Microeconomics or Dynamic Asset Pricing Theory

Microeconomics: Behavior, Institutions, and Evolution

Author: Samuel Bowles

In this novel introduction to modern microeconomic theory, Samuel Bowles returns to the classical economists' interest in the wealth and poverty of nations and people, the workings of the institutions of capitalist economies, and the coevolution of individual preferences and the structures of markets, firms, and other institutions. Using recent advances in evolutionary game theory, contract theory, behavioral experiments, and the modeling of dynamic processes, he develops a theory of how economic institutions shape individual behavior, and how institutions evolve due to individual actions, technological change, and chance events. Topics addressed include institutional innovation, social preferences, nonmarket social interactions, social capital, equilibrium unemployment, credit constraints, economic power, generalized increasing returns, disequilibrium outcomes, and path dependency.

Each chapter is introduced by empirical puzzles or historical episodes illuminated by the modeling that follows, and the book closes with sets of problems to be solved by readers seeking to improve their mathematical modeling skills. Complementing standard mathematical analysis are agent-based computer simulations of complex evolving systems that are available online so that readers can experiment with the models. Bowles concludes with the time-honored challenge of "getting the rules right," providing an evaluation of markets, states, and communities as contrasting and yet sometimes synergistic structures of governance. Must reading for students and scholars not only in economics but across the behavioral sciences, this engagingly written and compelling exposition of the new microeconomics moves thefield beyond the conventional models of prices and markets toward a more accurate and policy-relevant portrayal of human social behavior.

Table of Contents:

	Preface
	Prologue: Economics and the Wealth of Nations and People	1
Pt. I	Coordination and Conflict: Generic Social Interactions	21
Ch. 1	Social Interactions and Institutional Design	23
Ch. 2	Spontaneous Order: The Self-organization of Economic Life	56
Ch. 3	Preferences and Behavior	93
Ch. 4	Coordination Failures and Institutional Responses	127
Ch. 5	Dividing the Gains to Cooperation: Bargaining and Rent Seeking	167
Pt. II	Competition and Cooperation: The Institutions of Capitalism	203
Ch. 6	Utopian Capitalism: Decentralized Coordination	205
Ch. 7	Exchange: Contracts, Norms, and Power	233
Ch. 8	Employment, Unemployment, and Wages	267
Ch. 9	Credit Markets, Wealth Constraints, and Allocative Inefficiency	299
Ch. 10	The Institutions of a Capitalist Economy	331
Pt. III	Change: The Coevolution of Institutions and Preferences	363
Ch. 11	Institutional and Individual Evolution	365
Ch. 12	Chance, Collective Action, and Institutional Innovation	402
Ch. 13	The Coevolution of Institutions and Preferences	437
Pt. IV	Conclusion	471
Ch. 14	Economic Governance: Markets, States, and Communities	473
	Problem Sets	502
	Additional Readings	529
	Works Cited	537
	Index	571

Book review: Persian Girls or The Writer as Migrant

Dynamic Asset Pricing Theory

Author: Darrell Duffi

This is a thoroughly updated edition of Dynamic Asset Pricing Theory, the standard text for doctoral students and researchers on the theory of asset pricing and portfolio selection in multiperiod settings under uncertainty. The asset pricing results are based on the three increasingly restrictive assumptions: absence of arbitrage, single-agent optimality, and equilibrium. These results are unified with two key concepts, state prices and martingales. Technicalities are given relatively little emphasis, so as to draw connections between these concepts and to make plain the similarities between discrete and continuous-time models.

Readers will be particularly intrigued by this latest edition's most significant new feature: a chapter on corporate securities that offers alternative approaches to the valuation of corporate debt. Also, while much of the continuous-time portion of the theory is based on Brownian motion, this third edition introduces jumps--for example, those associated with Poisson arrivals--in order to accommodate surprise events such as bond defaults. Applications include term-structure models, derivative valuation, and hedging methods. Numerical methods covered include Monte Carlo simulation and finite-difference solutions for partial differential equations. Each chapter provides extensive problem exercises and notes to the literature. A system of appendixes reviews the necessary mathematical concepts. And references have been updated throughout. With this new edition, Dynamic Asset Pricing Theory remains at the head of the field.