· Contents Introduction iii First Year 1 Microeconomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Macroeconomics

Contents

Introduction iii

First Year 1Microeconomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Macroeconomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Calculus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Information Computer Systems . . . . . . . . . . . . . . . . . . . . 31Intellectual History of Europe . . . . . . . . . . . . . . . . . . . . . 35English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Second Year 63Microeconomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Macroeconomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72Mathematics for Economists . . . . . . . . . . . . . . . . . . . . . . 82Linear Algebra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Elements of Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . 94Methods of Optimization . . . . . . . . . . . . . . . . . . . . . . . . 100Principles of Sociology . . . . . . . . . . . . . . . . . . . . . . . . . 104Introduction to Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 121Philosophy and Methodology of Social Sciences . . . . . . . . . . . . 128English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132Introduction to Business and Management . . . . . . . . . . . . . . 135Principles of Banking and Finance . . . . . . . . . . . . . . . . . . . 145Research Seminar in Economic Theory . . . . . . . . . . . . . . . . 152

Third Year 157Microeconomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157Macroeconomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167Principles of Accounting . . . . . . . . . . . . . . . . . . . . . . . . 176Econometrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186Public Sector Economics . . . . . . . . . . . . . . . . . . . . . . . . 194History of Economic Thought . . . . . . . . . . . . . . . . . . . . . 200Political Science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

i

ii CONTENTS

Economic History . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217Further Mathematics . . . . . . . . . . . . . . . . . . . . . . . . . . 232

Fourth Year 239Industrial Organization . . . . . . . . . . . . . . . . . . . . . . . . . 239Corporate Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . 251Monetary Economics . . . . . . . . . . . . . . . . . . . . . . . . . . 264International Economics . . . . . . . . . . . . . . . . . . . . . . . . 272Institutional Economics . . . . . . . . . . . . . . . . . . . . . . . . . 281Economics of Transition . . . . . . . . . . . . . . . . . . . . . . . . 292Time Series Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 300Banking Operations and Risk Analysis . . . . . . . . . . . . . . . . 305Organisation Theory . . . . . . . . . . . . . . . . . . . . . . . . . . 311

Introduction

This edition presents the collection of syllabi for the courses taught at the Inter-national College of Economics and Finance (ICEF), State University � HigherSchool of Economics (SU�HSE), to the students on the bachelors' programmein the 2007�2008 academic year.

ICEF was established in 1997 as an autonomous department of SU�HSEwith the assistance of the London School of Economics and Political Science(LSE). ICEF o�ers Russian students a unique chance to obtain two degrees:Russian BSc in Economics from the SU�HSE and English BSc in Bankingand Finance, Economics and Management, Economics, Economics and Financefrom the University of London.

The ICEF curriculum has been approved by the SU�HSE Academic Counciland the ICEF International Academic Committee, which includes LSE and SU�HSE representatives: R.Jackman, A.Witztum (LSE), Y.Kuzminov, V.Radaev,S.Yakovlev, O.Zamkov (SU�HSE).

The content of a typical syllabus approved by the International AcademicCommittee includes:

• Course description

• Course objectives

• Methods and forms of study used in the course

• Reading list (Main and Supplementary reading)

• Web�resources

• Grade determination

• Course outline

• Teaching hours for topics and activities.

While developing this edition, the recommendations of ICEF TeachingMethods workshops were taken into account, reading lists and web�resourceswere updated. It is intended for students and teachers of ICEF and other SU�HSE departments, and it can also be used by those who wish to get acquainted

iii

iv INTRODUCTION

with modern syllabi in the �eld of Economics. Additional information aboutthe courses run at ICEF can be obtained at www.hse.ru/icef/.

First Year

Microeconomics

Lecturer: Maxim I. NikitinClassteachers: Maria V. Boyko, Victoria V. Dobrynskaya, Vladimir A. Bragin

Course description

The Introductory Economics (Microeconomics�1) is a one�semester course de-signed to prepare students for the Advanced Placement Test (APT). The courseis taught in English, but the main ideas and concepts are explained in Russianas well.

Course objectives

The purpose of the course is to give students a thorough understanding ofthe principles of economics in application to individual decision makers, bothconsumers and �rms. We will study demand, supply and equilibrium in goodsand factor markets, the e�ciency of the market economy and the potential roleof government intervention in the economy.

Methods

The following methods and forms of study are used in the course:

• lectures (2 hours a week)

• classes (2 hours a week, the main problems of homework assignments arediscussed)

• written homework assignments (1 per week, marked by class teachers)

• supplementary preparation for APT test (2 hours a week in the secondsemester)

• o�ce hours/consultations

1

2 FIRST YEAR

• self-study.

In total the course includes 32 hours of lectures, 32 hours of classes; 24 hoursof APT test preparation.

Main Reading

1. Begg, D., R.Dornbusch and S.Fischer (BDF). Economics. Seventh edi-tion. McGraw Hill. 2003. The chapters from BDF covered in the courseare indicated in the Course Outline.

Supplementary Reading

1. Mankiw, N.G. Principles of Economics. The Dryden Press, 1998.Ðóññêèé ïåðåâîä: Ìýíêüþ Í.Ã. Ïðèíöèïû Ýêîíîìèêñ. Ïèòåð, Ñ.�Ïåòåðáóðã, 1999.

2. Ward D., and D.Begg. Students Workbook for Economics. Seventh Edi-tion. McGraw Hill. 2003.

3. Íóðååâ Ð.Ì. Êóðñ ìèêðîýêîíîìèêè. Ó÷åáíèê äëÿ âóçîâ. 2 èçä.Ì.: ÍÎÐÌÀ�ÈÍÔÐÀ-Ì, 2001�2004.

4. Ñàìóýëüñîí Ï., Íîðäõàóñ Â. Ýêîíîìèêà. Áèíîì�ÊíîÐóñ, Ìîñêâà,1997. (Ðóññêèé ïåðåâîä 15�ãî Èçäàíèÿ Economics by P.Samuelson).

5. Ñáîðíèê çàäà÷ ïî ìèêðîýêîíîìèêå ê �Êóðñó ìèêðîýêîíîìèêè�Ð. Ì. Íóðååâà. Ì.: ÍÎÐÌÀ�ÈÍÔÐÀ�Ì, 2002�2004.

6. Ôðàíê Ð. Ìèêðîýêîíîìèêà è ïîâåäåíèå. Ì.: Èíôðà-Ì, 2003.

Internet Resources

1. http://mief.hse.ru

2. http://highered.mcgraw�hill.com/sites/0077099478/student_view0/

3. http://www.collegeboard.com/student/testing/ap/economics_micro/samp.html?micro

Grade determination

The mid�year grade is determined by the Winter (mid�year) exam (50%), mid�term (Mock) test (30%), homework assignments (15%), and class performance(5%). The Winter exam in set in AP format and graded in accordance with

MICROECONOMICS 3

APT rules, on a 100�point scale and from 1 to 5. In April students sit thesecond Mock test in APT format and graded by local teachers.

In the end of the year students sit external APT exam which is graded byAP Board from 1 to 5. This grade is used as enter grade to the University ofLondon external programme. It also gives 50% of �nal ICEF grade, while 30%is determined by the mid�year grade and the other 20% is determined by thesecond Mock test.

Course Outline

1. Introduction to EconomicsDe�nition of Economics. Economic needs and economic goods. Scarcity.

Economic choice. Opportunity cost. Production possibility frontier. Com-parative advantage. Specialisation and exchange of goods. Economic Agents.Circular Flow of Goods and Money. Economic systems. Market economy.Command economy. Mixed economy. Microeconomics and Macroeconomics.Positive and normative economics.

BDF, Ch.1

2. Economic Models and AnalysisInstruments of economic analysis. Economic Data. Nominal and Real vari-

ables. Measuring changes in economic variables. Concept of a model. Usinggraphs. Types of microeconomic models. Testing models. Economic theoryand economic policy.

BDF, Ch.2

3. Supply and DemandMarket. Demand curve and its determinants. Supply curve and its deter-

minants. Equilibrium. Producer surplus and consumer surplus. De�cit andsurplus. Free market and price control.

BDF, Ch.3

4. ElasticityPrice elasticity of demand. Point and arch elasticity. Elasticity of Demand

and Total Revenue of the �rm. Cross-Price Elasticity. Price and Income Elas-ticity of Demand. Application of elasticity theory. Taxation.

BDF, Ch.4

5. Consumer ChoiceTotal and marginal utility. Marginal utility and paradox of water and di-

amond. Consumer choice. Preferences. Indi�erence curves. Marginal rate ofsubstitution. Budget constraint. Adjustment to price and income changes: in-come e�ect and substitution e�ect. Normal and inferior goods. Substitutes andcomplements. In-kind and money subsidies.

4 FIRST YEAR

BDF, Ch.5

6. Producer Theory: Revenues and CostsThe �rm's production decisions. Elements of accounting. Revenues, costs

and pro�ts. Total, average and marginal revenues. Short run and long run.Fixed and variable costs. Total, average and marginal costs. Pro�t maximiza-tion.

BDF, Ch.6,7

7. Short-Run and Long-Run. Perfect competitionCosts in short run and in long run. Firm's short run and long run output

decisions. Economies and diseconomies of scale. Firm's supply and industrysupply. Perfect competition. Its advantages and disadvantages.

BDF, Ch.8

8. MonopolyTypes of market structures. Features of monopoly. Pro�t maximisation

under monopoly. Comparison with perfect competition: output and price.Social cost of a monopoly. Dead�weight loss. Regulation of monopoly. NaturalMonopoly. Regulation of natural monopoly. Price discrimination. Industrialpolicy.

BDF, Ch.9, 17, 18

9. Monopolistic Competition and OligopolyFeatures of monopolistic competition. Comparison with perfect competi-

tion: output and price. Advertising. Features of oligopoly. Price wars andcollusion. Game theory and interdependence. Prisoner's dilemma. Kinked de-mand curve. Cartels. Barriers to entry. Other forms of imperfect competition.New theory of industrial markets.

BDF, Ch.9

10. Factor Markets: Labour MarketFactors (inputs) of production. Derived demand for factors. Demand and

supply of labour. Equilibrium in labour market. Trade unions. Minimumwages. Wages and unemployment. Di�erences in wages, economic rent. Humancapital. Investments in human capital: costs and revenues. Expected returnsfrom studying in developed and developing countries. Signaling. Discriminationin the labour market.

BDF, Ch.10, 11

11. Factor Markets: Market for Capital and LandPhysical capital. Demand and supply of capital. Equilibrium in capital

market. Net present value and discounting. Interest rate. Choice under un-certainty. Individual attitudes to risk. Risk diversi�cation. Uncertainty andassets returns. Land and rent. Price of land. Income Distribution.

BDF, Ch.12, 13

MICROECONOMICS 5

12. Introduction to Welfare Economics: General EquilibriumPartial and general equilibrium. Backward induction. Gains from trade.

Contract curve. Production possibility curve and e�ective resource allocation.Consumption and allocation of resources. General equilibrium and welfare eco-nomics. Perfect competition and Pareto�e�ciency. Equity and e�ciency. Dis-tortions and the second best.

BDF, Ch.15

13. Market Failures. Externalities and Public GoodsMarket failure. Externalities. Property rights and transaction costs. Public

goods. Free�rider problem. Taxation and government expenditures. Scope forgovernment intervention. Government failure.

BDF, Ch.14�16

Distribution of hours for topics and types of work

No Topic Total Lectures Classes Self-study

1. Introduction to Microeconomics 6 2 2 22. Economic models and analysis 6 2 2 23. Supply and Demand 6 2 2 24. Elastisity 6 2 2 25. Consumer choice 12 4 4 46. Produce theory: Revenues and

Costs8 2 2 4

7. The �rm in Perfect competition 10 2 4 48. Monopoly 8 2 2 49. Monopolistic competition and

Oligopoly12 4 4 4

10. Factor markets: Labour market 10 4 2 411. Factor markets: Market for

Capital and Land8 2 2 4

12. Introduction to Welfareeconomics: General equilibrium

8 2 2 4

13. Market failures. Externalitiesand Public goods

8 2 2 4

Total: 108 32 32 44

6 FIRST YEAR

Macroeconomics

Lecturer: Tatiana Yu. MatveevaClassteachers: Tatiana Yu. Matveeva, Maria V. Boiko, Vladimir A. BraginComputer classes teacher: Victoria Dobrynskaya

Course description

The Introductory Economics (Macroeconomics�1) is a one�semester course de-signed as to prepare students to the Advanced Placement Test (APT). Thecourse is taught in English. The students are also studying for Russian SU�HSE degree in Economics, and knowing Russian terminology through readingtext�books in Russian is also required.

Course objectives

The purpose of the course is to give the students a thorough understanding ofthe principles of economics that apply to an economic system as a whole and ofthe mechanism of macroeconomic process and di�erent types of macroeconomicpolicy.

