the news media, education, health care and new industries, such as big-data driven industries, social networks, technological innovation and intellectual property, internet security, privacy and other regulatory issues.

This course considers firms, markets, and competition. We will study the theory of industrial organization, focusing on models of the way firms make decisions and compete and the impact of those decisions on market outcomes such as prices, quantities, the type of products offered and social welfare. This is a more math-focused version of ECO 321. For most topics considered, we will write down and solve a model of firm behavior, before considering real-world examples of the phenomenon the model seeks to analyze. We will use the examples to assess the model's ability to capture real-world outcomes.

The dynamics of the emergence and spread of disease arise from a complex interplay among disease ecology, economics, and human behavior. Lectures will provide an introduction to complementarities between economic and epidemiological approaches to understanding the emergence, spread, and control of infectious diseases. The course will cover topics such as drug-resistance in bacterial and parasitic infections, individual incentives to vaccinate, the role of information in the transmission of infectious diseases, and the evolution of social norms in healthcare practices. One three-hour lecture, one preceptorial.

An introduction to the use of economics in thinking about and dealing with environmental issues. Stress on economic externalities and the problem of dealing with them as instances of organizing gains from trade. Applications to a wide variety of problems, among them air pollution (including, importantly, global climate change), water pollution, solid waste and hazardous substances management, species preservation, and population policy.

Applies microeconomic analysis to the demand for labor, labor supply, and the determination of wages. Examines investments in human capital, unemployment, discrimination, unions, government intervention in the labor market. Empirical findings as well as theoretical models are studied. Prerequisites: 100, 302, and MAT 175 or equivalent. Two lectures, one precept.

This course will provide an opportunity to apply the concepts and methods studied in economics core courses to analyze selected topics in health economics. Topics will change from year to year. Prerequisites depend on topic. Two 90-minute lectures and one precept.

This course develops a conceptual framework for examining government taxing and spending, and uses this framework to analyze current public policy issues. We focus on both the efficiency and equity aspects of the government.

This course explores the role that money, financial markets and institutions, and monetary policy play in shaping the economic environment. The class investigates why these markets and institutions arise and may lubricate the resource allocation analytically (rather than descriptively), using tolls of economic theory. Two lectures, one class.

An introduction to the use of mathematical models and, especially, game theory in the study of politics. The basics of game theory are presented through applications to a broad range of political phenomena: voting, legislative politics, political campaigns, comparison of electoral systems, the evolution of cooperation, and international relations. Two lectures, one preceptorial.

Examination of the causes and economic consequences of international trade in goods and services, investment and migration. Stress on the possibility of aggregate national gains from trade, and the distributional conflicts generated by trade. Analysis of policies regarding these issues from the perspective of economics and political economy. Two lectures, one preceptorial. Prerequisites: WWS 100 or ECO 300 or ECO 310.

Foreign exchange markets and balance-of-payments accounts. Effects of incomes, prices, interest rates, and exchange rates on trade and capital flows. Effects of exchange rate arrangements and capital mobility on macroeconomic policies. Current policy issues: exchange rate management, macroeconomic policy coordination, managing currency crises, the roles of international institutions.

The course deals with the judgments required to analyze and communicate information about economic events of a firm through financial accounting. The first several classes deal with concepts of asset, liability, owners' equity, revenue, expense and the accounting processes that lead to the financial statements. Next follows an analysis of the components of financial statements: long-term liabilities, revenue recognition and income management, inventories, long-term assets, impairment and leasing chaos, off-balance sheet financing, and current controversies such as income tax inversions. Rudiments of financial analysis and valuation.

A survey of the field of investments with special emphasis on the valuation of financial assets. Issues studied include how portfolios of assets should be formed, how to measure and control risk, how to evaluate investment performance, and how to test alternative investment strategies and asset pricing models. Prerequisites: ECO 202, ECO 310 and MAT 175 or equivalent. ECO 202 or equivalent may be taken concurrently, but students would remain responsible for statistical concepts as they arise in this course. Two lectures, one precept.

