If you are considering studying Economics and/or related courses as a General Course student in 2016/17, please read through the following background guidance regarding the prerequisites and the expected level of maths for these courses.
PLEASE NOTE: A number of economics courses require that you obtain permission to take them from the relevant course convenor. This is done once you have arrived at LSE.
You should note that the economics courses taught at LSE are more mathematically advanced, rigorous and demanding than those on offer at many other universities. Students studying Economics at LSE will have entered the programme with A* grades in A-level Maths or a 7 in Higher Level Maths from the International Baccalaureate.
In their first year, students studying Economics at LSE will take three compulsory
courses:
• a year long introductory economics course (covering micro and macro that assumes a basic competency in calculus);
• a year long maths course (that assumes prior knowledge of single variable calculus and covers multivariate calculus with an ability to do differential and integral calculus including coverage of partial derivatives and linear algebra); and
• a year long statistics course (that covers statistical methods and techniques and probability theory).
These are tough, demanding, courses and one-semester versions of them will not provide an adequate basis for handling most 200 and 300 level economics courses.
More importantly, a comprehensive understanding of the material covered in these courses is the assumed background for the three compulsory 2nd year courses – EC201 Microeconomic Principles, EC210 Macroeconomic Principles, and EC220 Introduction to Econometrics.
The compulsory 2nd year courses are all full year courses. All are quantitatively based. For example, EC201 Microeconomic Principles assumes that you can comfortably do partial derivatives and use Lagrange Multipliers at the very start of the course.
These courses are the assumed backdrop for most of the 300 level Economics courses on offer at LSE. When selecting 300 level Economics courses that list Micro, Macro and possibly Econometrics as prerequisites, you need to keep in mind that it is the LSE version of these courses that is being referred to. If the micro and macro courses that you have taken at your home university are not mathematically based and if you do not have a solid background in multivariate calculus, linear algebra and a good introduction to statistics and probability theory, you may find yourself at a distinct disadvantage when taking some of the 300 level Economics courses.
It is often the case that General Course students understand the ideas and concepts being covered in the 300 level courses but that they struggle with the technical side of the courses when attempting to successfully complete problem sets and when answering questions in the exams.
Though many of the 300 level course guides will list ‘textbooks’, very few teach on the basis of textbooks. Instead, they tend to rely on journal articles at the forefront of theoretical and applied research in economics. The textbooks are ‘background reading’ that are indicative of the approach and scope of the course.
Finally, the failure rates for the courses listed below are a five year running average. It is worth keeping in mind that the overall failure rate for General Course students in the end of year exams is about 5% - and this is made up almost entirely of the quantitative courses listed below.
EC102 Economics B
• More rigorous than introductory courses at most universities
• You will need an introductory level calculus course
• The General Course student failure rate for this course is about 9%.
EC201 Microeconomic Principles I
• This is a very demanding, calculus based microeconomics course
• At least one semester of intermediate microeconomics is required
• A good grade in a serious single variable calculus course is required
• The course assumes that you are comfortable using linear algebra and single variable calculus, and that you understand and can find partial derivatives and have some experience with unconstrained and constrained optimisation of multivariate functions, including the use of Lagrange Multipliers.
• The core text book is: Perloff, Microeconomics theory and application with calculus 2nd ed (Pearson 2011)
• More policy and applications oriented than EC202
• Note: the failure rate amongst General Course students taking this course is
relatively high at about 24%.
• Access to this course requires permission of the course convenor
• An alternative microeconomics course is MG207 Economics for Management
EC202 Microeconomic Principles II (this is close to graduate level)
• Two semesters of microeconomics including an intermediate level course is required
• A good grade in a serious multivariate calculus course is expected (differential calculus is much more important than sophisticated integration)
• At least one semester of linear algebra is required
• Oriented towards formal proofs and mathematical analysis: for those who enjoy maths in economics
• Extensive use of partial differentiation, total differentials and the chain rule for partial derivatives
• Makes extensive use of vector notation – e.g. the addition of vectors, multiplication of vector by a scalar
• Familiarity with the concepts of continuity and of the convexity of sets is helpful
• The number of General Course students taking this course each year is small as few have the necessary technical background. The failure rate is about 15%.
•Access to this course requires permission of the course convenor.