Methods



• classes (2 hours a week, where the lecture material, unclear questions ofeach theme and home assignments are discussed)

• written home assignments (1 per week, examined and marked by theteachers)

• teachers' consultations (each week)

• self study (students are expected to examine the recommended textbooksand study guides, to solve conceptual and numerical problems and tomake test training).

In total the course includes 32 hours of lectures and 36 hours of classes. Selfstudy is the main method in the course and includes 98 hours.

MACROECONOMICS 7

Main Reading

1. Begg D., Dornbusch R., Fischer S. Economics. McGraw�Hill, 5th edition.(BDF)

2. Mankiw N.G. Principles of Economics, The Dryden Press, 1998.(Ðóññêèé ïåðåâîä: Ìýíêüþ Í.Ã. Ïðèíöèïû Ýêîíîìèêñ. Ïèòåð, Ñ.�Ïåòåðáóðã, 1999.)

3. McConnell C.R., Brue S.L. Economics. Principles, Problems, and Poli-cies. McGraw�Hill, 1998. (Ðóññêèé ïåðåâîä: Ìàêêîííåëë Ê.Ð., ÁðþÑ.Ë. Ýêîíîìèêñ. Ïðèíöèïû, Ïðîáëåìû è Ïîëèòèêà. Ïèòåð, Ñ.�Ïåòåðáóðã, 1999.)

4. Lipsey R.G., Chrystal K. An Introduction to Positive Economics. OxfordUniversity Press, 1995.


1. Blake D. A Short Course of Economics. McGraw�Hill, 1993.

2. Gordon R. Macroeconomics. HarperCollins College Publishers, 6�th edi-tion, 1993.

3. Ñàìóýëüñîí Ï., Íîðäõàóñ Â. Ýêîíîìèêà. Áèíîì�ÊíîÐóñ, Ìîñêâà,1997. (Ðóññêèé ïåðåâîä 15�ãî Èçäàíèÿ Economics by P.Samuelson).

4. Ôèøåð Ñ., Äîðíáóø Ð., Øìàëåíçè Ð. Ýêîíîìèêñ. Ïåðåâîä ñ àíãë. Ì.Äåëî. 1993.

5. Ìàêêîííåëë Ê., Áðþ Ñ. Ýêîíîìèêà. Ïåðåâîä ñ àíãë. Ì. 2002.

6. Äîëàí Ý., Ëèíäñåé Ä. Ìàêðîýêîíîìèêà. Ïåðåâîä ñ àíãë. ÑÏá. 1994.

7. Äîëàí Ý., Êåìïáåëë Ê., Êåìïáåëë Ð. Äåíüãè, áàíêîâñêîå äåëî èäåíåæíî�êðåäèòíàÿ ïîëèòèêà. Ïåðåâîä ñ àíãë. Ì. 1991.

8. Ëèíäåðò Ï. Ýêîíîìèêà ìèðîõîçÿéñòâåííûõ ñâÿçåé. Ïåðåâîä ñ àíãë.Ì. 1992.

9. Õåéíå Ï. Ýêîíîìè÷åñêèé îáðàç ìûøëåíèÿ. Ïåðåâîä ñ àíãë. Ì. 1991.

10. Àãàïîâà Ò.À., Ñåðåãèíà Ñ.Ô. Ìàêðîýêîíîìèêà. Ì., ÄèÑ. 2004.

11. Ìàòâååâà Ò.Þ. Ââåäåíèå â ìàêðîýêîíîìèêó. Ì., ÃÓ�ÂØÝ. 2005.

12. Ìàòâååâà Ò.Þ., Íèêóëèíà È.Í. Îñíîâû ýêîíîìè÷åñêîé òåîðèè. Ì.,Äðîôà. 2005.

8 FIRST YEAR

Study Guides

1. Smith P., Begg B. Economics Workbook. Fifth Edition. McGraw�Hill,1997.

2. Salvatore D., Diulio E. Schaum's Outlines of Theory and Problems ofPrinciples of Economics. McGraw�Hill, 2d edition. 1995.

3. Diulio E. Schaum's Outlines of Theory and Problems of MacroeconomicTheory. McGraw�Hill, 2d edition. 1990.

4. Ìîðãàí Äæ.Ì. Ðóêîâîäñòâî ïî èçó÷åíèþ ó÷åáíèêà Ñ.Ôèøåðà,Ð.Äîðíáóøà, Ð.Øìàëåíçè �Ýêîíîìèêà�. Ì. Äåëî. 1997. (Ðóññêèéïåðåâîä 2�ãî Èçäàíèÿ Morgan J.M. Study Guide to Accompany Fis-cher, Dornbusch, and Schmalensee �Economics�).

5. Ý.Äæ.Äîëàí, Á.Äîìíåíêî. Ýêîíîìèêñ. Àíãëî�ðóññêèé ñëîâàðü�ñïðàâî÷íèê. Ì., Ëàçóðü. 1994.

Grade determination

Students are expected to pass two Mock exams in the format of AdvancedPlacement Test, set and graded in accordance with APT rules by local teachers,on a 100�point scale and from 1 to 5.

At the end of the year students sit an external APT exam, which is providedin the written form and graded by the AP Board from 1 to 5. This grade isused as enter grade to the University of London external programme. The APTexam gives 40% of ICEF grade (from 2 to 5) and the other 60% is provided bystudents' grades for home assignments (10%) and Mock exams (25% for each).

Course Outline

1. Introduction to MacroeconomicsSubject of Macroeconomics. Di�erence of Macroeconomics from Microe-

conomics. Key Macroeconomic Problems. Principles and Tools of Macroeco-nomic Analysis. Macroeconomic Models and their Variables. Long run andShort run Analysis in Macroeconomics. Aggregation. Macroeconomic Agentsand Macroeconomic Markets. The Model of Circular Flows.

Aggregate Product, Aggregate Expenditures and Aggregate Income. Circu-lar Flows in the Closed Private Economy. Consumption Spending. InvestmentSpending. The Role of Financial Market. Economy with Government: Govern-ment Spending, Taxes (direct and indirect), Transfers, Net taxes. GovernmentBudget. Circular Flows in the Mixed Closed Economy. Open economy. Net

MACROECONOMICS 9

Exports. Capital Flows. Net Foreign Investment. Circular Flows in the OpenEconomy. Stock and Flow Variables.

The Major National Accounts Identity. Injections and Leakages. TotalInvestment and Total Saving.

The Macroeconomic System. Market Economy: the Key Concepts of Ag-gregate Demand and Aggregate Supply. Macroeconomic Policy.

(BDF Ch. 20)

2. National Accounts. Measuring Output and Income.National Income and Product Accounting System. Gross Domestic Prod-

uct (GDP). Methods for Calculating GDP. The Value Added Approach. TheExpenditure Approach. The Structure of Aggregate Expenditure. The Com-ponents of Consumption. Investment and its Structure. Inventory Investment.Gross and Net Investment. Government Spending. Net Exports. The IncomeApproach for Calculating GDP. The Structure of Aggregate Income. Equiva-lency of Product, Expenditure, Income and Value Added Approaches to Mea-surement of Gross Domestic Product.

Other Variables of National Accounts. Gross National Product. Di�erenceof GNP from GDP. The Role of Factor Incomes. Net Domestic and Net NationalProduct. National Income. Personal Income. Disposable Income.

Nominal and Real GDP. Price Indices. GDP De�ator. Consumer PriceIndex. How to Measure In�ation. Real GDP and Real GDP per Capita. Rateof Growth. The Measurement of Economic Well�being and Welfare. ActualReal and Potential Real GDP. GDP Gaps.

(BDF Ch. 20)

3. The Determination of National Income. Goods Market Equi-librium in the Private Closed Economy.

Determination of Output in in the Long run. Supply�side Analysis. Deter-mination of Output in the Short run. Demand�side Analysis.

The Composition of Aggregate Demand. Components of Aggregate Demandin the Closed Economy.

Consumption Demand and its Determinants. Consumption Function andConsumption Line. Autonomous Consumption Demand. Marginal and Aver-age Propensity to Consume. Saving Function and Saving Line. Marginal andAverage Propensity to Save. The Consumption Puzzle. Theories of Consump-tion.

Investment Demand and its Determinants. Investment Function and In-vestment Demand Curve. Theories of Investment.

Aggregate Expenditures in the Closed Private Economy. Planned Expen-ditures and Actual Expenditures. The 45o line and Equilibrium Output inthe Two�sector Model in the Short run (�Keynesian Cross Model�). Non�equilibrium Situations. The Role of Inventory Changes in the Restoration ofEquilibrium in the Goods Market.

10 FIRST YEAR

Another Approach: Planned Savings equals Planned Investment. Equilib-rium Output and Potential Output. In�ationary and Unemployment (reces-sionary) Gaps.

The Multiplier e�ect of Autonomous Spending on Output.The Paradox of Thrift.(BDF Ch. 21)

4. The Determination of National Income. Goods Market Equi-librium in the Mixed Closed and in the Open Economy

The Government in the Circular Flows. The Government and AggregateDemand. The E�ect of Government Spending on Output. The E�ect of Taxeson Output. Lump�sum and Proportional Income Taxes. The GovernmentSpending, Tax, Transfer and Balanced Budget Multipliers.

The Foreign Sector in the Circular Flows. Net Exports and AggregateDemand. Autonomous Net Exports and its Determinants. Marginal Propensityto Imports. The Multiplier E�ect in the Open Economy.

Keynesian Cross Model as the Model of Aggregate Demand. The AggregateDemand Curve.

E�ects Explaining the Negative Slope of Aggregate Demand Curve: thePigou E�ect, the Keynes' E�ect, the Mundell�Fleming E�ect. Causes of theShifts of the Aggregate Demand Curve.

In�ation and the Multiplier E�ect.(BDF Ch. 22)

5. Fiscal PolicyFiscal Policy and its Objectives. Instruments of the Fiscal Policy. Fiscal

Policy and Aggregate Demand. Types of the Fiscal Policy. Expansionaryand Contractionary Fiscal Policy. Discretionary and Automatic Fiscal Policy.Automatic (built�in) Stabilizers.

The Mechanism of the Fiscal Policy. Limitations of the Active Fiscal Pol-icy. Crowding out E�ect. Fiscal Policy and Budget De�cit. Types of BudgetDe�cits. National Debt.

E�ectiveness of Fiscal Policy in the Short run. The Role of the InterestRate Sensitivities of Investment and of the Demand for Money. The Role ofFiscal Policy in the Closed Economy: Monetarist and Keynesian views.

Fiscal Policy and Aggregate Supply. The La�er Curve. The E�ect of FiscalPolicy in the Long run.

(BDF Ch. 22)

6. Money and Money Market.Money and its Functions. Kinds of Money. Monetary Supply Aggregates.Financial Intermediaries. Banks. Mutual funds. The Banking System.

The Central Bank and its Functions. Commercial Bank and its Balance Sheet.Assets and Liabilities. Bank Reserves. Loans. Banks as Creators of Money.

MACROECONOMICS 11

The Deposit Multiplier. The Loan Multiplier. Limitations of Deposit and LoanMultiplier Process.

Determinants of Money Supply. The Monetary Base (high�powered money)and the Money Multiplier. The Money Supply Curve.

The Demand for Money. Motives for Holding Money (transactions motive,precautionary motive, speculative motive). Determinants of the Demand forMoney: price level, real GDP and interest rate. Interest rate Determination.The Money Demand Curve. The Slope and the Shifts of the Money SupplyCurve.

Money Market Equilibrium. Liquidity Preference Theory. The InterestRate and the Bond Price.

(BDF Ch. 23, 24)

7. Monetary Policy.

Monetary Policy, its Goals and Targets. The Tools of Monetary Policy. TheRequired Reserve Ratio. The Discount Rate. The Open Market Operations.Monetary Policy and Open Market Operations. The Types of Monetary Pol-icy. Expansionary and Contractionary Monetary Policy. Money TransmissionMechanism. Money, Interest, Investment and Aggregate Demand.

E�ectiveness of Monetary Policy in the Short run. The Role of the InterestRate Sensitivities of Investment and of the Demand for Money. The Role ofMonetary Policy in the Closed Economy: Monetarist and Keynesian views.

The E�ect of Monetary Policy in the Long run. Neutrality of Money.

(BDF Ch. 24)

8. Labour Market and Aggregate Supply.

Production Function and Aggregate Supply. The Role of Labour Market.

The Demand for Labour and its Determinants. The Labour Demand Curve:its Slope and Shifts. The Supply of Labour. The Slope and Shifts of the LabourSupply Curve. Labour Market Equilibrium. Real Wage Rate.

Labour Market with Flexible Wages. Long run Aggregate Supply Curve:its Slope and Causes for Shifts. Long run Aggregate Supply and EconomicGrowth.

Labour Market with Sticky Wages. Short run Aggregate Supply Curve.Determinants of Aggregate Supply in the Short run. The Slope and Shifts ofthe Short run Aggregate Supply Curve.

Classical and Keynesian Approaches to Aggregate Supply.

