ECOS3003 Lecture Notes - Lecture 1: Arbitrage, Job Rotation, Financial Statement
Document Summary
Lecture 1: markets, organisations, roles and game theory tools. Market mechanisms determine much of economic activity, but activity within a firm is largely centrally planned. Pareto efficiency: a distribution of resources is pareto efficient if there is no alternative allocation that keeps all individuals at least as well off but makes at least one individual better off. In theory, central planners can order a pe outcome in terms of production and distribution i. e. any allocation of resources that could be achieved by the market could also be achieved by a central planner. Not incorporating the proper scientific/assembled knowledge into economic decisions can have costly implications. For economic system to be successful, it must promote the use of relevant specific knowledge in economic decisions. In centrally planned economies it is difficult to incorporate specific knowledge in decision making: difficult to aggregate specific knowledge and costly to transfer.