EC210 Macroeconomic Principles
• Two semesters of macroeconomics, including intermediate macro, is an advantage
• A good grade in a serious single variable calculus course and some knowledge of partial derivatives is expected
• The General Course student failure rate for this course is on average 27%
EC220 Introduction to Econometrics
• Two semesters of economics, including intermediate micro, is required
• Two semesters of statistics, including rigorous coverage of probability theory, is required
• A good grade in a serious multivariate differential calculus course and some knowledge of partial derivatives is expected
• The General Course student failure rate for this course is on average about 18% but has been as high as 40% in some years.
• Access to this course requires permission of the course convenor
• Those General Course students wishing to study econometrics but without the above background should register for MG205 Learning from Quantitative Data
• See the separate guidance note on ‘Studying econometrics at LSE’ on the General Course web pages.
EC221 Principles of Econometrics (this is close to graduate level)
• Two semesters of economics including intermediate micro is required
• Very good grades in a serious multivariate calculus course is expected (differential calculus is much more important than sophisticated integration)
• Linear algebra is required (matrices and vectors, but abstract vector spaces are not required)
• A serious introductory statistics course is beneficial
• A more technical approach than EC220, it concentrates more on formal proofs
• The number of General Course students taking this course is small as few have the technical skills to handle the material.
• The failure rate for this course is on average 19%
• Access to this course requires permission of the course convenor
• See the separate guidance note on ‘Studying econometrics at LSE’
EC230 Economics in Public Policy
• Introductory level courses in micro and macro are required
• Covers the economic dimensions of a range of contemporary public policy issues, such as global growth and income inequality; shifts in global economic activity; tensions in international financial systems, and global climate change
• Minimal formal economics or mathematical background is assumed
• This is the most popular Economics course for General Course students and there is a very good track record in the exam performance.
• NOTE: if the economic courses you have taken at your home university do not have a strong quantitative component then this is an appropriate economics course for you to choose. The failure rate is about 1%.
EC301 Advanced Economic Analysis
• Two semesters of both micro and macro are required
• A more macro oriented course
• Covers contract theory, the role of incentives and the methods used to model these; theoretical determinants of current account and international portfolio diversification and the causes of large global imbalances, and the theory and evidence surrounding the causes, consequences and responses to financial crises from a macroeconomic perspective
• A serious multivariate calculus course (differential calculus is much more important than sophisticated integration)
• The track record of General Course students taking this course is relatively good, largely because the cohort is self-selecting. Those who lack the technical skills drop the course relatively early. Nevertheless, the failure rate is still high at around 12%
EC302 Political Economy
• Two semesters of both micro and macro are required
• Requires a strong background in game theory
• Covers theoretical models of political economy including social choice theory and preference aggregation; political economy of income distribution; comparative electoral systems, turnout and strategic voting
• Textbook: K A Shepsle and M S Bonchek, Analysing Politics, Rationality, Behaviour
and Institutions (Norton)
• The failure rate for the course is about 10%
EC303 Economic Policy Analysis
• Two semesters of both micro and macro are required
• An ‘applied’ economics course is necessary
• Covers economic analysis of contemporary policy issues: globalisation; trade policy; global imbalances; tax policies; monetary policy and exchange rate frameworks; financial integration and currency unions; financial crises and policy responses
• No single textbook but P Krugman and M Obstfeld, International Economics: Theory and Policy (Pearson, 2010) provides useful coverage of many of the topics
• After EC230 this is the next most frequently taken Economics course for General Course students.
• The track record of General Course students taking this course is relatively good with a failure rate of about 5%.
EC307 Development Economics
• Two semesters of both micro and macro are required
• Two semesters of econometrics are expected
• Covers: main theories on the determinants of growth; economic institutions in developing countries; the failure of markets and informal responses to these in the allocation and distribution of resources
• While the course has a strong applied focus, for each topic testable implications are derived from theory and subject to econometric testing to examine the robustness of results and draw out policy conclusions
• Textbooks: A Banerjee and E Duflo, Poor Economics, Public Affairs (2011) and D
Ray Development Economics (Princeton, 1998).
• But this is not a ‘textbook’ course. It is an excellent course for motivated students already strongly drawn to issues of development economics. However, it has a very heavy reading load, so students need to be willing to read a great deal without considering this ‘work’.
• For those students with the appropriate background, the overall track record is relatively good. However, many of those who take the course without a solid background in econometrics have tended to struggle with the technical side and performed badly on the end of year exam.