The Modern Models of the Short run Aggregate Supply. StickyWage Model.Workers Misperception Model. Imperfect Information Model. Sticky PriceModel. Lucas Equation. The International Di�erences in the Slope of theShort run Aggregate Supply Curve.

(BDF Ch. 26, 27)

12 FIRST YEAR

9. Aggregate Demand and Aggregate SupplyThe Aggregate Demand and Aggregate Supply Model.Equilibrium in the AD�AS model in the Long run. Economic Growth and

its Factors. Economic Growth and Government Policy.Equilibrium in the AD�AS model in the Short run. Economic Fluctuations

and their Sources. The Business Cycle and its Phases. Theories of the BusinessCycle.

Changes in Aggregate Demand and the Equilibrium in the AD�AS Model.Changes in Aggregate Supply and the Equilibrium in the AD�AS Model.Shocks of Aggregate Demand and Aggregate Supply. From Short run to Longrun Equilibrium.

Adverse Supply Shocks and Demand Management Policy Dilemma. Howto Fight Stag�ation: Di�erent Approaches.

Fiscal and Monetary Policy in the Framework of AD�AS model.(BDF Ch. 26, 30)

10. UnemploymentDisequilubrium in the Labour Market and Unemployment.Population and Labour Force. Non�labour Force and Unemployed. Mea-

sures of Unemployment. Rate of Unemployment. Labour Force ParticipationRate. Labour Market Flows.

Types of Unemployment: Frictional, Structural and Cyclical. Natural Rateof Unemployment and its Determinants. The Model of Labour Force Dynamics.Voluntary and Involuntary Unemployment. Unemployment in Classical Model.Unemployment in Keynesian Model. The Wait Unemployment. Causes of WaitUnemployment: the Minimum�Wage Laws; Unions and Collective Bargaining;the Theory of E�ciency Wages. E�ciency Wages and Asymmetric Information.

Actual Rate of Unemployment. The Private and Social Cost of Unemploy-ment. Unemployment and Output. Okun's Law. Ways of Reducing NaturalRate of Unemployment. Ways of Reducing Cyclical Unemployment.

(BDF Ch.27)

11. In�ationThe Price Level and the Rate of In�ation. Types of In�ation: Creeping,

Galloping and Hyperin�ation. De�ation and Disin�ation.Causes of In�ation. Demand�pull and Cost�push In�ation. Demand�pull

In�ation and the Quantity Theory of Money. Classical Dichotomy and Neutral-ity of Money. The Monetary Rule. Budget De�cits and In�ation. The In�ationTax. In�ation and the Purchasing Power of Money In�ation and Real Incomes.Stag�ation. In�ationary Spirals: price�wage type and cost�price type.

Costs of In�ation: Shoe�leather Costs, Menu Costs, Misallocation of Re-sources, Tax Distortions, Confusion and Inconvenience.

Anticipated and Unanticipated In�ation. Costs of Unanticipated In�ation.Nominal Interest Rate and In�ation: Fischer E�ect. Real Interest Rate ex ante

MACROECONOMICS 13

and ex post. In�ation and Uncertainty.Hyperin�ation: Causes and De�nition. How to Fight Hyperin�ation.(BDF Ch. 28)

12. The Phillips CurveTrade�o�s between In�ation and Unemployment. The Original Phillips

Curve. The Short�run Phillips Curve: the Explanation of its Slope and theCauses for Shifts. Expectations�Augmented Phillips Curve. Types and Roleof In�ationary Expectations. The E�ect of Supply Shocks. The Short�runPhillips Curve and Demand�side Policy Dilemma.

Phillips Curve as the Model of Aggregate Supply.Natural Rate Hypothesis and the Long�run Phillips Curve: its Shape and

Causes for Shifts.The Movement of the Economy from the Short run to the Long run Equilib-

rium under Adaptive Expectations. The Movement of the Economy from theShort run to the Long run Equilibrium under Rational Expectations.

The Cost of Reducing In�ation. The Sacri�ce Ratio. Strategies to ReduceIn�ation. Costs of Reducing In�ation: Rational Expectations Approach.

(BDF Ch.28)

13. The Open EconomyThe Closed Economy and the Open Economy. International Links between

Economies. International Trade: Exports, Imports and Net Exports. CapitalFlows: Capital In�ows and Capital Out�ows.

Factors of International Trade. Absolute Advantage. Comparative Advan-tage. The Gains from Trade. Trade Policy. Free Trade and Protectionism.Obstacles for Free Trade and Arguments for Protectionism. E�ect of Tari�sand Quotas.

International Financial System. Determinants of Capital Flows.Foreign Exchange Market and its Equilibrium. Determinants of Demand for

and Supply of National Currency. Nominal and Real Exchange Rate. Fixed andFlexible Exchange Rate Systems. Fixed Exchange Rate System: the CentralBank Interventions. Devaluation and Revaluation. Flexible Exchange RateSystem: Depreciation and Appreciation.

Balance of Payments and its Structure. Current Account. Capital Account.Credits and Debits in the Balance of Payments. The O�cial Reserves Ac-count. O�cial Reserves and their Role. The Balance of Payments under FixedExchange Rates. The Balance of Payments under Flexible Exchange Rates.

Monetary and Fiscal Policy in the Open Economy under Fixed and underFlexible Exchange Rates: Mechanism and Economic E�ects.

(BDF Ch. 29, 32, 33)

14 FIRST YEAR

14. Macroeconomics Schools of ThoughtMajor Schools of Macroeconomic Thought. The Classical School. The

Say's Law. Quantity Theory of Money and Monetarism. The New ClassicalMacroeconomics. Rational Expectations School. J.M.Keynes and his �GeneralTheory of Employment, Interest and Money�. Eclectic Keynesians. ExtremeKeynesians. Real Business Cycle Theory. Supply�side Economics Theory.

Fields of Disagreement: Behavior of the Economy; Speed of Market Clear-ing; Type of Expectations; Di�erence between the Short run and the Long run;Nature and Sources of Shocks in the Economy. Comparative Analysis of Equi-librium Formation in the Economy, Determinants of Economic Equilibrium andNon�equilibrium Situations by Di�erent Schools.

Keynesians versus Monetarists: the Basic Equations; the Money Transmis-sion Mechanism; the Velocity of Money; the Shape of Aggregate Supply Curve.

Alternative Views on the Role, E�ects and E�ectiveness of GovernmentPolicy. Fiscal and Monetary Policy Prescriptions: Classical Economists, Key-nesians, Monetarists, New Classical Macroeconomists, Supply�siders. Contem-porary Debates over Macroeconomic Policy.

(BDF Ch.31)

MACROECONOMICS 15


No Topic lectures Classes Self-study Total

1. Introduction to Macroeconomics 2 2 6 102. National Accounts. Measuring

Output and Income2 4 8 14

3. The Determination of NationalIncome. Goods MarketEquilibrium in the PrivateClosed Economy

2 4 8 14

4. The Determination of NationalIncome. Goods MarketEquilibrium in the Mixed Closedand in the Open Economy

2 2 6 10

5. Fiscal Policy 2 2 8 126. Money and Money Market 2 2 6 107. Monetary Policy 2 2 8 128. Labour Market and Aggregate

Supply2 2 6 10

9. Aggregate Demand andAggregate Supply

4 4 6 14

10. Unemployment 2 2 6 1011. In�ation 2 2 6 1012. The Phillips Curve 2 2 6 1013. The Open Economy 4 4 8 1614. Macroeconomics Schools of

Thought2 2 6 10

Total 32 36 94 162

16 FIRST YEAR

Calculus

Lecturer: Je�rey LockshinClassteachers: Je�rey Lockshin, Anastasia V. Lavrenova, Dmitri D. Pervouch-ine, Ivan O. Kachkovski.

Course description

This course is designed to introduce the students to the basic ideas and methodsof mathematical analysis and their application to mathematical modeling. Thiscourse helps lay the foundation for the entire block of quantitative disciplinesthat are studied at ICEF, and it also provides some of the analytical tools thatare required by advanced courses in economics. This course provides studentswith experience in the methods and applications of calculus to a wide range oftheoretical and practical situations. The course is taught in English.

Course objectives

By the end of this course the students should:

• be able to analyse functions represented in a variety of ways: graphical,numerical, analytical, or verbal, and understand the relationships betweenthese various representations.

• understand the meaning of the derivative in terms of a rate of changeand local linear approximation, and be able to use derivatives to solve avariety of problems.

• understand the meaning of the de�nite integral both as a limit of Riemannsums and as the net accumulation of change, and be able to use integralsto solve a variety of problems.

• understand the relationship between the derivative and the de�nite inte-gral, as expressed by the Fundamental Theorem of Calculus.

• be able to communicate mathematics in well�written sentences and toexplain the solutions to problems.

• be able to model a written description of a simple economic or physicalsituation with a function, di�erential equation, or an integral.

• be able to use mathematical analysis to solve problems, interpret results,and verify conclusions.

• be able to determine the reasonableness of solutions, including sign, size,relative accuracy, and units of measurement.

CALCULUS 17

Methods



• classes (4 hours a week)

• written home assignments

• revision and test training

• teachers' consultations

• self�study.

In total the course includes 68 hours of lectures and 136 hours of classes.Students are assigned weekly written home assignments. Self�study is alsorequired, and includes up to 174 hours.

Main Reading

1. Dowling E.T. Introduction to Mathematical Economics. McGraw�Hill,1980. (D)

2. King K.J. Calculus AB Preparation Guide. Cli�s, 1998.

3. Êðàññ M. C., Âûñøàÿ ìàòåìàòèêà äëÿ ýêîíîìèñòà. Ì., 1998 (Kp).

4. Êðåìåð Í.Ø., Ïóòêî È.Ì., Ôðèäìàí Ì.Í. Âûñøàÿ ìàòåìàòèêà äëÿýêîíîìèñòîâ. Ì, 2000 (ÊÏÔ)

5. Ôèõòåíãîëüö Ã.Ì. Êóðñ äèôôåðåíöèàëüíîãî è èíòåãðàëüíîãî èñ÷è-ñëåíèÿ (â òðåõ òîìàõ). Ì., 1998 (Ô).


1. Simon C.P., Blume L. Mathematics for Economists. W.W.Norton &Company, 1994.

2. Chiang A.C. Fundamental Methods of Mathematical Economics.McGraw�Hill, 1984

3. Anthony M., Biggs N. Mathematics for Economics and Finance. CUP,1996.

4. Äåìèäîâè÷ Á.Ì. Ñáîðíèê çàäà÷ è óïðàæíåíèé ïî ìàòåìàòè÷åñêîìóàíàëèçó. Ì., Íàóêà, 1996.

18 FIRST YEAR

5. Çîðè÷ Â.Ï. Ìàòåìàòè÷åñêèé àíàëèç (â 2�õ) òîìàõ. Ôàçèñ, 1997�1998.

6. The Student Guide to the AP Calculus Courses and Examinations. TheCollege Board, 1998.

7. Advanced Placement Course Description. The College Board, 1998.

8. Free�Response questions. The College Board, 1995.

Internet Resources

1. The College Board, creators of the APT exams:http://apcentral.collegeboard.com

2. A very good comprehensive math resource that completely covers theprogram: http://www.sosmath.com

3. Java applets that demonstrate various concepts and methods in calculus:http://cs.jsu.edu/mcis/faculty/leathrum/Mathlets/topframe.htmlhttp://www.ies.co.jp/math/java/calc/index.htmlhttp://www.plu.edu/ heathdj/java/http://www.slu.edu/classes/maymk/MathApplets�SLU.html

4. Many practice multiple�choice problems can be found athttp://homepages.seresc.net/ sray/alvirne.html

Grade determination

The students sit a mid�year exam in the AP format set by local teachers andgraded in accordance with APT rules, on a 100�point scale and from 1 to 5.This grade gives 50% of the mid�year grade, and the other 50% is given by theirgrades for home assignments and the mid�term test. In April the students sita Mock exam in the APT format set and graded by local teachers.

At the end of the year students sit an external APT exam, which is gradedby the AP Board from 1 to 5. This grade is used as enter grade to the Universityof London external programme. It also gives 40% of �nal ICEF grade, and other60% is given by the mid�year grade, the Mock exam and home assignments inthe second semester.

Course Outline

1. IntroductionThe application of mathematics to describing phenomena. The role of math-

ematics and mathematical modeling in economics. Di�erent forms of represen-tation of functions. Elementary concepts: domain and range of a function,

CALCULUS 19

even and odd functions, periodic functions. Graphs of elementary functions.Shifts and distortions of graphs. Implicit functions. Examples of functions ineconomics: utility function, production function, cost function, demand andsupply functions.

(D. Ch. 7; K. � pp. 23�51; Êð. � pp. 11�14, 46�58, 88�91,155�161; ÊÏÔ � pp. 125�137; Ô. � V.1, pp. 93�114)

2. Sequences. Limit of a sequenceSequences: bounded and unbounded, in�nitely small and in�nitely large.

Limit of a sequence. Limit theorems for sequences: arithmetic operations,sandwich theorem. Monotone sequences. Convergence of a monotone increasingsequence. The number e.

