Learning Microeconomics
Reading list · Microeconomics
Learning Microeconomics
through a discussion about education
A chapter-by-chapter exploration of microeconomic ideas — using schools, colleges, and universities as the running case study. No prerequisites. An introduction to economics.
Why education?
Microeconomics is the study of how individuals and firms behave, how they make decisions and optimize when resources are limited. They have to pick between options. In economics we call this scarcity and it is the fundamental reason why economics exists. You can’t have your cake and eat it too.
And without being too meta, education is one of the most consequential arenas in which constrained resources, decision making and optimization matter. Every year, millions of students and their parents choose where to enroll, what to study, and how much debt to take on. A public elementary or a top tier private academy? A flagship public state school or an Ivy? And then there is the other side of the story – supply. Institutions decide how many students to admit, what to charge, and where to spend. Governments subsidize, regulate, and occasionally intervene.
These are not just administrative decisions. They are economic ones. In economics we say these decisions are determined by ‘incentives’, ‘constraints’, ‘information’, and market structure. And they are a perfect case study for a practical introduction to the core concepts of introductory microeconomics.
The classroom turns out to be a remarkably good place to learn about markets — not just because of what happens inside it, but because of all the economic forces that lead to a student entering a classroom to be taught by a teacher in the first place.
The goal of this series is to use education as a practical way of understanding microeconomics in action. Rather than working through abstract supply-and-demand diagrams and hoping the reader connects them to the real world, we start in the real world — in dinner discussions about schools, graduation ceremonies, school board meetings, admissions committees, tuition-setting meetings, dorm rooms, dining halls, and state education agencies — and build the economic framework from there.
What you will learn
Each chapter will introduces a core microeconomic concept through a discussion of an education sector issue. The concepts build on one another, roughly following a standard introductory microeconomics course — but the individual chapters are designed so that a reader who is somewhat familiar with basic economics can dip in at any chapter and follow along without having read everything before it.
Market structure
Why universities behave nothing like elementary schools
Supply & demand
The demographic cliff as a real-time demand shock
Human capital
College as investment — and as consumption good
Externalities
Why the private return to education is lower than the benefit to society
Price discrimination
Financial aid as third-degree price discrimination
Information
Rankings, signaling, and the credence good problem
A note on why no prior experience with economics needed
This series does not assume a prior economics course. In fact having taught Principles of Micro to more than a thousand students over the last few years, I do my best to make it even more accessible. The chapters do require a reader who is comfortable sitting with an idea for a few paragraphs before it is explained, and a curious mind who is willing to go further and follow up with the linked additional resources will be much appreciated. The goal is not to simplify microeconomics (although hopefully I do that as well), but to give these abstract concepts a concrete connection in the real world.
Where formal models exist (Becker’s human capital model, Hotelling’s spatial model, Spence’s signaling, Neoclassical model of labor), they are introduced by name and explained in plain language. Readers who want to go deeper will find pointers to the primary economic literature. Readers who just want to understand why tuition keeps rising will find that too.
How to read this series
Read sequentially if you are new to microeconomics as the units build on one another.
Jump to any chapter if you have a specific concept or question in mind – each is self-contained.
Follow the links, each chapter points to additional readings if you want to learn more.
Syllabus
The chapters
*
What is economics? Some basic concepts
Work or go to school? Opportunity cost and how time can be a scarce resource.
1
Building the demand curve from first principles — why students choose schools the way consumers choose goods, and what happens when prices, incomes, or tastes shift.
2
Supply constraints in schools and universities
educational supply is not simply the number of empty chairs; it is the institution's ability and willingness to provide a particular kind of seat at a particular cost and quality
3
Equilibrium and the demographic cliff
the demographic cliff is a persistent leftward demand shift meeting institutions whose capacity and costs cannot adjust quickly
4
Primary schools and perfect competition
perfect competition is useful not because primary schools literally satisfy it, but because the benchmark reveals exactly how assignment, geography, regulation, and differentiation shape school choice
5
Universities and monopolistic competition
most universities compete among substitutes while selling differentiated bundles of programs, place, reputation, experience, and expected outcomes
6
Spatial models – location, location, location
distance is an economic cost, and educational markets are shaped by the distance students can realistically travel in geography, time, money, and social fit
7
Mergers, acquisitions, and market concentration
education mergers can preserve services, share fixed costs, extend market power, or delay exit, and often do several of these at once
8
College as investment: human capital
college can be understood as an investment that requires costs today in exchange for uncertain benefits over many future years
9
College as a consumer good and service
college is simultaneously an investment and a bundle of present experiences, services, relationships, amenities, and identities
10
Signaling versus human capital
education can increase productivity and signal traits that employers cannot observe directly, and the two mechanisms can operate together
11
Externalities and spillovers – why education is undersupplied
when education benefits people beyond the student, private decisions can produce less education than is socially desirable
12
Market size and the geography of opportunity
some communities cannot sustain every educational option because fixed costs and thin demand make the minimum viable market larger than the local population
13
Asymmetric information in higher education
students buy education before they can fully judge its quality, while institutions know more about their programs, constraints, and outcomes than prospective students do
14
Principal-agent problems on campus
universities have many principals, many agents, incomplete contracts, and competing objectives, so accountability is necessary and inherently difficult
15
Tuition pricing and price discrimination
tuition is a posted price, a signal, and the starting point for an individualized pricing system shaped by willingness to pay, need, mission, and enrollment goals