• The General Course failure rate for this course is on average 24%
EC309 Econometric Theory
• This course is pitched at the level of an advanced graduate course
• At least two semesters of micro and macro are required
• Two semesters of econometrics at the level of EC221, rather than EC220, are expected
• Excellent grades in serious courses in linear algebra, multivariate calculus, statistics are necessary
• Covers: asymptotic theory of estimation and inference; large sample theory; linear regression models; testing hypotheses and model specifications; estimation of nonlinear models; systems of equations, and time series analysis
• Textbook: R Davidson and J G MacKinnon, Econometric Theory and Methods (OUP:
2004)
• Only a very small number of General Course students have the relevant background to handle the course material. Those that do have a relevant background manage to do OK, but those who don’t perform poorly.
EC310 Behavioural Economics
• At least two semesters of intermediate micro equivalent to the material covered in
EC202 is required
• Fluency in multivariate differential calculus and partial derivatives is essential
• Some knowledge of analysis and set theory is advised.
• A course for those who find that handling economics mathematically comes easily.
• A course of two halves: the first will focus on departures from neoclassical preferences; the second on departures from rational expectations
• Covers: Reference Dependent Preferences and Loss Aversion; Social Preferences; Hyperbolic Discounting; Naiveté and Self-Control; Projection Bias; Happiness and Adaptation; Heuristics and Biases; Inattention and Shrouding; Nudging and Framing, and Behavioural Welfare Analysis
• NOTE: The course entails the use of formal economic models in the analysis of policy issues and cases
• Textbook: W Congdon, J Kling and S Mullainathan. Policy and Choice: Public
Finance Through the Lens of Behavioral Economics (Brookings Institution Press:
Washington: 2011)
• Access to this course requires permission of the course convenor
• The failure rate for General Course students taking this course is very high at 45%
EC311 History of Economics: How Theories Change
• Two semesters of micro and macro are required
• The course examines the ways in which economics has developed from the Mercantilists of the 17th century to the Neoclassical thinking of the later 20th century. It makes use of original texts in order to understand how economists of the past approached perennial questions (for example, about the sources of growth or the
role of money) and resolved them in the context of the scientific thinking and the economic conditions of their own time and place
• Textbooks: D Colander and H Landreth, History of Economic Thought and R L Heilbroner, The Worldly Philosophers
• Minimal formal economics or mathematical background is assumed
• This course has a heavy reading load.
• Access to this course requires permission of the course convenor as the course is capped at 80 students
• NOTE: if the economic courses you have taken at your home university do not have a strong quantitative component then this is an appropriate economics course for you to choose. The failure rate is about 1%.
• An alternative to this course is the half unit course IR354 Governing International Political Economy (see the information on Non-Technical Economic course option).
EC313 Industrial Economics
• At least two semesters of calculus based microeconomics is required
• Covers: analytical models of the structure, conduct, and performance of firms; monopoly; price discrimination; vertical and horizontal restraints; transactions costs and contract design, and game theoretic models of firm behaviour, collusive arrangements, product differentiation, and strategic entry deterrence.
• Textbook: Church and Ware, Industrial Organisation and Tirole, Theory of Industrial Organisation
• NOTE: The course entails the use of formal economic models in the analysis of policy issues and case studies.
• The overall track record of General Course students taking this course is relatively poor. The reason for this is that while they may understand the concepts and ideas being covered in the course, they lack the technical skills needed to cope with the formal modelling elements and have tended to perform poorly on the end of year
exam.
• The failure rate for General Course students averages 17%
EC315 International Economics
• At least two semesters of micro (calculus based) and macro required
• This is a course of two halves. The first covers international trade issues – patterns
of inter-and intra-industry trade flow; causes and factors of trade flows; gains and
losses from trade; implications for debates on trade liberalism vs protectionism. The
second covers international macroeconomics – causes and consequences of global
imbalance of payments; exchange rates, money and prices in open economies;
exchange rate regimes; causes and consequences of debt, default, speculative
attacks and financial crises
• Textbooks: L Copeland Exchange Rates and International Finance 3rd ed; P
Krugman, M Melitz and M Obstfeld International Economics: Theory and Policy, 8th
ed; M Obstfeld and K Rogoff Foundations of International Macroeconomics
• The overall track record of General Course students taking this course is relatively
poor with a high failure rate on the end of year exam. While some students do
perform well, the overwhelming majority seem to lack the technical skills necessary
to cope with the problem sets covered in the classes and the end of year exam.
• The General Course failure rate for this course is on average 19% though it has been as high as 25%.