(Êð. � pp. 24�45; ÊÏÔ � pp. 141�142; Ô. � V.1, pp. 43�92)

3. Limit of a functionThe limit of a function at in�nity. Asymptotes of a function at in�nity. The

limit of a function at a point. Limit theorems for functions. Functions thattend to zero, functions that tend to in�nity. First and Second Special Limits.Types of indeterminate forms. Finding limits. Left and right limits.

(D. � Ch. 3.1; K. � pp. 71�91; Êp. � pp. 58�73; ÊÏÔ � pp.143�160; Ô. � V.1, pp. 115�145)

4. ContinuityDe�nition of continuity of a function at point and on an interval. Conti-

nuity of elementary functions. Properties of continuous functions. Points ofdiscontinuity. Classi�cation of points of discontinuity. Vertical asymptotes.

(D. � Ch. 3.2; K. � pp. 92�95; Êp. � pp. 74�87; ÊÏÔ � pp.161�164; Ô. � V.1, pp. 146�185)

5. The derivativeDe�nition of the derivative. Tangent lines and normal lines. Geometric,

physical and economic interpretations of the derivative. Right and left deriva-tives. Di�erentiability at a point. Di�erentiability and continuity. Di�eren-tiation. Rules of di�erentiation. Derivatives of elementary functions. Di�er-entiation of inverse functions. Logarithmic di�erentiation. Di�erentiation ofimplicit functions. Existence of a di�erentiable implicit function. De�nitionand geometric interpretation of di�erentials. Approximate calculations usingdi�erentials. The second derivative. The economic meaning of the secondderivative. Higher�order derivatives and di�erentials. Properties of di�eren-tiable functions: Rolle's theorem, the Mean Value theorem, Cauchy's theorem,and their geometric interpretation.

(D. � pp. 41�47; K. pp. 109�144, 163�166, 211�214, 216�218;Êp. � pp. 98�123; ÊÏÔ � pp. 176�198, 209�211; Ô. V.1, pp.186�222, 231�245)

20 FIRST YEAR

6. Applications of the derivativeL'Hospital's rule. Necessary and su�cient conditions for increasing/decrea-

sing functions. Related rates. Concave and convex functions. Di�erent ways ofexpressing concavity. Economic interpretation of concave and convex functions.Points of in�ection. Local extrema. First�order necessary and su�cient condi-tions for a local extremum. Second�order necessary and su�cient conditions fora local extremum. Maximum and minimum values of a function on an interval.Geometric and economic applications of optimisation. Curve sketching.

(D. � Ch. 4; K. � pp. 167�210; Êp. � pp. 124�132, 140�161;ÊÏÔ � pp.212�234, 240�241; Ô. � V.1, pp. 268�336)

7. Number series, power series, and Taylor expansionsNecessary condition for convergence of a series. Harmonic series and power

series. The ratio test. Comparing series to test for convergence. Alternatingseries. Su�cient condition for convergence of an alternating series. Absoluteconvergence. Radius and interval of convergence of a power series. Abel's the-orems. Taylor's formula. Taylor and Maclaurin series. Taylor and Maclaurinexpansions for elementary functions. Application of Taylor series for analyzingthe behavior of a function at a point and for conducting approximate calcula-tions.

(Êp. � pp. 133�139; ÊÏÔ � pp. 356�372, 379�390; Ô. � V.1,pp. 246�262; S. � Ch. 30.2)

8. Antiderivatives and the inde�nite integralAntiderivatives. The inde�nite integral and its properties. Table of indef-

inite integrals. Basic methods of integration: direct integration, substitutionand integration by parts. Integration of rational functions.

(D. �pp. 357�362; K. � pp. 234�257; Êp. � pp. 162�186; ÊÏÔ� pp. 251�270; Ô. � V.2, pp. 11�93)

9. Di�erential equations and slope �eldsDe�nition of �rst order di�erential equations. General and particular solu-

tions. Existence and uniqueness theorem. Isoclines and direction �elds. Solu-tion of separable di�erential equations. Application of di�erential equations tophysics and economics.

(D. �pp. 392, 395�396; K. � pp. 316�323; Êp. � pp. 477�544;ÊÏÔ � pp. 325�336; Ô. � V.2, pp. 244�257)

10. The de�nite integralProblems that require the de�nite integral. De�nition of the de�nite inte-

gral using Riemann sums. Su�cient condition for the existence of the de�niteintegral. Approximate calculation of de�nite integrals using rectangles andtrapezoids. Simpson's rule. Properties of the de�nite integral. Di�erentiationof a de�nite integral with variable upper bound. The fundamental theorem ofcalculus. Substitution and integration by parts.

CALCULUS 21

(D. �pp. 373�375; K. � pp. 273�285; Êp. � pp. 187 � 210,233�236; ÊÏÔ � pp. 283�296, 312�317; Ô. � V.2, pp. 94�168)

11. Applications of the de�nite integralApplications of the de�nite integral in geometry, economics and physics.

Area of a �at region, volume of a solid of revolution, volume of a solid withknown cross�sections. Use of de�nite integrals to solve separable di�erentialequations.

(D. � p. 376; K. � pp. 286�315; Êp. � pp. 211�232; ÊÏÔ � pp.298�306; Ô. � V.2, pp. 169�243)

12. Improper IntegralsIntegrals with in�nite bounds. Improper integrals of the �rst kind. Integra-

tion of unbounded functions. Improper integrals of the second kind. Principlevalue. Convergence tests for improper integrals. Absolute and relative conver-gence of improper integrals.

(Êp. � pp. 237�248; ÊÏÔ � pp. 307�311; Ô. � V.2, pp. 552�653)

13. The double integralDe�nition of double integrals. Reduction of double integrals to iterated

integrals. Changing the order of integration in iterated integrals. The geometricinterpretation and main properties of double integrals.

(Êð. � ñ. 390�405; ÊÏÔ: pp. 425�427; Ô.: V. 3, pp. 136�141,154�167)



1. Introduction. 10 2 4 42. Sequences. Limit of a sequence 22 4 8 103. Limit of a function 22 4 8 104. Continuity 22 4 8 105. The derivative 44 8 16 206. Applications of the derivative 55 10 20 257. Series and Taylor expansions. 33 6 12 158. Antiderivatives and the

inde�nite integral44 8 16 20

9. Di�erential equations 33 6 12 1510. The de�nite integral 33 6 12 1511. Applications of the de�nite

integral33 6 12 15

12. Improper integrals 11 2 4 5

22 FIRST YEAR


13. The double integral 16 2 4 10

Total: 378 68 136 174

STATISTICS 23

Statistics

Lecturer: Pavel K. KatyshevClassteachers: Pavel K. Katyshev, Vladimir I. Chernyak, Ivan O. Kachkovski,Dmitriy D. Pervouchine

Course description

The course Introductory Statistics is two semesters course for the �rst yearstudents. This is introductory course for the students who are specialized ineconomics. The course is taught in Russian and English.

The basic concepts and notions of statistics are taught in this course: de-scriptive statistics, population and sample, parameter estimation, hypothesistesting, etc. Moreover, some topics of probability theory that are necessary forthe main course are taught as well.

Course objectives

The purpose of the course is to give the students basic knowledge of the intro-ductory Probability Theory and Mathematical and Applied Statistics. At theend of the course they should know the subjects and basic methods of statisti-cal analysis. During the process of study the students are acquiring the skillsof primary data processing viz. to �nd median, mean and other descriptivestatistics of the distribution; they should learn to graphic presentation of data(histogram, stem� and leaf�plots, etc.).

Data must be collected according to a well�developed plan, and studentsshould get the initial knowledge what is well designed and well conducted ex-periment. They must detect the sources of bias.

Students should understand the di�erence between population and sam-ple and respectively between population and sample characteristics. It seemsinexpediently to teach statistics without teaching the elements of ProbabilityTheory therefore some basic concepts and notions of the Probability Theoryare taught in the course, namely, probability space, random events, probabilityof the random event. Students should calculate the probabilities of the complexevents, solve combinatorial problems, use Bayes formula. They should knowthe notion of random variable and its distribution, �nd the characteristics ofrandom variable (mean, variance, standard deviation, etc.).

At the end of the course students have to formulate and to solve the tradi-tional problems of introductory statistics, viz. parameter estimation, hypoth-esis testing, correlation analysis, analysis of variances. One of the purposes ofthe course is to prepare the students for the learning of simple and multipleregressions.

24 FIRST YEAR

The course exposition is not mathematically rigorous therefore the provesof many theorems and even the strict formulations of some results are skipped.

During the course students should solve a lot of problems including com-puter exercises with the real data.

At the end of the course the students have to know the main theoretical re-sults of introductory statistics, should be able to make the required calculationsand to use the standard statistical methods for applied problems.

One of the purposes of the course INTRODUCTORY STATISTICS is toprepare the �rst year students for Advanced Placement Test (APT).

Methods




• weekly written home assignments


• self study.

In total the course includes 42 hours of lectures and 42 hours of classes forthe �rst year students.

Main Reading

1. Wonnacott R.J. and Wonnacott T.H. Introductory statistics for businessand economics. John Wiley & Sons, fourth edition, 1985 (for the �rstyear students, WW).


1. Aivazian S.A., Mhitaryn V.S. Probability Theory and Applied Statistics.Moscow, UNITY, 2001 (in Russian).

2. Gmurman V.E. Probability Theory and Mathematical Statistics.Moscow, �Higher School�, 1998 (in Russian).

3. Gmurman V.E. Guide to problems on Probability Theory and Mathe-matical Statistics. Moscow, �Higher School�, 1998 (in Russian).

4. Shvedov A.S. Probability Theory and Mathematical Statistics. Moscow,HSE, 1995 (in Russian).

STATISTICS 25

5. Hogg R.V. and Tanis E.A., Probability and Statistical Inference, PrenticeHall, 1993.

Internet Resources

1. http://www.stat.yale.edu/Courses/1997�98/101/expdes.htm

2. http://www.itl.nist.gov/div898/handbook/pri/section3/pri3.htm

3. http://www.cas.lancs.ac.uk/glossary_v1.1/main.html

4. http://home.xnet.com/~�dler/triton/math/review/mat170/mat170.htm

5. http://www.statsoft.com/textbook/esc.html

6. http://mail.pittstate.edu/~winters/tutorial/

Grade determination

The �rst years students sit for mid term exam and �nal exam in the �rstsemester. These exams consist of multiple choice questions and free responsequestions. The grade for the �rst semester is the weighted sum of the gradesfor mid term exam (20%), �nal exam (60%) and home task grade (20%).

At the end of the second semester students sit for exam having the sameformat. After that the �rst year students �t for AP test. The �nal grade isthe weighted sum of APT (40%), grade at the end of the �rst semester (35%),grade of exam at the end of the second semester (15%), and home task grade(10%).

Course Outline

1. Primary data analysis

1. Graphical representation of the data. Dotplot. Steam and leaf plot.Histogram.

2. Outliers. Clusters. The shape of histogram.

3. Elementary statistics. Characteristics of the center of the distribution:arithmetic mean, median, mode, geometric mean. Characteristics ofthe dispersion of the distribution: range, mean quadratic deviation, in-terquartile range, mean absolute de-viation, mean relative deviation. Boxplot.

26 FIRST YEAR

4. Linear transformation of the data and transformation of the elementarystatistics.

5. Characteristics of observations' positions: quartiles, percentiles, z�score.

6. Grouped observations and their statistics.

(WW Ch. 2)

2. Data collection; planning and conducting experiments

1. The methods of data collection: census, sample survey, experiment, ob-servational study.

2. Population, samples and random selection

3. Sources of bias in sampling and surveys.

4. Sampling methods: simple random sampling, strati�ed random sampling,cluster sampling.

5. Planning and conducting experiments. Characteristics of well�designedexperiment.

6. Treatments, control groups, random assignments and replication.

7. Sources of bias and confounding, including placebo e�ect and blinding.

8. Completely randomized design, block design

(WW, Ch. 1)

3. Elements of Probability Theory

1. Experiment with random outcomes. Interpretation probability includ-ing long run relative frequency interpretation. �Law of Large Numbers�concept.

2. The space of elementary outcomes as a mathematical model of the ex-periment with random outcomes. Algebra of events. Disjoint events.

3. Probability in the space of elementary outcomes. The notion of classicprobability. Elementary combinatorics. Addition rule.

4. Conditional probability. Multiplication rule. Independent events.

5. Formula of full probability. Bayes formula.

(WW, Ch. 3, 4)

STATISTICS 27

4. Discrete random variables

1. The examples of discrete random variables. Distributions of discrete ran-dom variables. Relative frequencies and cumulative frequencies.

2. Expectation and variance of a discrete random variable. Standard devi-ation.

3. Binomial distribution. Geometric distribution.

(WW, Ch. 3, 4)

5. Continuous random variables

1. The examples of Continuous random variables. Cumulative distributionfunction. Density function. Expectation and variance. Standard devia-tion.

