Economics 330—Behavioral Economics

Important: The plan contained herein is tentative.  Changes may be made as appropriate.  You are responsible for any changes or additions to what follows that may be announced.   Regular class announcements will be posted on the Announcements page on Canvas.  It is your responsibility as a student in this class to check it very regularly.

Purpose: Behavioral economics incorporates results from psychology and neuroscience in the attempt to gain deeper insight into economic behavior, to make better predictions, and to generate improved policy prescriptions.  A core belief of behavioral economists is that, since psychology studies human judgment and behavior, our understanding can be improved by utilizing more realistic psychological underpinnings of economic analysis. This course surveys these attempts to improve the field of economics.

Structure: a focus on discussion and questions. What makes behavioral economics an especially fun and interesting class for me is that not only is the material useful to know but also that we’ll be covering material that is in a number of ways at the cutting edge of what is known.  A neuroscientist wrote recently that neuroscience is in a state where a single person working alone can still make meaningful contributions.  The same can be said of behavioral economics.  It’s still in a very plastic state, kind of squishy if you will.  So, discussion and questions are very welcome as we go through the slides for each class.

PREREQUISITES: Economics 310-1 and 310-2

Texts: There is no text for the class.  In general, readings for the class will be made available as appropriate throughout the quarter.  For reasons that I’ll explain in class, I’ll only post them bit by bit as we proceed through the quarter.  Psychologists say that two of the most important life skills are the ability to deal with ambiguity and with frustration.  If you absolutely cannot live with not knowing what the required readings are ahead of time, happily, you can drop the class and survive!

Office Hours: I’ll be available to answer questions via email on most weekdays.  I’ll also later schedule some time when I’ll be available via Zoom.

Method of Evaluation: There will be two exams and a paper.  Exam 2 will be cumulative in a way that I’ll describe near the end of the quarter.  Class participation, etc. will be definitely considered in borderline cases.  Oh, and while I have greatly appreciated the attempts by a few students over the years to define themselves as borderline cases, it’s actually my decision as I consider the final point distribution.

Examination Policies and Dates:

Exam 1—Either Tuesday, July 13 or Thursday, July 8

Exam 2—Thursday, July 29 or Tuesday, July 27

The actual dates will be determined after class discussion of the timing.

The paper will be due at 11:59 PM on Thursday, July 29.  The class paper will be 8-10 pages in length.  You will choose the topic of your paper.

You are strongly urged to submit a paper proposal beginning after first exam.  We’ll discuss this in class later.  The proposal should briefly (in a page or two at most) and clearly 1) outline your chosen topic, 2) explain why it is an interesting issue (i.e., why would anyone care about this topic?) and 3) provide a list of sources you will use in its study.

Each exam is worth 125 points as is the paper.  The exact coverage of each exam will be announced on Canvas.

The class re-grade policy will be posted on Canvas later in the quarter.  Happily, it’s rare that a Northwestern student chooses to cheat but I am required to report any evidence of cheating to the Dean’s office immediately with no discussion with the student.    No cheating is allowed in any way in this class.

Copyright: Northwestern University owns a copyright on all class material, including the lectures. No recording of classes is allowed nor is posting of class material (e.g., homework sets) online or otherwise sharing allowed.

Here is the statement from https://www.northwestern.edu/provost/policies/recording-class.html:

Unauthorized student recording of classroom or other academic activities (including advising sessions or office hours) is prohibited. Unauthorized recording is unethical and may also be a violation of University policy and state law. Students requesting the use of assistive technology as an accommodation should contact AccessibleNU. Unauthorized use of classroom recordings – including distributing or posting them – is also prohibited.  Under the University’s Copyright Policy, faculty own the copyright to instructional materials – including those resources created specifically for the purposes of instruction, such as syllabi, lectures and lecture notes, and presentations.  Students cannot copy, reproduce, display, or distribute these materials. Students who engage in unauthorized recording, unauthorized use of a recording, or unauthorized distribution of instructional materials will be referred to the appropriate University office for follow-up.

Academic Integrity: No cheating in any form is allowed in this class.  Happily, in my rich experience, very few NU students will resort to cheating.  Faculty members are required to report to the Dean violations with no discussion any instances of violations of academic integrity.  Here is Northwestern’s statement from https://www.weinberg.northwestern.edu/undergraduate/courses-registration-grades/integrity/:

The Northwestern brochure Academic Integrity: A Basic Guide contains a non-exhaustive list of behaviors that violate standards of academic integrity. These include:

● cheating,

● plagiarism,

● fabrication,

● obtaining an unfair advantage,

● aiding and abetting dishonesty,

● falsification of records and official documents,

● unauthorized access to computerized academic or administrative records or systems.

Course Topics: The plan for the course includes the following topics:

Introduction and Basics

Preferences

Risk

Happiness

Intertemporal Choice & Preference Reversals

Self Control

Fairness

Bargaining

Reputation

Trust

Behavioral Macroeconomics

Behavioral Finance

Least Importantly (IMO): In my case, you are welcome to call me by my name, which it turns out is Eric. If you prefer, Professor Schulz is OK too.  I received my PhD here at Northwestern in 1993.  Except for a leave year spent at Northwestern, I was on the faculty of Williams College from 1993-2000.  In 2000, I was delighted to be able to return to Northwestern and have very happily taught NU students ever since.  (BTW, Williamstown, in the Berkshire Mountains of western Massachusetts, is a beautiful place in to visit in summer or early autumn.  Take a trip to the coast of Maine while you’re there!)  My particular interests are applied microeconomics, money, and behavioral economics especially.

My best photographic effort to capture the scenery about a mile from where I lived in Williamstown does not adequately capture 1) the full beauty of the area in early autumn, and 2) the negative externality of the stench of a dairy farm that was across the road from here.