Microeconomic Theory and Public Policy
Students master and apply economic theory, causal inference, and contemporary evidence to analyze policy challenges. These include the effect of minimum wages on employment, the value of healthcare, the power and limitations of free markets, the benefits and costs of international trade, the causes and remedies of externalities, the consequences of adverse selection in insurance markets, the impacts of labor market discrimination, and the application of machine learning to supplement to decision-making. Class attendance and participation are mandatory. Students taking graduate version complete additional assignments.
Fall 2025
14.03/003 is a fast-paced, interactive introduction to modern applied economics as it is lived, breathed, and practiced by academic researchers and policy analysts. You will master core tools of applied theory while learning how to frame and test causal relationships using research design, experimentation, and data analysis. In class and in the problem sets, you will read and we will discuss classic and contemporary research studies that put these pieces together.
Readings
- [MM] Chapter 5, “Differences-in-Differences.”
- [IM] Chapter 10.1 and 10.2, “Monopoly”; Mathematical appendix.
- [MM] Chapter 1, “Randomized Trials.”
- [IM] Chapter 3, “Preferences.”
- [IM] Chapter 4, “Individual Demands.”
- [IM] Chapter 5.1, “Consumer Comparative Statics: Price and Income Consumption Curves.”
- [IM] Chapter 5.3, “Consumer Comparative Statics: Decomposing Price Effects.”
- [IM] Chapter 6, “Exchange Economies.”
- [MM] Chapter 3, “Instrumental Variables.”
- Schmalensee, Richard, and Robert N. Stavins. “ The SO 2 Allowance Trading System: The Ironic History of a Grand Policy Experiment .” Journal of Economic Perspectives 27, no. 1 (2013): 103–122.
- Bergstrom, Theodore. “Lecture 5: Externalities.” UC Santa Barbara, March 2002.
- [IM] Chapter 14, “Externalities.”
- [IM] Chapter 11.4, “Pareto Efficient Risk Sharing.”
- [IM] Chapter 12, “Game Theory,” and Chapter 15, “Asymmetric Information.”
Prerequisites & course information
Subject meets with 14.03 Prereq: 14.01 or permission of instructor G (Fall, Spring) 4-0-8 units
Sources
- Course catalogue ↗2026–2027
- MIT OpenCourseWare ↗Fall 2025
- MIT OCW calendar ↗
- MIT OCW readings ↗
- MIT OCW syllabus ↗
- Historical MIT OpenCourseWare offering. Named reading entries and schedule topics are automatically extracted from the linked source pages.