Carnegie Mellon University
January 30, 2015

New Electives Added to Undergraduate Economics Program

Several new economics courses have been designed to further students’ understanding of central economic theories. These classes are aimed at students with strong analytical insights, creative problem-solving skills and a passion for making a difference to the business world. The new additions to the curriculum, including three upper-level courses and one introductory level course, debuted in spring 2015.

Financial Crises and Risk, taught by Ariel Zetlin-Jones, provides an in-depth examination of the causes of financial crises as well as what governments can do to prevent them or at least reduce their cost. The course is designed to provide an understanding of individual attitudes toward risk and individual decision making about savings and investment under uncertainty, and to use this understanding to evaluate the various economic roles played by financial institutions in helping individuals manage risk, especially those roles which may lead to economic instability and crises. In addition, the course may cover bubbles and swindles, especially when these spillover to the broader macroeconomy; the role of information in banking in normal times and in bank runs; crisis resolution techniques; and the extensive history of attempts to improve regulation so as to reduce the frequency and cost of crises.

Within the Firm: Managing through Incentives will help students learn how to reason about incentives between managers and employees, between managers and owners, and within a team of co-workers. Aligning the objectives of workers, managers and owners by providing them with appropriate incentives becomes an emerging paradigm in the modern business world. Alexey Kushnir will cover a broad range of topics including principle-agent problem, moral hazard, asymmetry of information, incentive in teams, collective decision making and repeated interactions. These theoretical underpinnings will be illustrated with actual business experience and case studies.

Economic Foundations of Regulation with Applications to Financial Markets will address the foundations of regulation from various perspectives within the context of a market economy, highlighting the sources of market failure. Chester Spatt teaches how the financial crisis has focused attention on the role of regulation for our financial system and the broader economy. Portions of the course will tackle relatively broad questions such as, Why regulate? What is the objective of a policy advocate? Are regulators and regulatory policies a systemic risk? How can regulators enhance the predictability and credibility of their policies?

Legonomics: Building Blocks of Economic Analysis is an introductory-level course taught by Stephen Spear that will show how to use data and measurement to form models for economic analysis. The emphasis of this course is not on any kind of formal statistical or econometric analysis, but rather on how to do the inductive science of translating perceived patterns in data into a usable model in the sense of ignoring noise and abstracting from patterns to hypothesize relationships. Students will work with historical data sets to “discover” Malthusian economics and model economic relationships that governed the human condition up until the mid-1700s. They will then move on to the industrial revolution and explore the role of technology, culminating in an overview of modern thinking about economic growth.