2. Normal (Gaussian) distribution and its properties. Using tables of thenormal distribution.

3. Linear transformation of the random variables.

(WW, Ch. 3, 4)

6. Joint distribution of two random variables

1. Joint distribution of two discrete random variables. Marginal distribu-tions. Conditional distributions. Conditional expectation.

2. Independent random variables.

3. Covariance. Correlation as a measure of linear relationship of two randomvariables. Uncorrelated and independent random variables. Expectationand variance of the linear combination of two random variables.

(WW, Ch. 5)

7. Limit Theorems

1. The law of large numbers.

2. Central Limit Theorem. Normal approximation for the binomial distri-bution.

3. Joint distribution of two random variables.

(WW, Ch. 6)

28 FIRST YEAR

8. Sampling distribution

1. Distribution of sampling mean and sampling proportion.

2. Sampling distribution of a di�erence between two independent samplemeans. Sampling distribution of a di�erence between two independentsample proportions.

3. t distribution. Chi square distribution.

(WW, Ch. 6)

9. Point parameter estimates

1. Point parameter estimators. Examples: sampling mean and samplingvariance. Expectation and variance of the sampling mean. Estimation ofthe proportion.

2. Properties of estimators: unbiasedness, e�ciency, consistency.

3. Estimators of the population mean and variance.

4. Estimator of the population proportion.

(WW, Ch. 7)

10. Interval estimates

1. Con�dence intervals. Con�dence interval for population mean. Normalapproximation for large samples. Small samples and t distribution.

2. Con�dence intervals for di�erence between two population means (inde-pendent and matched samples).

3. Con�dence intervals for di�erence between two proportions.

4. One� and two�sided con�dence intervals.

(WW, Ch. 8)

11. Hypothesis testing

1. Hypothesis and statistical test. Test for a population mean. Using con�-dence intervals and test statistics.

2. One sided and two sided tests. P values.

3. Type I error and type II error. Signi�cance and power of a test.

STATISTICS 29

4. Standard tests for

• population mean

• population proportion

• di�erence between means for independent and matched samples

• di�erence between proportions

5. Chi square test (goodness of �t test). Contingency tables.

(WW, Ch. 9, 17)

12. Simple regression and sampling correlation

1. X Y graph. Fitting a line. Ordinary least squares.

2. Transformations of nonlinear models into linear models.

3. Outliers.

4. Fitted values.

5. Errors and residuals of regression model.

6. Statistical properties of regression estimates. Con�dence interval for theslope. Hypothesis testing.

7. Population and sampling correlation.

8. Correlation and simple regression. Coe�cient of determination.

(WW, Ch.11, 12, 15)



1. Primary data analysis 24 6 6 122. Data collection; planning and

conducting experiments22 6 6 10

3. Elements of Probability Theory 24 6 6 124. Discrete random variables 16 4 4 85. Continuous random variables 16 4 4 86. Joint distribution of two random

variables16 4 4 8

7. Limit Theorems 16 4 4 8

30 FIRST YEAR


8. Sampling distribution 16 4 4 89. Point parameter estimates 24 6 6 1210. Interval estimates 32 8 8 1611. Hypothesis testing 40 10 10 2012. Simple regression and sampling

correlation24 6 6 12

Total: 270 68 68 134

INFORMATION COMPUTER SYSTEMS 31

Information Computer Systems

Classteachers: Anatoly A. Akinshin, Sera�ma N. Belousova, Irina A. Bessonova,Gennadiy I. Perminov

Course description

Computer literacy is essential in modern life. The program of university pro-fessional education has to provide the student with the skills and knowledgeon algorithmic languages. All this is especially important for the students whostudy economics and �nance, because in these areas computer processing ofinformation plays a signi�cant role.

Microsoft O�ce Word 2003 and Microsoft O�ce Excel 2003 from MicrosoftO�ce 2003 were chosen as examples of a word processor and a spreadsheet.The choice is justi�ed by the following reasons:

First, these programs are mostly spread over the world and dominate on theRussian software market. Second, they are rather sophisticated and include allnecessary tools. Third, as the teaching experience shows, students, who canoperate these two programs can easily learn any other programme of this typelike Lotus 1�2�3 or Word Perfect. VBA programming language is chosen as anappropriate language for studying.

Course objectives

The goal of the course is to give students a practical experience of work witha text processor and a spreadsheet and an introduction to programming lan-guages. Students also become acquainted with networks.

Methods


• lectures

• classes

• self�study

In total the course includes: 12 hours of lectures, 60 hours of classes, 90hours of selt-study.

Self�study is the main method of study in the course. Students have a freeaccess to ICEF computer classes studying the lecture's materials, doing theirhome assignments and practical exercises.

32 FIRST YEAR

The course outline is coordinated with other courses, in which computerclasses are an essential method of study, such as micro- and macroeconomics,statistics and English.

Main Reading

1. Èâàíîâ Â. Ñ. Microsoft O�ce System 2003. Ó÷åáíûé êóðñ. ÈÄ�Ïèòåð�, 2004

2. Êóçüìåíêî Â.Ã. VBA 2000. Ñàìîó÷èòåëü. Áèíîì. Ìîñêâà. 2000.

3. Ãàðíàåâ À. Excel, VBA, Internet â ýêîíîìèêå è ôèíàíñàõ, BHV �Ñàíêò - Ïåòåðáóðã, 1999.


1. Ãåòö Ê., Äæèëáåðò Ì. Ïðîãðàììèðîâàíèå â Microsoft O�ce. Ïîëíîåðóêîâîäñòâî ïî VBA. BHV�Kèeâ. 2000. 768 ñ.

2. Ãàðíàåâ À. Èñïîëüçîâàíèå MS Excel è VBA â ýêîíîìèêå è ôèíàíñàõ.BHV � Ñàíêò - Ïåòåðáóðã, 1999, 816 ñòð.

3. Ãàðíàåâ À. Ñàìîó÷èòåëü VBA. Òåõíîëîãèÿ ñîçäàíèÿïîëüçîâàòåëüñêèõ ïðèëîæåíèé. BHV � Ñàíêò - Ïåòåðáóðã, 1999, 816ñòð.

Internet Resources

1. VBA: äëÿ òåõ, êòî ëþáèò äóìàòühttp://inform.p-stone.ru/libr/program/vba/data/public1/

2. Excel VBA: Ïðè¼ìû ïðîãðàììèðîâàíèÿhttp://www.codenet.ru/progr/vbasic/vbaexcel/

3. Îñíîâû îôèñíîãî ïðîãðàììèðîâàíèÿ è ÿçûê VBAhttp://www.intuit.ru/department/o�ce/vba2000/

4. http://www.vbnet.ru/vba/

5. http://www.microsoft.ru/o�ext/developers/

INFORMATION COMPUTER SYSTEMS 33

Grade determination

At each seminar students receive home assignments. At the middle of the coursethey have a mid�term exam on MS Excel and MS Word. At the end of thecourse they have an exam on programming in VBA. During this four�hoursexam students are suggested to design a VBA program.

Course Outline

1. Personal Computer. Operation systems.Introduction to PC. Software and Hardware. IBM PC architecture. Com-

ponents of OS. File system. Windows 2000, XP. Graphical interfeice. Multitasksystem. Installation. Tuning. Programming languages.

2. Microsoft O�ce 2003. Main components. User interface.[Î1] Óðîê 1

3. Microsoft O�ce Word 2003.Basic notion. Main features. Document structure. Templates. Text editing.

Text formatting. Styles. Tables. Equation Editor. Objects.[Î1] Óðîê 1.,2,3

4. Microsoft O�ce Excel 2003.Basic notion. Cells addresses. Formulas and values. Workbooks and work-

sheets. Tables formatting. Sorting. Filters. Plots and Diagrams. Dialogues.Macros. Goal seek. Solving. Objects.

[Î1] Óðîê 5,6

5. Data Bases. Microsoft O�ce Access 2003.Basic notion. Relational model. MS Access as RDBMS. Tables, �elds,

entry. Quaery into the data base. SQL. Forms. Reports. Importing, exportingand linking with others MS O�ce programs.

[Î1] Óðîê 8

6. MS Visual Basic. Visual Basic for ApplicationBasic notion. Syntaxes. Data types. Expressions. Operators. Functions.

Declarations. Pre�processor. Input�Output libraries. More libraries. Format-ted input�output. Examples. User Forms. Event�drived programming.

[Î1] Óðîê 13,14; [Î2] ; [Î3]×àñòü II, Ãëàâû 7�14

7. WWW technologies.Protocol. HTTP(S). HTML. WWW server and WWW client (browser).

Server�side and client�side applications. Static and dynamic HTML. WWWtechnologies (DBMS, Application and HTTP servers) . Internet. Protocols andservices. Internet security and privacy .

[Î3]×àñòü III, Ãëàâà 15

34 FIRST YEAR



1 Introduction. PC architecture.Hardware and Software. MSO�ce 2003.

4 2 2

2 Microsoft O�ce Word 2003 20 8 123 Microsoft O�ce Excel 2003 36 16 204 Microsoft O�ce Access 2003 12 4 85 Visual Basic for Application.

Macros.8 4 4

6 VBA. Data types . Operators.VBA Functions. Input�Otputfunctions.

10 2 4 4

7 VBA. If...Then...Else Statement.Do...Loop Statement. For...NextStatement

14 2 4 8

8 VBA. String functions. 18 2 4 129 VBA. Cells access functions. 10 2 4 410 VBA. User forms. Event�driven

programming.24 4 8 12

11 WWW technologies 6 2 4

Total: 162 12 60 90

INTELLECTUAL HISTORY OF EUROPE 35

Intellectual History of Europe

Lecturer: Krister SairsinghClassteachers: Krister Sairsingh, Simon Skempton

Course description

The Intellectual History of Europe is a one�year course in which the maintraditions of epistemological, moral and political thought in European historywill be analyzed and their signi�cance discussed and assessed. The course alsoprovides the necessary historical and philosophical background for the secondyear courses in sociology and in philosophy and the methodology of the so-cial sciences. The lectures are presented in English and the seminars are alsotaught in English. In the �rst half of the course, the focus will be on Socrates,Plato, Aristotle, Later Hellenistic philosophy, Augustine, Aquinas and the Re-naissance and the Reformation of the Sixteenth Century. We shall be concernedwith the following questions: What is the conception of the good life that thegreat philosophers defend? What is their conception of the nature of reality?How do they view the relation between goodness and truth? What have thesephilosophers contributed to the emergence of the political and cultural institu-tions of the West and the shaping of the Western mind?

In the second semester we will begin with Descartes and discuss the epis-temological turn that he brought about in European thought. We will thenanalyze the responses of Spinoza, Leibniz, Locke, Hume and Kant to Cartesianrationalism. In a scienti�c age which no longer appeals to traditional religiousauthority, what is the basis for ethics, moral values and political authority?How did Hobbes, Locke, Rousseau, Kant, Mill, Marx, Hegel and Nietzsche re-orient European political and moral thought without the support of the churchand traditional authority? Students will be introduced to primary source ma-terial from internet sites. Bertrand Russell's History of Western Philosophy,Robert Paul Wol�'s About Philosophy, and a collection of primary sources inFranklin Le Van Baumer's Main Currents of Western Thought will be the maintexts for the course. With the exception of primary sources in Plato, Aristo-tle and Augustine, and Russell's History of Western Philosophy, all assignedreadings for the course can be found in the ICEF Reader.

Course objectives

The course aims at introducing students to the fundamental categories ofthought which have shaped the Western mind. One objective is to enablestudents to appreciate the diversity of traditions and modes of critical inquirywithin Western thought; another is to illustrate how these various traditionsof thought have de�ned the major epochs of the West from Greco�Roman

36 FIRST YEAR

civilization, Medieval Christendom, the Renaissance, the Scienti�c Revolutionof the Seventeenth Century, and the Enlightenment to the contemporary re�assessment of the whole Western tradition from feminist, postmodern and anti�rationalist perspectives. Fundamental to the course is an introduction to themain ideas of the great philosophers from ancient Greece to modern times andtheir role in shaping the mind of the West. While the major emphasis will beupon ideas and their cultural and historical impact, the course also attemptsto draw attention to the political and social context in which the great ideashave emerged and to discuss their economic implications.

Methods


• Lectures (2 hours per week)

• Seminars (2 hours per week)

• Consultations with teachers

• Self study with literature

• Use of Internet resources

The course includes: 48 hours of lectures, 48 hours of classes. During eachsemester students will make an oral presentation and write an essay (5�6 pp.).

Main Reading

Required and recommended texts for writing the two required essays for thecourse:

1. Franklin Le Van Baumer, Main Currents of Western Thought (NewHaven: Yale University Press, 1966). This is a collection of primarysources from which most of the second semester readings will be assigned.

2. Tom Bottomore (edited), A Dictionary of Marxist Thought. (Cambridge:Harvard Universit Press, 1983

3. Henry Chadwick, The Early Church: The Pelican History of the Church,vol. 1 (Middlesex, 1967). Selection in the Reader.

