Economics of Information and Applied Microeconomics

Information economics is a branch of microeconomic theory that studies how information and information systems affect an economy and economic decisions. Information has special characteristics. It is easy to create but hard to trust. It is easy to spread but hard to control. It influences many decisions. These special characteristics (as compared with other types of goods) complicate many standard economic theories. The economics of information has recently become of great interest to many -- possibly due to the rise of information-based companies inside the technology industry. From a game theory approach, we can loosen the usual constraints that agents have complete information to further examine the consequences of having incomplete information. This gives rise to many results which are applicable to real life situations. For example, if one does loosen the assumption, then it is possible to scrutinize the actions of agents in situations of uncertainty. It is also possible to more fully understand the impacts -- both positive and negative -- of agents seeking out or acquaring information.

Meanwhile, Applied Microeconomics includes a range of specialized areas of study, many of which draw on methods of other fields:

• Economic history examines the evolution of economy and economic institutions, using methods and techniques from the fields of economics, history, geography, sociology, psychology, and political science.
• Education ecenomics examines the organization of education provision and its implication for efficiency and equity, including the effects of education on productivity.
• Financial economics examines topics such as the structure of optimal portfolios, the rate of return of capital, econometric analysis of security returns, and corporate financial behavior.
• Health economics examines the organization of health care systems, including the role of the health care workforce and health insurance programs.
• Industrial organization examines topics such as the entry and exit of firms, innovation, and the role of trademarks. Labor economics examines wages, employment, and labor market dynamics. 
• Law and economics applies microeconomic principles to the selection and enforcement of competing legal regimes and their relative efficiencies.
• Political economy studies the role of political institutions  in determining policy outcomes.
• Public economics examines the design of government tax and expenditure policies and economic effects of these policies (e.g. social insurance programs).
• Urban economics, which examines the cgallenges faced by cities, such as sprawl, air and water pollution, traffic congestion, and poverty, draws on the fields of urban geography and sociology.

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This blog entry is made possible by Tom Wood.