AM23 Fallback of LT and Real S&D Model

This was an INVERTED class. Students were asked to watch Lectures L8 and L9, linked below, before coming to class.

This lecture consists of two parts. First part of this lecture covers the issue in Labor Theory and provides empirical evidences against classical labor theory. It also address some basic issues in labor market like why supply and demand theory doesn't work in labor market and how empirical evidence negates Borjas classical theory of labor market and its basic implications. Material of this lecture is taken from L8: Labor Market.

Second part of this lecture is the critique on Varian's supply and demand model. It's proved through a simple exercise that how postulate of classical theory that there is single equilibrium price doesn't hold in reality but a wide range of prices exist in any market. It's also proved that free market outcome is not socially optimal as compare to command economy. This lecture is based on L9: S&D taught to previous class.

Sample Question for Final:

1. Explain the neoclassical theory of the labor supply function.

2. Provide empirical evidence against this theory -- there are several types of evidences.

3. Provide a real explanation of human behavior regarding jobs, which explains why human beings do not give hours to jobs by setting marginal disutility of labor equal to real wage.

Lecture was given by Maaz and relevant material is attached below.

For the THURSDAY class on 21st December, you are required to study TWO lectures from the previous classes:

Lecture L8: Seventy years of Economists Failure to Understand the Labor Market:

https://sites.google.com/site/economicsislamicapproach/l8

Lecture L9: Supply and Demand in Varian's Model of Housing Rental

https://sites.google.com/site/economicsislamicapproach/l9-s-d