4. Jacques Barzun, From Dawn to Decadence (New York: HarperCollins,2000).

5. Marcia Colish, Medieval Foundations of the Western Intellectual Tradi-tion (Yale University Press, 1997). Selection in the Reader.


6. Frederick Coplestone, A History of Philosophy. Volumes one and two arehighly recommended for writing essays on Socrates, Plato, Aristotle andAugustine.

7. David Knowles, The Evolution of Medieval Thought (New York, 1962).

8. Bryan Magee, The Great Philosophers (Oxford, 1987). Based on BBCinterviews with contemporary philosophers. Selections in the Reader.

9. William H. McNeill, The Rise of the West (Chicago: The University ofChicago, 1965). Selection in the Reader.

10. R. R. Palmer, A History of the Modern World (New York, 1965). Selec-tion in the Reader.

11. Bertrand Russell, A History of Western Philosophy (available in Russiantranslation from local stores).

12. John Plamenatz, Man and Society, 2 vols. (New York, 1963). An excel-lent history of modern political philosophy from Bodin to Marx.

13. Max Stackhouse, P. Williams and others (editiors), Classical and Contem-porary Sources for Ethics in Economic Life (Eerdmans: Grand Rapids,1995). Selection in the Reader.

14. R. W. Southern, Western Society and the Church in the Middle Ages:The Pelican History of the Church, Vol. 2 (Middlesex, 1970). Selectionin the Reader.

15. Richard Tarnas, The Passion of the Western Mind. (New York, 1991).

16. Ernst Troeltsch, Social Teaching of The Christian Church, Vol. 2 (NewYork, 1960).

17. Peter Watson, The Modern Mind: An Intellectual History of the Twen-tieth Century (HarperCollins, 2001). Selections in the Reader.

18. Robert Paul Wol�, About Philosophy (Prentice Hall, 2000). Translatedinto Russian. Selections from the English text in the Reader.

19. Aristotle, The Nicomachean Ethics. Internet Classics Archives:http://classics.mit.edu

20. Augustine, Confessions, trans. Henry Chadwick (Oxford, 1992). In Rus-sian translation and on the Internet.

21. Plato, The Apology, The Eutyphro, the Crito and selections from theRepublic (The Internet Classics Archives: http://classics.mit.edu

38 FIRST YEAR

Highly recommended:

1. The Shorter Routledge Encyclopedia of Philosophy. Edited by EdwardCraig. (Oxford: Routledge, 2005).

2. Ted Honderich (edited), The Oxford Companion to Philosophy. (Oxford:Oxford University Press, 1995).

Internet Resources

1. Ancient Greece. www.ancientgreece.com

2. Internet Encyclopaedia of Philosophy http://www.utm.edu/research/iep/

3. Stanford Encyclopedia of Philosophy: www.plato.stanford.edu

4. The Internet Classics Archives: http://classics.mit.edu

Grade determination

There will be an intermediate examination at the end of the �rst semester and�nal examination at the end of the second semester. During each semester anoral presentation and a 5�6�page essay on assigned topics will be required ofeach semester. Attendance and active participation in the weekly seminars arerequired. The �nal grade will consist of:

• Participation in seminars 10%

• Written assignments (Essays) 30%

• Intermediate and �nal examination 60%

Course Outline

Autumn Semester

1. Ancient Greek Civilization

• Emergence of the Polis.

• Historical and political developments from Minoan and Mycenaean civi-lization to the Sixth century.

• The �owering of Greek culture 500�336 BCE.

• The rise of Athens.


Ancient Greece: www.ancientgreece.com. Interactive site on the evolutionof the civilization of ancient Greece. William H. McNeill, The Rise of the West(University of Chicago, 1965), 210�237.

Highly recommended: Coplestone, A History of Western Philosophy, Vol-ume 1. The Cradle of Western Thought: Ionia, pp. 29�27.

Bertrand Russell provides an interesting overview of the rise of Greek civ-ilization in the �rst chapter of his History of Philosophy. Unlike McNeill, hegives detailed attention to the role of Orphic religion in the early history ofGreece.

2. The Development of Greek Thought.

• Beginnings of Greek Philosophy.

• The development of pre�Socratic thought: Pythagoras, Heraclitus, Par-menides and the Atomists.

• The Sophists and Socrates: The Socratic method.

Bertrand Russell, History of Western Philosophy, Read chapters onPythagoras, Heraclitus, Parmenides and the Atomists. Chapters 3, 4, 5 and 9in the English text.

3. The Sophists and Socrates.

• The Sophists and their rejection of cosmology and metaphysics.

• Socrates in the early dialogues of Plato. Sources of our knowledge of thehistorical Socrates.

• The last days of Socrates and the argument of the Apology and the Crito

• Why is Socrates considered the ideal philosophy?

Plato, The Apology: Internet Classics Archives. http://classics.mit.eduRead the Apology and the Crito. Careful reading of the Apology is essential

for this course.Recommended secondary source for a discussion of Socrates: Frederick

Coplestone, A History of Philosophy: Volume 1, Part 1, Chapter 14. Availablein Russian translation.

4. Plato.

• Life of Plato and the in�uence of Socrates upon him.

• Plato's philosophy of Virtue in the Euthyphro.

40 FIRST YEAR

• Plato's moral vision and his theory of the uni�ed self: Justice in the soulas the pattern for justice in the state.

• Education in Plato's ideal state.

• The Plato's theory of Forms and its importance for the interpretation ofTruth.

• Women and the Family in Plato's Republic.

• Plato's politics.

The Eutyphro. The Internet Classic Archives: http://classics.mit.edu Goto 441 titles and select Plato.

The Theory of the Healthy Personality: Robert Wol�, About Philosophy,182�188 (selections from Plato's Republic included). This text will be closelystudied in the seminars.

The Republic: Read the section on Women and the Family in Part 6, Chap-ters 1 and 2.

Bertrand Russell, History of Western Philosophy. Book 1, Part 2. Plato'sUtopia, The Theory of Ideas. Chapters 14 and 15.

Coplestone, Volume 1, Part 1, Chapters 20, 22, and 23.Plato's ethics and politics in The Stanford Encyclopedia of Philosophy

http://plato.stanford.edu/entries/plato�ethics�politics/

5. Aristotle.

• The Four Causes: Meaning and Purpose in Nature.

• Politics as the supreme practical science.

• Ethics as the search for happiness.

Aristotle, Nicomachean Ethics: Book 1 and 2, in The Internet ClassicArchives: http://classics.mit.edu

Bertrand Russell, Chapters on Aristotle's Metaphysics, Ethics and Politics.These chapters will be discussed in the seminars. Chapters 19�21 in the Englishtext.

Aristotle's Ethics: The Stanford Encyclopedia of Philosophy: Aristotleethics: http://plato.stanford.edu/entries/aristotle�ethics/

Aristotle's Politics: http://plato.stanford.edu/entries/aristotle�politics


6. Ancient Philosophy after Aristotle

• The Hellenistic World

• Cynics and Skeptics

• The Epicureans

• Stoicism

• Plotinus.

Bertrand Russell, Ancient Philosophy after Aristotle. Read chapters 25,26, 27, 28 and 30

7. The Roman Empire, Early Christianity and the Division ofChristendom

• From Jerusalem to Rome. The Jewish background of the early church.The encounter with the Roman Empire. Geographical expansion and thegrowth of the Church: The causes of the expansion of the Church.

• Church, state and society in the third and fourth century.

• The conversion of Constantine and the religion of the Empire. Lactantiusand the idea of toleration.

• Theories of the decline and fall of the Roman Empire.

• The division between Eastern and Western Christendom

The New Testament, Read chapters 1�10 from The Acts of the Apostles.Written by Saint Luke.

Richard Tarnas, The Passion of the Western Mind, Chapter 3, The Chris-tian World View.

Read the section entitled, �The Conversion of the Pagan Mind� 106�119 inthe English text. Russian translation is available in the library.

Chadwick: From Jerusalem to Rome, 9�32 in Reader.R.W. Southern, The Divisions of Christendom: Western Society and the

Church in the Middle Ages, 53�72 in Reader.

8. Augustine and the Transformation of Ancient Thought.

• Augustine as the Christian Plato.

• Life and search for truth: Augustine's Neo�Platonic quest.

42 FIRST YEAR

• Psychology and moral theory: Love and happiness, freedom and obliga-tion.

• Augustine's philosophy of history. The Two Cities.

• Theory of the state. Church, state and society.

Augustine, The Confessions, Books 2, 7 and 8. Available on the inter-net and in Russian translation. English translation by Henry Chadwick highlyrecommended, (Oxford, 1992).

Bertrand Russell, History of Western Philosophy. Book 2, chapter 4, �SaintAugustine's Philosophy and Theology. 352�366 in the English text.

Recommended. Chadwick, The Development of Latin Christian Thought:The Early Church, 213�236, The Reader.

Although it is long and comprehensive, Coplestone's discussion of Augustineis worth reading. Book 2, Part 1, Chapters 3, 4, 5.

The Stanford Encyclopedia of Philosophy:http://plato.stanford.edu/entries/augustine/

9. The Formation of Western Christendom.

• The Western Church and the Conversion of the Barbarians. (300�700).

• The Awakening of Western Europe.

• The Carolingian Renaissance: The achievement of Charlemagne.

• The Papacy and the political order (700�1300).

• The rise of the universities: Bologna, Paris and Oxford.

• The rise of nation states.

Bertrand Russell, History of Western Philosophy, Book 2, Part 2, chapters7 & 8. The Papacy in the Dark Ages, John the Scot.

The Divisions of Time (700�1550): R. W. Southern, Western Society andthe Church in the Middle Ages. 24�52 in the Reader.

Recommended: R. W. Southern, The Papacy, 91�131 in the Reader.

10. The Golden Age of Medieval Scholasticism

• The rediscovery of Aristotle.

• The scope of reason. The unity of philosophy and faith.

• Anselm and the Ontological Argument


• Realism and Nominalism in Medieval Philosophy.

• Aquinas and Natural Law

• Moral and political theory of Aquinas.

• Collapse of the medieval synthesis: The harvest of Medieval Nominalism.

Bertrand Russell, History of Western Philosophy. Book 2, Part 2. Chap-ter 11, The Twelfth Century. Read only the last section on �The Growth ofScholasticism.� Read the whole of chapter 13 on Saint Thomas Aquinas.

Thomas Aquinas, On the Contemplative Life: Baumer, 28�32.Of Reason and Faith: Baumer, 51�53On the Ethics of Trading, Baumer: 88�91.Recommended; The Legacy of Scholasticism: Marcia L. Colish, Medieval

Foundations of the Western Intellectual Tradition 400�1400 (New Haven &London: Yale University, 1997), 319�359. Try and read at least 319�330.

11. The Renaissance.

• The rediscovery of classical civilization

• Renaissance humanism from Petrarch to Erasmus.

• Individualism and the nature of man.

• The new politics: Machiavelli.

• The rise of the European nation state.

Bertrand Russell, History of Western Philosophy. Book 3, Part 1. Chapters1�4

Petrarch, My Secret: Baumer, 112�116;Petrarch, Letter to Classical Authors: Baumer, 123�126;Vasari, The Lives of the Painters: Baumer, 120�123;Mirandola, Oration on the Dignity of Man: Baumer, 126�128;Erasmus, On the Education of Children: Baumer, 128�130;Leonardo da Vinci, On Painting as an Art: Baumer, 138�140;Erasmus, Christian Humanism: Baumer, 149�161.Recommended: Richard Tarnas, The Passion of the Western Mind. Read

the section on the Renaissance in the �rst part of Part 5, The Modern WorldView. Available in the library in Russian translation.

44 FIRST YEAR

12. The Reformation.

• Theories of the origins of the Reformation,

• Lutheranism, Calvinism, Anglicanism, the Radical Reformation and theCounter�Reformation. In what respects they di�er?

• Main principles of the Reformation.

• Luther's theory of the Two Kingdoms and the role of the State.

• Luther's economic theory: On trade and usury.

• The Calvinist ethic. Calvinism and capitalism. Weber's sociology ofCalvinism.

Luther, On Trade and Usury: Stackhouse, 171�179 in the Reader.Richard Tarnas, The Passion of the Western Mind. Section 5, The Modern

World View, �The Reformation�, 233�247 in the English text.Luther: On the Babylonian Captivity of the Church: Baumer, 185�187.Calvin, Institutes of the Christian Religion: Baumer, 189�198.Calvin, Letter on Usury: Baumer, 231�234.Recommended: The Transmutation of Europe: Politics, Economics, and

Culture: William H. McNeill, The Rise of the West, 632�652.

Second Semester

13. Science, the Birth of the Modern World and the ReligiousReaction: Copernicus, Galileo, Bacon, Newton, and Pascal.

• Medieval methods: Explanation by purposes. Nature as a created hier-archy.

• Galileo's �Two New Sciences.�

• Bacon's method: A polemic against metaphysics and tradition.

• The Newtonian World�Machine.

