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Economics Curriculum

Submitted by dfto on Wed, 07/11/2007 - 1:52pm

7.1 Understanding the Economics Curriculum

The economics curriculum is highly structured because economics is a theoretical science. As a consequence, higher level courses build on knowledge and skills developed in lower level courses. The course progression is carefully structured to ensure students have the opportunity to achieve the expectations the Department has for its majors upon graduation.

The structure of the program and the requirements for graduation can be understood by grouping the required courses in economics into five clusters. The first two clusters introduce and develop the theory tool kit required for economic analysis. The third cluster introduces and develops the statistical and econometric tool kit required to test and measure economic responses. The fourth and fifth clusters involve the application of the economists' tool kit to applied problems, developing a student's ability to think like an economist, providing opportunities and instruction in student research, and exposure to the knowledge base expected of a graduate.

These clusters are as follows:

1. Principles Courses (Economics 201 and 203) 
In Economics 201 and 203 students are introduced to the economic way of thinking, emphasizing key concepts, ideas, and institutions. Key concepts include the notions of self-interest, incentives, opportunity cost, scarcity, profits, substitution, competition, efficiency and equity, and comparative advantage. The institutions of a market economy considered include the role of private property, governments, international trade agreements and organizations, contracts, firms, money, markets and the role of prices. A discussion of the role of government introduces students to current policy issues and the relative roles of analysis and values.

2. Economic Theory and Calculus 
(Economics 301, 303, 357, and 359 and Math 249 or 251) 

At the intermediate level, there are two courses in microeconomics and two courses in macroeconomics. These courses are the core of the theory sequence in the undergraduate Major program and they provide the foundation for the field courses at the 400 and 500 level. The emphasis of the intermediate microeconomics courses is on building the basic theoretical tool kit of an economist, and involves extending and formalizing the concepts and ideas introduced in the principles courses. Of particular importance are (i) understanding the distinction between positive analysis (explaining why or what will happen) and normative analysis (arguing what resource allocation should be); (ii) understanding when and why markets work well and when they do not; and (iii) understanding the role of government in wealth creation and redistribution. Macroeconomic theory is concerned with the behaviour of aggregate data and relationships, for instance the determinants of unemployment, the rate of inflation, or the rate of economic growth. The emphasis of the intermediate macroeconomics courses is on the major macroeconomic models and learning how these models can be applied to real world macroeconomic problems, with a particular emphasis on assessing different government policies and their appropriateness.

The importance of marginal analysis—thinking about the marginal benefits and costs of an activity—and the use of logic to deduce conclusions means that calculus is a natural language of economics. As a consequence both Econ 357 and 359 have a calculus prerequisite and Math 249 or 251 is a graduation requirement.

3. Statistics and Econometrics (Stats 213 or 205 and Econ 395) 
In these courses students develop familiarity with the statistical and econometric techniques required to assess theory and to estimate the magnitude of the sensitivity of behaviour of individuals and organizations to changes in incentives.

4. Application Courses at the 300 Level 
In these courses students are introduced to different applications of economic theory. The applications are typically defined by area of interest or field. The 300-level field courses apply basic economic concepts, and introduce both majors and non-majors to the economic perspective on a range of real world problems. The emphasis in 300-level courses is typically on facts, institutions, and policy issues.

5. Application Courses at the 400 and 500 Level 
These courses use intermediate economic theory and the emphasis is less on facts and institutions and more on analysis grounded in economic theory as well as testing that analysis for its applicability. The application of intermediate theory allows a more sophisticated analysis of economic policy and the student is expected to develop some expertise and understanding of the issues (economic and policy) in the field. In these courses students typically are expected to master the art of research and become engaged in their own research projects.

Sequencing of Courses 

The logic of the program means that students are strongly encouraged to complete the theory and statistics/econometric tool kit clusters as soon as practically possible. Ideally, students would complete Econ 201 and 203, Stats 213, and Math 249 or 251 in their first year; Econ 301, 303, 357, and 359 in their second year; and Econ 395 in their third year. 7.2 Fields in Economics

The Department offers a wide range of courses in various fields of economics. Nearly all fields have courses available at the 300 level, so students can become familiar with the institutional factors and general ideas in a field before encountering a more in depth treatment at the 400 and 500 level. The choice of field courses is open. Students are likely to have different preferences: some may simply take courses in areas they find interesting, others may diversify by sampling across many different fields, and yet others may develop considerable expertise and depth by focusing on only one or two areas.

