Class 02 | Advanced Microeconomics | Duncan Foley

Advanced Microeconomics: Information and Behavior in Political Economy | Lecture 02 Entropy Constrained Behavior | Duncan Foley | Leo Model Professor of Economics at the New School for Social Research (http://www.newschool.edu/nssr) | Spring 2016 Class 02 Entropy-constrained behavior. The central point of discussion in the second lecture is the basic economic framework of human behavior developed based on the entropy-constrained theory and its advantages over the marginal utility theory of economics. The lecture begins pointing out the significant impact of the entropy theory on a variety of scientific fields. Moving on, the focus shifts to the economic approach and the audience is presented with two examples of the behavior model. In the first case an individual maximizes her pay-off function through a single choice, whereas, in the second case the payoff maximization occurs via a set of mixed actions. Afterwards, the utilitarian theory is contrasted to the mainstream marginal utility theory. The former advocates that the welfare is comparable among individuals, in contrast to the latter which argues that the interpersonal comparisons of welfare are impossible due to the inherently subjective aspects of welfare. This raises the ground to legitimately taxation of the richest people, in case that people approximately have the same temperature. The second class ends with some simple examples and applications of this theory.