• Science and religion: Pascal and the reasons of the heart.

Bertrand Russell, History of Western Philosophy. Book 3, Part 1. Chapter6, The Rise of Science. Chapter 7, Francis Bacon.

Selections from Francis Bacon: Baumer, 280�289.Newton's Optics: Baumer, 322�325.


Galileo, On Theology as Queen of the Sciences: Baumer, 326�328.Pascal http://plato.stanford.edu/entries/pascal�wager/Tarnas, The Passion of the Western Mind. Part 5, The Scienti�c Revolu-

tion, 248�271.Francis Bacon and the Foundations of the Scienti�c Method: Robert P.

Wol�, About Philosophy, 123�129. Russian translation is available in the li-brary.

14. The Rationalist Tradition in European Thought: Descartes.

• The birth of modern philosophy and the epistemological turn.

• The Cartesian method of doubt.

• Descartes' Cogito argument..

• The function of God in Descartes' method.

• The validation of reason

• The ghost in the machine: Mind and body in Descartes.

Bertrand Russell, Book 3, Part 1. Chapter 9. Descartes, 557�568.Descartes, The Principles of Philosophy: Baumer, 315�318.Descartes' Method of Doubt, Robert Wol�: About Philosophy, 42�54.Recommended: Descartes, Bernard Williams and Magee: The Great

Philosophers (Oxford, 1997), 79�95.Descartes, http://plato.stanford.edu/entries/descartes�epistemology/

15. The Rationalist Tradition in European Thought: The Meta-physics of Spinoza and Leibniz.

• Spinoza's pantheism as a solution to the Cartesian mind/body problem.

• Nature, freedom and determinism according to Spinoza.

• Spinoza's Ethics: The emotions and happiness.

• The meaning of Leibniz's Monadology.

• Russell's critique of Leibniz's theistic arguments.

• Leibniz's Theodicy: A rationalist approach to the problem of evil.

• The modernity of Leibniz's view of the world according to Quinton andMagee.

Bryan Magee, Spinoza and Leibniz. BBC interview with Anthony Quintonin The Great Philosophers, 98�117 in the Reader.

Russell, Book 3, Modern Philosophy, Spinoza and Leibniz, chapters 10 and11.

46 FIRST YEAR

16. British Thought in the 17th and 18th Century. The Empiri-cism of John Locke, David Hume and Bishop Berkeley.

• The consequences of Descartes' decision to make ideas primary.

• Locke's theory of knowledge. What is an Idea?

• Hume's theory of knowledge. What is a Cause?

• Hume's attack on reason

• Berkeley's theory of knowledge.

• Ethics without rational foundation. Hume's ethics.

Bertrand Russell, Locke's Theory of Knowledge, chapter 13 of Book 3.Hume, chapter 17 of Book 3.

Locke, Journal: Baumer, 297�299.Locke, An Essay concerning Human Understanding, in Baumer: 329�334.Hume and Empiricism, Wol�: 62�72.Hume, Passmore and Magee: The Great Philosophers, 144�167.Locke http://plato.stanford.edu/entries/locke/Hume http://plato.stanford.edu/entries/hume/

17. European Social and Political Philosophy in the Seventeenthand Eighteenth Century.

• Hobbes' theory of the origin of political association and the Social Con-tract.

• Locke's theory of government, toleration and the Social Contract.

• Rousseau's on the origins of political society and the social contract.

• Montesquieu and political theory.

• How has theory a�ected practice?

Bertrand Russell, Book 3, Chapter 8, Hobbes' Leviathan.Russell, Chapter 14, Locke's Political Philosophy.Rousseau and the Theory of the Social Contract, Wol�: 266�281 in theRousseau, The Social Contract, in Baumer: 419�427. The Reader.Montesquieu, The Spirit of the Laws, Baumer: 414�419.


18. The European Enlightenment: Reason, Progress and theConquest of Nature

• Voltaire and the age of reason.

• Kant and the concept of Enlightenment.

• The Encyclopedia and the uni�cation of knowledge.

• Condorcet's Utopia: Reason and progress.

• The ideals of the Enlightenment

Kant, What is Enlightenment? Available on the Internet.http://www.fordham.edu/halsall/mod/kant�whatis.html

The Philosophes, the Enlightenment and the Idea of Progress: R.R. Palmer,A History of the Modern World, 290�300. The Reader.

The Encyclopedia, Baumer: 370�375.Voltaire, Philosophical Dictionary, in Baumer: 410�414Condorcet, The Progress of the Human Mind, Baumer: 427�429, 441�447.

19. Kant's Copernican Revolution and Moral Worldview. TheRomantic Reaction against the Enlightenment.

• Kant's theory of knowledge

• Kant's relation to the Enlightenment. A Copernican revolution.

• Kant's resolution of the rationalism/ empiricism opposition.

• Kant's moral worldview. The categorical imperative.

• Kant's moral argument for God's existence.

• Kant's response to the con�ict of science and religion.

• Romanticism and the Enlightenment.

Ethical Theory, Wol�: 158�172, Reader. (This is an analysis of Kant'smoral philosophy.)

Russell, Book 3, Part 2. Kant.The Bourgeois Century, Baumer: 451�459.Edmund Burke, Re�ections on the Revolution, in France, in Baumer: 473�

477.Recommended. Kant (sections on empiricism, rationalism, resolution of

the opposition, and sections on ideas of reason and ethics), The Internet En-cyclopedia of Philosophy: http://www.utm.edu/research/iep/

48 FIRST YEAR

20. Hegel and Marx.

• Hegel's idea of reason and the concept of dialectic.

• Hegel's social and political philosophy. Ethical Theory.

• The concept of dialectic in Hegel and Marx.

• The main pillars of Marxism.

Hegel, Lectures on the Philosophy of History, Baumer: 479�484.Hegel and Marx, Singer and Magee: The Great Philosophers, 188�208.The Socialist Attack on Capitalism: Wol�, About Philosophy, 256�266.Karl Marx, The Communist Manifesto, On Moral Business: 238�244.Supplementary: Hegel, The Internet Encyclopedia of Philosophy.

http://www.utm.edu/research/iep/

21. Liberalism, Utilitarianism, Positivism, and Social Darwinism:Bentham, Mill, Comte, and Newman.

• The ideals and legacy of Liberalism. Di�erence from modern Liberalism.

• The decline of 19th Century Liberalism: Economic trends.

• The rise of Utilitarianism: Bentham and Mill.

• Mill on Liberty.

• Mill's views on women.

• The Positivism in the philosophy of A. Comte.

• Newman's attack on liberalism.

Mill and Classical Laissez�Faire Liberalism: Wol�, About Philosophy, 244�256.

John Stuart Mill, Private Property and its Critics, On Moral Business:216�224.

J. S. Mill, Autobiography; Jeremy Bentham: Baumer, 285�288.Auguste Comte, The Positive Philosophy: Baumer, 488�491.J.H. Newman, Note on Liberalism: Baumer, 508�510.The Waning of Classical Liberalism: R.R. Palmer, A History of the Modern

World, 607�612.Liberalism http://plato.stanford.edu/entries/liberalism/http://plato.stanford.edu/entries/mill/


22. The Con�ict between Science, Philosophy, and Religion inthe 19th Century. Nietzsche and the Death of God.

• Schleiermacher's response to Enlightenment rationalism.

• B. Darwinism and the crisis of faith in England.

• Feuerbach on atheism and alienation.

• Nietzsche on the cultural crisis of Europe.

Russell, Nietzsche. Book 3, Part 2, Chapter 25.Ludwig Feuerbach, The Essence of Christianity: Baumer, 569�572.Thomas Huxley, On Honest Disbelief and Ethics: Baumer, 572�575.Ernst Haeckel, The Riddle of the Universe: Baumer, 575�579.Sir Leslie Stephens, An Agnostic's Apology: Baumer, 579�586.Recommended: Nietzsche. http://plato.stanford.edu/entries/nietzsche/

23. The Twentieth Century: An Age of Anxiety.

• The Freudian revolution.

• World War 1 and cultural despair: Poets from the trenches.

• T. S. Eliot's Wasteland, Pirandello's bleak stage, pessimism in Joyce,Ionesco, and Beckett.

• Religious responses to cultural despair: Karl Barth, Martin Buber,Jacques Maritain, and Paul Tillich.

• A�rmations of Freedom and Justice: Hayek, Friedman, Berlin, Rawlsand Nozick.

Paul Tillich, Age of Anxiety: Baumer, 598�599Basil Willey, On the Secular Drift: Baumer, 604�606.Sigmund Freud, The Future of an Illusion: Baumer, 606�608Sigmund Freud, Selected texts on the nature of man: Baumer, 654�662Karl Barth, The Word of God and the Word of Man: Baumer, 613�616Jacques Maritain, The Angelic Doctor: Baumer, 617�621E. Cassirer: The Crisis in Man's Knowledge of Himself: Baumer, 653�654Equality, Freedom and Justice: Hayek, Friedman, Berlin, Rawls, Nozick

and B. F. Skinner: Peter Watson, The Modern Mind, An Intellectual Historyof the 20th Century, 517�519, 544�545, 548�551.

50 FIRST YEAR

24. Movements in Twentieth Century Thought

• Positivism,

• Existentialism,

• Structuralism and Post�Structuralism,

• Feminism, the Culture Wars.

• Postmodern rejection of reason and rationality and the future of the West.

Jean�Paul Sartre, Existentialism: Baumer, 612�625, 710�712Sartre: Peter Watson, The Modern Mind, 407�410Oswald Spengler, The Decline of the West, Baumer, 721�724The Feminist Critique of Ethical Theory: Robert Wolf, About Philosophy,

190�200.Culture Wars: Peter Watson: The Modern Mind, 721�736.Local Knowledge, (Science and Society in Postmodern Thinking): Peter

Watson, The Modern Mind, 667�677. This is the most important of the as-signed readings in this unit.

Supplementary: Feminist Epistemology and Philosophy of Science, Eliza-beth Anderson: The Stanford Encyclopedia, www.plato.stanford.edu



1. Historical background ofEuropean Civilization.

30 8 8 14

2. History of Ideas from earlyGreeks to Aristotle

26 8 8 10

3. The Christian Civilization of theWest from Augustine to the lateMiddle Ages.

20 6 6 8

4. The Renaissance and theReformation

16 4 4 8

6. The Rationalist Tradition inEuropean Culture

18 4 4 10

7. British Thought in the 17th &18th Centuries: Social, Politicaland Epistemological

20 6 6 8

8. The European Enlightenmentand the Romantic Reaction.

26 8 8 10



9. The Hegelian Synthesis and itsCollapse: Hegel, Mill and Marx.

28 8 8 12

10. The Philosophical and Scienti�cCritique of Religion in the 19thCentury

22 6 6 10

11. Movements of Thought in the20th Century.

21 6 6 9

Total: 243 68 68 107

52 FIRST YEAR

English Language

Course coordinator: Elena V. VelikayaClassteachers: Helen�Mary Jones, Jennifer Lockshin, Helen-Mary Owen, MarkDunnet, Lyudmil Staykov

Course description

The aim of the syllabus is to prepare students to use English in their fur-ther academic study on the University of London external programme. This isunderstood as being a �competent user� as de�ned by the Association of Lan-guage Testers in Europe Level 3 and realized as IELTS band 6 (the studenthas generally e�ective command of the language despite some inaccuracies, in-appropriacies and misunderstanding; can use and understand fairly complexlanguage, particularly in familiar situations) or a �good user� � IELTS band7 (the student has operational command of the language, though with occa-sional inaccuracies, inappropriacies and misunderstanding in some situations;generally handles complex language well and understands detailed reasoning).

Course objectives

The main objectives of the syllabus are:

• to broaden and expand the students' pro�ciency and knowledge in Gen-eral English;

• to provide material for the students to revise, consolidate and extendtheir command of English grammar and vocabulary;

• to develop the students' reading skills to enable them to skim the text formain idea, to scan the text for speci�c information, to interpret the textfor inferences, attitudes and styles, to deduce meanings from the context;

• to develop the students' writing skills to enable them to respond to inputapplying information to a speci�ed task, to elicit, to select, to summa-rize information in a range of writing activities, such as essays, articles,reports;

• to develop the students' listening skills to enable them to understand andapply speci�c information from the input;

• to develop the students' speaking skills to enable them to use general,social and professional language, to negotiate, report, explain, summarizeand develop a discussion;

ENGLISH LANGUAGE 53

• to develop the students' general capacity to a level that enables them touse English in their professional and academic environment granted thatthey are provided with the speci�c notions and vocabulary of economics,mathematics, statistics, banking and �nance in the course of their studies;

• to develop the students' ability to apply knowledge of the language sys-tem, to develop their social competence skills, to form their behaviouralstereotypes and professional skills necessary for successive social adapta-tion of graduates.