EC317 Labour Economics
• At least two semesters of micro (calculus based) and macro are required
• Two semesters of econometrics is expected
• Covers: microeconomic models of the institutions and behaviour of labour markets; labour supply and demand; wage determination under different institutional settings, and use of microeconomic models to evaluate labour market policies, such as the minimum wage, welfare reform, or restricting immigration.
• NOTE: The course entails the use of formal economic models in the analysis of labour market issues.
• Textbook: G Borjas, Labor Economics
• The overall track record of General Course students taking this course is relatively good. This is because the cohort of students is very small (about 2 per year) and tends to be self-selecting given the microeconomic and econometric focus of the course. General Course students without a strong micro and econometrics background tend to struggle with the more technical aspects of the course, particularly on the problem sets and in the exam.
EC319 Economic Theory and Its Applications
• Two semesters of calculus-based intermediate microeconomics is required
• Fluency in multivariate calculus is essential
• One semester of linear algebra is necessary
• This course is mainly theoretical making use of formal models
• It is a course of two halves. The first covers non-cooperative and cooperative/coalitional game theory and models of bargaining. The second covers auction theory.
• Textbook: M Osborne, An Introduction to Game Theory (OUP: 2003) and V Krishna Auction Theory (2002)
• NOTE: Because of its formal modelling approach, this course tends to attract only 1 or 2 General Course students in any given year. Those who like and are good at such formal modelling can do reasonably well on the course. Others would find themselves struggling to keep up. The failure rate is about 12%.
EC321 Monetary Economics
• At least two semesters each of micro (calculus based) and macro are required
• The course entails a mixture of essays and problem sets
• Covers: the nature and function of money; classical monetary theory, neutrality and inflation; theories of the demand for money; the banking system, financial
intermediation and the determinants of the money supply; the transmission mechanism of monetary policy, including theories of nominal rigidities and the Phillips curve; the term structure of interest rates; the theory and practice of monetary policy and the design of optimal policies; monetary policy strategies, including inflation targeting and Taylor rules; policymaking in an uncertain environment; the interaction between monetary and fiscal policy and the arguments for central bank independence; quantitative easing and unconventional policy.
• Textbooks: M Lewis and P Mizen, Monetary Economics and C Goodhart, Money, Information and Uncertainty 2nd ed
• This is not a ‘textbook’ course and entails a very heavy reading load, so students need to be willing to read a great deal without considering this ‘work’.
• NOTE: The overall track record of General Course students on this course is very poor with a high failure rate of 23%
• While General Course students understand the general ideas, concepts and arguments covered in the course, they tend to struggle with the technical side, particularly in the problems set in the end of year exam.
•Access to this course requires permission of the course convenor
EC325 Public Economics
• At least two semesters of calculus-based intermediate micro are required
• A semester of econometrics is desirable
• Covers: theoretical and applied public economics; issues of equity and efficiency and alternative theories of the role of the state; behavioural economics and its implications for welfare analysis as well as for savings and pension policy; models of public goods and externalities, including environmental policy; issues of tax incidence and tax evasion; income inequality, poverty alleviation and the role of welfare programmes in theory and in practice; health and education policy; the effects of taxes and transfers on labour supply and migration; incomes and behavioural responses at the top of the income distribution; the optimal taxation of commodities and incomes, and current topics in public finance.
• Textbook: J Gruber, Public Finance and Public Policy 3rd ed, 3rd (Worth Publishers: 2011)
• NOTE: It is useful to be able to read and consume ‘econometrics’ based research but it is not necessary to ‘do’ econometrics in order to succeed on this course.
• The overall track record of General Course students taking this course is relatively good with a failure rate of about 4%.
EC 331 Quantitative Economics Project
• This course is not available to General Course students.
EC 333 Problems of Applied Econometrics
• At least two semesters of intermediate calculus based micro and macro are required
• Two semesters of econometrics is expected
• Uses both analytical and computer-based (data) exercises in analysing a wide
variety of econometric problems
• Covers: analysis of experimental and non-experimental data; identification of average treatment effects and local average treatment effects; weak instrument problems; quantile regressions; regression discontinuity; analysis of panel data of both static and dynamic models, including fixed and random effects; measurement error in panel contexts; instrumental variable regression, and generalized method of moments.
• Textbooks: Angrist and Pischke, Mostly Harmless Econometrics, Hsiao, The Analysis of Panel Data and Econometrics
• NOTE: The econometrics prerequisite and the formal modelling approach of the course means that only 1 or 2 General Course students have the appropriate technical background to be able to take this course in any given year. Given the self-selecting nature of this cohort, their performance tends to be relatively good.
Updated July 2016