Investigates the financing decisions of companies and financial institutions in the wider context of the workings of financial markets. Topics include capital budgeting, capital structure choice, risk management, liquidity, corporate governance, and the interactions between corporate finance and the workings of financial institutions and markets. Prerequisite: ECO 362. Two lectures, one precept.

Financial Mathematics is concerned with designing and analyzing products that improve the efficiency of markets, and create mechanisms for reducing risk. This course develops quantitative methods for these goals: the notions of arbitrage and risk-neutral pricing in discrete time, specific models such as Black-Scholes and Heston in continuous time, and calibration to market data. Credit derivatives, the term structure of interest rates, and robust techniques in the context of volatility options will be discussed, as well as lessons from the financial crisis. Prerequisites: ORF 309, ECO 100, and MAT 104. Two lectures, one precept.

These courses will provide an opportunity to apply the concepts and methods studied in economics core courses and electives to analyze the economic problems confronting particular countries or groups of countries. The choice of the country or region, and of the economic problem, will change from year to year. Prerequisites depend on topic. Two 90-minute lectures.

Europe is at a crossroads. Political and economic integration in the European Union (EU) exceeds levels reached in the rest of the world. Economic integration affects trade, migration, agriculture, competition, regions, energy and money. Most euro area economies have been struggling with interlocking crises involving debt, banking and growth, which challenge the viability of monetary union. The EU is now facing a migration crisis. This course studies economic integration in Europe, the ongoing crises, and economic challenges facing EU member countries. It uses economic analysis to study policy issues. Two 90-minute lectures.

An introduction to the ethics of market exchange and of economic regulation intended to promote ethical goals. We ask how ethical commitments evolve, and how they influence competition and cooperation. We consider the moral dimension of outsourcing, sweatshops, wage gaps, price gouging, price discrimination, time-inconsistent preferences and policies that exploit them ("nudging"), trade in repugnant goods (such as human organs), poverty, and the inequality of income and health. Prerequisite: ECO 100. Two 90-minute lectures.

This course studies the impact of recent technological innovations in the financial sector. We will first study the microeconomic principles of using big data to design credit rating systems, financial platforms, digital tokens, and smart contracts. We will then study a range of applications such as peer-to-peer lending, cryptocurrency valuation, crowdsourcing, micro-credit, green contracting and central bank digital tokens. Finally, we will study the macroeconomic impact of fintech on the broader economy.

Explores basic themes in modern game theory and information economics. Non-cooperative solution concepts for games will be developed and applied to the study of repeated games and dynamic interaction in oligopolistic industries, reputation formation, auctions, and bargaining. Prerequisites: MAT 175 or MAT 201, or equivalent. Some basic knowledge of probability theory is assumed. Two lectures, one precept.

Course introduces use of economics in understanding both the sources of and the remedies to environmental and resource allocation problems. It emphasizes the reoccurrence of economic phenomenon like public goods, externalities, market failure and imperfect information. Students learn about the design and evaluation of environmental policy instruments, the political economy of environmental policy, and the valuation of environmental and natural resource services. These concepts are illustrated in a variety of applications from domestic pollution of air, water and land to international issues such as global warming and sustainable development.

Questions at the intersection of politics and economics will be analyzed using economic methods. Particular emphasis will be placed on mathematical and game theoretic methods. The course will cover economic models of political institutions, such as elections or political parties. Topics include lobbying and interest groups, political business cycles, economic reform, and the size of government. Two 90-minute lectures. Prerequisite: MAT 203 or equivalent, or permission of instructor.

This course will explore how technology-based start-up ventures are founded, managed and financed. Specific emphasis will be put on the early stages of development. The goal is to offer perspectives on the "two sides of the coin": the entrepreneur's perspective and the financier's perspective and in particular the venture capitalist.