7.2 Fields in Economics

Instruction in the following fields of economics is offered by the Department of Economics: 

  • Public Economics
  • Resources and Environment
  • International and Development
  • Industrial Organization and Regulatory Economics
  • Labour
  • Quantitative
  • Monetary and Financial
  • Behavioural Economics
  • History of Economic Thought
  • Comparative Economic Systems
  • Law and Economics

 Public Economics

Every day you interact with the government in hundreds of different ways. From the time you wake up in the morning, secure in the knowledge that you were protected by government provided police and fire services, as you drive to your publicly funded university on government built roads, either in your car powered by government approved gasoline (half of the price of which is accounted for by taxes) or by publicly provided transit, to when you finish off your shift at your part time job, where almost half of the wages you earn go towards paying various taxes, you deal with the government in its various forms.

Public finance, also known as public economics, is the study of government, its activities, and its policies. As a field of economics, public finance utilizes the theories and methods of economics to examine and explain the effects of government programs and policies on the national economy, and on the everyday life and well-being of Canadians. Public finance is a very broad discipline, encompassing everything from the effects of government provided goods and services, such as police and fire protection, health care and schools; to government regulations relating to the environment, health and safety; to government transfer programs such as unemployment insurance and welfare; to governments' tax and revenue policies, such as the income tax and sales tax systems.

Public finance not only seeks to explain how government affects your life, but why. Why do government’s do some things and not others? Why is the tax system so complicated? Why do our unemployment insurance system, or gun registration system, and the myriad of other government programs look the way they do? To answer these questions, and others like them, we must bring economics together with politics. The result is the study of political economy, which applies the fundamental tools of economics and public finance to the study of politics and political decision making.

The public economics stream at the University of Calgary consists of: Econ 355 (Canadian Public Finance), Econ 379 (Health), Econ 401 (Public Sector Economics: Expenditures), Econ 403 (Public Sector Economics: Taxation), Econ 405 (Political Economy of Public Policy), and Econ 453 (Cost-Benefit Analysis).


Resources and  Environment

These fields deal with the interactions between the economy and the physical and biological world in which we live. Natural resources are broadly classified as either renewable or non-renewable resources. However, either type can be exhausted—extinction of a biological species exhausts that resource in the same way as consumption of the final barrel of oil exhausts an oil field. One of the most important issues in natural resource economics concerns what sort of economic system is most likely to yield the most benefits for society. One way to look at this is to ask why the North American bison or redwood forests have been in greater danger of extinction than cows or wheat? The answer is that someone owns the cows and the wheat, and this ownership gives them an incentive to treat this as a productive asset. Bison and redwood forests, and before them, species like the wooly mammoth and the giant sloth, were endangered because there were no secure property rights over them. Modern analogs to the wooly mammoth and the North American bison include many of the world's fisheries, clean air, and even public lands.

Agricultural economics is thus the study of how land is used as a renewable resource. Land is an input in the process that produces food and other outputs. Land is used in conjunction with other inputs such as labor, livestock, seed, fertilizers, and pesticides. In Western societies, property rights are fairly well defined for land, but this is not true in many developing countries. Thus, problems such as slash and burn practices in developing countries can be viewed as problems of lack of property rights. While farmers and ranchers form the most obvious part of the agricultural sector, there are many other industries that supply inputs to farmers or process agricultural products. Questions in agricultural economics include how should land be used, including what is the appropriate level of range and soil conservation? How do crop choices and genetic modification of crops and livestock affect farmers and consumers welfare? What is the appropriate level and method of disease and pest control through pesticides, antibiotics, and natural practices? How to deal with agricultural pollution, both in things like pesticide runoffs or waste disposal? What is the effect of the organization of agricultural distribution systems such as marketing organizations, ownership and investment in the transportation infrastructure, and market power in agricultural processing industries? What should be public policies towards agriculture subsidies, to food safety (e.g., genetic modification issues or mad-cow disease), and to disease control (e.g., hoof and mouth disease)?

Natural resource economics is the study of resources such as fisheries, timber, coal, oil and natural gas, minerals industries such as copper, gold, etc., ground and surface water, and energy sources such as hydroelectric, geothermal, nuclear, and solar. Why did the introduction of private property rights in the Pacific halibut fishery cause the time it took to harvest the entire annual allowable catch to change from about four days time to now being a fishery that is active all year round? Why did the population of Easter Island decline dramatically? Is it possible that it could ever be optimal to cause a species to become extinct? What is the best rate at which to extract a resource when that resource can only be used once? How well do markets do at achieving that rate? Do monopolies use resources too quickly or too slowly? Does it matter whether commodity prices are rising or falling over time? How should we measure resource scarcity? Should we be cutting back on greenhouse gas emissions? If so, by how much?

