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1 LDSP 355-01; ECON 260 Competition, Cooperation and Choice Fall 2009 Tuesday, 3:00-5:40, Jepson 108 Sandra J. Peart, Dean & Professor Jepson Hall 240 Office Hours: by appointment (best bet!); Tuesday 2:00-3:00 Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only.… It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. (Smith, Wealth of Nations) I) Course Description: Summary: We've got two quite different and yet overlapping sets of interests and training here: leadership studies and economics. For both, the central questions are the same: how do we come together with a combination of self interest and interests towards others (public interest) and act/make decisions, choose. That's the theme we'll explore throughout the semester. Why? To understand and then perhaps to influence the myriad of collective choices in which we all play a part, day in and day out. How?  The course examines these themes using two sets of texts, one quite old and the other quite recent. We begin with Smith, while considering the context of the work: the development of the modern industrial society and two extraordinarily important policy debates, on slavery and enfranchisement. Today, economists have rediscovered Smithian insights and this will be our second major focus.  Contemporary game theoretic and experimental research examines how cooperative behavior emerges in a setting where individual interests sometimes conflict with the interest of the group (or society).  The prisoners’ dilemma game will be an important cornerstone of our investigations along these lines. We consider what institutional frameworks most facilitate cooperation in a repeated prisoner’s dilemma setting: competition, repetition, punishment and reciprocity. Finally, we will look at public goods games, in which players choose to cooperate or not; and see what mechanisms facilitate cooperation in this setting.2  As such, the class will have an experimental emphasis -- so that we can in and of ourselves come to better understand some Smith's insights, the "theoretical" pieces of leadership and economics. Why economics? Economists rarely explicitly consider questions of leadership. Micro economists talk about “the individual”, a faceless and nameless agent, the “representative” consumer or firm. But economics is essentially about how individuals come together in social settings (a market place, an organization, a political entity) and make decisions that serve to determine who gets what. Why leadership? Supposing individuals come together to make such decisions in a group, what does it mean to say the group has a leader and how does the presence of such a leader affect the outcome? Why Smith? Adam Smith was the first to treat such economic interactions seriously. First and foremost a moral theorist, Smith’s great book, Theory of Moral Sentiments [1759], grounded a theory of morals on the human sentiments. In his Wealth of Nations, he stressed that we need to help the self, to be “prudent”, to save for ourselves and our families. The juxtaposition of these two great books – one focused on how we help others, we do the right thing, the other on how we look after ourselves first – presents a central question for the study of leadership and economics: how individuals, motivated by self- and other-regarding interests and connected by language and rules of action, come together and make decisions affecting the group or polity. Required texts: Austen, Jane. 1818. Persuasion. Penguin Classics (or any other edition). Smith, Adam. 1759. The Theory of Moral Sentiments. London: A. Millar, 1790. Sixth edition. http://www.econlib.org/library/Smith/smMS.html. If you want to purchase it instead (I recommend this!), get the Liberty Fund edition which is very inexpensive. It's edited by D. D. Raphael and A. L. Macfie and a 1982 reprinting (by Liberty Fund) of the 1975 Oxford edition. Smith, Adam. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations. London: Methuen and Co., Ltd Edited by. Edwin Cannan, 1904. http://www.econlib.org/library/Smith/smWN.html. If you want to purchase it instead (I recommend this!), get the Liberty Fund edition which is very inexpensive. It's edited by R. H. Campbell and A. S. Skinner, in 2 volumes, 1976 Oxford edition, reprinted in 1979 by Liberty Fund. Additional Readings: Mandeville, Bernard, Fable of the Bees (http://cepa.newschool.edu/het/profiles/mandev.htm) and http://andromeda.rutgers.edu/~jlynch/Texts/hive.html3 Malthus, T. R. Essay on Population, 1798 (1st Edition), chapter XVIII, http://www.econlib.org/library/Malthus/malPop7.html#Chapter%20XVIII Mises, Human Action, “The Market” (chapter XV), available online at http://www.econlib.org/library/Mises/HmA/msHmA.html Peart, Sandra J. and David M. Levy. 2005. The “Vanity of the Philosopher”: From Equality to Hierarchy in Post-Classical Economics. Ann Arbor: University of Michigan Press, chapter 4. Peart, Sandra and David Levy. 2009. manuscript in progress, on experts and expertise, another (with additional authors) on leadership experiments. Rapoport, Anatol, “Prisoner’s Dilemma” in Game Theory, Ed. by J. Eatwell, M. Milgate and P. Newman, pp. 199-204. Schelling, Thomas.C. 1960. The Strategy of Conflict. Cambridge, MA: Harvard University Press, pages tba. Smith, V.L., 1997. “The Two Faces of Adam Smith”. Southern Economic Journal 65: 1998. http://pages.towson.edu/jpomy/behavioralecon/twofaces.pdf There may be more! I will be constructing some of this on the fly and will add readings as I come across them. Topics and readings: Please Note: I'll put links on blackboard for the sites that are available. In general, your friend in the class will be the Liberty Fund website (www.econlib.org); and the New School website: http://cepa.newschool.edu/het/ Weeks 1-3 Topic 1: (Economic) Competition -- self and public interest; rationality; competitive markets; competition and innovation; leadership and competition Bernard Mandeville, Fable of the Bees (http://cepa.newschool.edu/het/profiles/mandev.htm) and


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