Micro-economic Foundations-I: Choice and Competitive Markets, David M. Kreps, Princeton University Press, Pp 563, £27.95
KREPS, the Adams Distinguished Professor of Management at Stanford University, has written this book essentially for aspiring academic economists and those in related fields. The target audience includes first-year graduates who are taking the standard ‘theory sequence’ and would like to go more deeply into selection of foundational issues, and those students who, having taken the first-year graduate course, would like to dive deeper.
The book deals with economic foundations that existed in finished form in the mid 1970s and the reader needs to be comfortable with mathematical abstraction and a definition-proposition-proof style of presentation in order to be able to make through it. Students with a strong background in mathematics will have no problem but the others certainly would.
The book takes the reader from acquaintance with these foundational topics to something closer to mastery of the models and results connected to them. Basically microeconomics refers to a rising supply function and a falling demand function, determining an equilibrium price and quantity. In other words, the demand and supply functions arise from choices – choices by firms and by individual consumers. Hence microeconomic theory begins with choices.
As this book is not meant for the lay reader, much of what is given in the text has gone above the head of this reviewer but the main contents of the text are as follows:
* It provides a rigorous treatment of some of the basic tools of economic modelling and reasoning along with an assessment of the strengths and weaknesses of these tools.
* It complements standard tools.
* It covers choice, preference and utility; structural properties of preferences and utility functions; basics of consumer demand; revealed preferences and Afriat’s Theorem; choice under uncertainty; dynamic choice; social choice and efficiency; competitive and profit-maximising firms; expenditure minimisation; demand theory (duality methods); producer and consumer surplus; aggregation; general equilibrium; efficiency and the core; GET, time and uncertainty; and other topics.
* It features a free web-based student’s guide, which gives solutions to approximately half he problems and a limited-access instructor’s manual, which provides solutions to the rest of the problems.
* It contains appendices that review most of the specific mathematics employed in the book, including a from-first-principles treatment of dynamic programming.
(Princeton University Press, 41, William Street, Princeton, New Jersey-08540; www.oprinceon.edu)