Environmental economics studies issues such as pollution control and the valuation of environmental goods for which markets do not exist. Questions in pollution regulation include which methods of pollution regulation have been most successful? Why did countries such as the U. S. and Canada insist upon using tradable pollution permits during the recent Kyoto negotiations? What would be the effect of Kyoto on Alberta’s energy industry? What is the economic problem with command and control regulations? Questions regarding how we place a value on the environment include what is the best method to get such information? Can we infer value from observed actions such as visits to parks? When would increasing national park land be beneficial and when would it not be beneficial? What criteria should we use to make such a decision?

The Natural Resource and Environmental stream at the University of Calgary consists of: Econ 323 (Natural Gas Markets), Econ 325 (Petroleum in the North American Economy), Econ 327 (Petroleum in the World Economy), Econ 367 (Agricultural Economics), Econ 377 (Economics of the Environment), Econ 475 (Economics of Natural Resources I), and Econ 527 (World Oil Economics). 


International and Development

International Economics studies the nature, causes and consequences of trade and investment linkages between countries. Development Economics focuses on the problems and potential of developing countries, often in an international context. Regional Economics focuses on trade and economic growth/development within a country. Three distinguishing features of regions from countries are (i) a common currency; (ii) regional, as well as national governments; and (iii) mobility of factors, both investment flows and population migration.

International Economics considers numerous issues that are vital to Canadians. Should Canada bother with international trade, or should it buck the trend toward globalization? How does trade affect the wages and other types of income of Canadians? Why do countries including Canada routinely intervene in trade flows with policies such as tariffs and export subsidies, but also negotiate trade arrangements aimed at liberalizing trade, such as the North American Free Trade Agreement and the World Trade Organization? Why do trade disputes erupt, involving a wide range of products from pork to softwood lumber, and how are they resolved? Are there unfair trade practices? How is trade liberalization likely to affect the environment in Canada and the world? What are the causes and effects of short and long term foreign investment in Canada and Canadian investment abroad? Why has the Canadian dollar depreciated relative to the US dollar in recent years? Should Canada and the US adopt a common currency? Why has Canadian productivity growth fallen short of that in the US in recent years?

The field of development economics seeks to answer why standards of living differ across countries and why countries grow, or do not grow, richer over time. It also asks what policies, if any, can help developing countries follow a path more like South Korea’s (which in a generation has made the transition from pauper to industrial power) than that followed by many African economies (the average African household consumed 20% less in 1998 than 25 years earlier). Why in the developing world do 790 million people not have enough food to eat and 1.2 billion do not have access to safe drinking water, yet the 1.2 billion people who live in the industrialized world are more likely to suffer from diseases caused by too much rather than too little food? Why in the industrialized world is there an average of 405 cars per 1000 people, but only 16 in the developing world. In the United States there are 626 telephone lines per 1000 people, in India there are 13.

The International Trade and Development stream at the University of Calgary consists of: Econ 321 (The Global Trading System), Econ 337 (Development Economics), Econ 339 (Canadian Economic Development), Econ 365 (Regional Economics), Econ 423 (International Macroeconomics), Econ 425 (International Trade), Econ 465 (Industrial Development of Alberta), and Econ 537 (Theory and Policy of Economic Development).


Industrial Organization and Regulatory Economics

Industrial organization is the study of the operation and performance of imperfectly competitive markets and the behaviour of firms in these markets. It is the field of economics concerned with markets and firms where the applicability and explanatory power of the theory of perfect competition is questionable because there is insufficient competition. Insufficient competition means that firms will have market power, the ability to profitably raise price above competitive levels.

A focus and concern with market power underpins industrial organization. What are the determinants of market power? How do firms create, utilize, and protect it? What is the role of nonprice competition (advertising, product design, research and development, etc.) in creating an environment where firms can harvest economic profits? Why is there insufficient competition? What are the implications of market power for resource allocation? The focus on market power means that industrial organization provides the intellectual foundations for competition policy based on preventing firms from creating, enhancing, or maintaining market power that leads to an inefficient allocation of resources. Regulatory economics is concerned with situations where the exercise of market power is socially undesirable. What are the economic justifications for the regulation of prices and entry by governments? What is the optimal pricing policy for a natural monopolist? What are the relative strengths and weaknesses of alternative forms of regulation?