This course studies the asset allocation decisions and overall management of the risk and return characteristics of portfolios. It focuses on quantitative approaches to portfolio optimization, including dynamic strategies to control risks and to achieve investment goals; empirical studies of asset returns; and the money management industry. Prerequisites: ECO 202 or ORF 245; ECO 310; ECO 362 (no exceptions). Two 90-minute lectures, one preceptor.

A study of the assets and institutions of international financial markets. A key difference between these markets and others is the role of exchange rates relating the value of two or more national currencies. The course studies the market-making institutions, the market conventions and market practices as well as the interrelationships between different assets, their pricing, their trading and their use by corporations. Prerequisites: MAT 175 and ECO 202 or equivalent. Two 90-minute lectures.

This course concerns the motives and methods of corporate actions such as dividend payments, share repurchases, recapitalizations, acquisitions, divestitures, joint ventures, with a focus on the implications of such actions for the prices of a corporation's publicly traded securities. The course should be of particular interest to students considering a career in financial services. Introductory courses in micro economics, investments, and probability and statistics are prerequisites. One 3-hour seminar.

A study of models for the term structure of interest rates, bond prices and other contracts such as forwards and futures, swaps and options. The course develops the theory of arbitrage-free pricing of financial assets in continuous time, as well as special models that can be used to price and hedge fixed income securities. Prerequisites: ECO 362 (or FIN 501) and ECO 465. One three-hour lecture, one precept.

The way in which financial markets work and securities are traded can often not be reconciled with the notion of a frictionless and self-equilibrating market. In this course, we try to account for this fact and cover important theoretical concepts and recent developments in market microstructure, asset pricing under asymmetric information, financial intermediation, and behavioral finance. Topics include market efficiency, market making, financial regulation, asset price bubbles, herding, and liquidity crises. Prerequisites: ECO 300 or 310.

This course discusses how inefficiencies arise due to psychology and limits to arbitrage. The psychology of investors shapes their preferences and may impair judgment. Whether these psychological factors have an impact on financial markets ultimately depends on arbitrageurs' ability to fight against mispricing. These issues will be covered through lectures and exercises that will foster discussions about cognitive illusions and speculative bubbles. Prerequisite: 300 or 310. 362 recommended.

This course will teach students about financial risk management through the lens of the financial crisis that began in August 2007. Topics covered will include market risk, credit risk, liquidity risk, and systemic risk. Students will draw on their background in economics, finance, probability theory and statistics. The class will be in seminar format and active participation in the discussion is encouraged. Prerequisites: 362 and 465.

The course explores the increasing weight of Asia in global financial markets. It frames the discussion in the context of the globalization of financial markets, with emphasis on concepts of economic development, institutional reform of markets, and public and private market investments. Discussions combine analysis of historical trends and recent events with insights from practical experience in Asian markets. Particular focus is devoted to China and Japan. The course explicitly considers China's gradual shift toward a capital market-based financial system and prospects for the development of the renminbi into an international currency.

This course will use economic theory and empirical evidence to study the causes of financial crises and the effectiveness of policy responses to these crises. Particular attention will be given to some of the major economic and financial crises in the past century and to the crisis that began in August 2007. Prerequisite: 202 or equivalent, and 310.

With its rapid economic growth in the past three decades, China already has the world's second largest economy. Meanwhile its financial markets are also being quickly liberalized and integrated with the rest of the world. As the current trend continues, there are growing interests to learn and understand the workings of China's financial and monetary systems. This course aims to serve this objective with a particular emphasis on understanding the role provided by the financial system in facilitating China's economic development, in addition to the investment opportunities and risk presented by the system to the outside world.

The senior thesis (498-499) is a year-long project in which students complete a substantial piece of research and scholarship under the supervision and advisement of a Princeton faculty member. While a year-long thesis is due in the student's final semester of study, the work requires sustained investment and attention throughout the academic year.

The senior thesis (498-499) is a year-long project in which students complete a substantial piece of research and scholarship under the supervision and advisement of a Princeton faculty member. While a year-long thesis is due in the student's final semester of study, the work requires sustained investment and attention throughout the academic year.