Who’s Afraid of Third Year Microeconomics


A handy rule of thumb is that every new hire in an Australian economics department should be comfortably able to teach exactly two of the following courses:

  1. Third year Microeconomic Theory.
  2. Third year Macroeconomic Theory.
  3. Third year Econometric Theory.

More than two indicates that the courses may be too easy. Only one: too specialised or hard. And none–well your new hire is perhaps comfortable contributing to demography or sociology or psychology or history curricula-but not to economics.

I’m scared of teaching third year microeconomics in any of our good departments in Australia. I have taught it on and off  for almost a decade and I struggled with it early in my career. There were years when I gladly traded my class of 60 third year students for a first year class of 600. I was even willing to become the head of  our department if in return I did not have to teach third year micro.  I’m now back in the third year hot-seat but I think that this year I have found the winning formula.

You see, third year micro sits uncomfortably between a standard second year intermediate microeconomics course and our glorious fourth year Honours micro course, which is as rigours as any first year PhD Microeconomics (A) course [Princeton but with proofs, Rochester with economics] .  This year’s fourth year Honours micro is based on Paul Milgrom’s  PhD course notes and has a number of textbooks including the ubiquitous “Encyclopaedia of What Every Young Economist Should Know”  by MasColell, Winston, and Green.     One aim of third year microeconomics is to bridge the gap between Varian’s intermediate micro and our Honours micro, but in addition third year micro is likely to be the last microeconomics class taken by many of our majors who don’t do honours but complete other degrees, like law, mathematics, and engineering.

I have struggled for many years to  find a good textbook for third year microeconomics. This year I’m experimenting with Ariel Rubinstein’s textbook  Lecture Notes in; Microeconomic Theory; The Economic Agent, which can be easily downloaded from The Pirate Bay. This textbook is based on the author’s  lecture notes for the first term of a PhD microeconomics course taught at Tel Aviv, Princeton, and New York universities. Of course, I have had to extensively adapt the materials in the textbook.  The chapters in this textbook are short and to the point, the writing style is interesting and fun, but the exercises are outrageously difficult.

Pedagogically, for an undergraduate course, the textbook is also lacking  in a fundamental way. It is entirely bereft of geometric intuition. It seems that the author gave up on trying to work with LaTeX’s graphing modules. There is a long and rich geometric tradition in economics. In any third year undergraduate class every proof ought to be accompanied with a graph and in most instances a picture can entirely replace a formal proof.  Every economic concept is associated with some sort of geometric intuition and most definitions can be well explained by means of a diagram.

For this reason, most of my time this semester is being spent on articulating Rubinstein’s textbook geometrically (and of course writing exercises that are solvable in reasonable time for the chapters that we cover). And I’ve thoroughly enjoyed bringing geometric intuition to each economic idea.

An important part of an education in economics is nurturing geometric thinking. Many areas outside of economics, even those that use the same tools as us–say probability and statistics–are in my opinion lacking in terms the richness that is uniquely afforded by diagrams, graphs, and pictures. Indeed, when my late coauthor Roko Aliprantis and I wrote our highly specialised second year PhD level textbook on pointed cones we sought to imbue the narrative with geometry in keeping with a long tradition of this in economics.  In some sense the geometric culture in economics was allowed to bring some life, colour, and fullness to a very abstract area of functional analysis.

In short, when teaching third year economics remember that every idea has at least one diagram and every proof has a graphical narrative. And please when the Chair of the Teaching and Learning Committee softly and gently begs you to teach one of the core third year courses, don’t rebuff him/her/me with a “they’re not in my area.”



8 Responses to "Who’s Afraid of Third Year Microeconomics"
  1. Rabee,
    ANU is a little different to other places, in that we have an extra hour or so for honours. This means the third year course can utilize tools of second year for applications to real economic problems. We currently have Mark Harrison do this and his course is excellent. It follows the geometric tradition you outline and takes up many of the latest policy issues…

  2. Rabee,  I am a fan 😉 

    Would love to read your geometry additions. Link?

    When at CERGE-EI in Prague, I taught micro 3 for first-year grads, by and far very smart and very tooled-up kids.
    Problem was many of them had no idea about economics.

    So I  taught for about 45 minutes  “Encyclopaedia of What Every Young Economist Should Know”  by MasColell, Winston, and Green. but for the remaining 45 minutes of each class I taught experimental papers.

    There is some wonderful stuff out there (for example on the (non) equivalence of normal and extensive form – Cooper & Van Huyck JET 2003) that made students understand all those concepts. I think.

  3. Andreas, I’ll post link at the end of semester when the course is done.

    Third year micro is in desperate need of a good textbook really. I’d love a textbook that does it right for the Australian curriculum.   

  4. Arrgghhh – Mas-Collel, Whinston Green!! I had successfully repressed ANU masters micro memories for 10 years. I need to go home…

  5. Chrs,

    Mas-Collel et al is an exercise in intellectual aridity. The chapter on externalities and public goods the worst-written and least insightful piece of microeconomics on this topic I have ever read. The whole book sets the hurdles high but that’s all they are, hurdles. Valueless for those seeking to understand how an economy works and for those seeking to do applied work 

    Hence I disagree with the proposition that its “what <b>every</b> young economist should know”.  This one should be reserved for sadistic academics seeking to teach masochistic students.

  6. Harry, you miss-typed: one missing word and wrong word emphasised: Encyclopaedia of What Every Young Economist Should Know  and not What Every Young Economist Should Know   Now I don’t like all of MWG  because it is encyclopaedic. That is a very common criticism.  It does however cover material that every economist doing his/her PhD should learn. It covers these materials in a way that’s not always great, but at least it is all there in one place which can be convenient for teachers.  My preference is that students learn this material from a better textbook than MWG.   

  7. Hi Rabee (and others) Have you seen John Riley’s new text “Essential Microeconomics” – it sort of sits between MWG and Varian (though a lot closer to MWG) – it has more diagrams and a range of exercises – I used it for honours micro at LTU – and it sounds like it (or selections from it) might be suitable for what you want to do.

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