Why are there many relatively small firms that produce wheat, yet on the other hand why is the market for pick-up trucks in North America dominated by Chrysler, Ford, and General Motors and why is sugar only sold by Rogers in Western Canada? Why are there so many brands of toothpaste and breakfast cereals? What factors make it possible for Microsoft to exercise market power and realize huge monopoly profits, but entry by other firms is mostly unsuccessful, and in the case of IBM's OS/2 significantly so? What is the reason for Air Canada's rise to monopoly? What is the rationale and effect of introducing competition and restructuring the nature of regulation in Alberta's electricity industry?

The Industrial Organization stream at the University of Calgary consists of: Econ 371 (Economic Analysis of Transportation), Econ 373 (Game Theory and Strategic Thinking for the Social Sciences), Econ 471 (Industrial Organization), Econ 477 (Regulatory Economics), and Econ 571 (Competition Policy).



Why do women earn less than men? Why are some people unable to obtain jobs? And, how can we alleviate poverty? A moment's reflection will indicate to you that a great many of these questions arise from the importance which work has upon our lives. With the exception of those who are severely disabled or independently wealthy, all of us will spend a large percentage of our lives working —either in the home or in the labour force—and most of us will derive the greatest part of our incomes from the efforts of that work. Accordingly, it is of interest to understand why some jobs offer better working conditions than others, what determines the relative wages offered to different occupations, and why workers in some regions appear to have less difficulty obtaining employment than do those in other regions. The sub-discipline within economics which deals with questions related to work and pay is called labour economics.

The Labour Economics stream at the University of Calgary consists of: Econ 431 (The Canadian Labour Market) and Econ 433 (Wage Determination).



The quantitative stream at the University of Calgary consists of courses in computational optimization, mathematical economics, and computer applications. Economic analysis frequently involves "doing the best you can with what you've got" or optimizing some "objective" subject to resource constraints. Analysis may involve a consumer, a firm, a sector of an economy or an industry. Real-world problems frequently are complex, involving many decision variables and constraints. Moreover, the constraints typically include inequalities (for example, where a resource can be used up to some ceiling amount, or where a contractual requirement must be met or exceeded) as well as equalities, and in an optimal solution some or many variables take on zero values. Such complex problems generally can be formulated and solved using computational optimization methods. These methods are highly complementary to analytical approaches adopted in economic theory and field courses. They enable implementation of, and insight into, optimal decision making on a large scale.

Similarly, spreadsheet and database methods are natural ways to operationalize many economic concepts, and these methods are the subject matter of the computer applications course. The focus is on (i) using computing power to extend the insights of theory and show how it can be applied in practice using computing power to optimize decision making and provide insight into policy formation; and (ii) the effective presentation of economic data.

The computational and computer application courses require use of microcomputers and the computer application courses have required tutorials in the Tri-Faculty Micro Lab.

The natural language of economics is mathematics and most high-level economic analysis typically uses mathematics. The advantages of using mathematics are two-fold: (i) it allows for precise communication of concepts and (ii) it is possible to use the laws of mathematics to logically distinguish between hypotheses that follow from assumptions from those that do not. The emphasis in mathematical economics is on acquiring expertise on techniques linear algebra and calculus that are commonly used by economists in economic analysis.

The Quantitative stream at the University of Calgary consists of: Econ 305 (Computational Optimization and Economic Applications I), Econ 307 (Computational Optimization and Economic Applications II), Econ 311 (Computer Applications in Economics), Econ 387 (Introduction to Mathematical Economics I), and Econ 389 (Introduction to Mathematical Economics II).


Monetary and Financial

Financial markets (such as those for stocks, bonds, and foreign exchange) are large interactive systems and tend to be highly volatile. For example, the TSE index (a measure of stock prices) climbed steadily in the 1990s, reached a peak above the 11,000 level in 2000, and then fell to below 8,000 points in early 2001. Similarly, the Canadian dollar rose in value relative to many other currencies in the early 1980s but weakened and fell in value in the 1990s. These changes in the markets affect your daily life. They affect the size of your wealth and as a result may affect your ability to consume, invest, buy foreign goods, and travel overseas.

What factors explain the significant fluctuations in the stock and bond markets and the former strength and later weakness of the Canadian dollar? Why are long periods of comparative market stability occasionally punctuated by major shifts, such as, for example, depressions, currency collapses, bank runs, and speculative bubbles? Why are the magnitudes of these shifts so unpredictable?

In Monetary and Financial Economics you will learn how financial markets and financial institutions (banks, insurance companies, mutual funds, and other institutions) work, about the role of money in the economy, why the financial system is among the most heavily regulated sectors of the economy, and why the Internet is spawning the biggest restructuring and reform in the financial services landscape in recent history. You will also learn about the tools central banks around the world use to manipulate interest rates and the money supply, the goals of monetary policy, and the strategies for attaining them.

The Monetary and Financial Economics stream at the University of Calgary consists of: Econ 341 (Money and Banking), Econ 443 (The Economics of Financial Markets), and Econ 541 (Monetary Economics).


Behavioural Economics

The economics theory of decision making assumes that individuals are rational with respect to the ways in which they process information, form beliefs, and respond to market incentives. However, there is evidence that in some instances individuals often fail to act in ways consistent with an economist's notion of rationality. Behavioural economics deals with the behaviour of individuals and particular kinds of economic decisions where their choices do not seem to be as rational as economic theory usually assumes. It incorporates concepts from psychology and sociology to help us understand how, and why, people make decisions in these circumstances, thus allowing us to build economic models which provide more complete explanations of how people behave. Paradoxes which Behavioural Economics seeks to unravel and which appear to be inconsistent from the perspective of self-interested behaviour include the following:

(i) Suppose that you are planning to drive across town to a Flames game when a huge snow storm hits. You have paid $35 for the ticket so you decide to go to the game anyway. Two weeks later the same team is in town playing the Flames and you again plan to attend the game, when another storm rages into Calgary. This time you have been given a $35 ticket by a friend, and you decide not to go. Since the gains (enjoyment of the game) and costs (driving across the city) are the same in both cases, traditional theory suggests you should make the same decision in both cases.

(ii) Many people contribute regularly through payroll savings plans to buy Government Savings Bonds paying an annual interest rate of about 5%. At the same time they carry forward unpaid balances on their credit cards costing them 18% per year. Wouldn't it be rational to pay off the credit card balances first, and then put money into savings?

(iii) Some people have violent tempers which drive them to do harmful, irrational things. But if this is the case wouldn't we expect that the process of evolution would have tended to weed out the predisposition to irrational fits of anger? Unless of course apparently irrational and uncontrollable anger may be beneficial to people in society.

(iv) Economics usually assumes that people always make the choice which is best for them. But how can this be applied to something like drug addiction? Is it sensible to talk about a rational theory of drug addiction?

The Behavioural Economics stream at the University of Calgary consists of: Econ 349 (The Economics of Social Problems) and Econ 481 (Behavioural Economics).


History of Economic Thought

The History of Economic Thought explores the lives, times and especially the ideas of important economic thinkers. In addition to tracing the development of ideas that remain central in modern economics, the field examines ideas that, well, bombed. The field encompasses the writings of the great classical economists such as Adam Smith, Thomas Malthus, David Ricardo and Karl Marx, as well as the roots of modern economics beginning with the marginal revolution and figures such as Alfred Marshall, Thorstein Veblen, Harold Innis, John Maynard Keynes and Joseph Schumpeter.

The History of Thought stream at the University of Calgary consists of Econ 483 (History of Economic Thought).


Comparative Economic Systems

The wide variations in economic institutions and the role of government in the economy across countries and time provide the subject matter of Comparative Economic Systems. Various mixed market economies are compared with each other and with command economies—where resources are allocated by bureaucrats and not markets—and transitional economies—where the traditional institutions for allocating resources are replaced with markets and which often include remnants of the former central planning system coexisting with nascent markets.

The Comparative Economic Systems stream at the University of Calgary consists of Econ 491 (Comparative Economic Systems).


Law and Economics

Economic analysis of law is an interdisciplinary set of theories that starts from the basic proposition that many (if not most) of the doctrines and institutions of the legal system are best understood and explained as efforts to promote the efficient allocation of resources. For example, whereas legal scholars normally argue that the function of tort law (the body of law that allows the victims of accidents to sue their "injurers") is to compensate victims; followers of the economic analysis of law argue that the rules of tort law can best be understood if one assumes that the goal of the courts is to deter individuals from engaging in negligent behaviour. Similarly, the economic analysis of law argues that contract law operates to enforce efficient exchanges between consenting individuals; and that criminal law is designed to minimize the sum of the costs of criminal behaviour and the costs of policing.

The Law and Economics stream at the University of Calgary consists of: Econ 345 (Economic Analysis of Law).

This section continues with Section 7.3, Recommended Options

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