Methods

The English course consists of four main parts:

• General English

• Professional (English for Speci�c Purposes) English

• Business English

• Skills development for academic purposes

In total the course includes 228�256 hours of classes (from 6 to 10 per week de-pending on the entry level of the students' competence). The course starts witha 2�week intensive course in September (the main purpose being preparation ofthe students for their professional studies in the �rst semester and developmentof their English language skills) and �nishes with a 2�week intensive course inJune (IELTS exam preparation).

Main Reading

This syllabus may be accomplished on the basis of textbooks and training ma-terials, original special supplementary materials published by British, Americanand Australian publishing houses. The usage of up�to�date authentic materialswill help students to obtain the necessary skills in reading, writing, listening andspeaking, develop their abilities in making presentations and participating indiscussions and form the students' much higher level of social and professionaladaptation.

General English Course books:

• Foll, Kelly (1996) First Certi�cate Avenues. Cambridge University Press.

• Spratt, Taylor (1997) The CAE Course. Cambridge University Press.

54 FIRST YEAR

• O'Connell, S. (1999) Focus on Advanced English. Longman

• O'Connell, S. (1996) Focus on Pro�ciency. Longman

• Joseph, F., Travis, P. (1999) Fast track to CAE. Longman

Teaching materials for skills development:

• Greenall, Swan (1997) E�ective Reading. CUP

• McGovern (1994) Reading. Prentice Hall

• White, McGovern (1994) Writing. Prentice Hall

• Trzeciak, Mackay (1994) Study Skills for Academic Writing. PrenticeHall

• Rignall, Furneaux (1997) Speaking. Prentice Hall

• Lynch (1983) Study Listening. CUP

• Lynch (1992) Study Speaking. CUP

• Glendinning (1992) Study Reading. CUP

• Hamp�Lyons (1997) Study Writing. CUP

• Jordan (1990) Academic Writing Course. Longman

• Ellis, M., O'Driscoll, N. (1997) Giving Presentations. Longman

• Oshima, A., Hogue, A. (1999) Writing Academic English. Longman

• Master, P. (2004) English Grammar and Technical Writing. US Dep. ofState

Teaching materials for IELTS preparation:

• Practice Tests for IELTS 1-4. CUP

• Jakeman, McDowell (1999) Insight into IELTS Extra. Cambridge Uni-versity Press

• Catt, C. (1999) Language Passport. Preparing for the IELTS Interview.Longman

ENGLISH LANGUAGE 55

Teaching materials for ESP and Business English:

• Lannon, Tullias, Trappe (1993) Insights into Business. Nelson

• Yates, C.St.J (1992) Economics. Prentice Hall Int.

• Cotton, D.(1977) International Business Topics. Longman

• MacKenzie (1997) English for Business Studies. CUP

• Cotton, Falvey, Kent (2000) Market Leader. Intermediate Business En-glish. Longman

• Cotton, Falvey, Kent (2001) Market Leader. Upper�intermediate Busi-ness English. Longman

• MacKenzie, I. (1996) Financial English. LTP.

• The Economist. Weekly issues.


1. Pye, D., Greenall, S. (1996) Cambridge Advanced English Reading Skills.Cambridge University Press

2. Pye, D., Greenall, S. (1996) Cambridge Advanced English Listening andSpeaking Skills. Cambridge University Press

3. Phillips, T., Anna Phillips, A. (1994) Key Writing Skills for CAE.Macmillan Publishers

4. Walton, R., O'Connell, S. (1996) Focus on Advanced English. GrammarPractice. Longman

5. First Certi�cate Skills Practice Books. Cambridge

6. CAE and FCE practice test books (CUP) can be used as supplementaryand self�access material for IELTS preparation.

Grade determination

This syllabus is designed basing on the belief that testing and teaching areclosely interrelated. A test is seen as a natural extension of classroom workproviding teacher and student with useful information that can serve as a basisfor improvement.

The following system of tests will be used:

56 FIRST YEAR

The entrance exam � a criteria�reference test within placement to �ndout what a student can actually do with the language. The purpose of suchtesting is to classify students according to whether or not they can carry out aset of tasks satisfactorily and therefore are eligible for admission to the ICEF.

Mid of the 1st semester test � a diagnostic test used to identify thestudents' progress, their strengths and weaknesses, intended to ascertain whatfurther teaching is necessary.

End of the 1st semester exam � an achievement/attainment testdesigned to show mastery of the syllabus, directly related to language courses,the purpose being to establish how successful the students have been attainingobjectives. It shows the standard one student has reached in relation toanother at the same stage based on IELTS band. Students can be regroupedaccording to the results of this exam; it will also form the main means for theend of the �rst semester assessment.

Mid of the 2nd semester test � an achievement/attainment testdesigned to show the students' progress, their competence in academic skillsand their strengths and weaknesses in IELTS exam preparation.

End of the 2nd semester exam � a pro�ciency test designed to mea-sure a student's competence in the form of the IELTS Academic Module takenexternally at the British Council. Students must achieve a minimum overallBand 6 to be deemed successful in their �rst year studies and to be consideredcapable of successfully pursuing their second year studies.

Course Outline

The content of the English syllabus is based on preliminary testing and group-ing the students into several groups (depending on the number of studentsadmitted): strong advanced, advanced, upper�intermediate, mid�intermediate,lower�intermediate, pre�intermediate, elementary). This approach helps stu-dents in low groups to obtain needed competence and students in high groupsto perfect their knowledge of English.

1. General EnglishThe students' competence in this aspect is measured by their ability to

maintain social and professional contacts in familiar situations. They masterand perfect their knowledge of all grammatical structures and functions (e.g.sentence types, tenses, parts of speech, numerals, word order, word and sen-tence formation); they extend their vocabulary to ful�ll the above mentionedfunctions in roles, topics, discussions.

ENGLISH LANGUAGE 57

The students are taught to be able to converse on di�erent themes (language,people, home, relationships, town, country, health, free time, education, scienceand technology, the world around, culture and traditions etc.) with nativespeakers, take part in discussions; analyze authentic materials from newspapersand magazines; write formal and informal letters, compositions.

2. Professional (ESP) EnglishThe purpose of ESP course (done basically during the �rst intensive course)

is to prepare the students for doing Economics, Mathematics and Statistics inEnglish.

Development of the students' restricted knowledge in economic terms andtopics includes: economic problems, the production possibility frontier, mar-kets, microeconomics and macroeconomics, economic analysis, supply and de-mand, price, income, output, supply, money and banking, central banking,international trade.

Development of the students' knowledge in mathematical terms (also doneduring the intensive course) includes giving the English equivalents of all math-ematical terms that the students have encountered in school. Each topic(arithmetic, percents, polynomials, inequalities, functions and their graphs,sequences, trigonometry, exponential and logarithmic functions, limits, deriva-tives, functions investigation, integration) in the course will be discussed usingconcrete examples for maximum e�ciency which serves the purpose to quickrefresh the course in Math.

Development of the students' knowledge in English for Statistics (also doneduring the intensive course) will include introduction of some speci�c terms(event, histogram, frequency, sample, population, probability) and a generaldiscussion of how statistics should be understood relative to the real world.This will include a discussion of meaning of statements such as �the probabil-ity that a red ball will be chosen is 1/3�, �the average life expectancy is 65years�, 'it is unlikely that this law will be passed�, etc. A real�life example ofBernoulli's triple test with a discussion of type I and type II errors is plannedas an illustration of statistical methods in decision making.

The students' competence in ESP is measured by their ability to use ESPin their professional and academic work to the level whereas they are able to:

• understand and interpret information presented in verbal, numerical orgraphical

• form and do information transfers;

• explain contemporary events and familiar phenomena in terms of relevantprinciples;

• make meaningful generalizations about data;

58 FIRST YEAR

• select and apply laws and principles to familiar problems presented innovel and familiar manner;

• recognize unstated assumptions;

• distinguish between statements of fact, statements of value and hypothet-ical statements;

• make valid inferences from materials presented;

• organize ideas and present them in an appropriate manner;

• evaluate the reliability and accuracy of the material;

• detect logical fallacies in arguments;

• check that conclusions drawn are consistent with given information;

• organize and present ideas and statements in a clear, logical and appro-priate form.

3. Business EnglishBusiness English course starts during the �rst intensive course with the

introduction of the students into the world of business.The course aims to:

• provide students with the language and concepts found in books andnewspaper and magazine articles on business and economics;

• develop the students' comprehension of business and economic texts;

• develop the students' listening skills in the �eld of business and economics;

• provide the students with opportunities to express business concepts byreformulating them in their own words while summarizing, analyzing,criticizing and discussing the following ideas: company structures, workmotivation, recruitment, management styles, advertising and marketing,franchising, retailing, banking, stocks and shares bonds, the small busi-ness, the role of government, ecology, etc.

The students' competence in this aspect is measured by their ability tonegotiate, write letters of request and complaint, business letters, memos; beIT users; create data bases and work with them; analyze information (includingads); make reports and business plans; analyze job ads in search of appropriatejob positions, prepare CVs and letters of application and have successful jobinterviews.

ENGLISH LANGUAGE 59

4. Skills developmentStudents are taught to develop their skills in:

Reading which includes: predicting, skimming, scanning, detailed read-ing, guessing unknown words from context, understanding text organization,recognizing argument and counter�argument; distinguishing between main in-formation and supporting detail, fact and opinion, hypothesis versus evidence;summarizing and note�taking.

Writing includes:

• Essay content and structure (patterns of organization, paragraphing, dis-cussion � argument/counter�argument, advantages and disadvantages,topic sentence and supporting ideas, coherence and cohesion, punctua-tion, quoting and referencing, avoiding plagiarism, bibliographies).

• Functions (generalization, de�nitions, exempli�cation, classi�cation,comparison and contrast, cause and e�ect, process and procedure, in-terpretation of data).

• Style (passive constructions, avoiding verbosity)

• Punctuation

Listening includes:

• General comprehension (listening for gist, listening for detailed informa-tion, recognizing relevant/irrelevant information, signposting and impor-tance markers, recognizing sentence connections: reference, addition, con-trast, cause and e�ect, listing; evaluating the importance of information).

• Lectures (identifying the topic and main themes, identifying relationshipsamong major ideas, comprehending key information, identifying support-ing ideas and examples, retaining information through note�taking, re-trieving information from notes, inferring relationships between informa-tion supplied in a lecture, taking e�cient notes from a lecture).

Speaking includes:

• Seminar skills (agreeing and disagreeing, clarifying, questioning, persuad-ing, emphasizing, concluding, interrupting; evaluating ideas and actions,presenting solutions, recommending action, comparing and contrasting,probability and possibility, cause and e�ect, criticizing).

• Presentation skills (introductions and stating the purpose, signposting,creating interest and involving audience, using rhetorical questions, em-phasizing and highlighting key points, preparing the audience for visuals,

60 FIRST YEAR

how to use an OHP, summaries, conclusions and closing courtesies; bodylanguage and non�verbal communication).

The students' competence in skills development is measured by their abilityto understand and produce written and spoken language in an educationalcontext, to perform the following academic tasks:

• reading and understanding written academic language;

• writing assignments in an appropriate style for university study;

• listening to and comprehending spoken language in both lecture formatas well as formal and informal conversational style;

• speaking to colleagues and lecturers on general and given topics in formaland informal situations.

ENGLISH LANGUAGE 61


No Topic Total

Intensive course (September): 28�401. General English 0�82. Professional (ESP) English 43. Business English 84. Skills development 16�205. Self-study 26

1st semester (October � December): 881. General English 222. ESP and Business English 223. Skills development 444. Self-study 26

2nd semester (February�April): 801. General English 202. Business English 203. Skills development 404. Self-study 24

Intensive course (June): 32�481. IELTS preparation 32�482. Self-study 20

Total: 228�256Total: Self-study 96

62 FIRST YEAR

Second Year

Microeconomics

Lecturer: Natalya FrolovaClassteachers: Natalya Frolova, Natalya Dzagourova

Course description

Microeconomics is a one�semester course for the second�year students basicallytaught in the third semester. The assessment of the students will be by the Uni-versity of London (UL) examinations at the end of the fourth semester. Duringthe fourth semester students are specially prepared to the University of Londonexamination in the course of supporting classes. Students are supposed to becompetent in basic economic analysis up to the level of the Introductory Mi-croeconomics taught in the �rst year of studies. Intermediate Microeconomicsis a core discipline under world standards. It forms the basis of further eco-nomic studies in applied disciplines such as: courses in industrial organization,public �nance, labour economics, international economics, corporate �nance,development economics, etc. The course is taught in English.

Course objectives

The objectives of the course are:

• to expand the students' knowledge in the �eld of microeconomics and tomake them ready to analyze real economic situations;

• to provide students with the knowledge of basic microeconomic models'assumptions, internal logic and predictions, grounding the explanationsmostly on intuitive and graphical approaches, if necessary, with addingsome simple algebra;

• to develop the students' ability to apply the knowledge acquired to theanalysis of speci�c economic cases, recognizing the proper frameworkof analysis and constructing the adequate economic models within thisframework.

63

64 SECOND YEAR

Methods

While teaching the course the following teaching methods and forms of studyand control are used:

• lectures (2 hours per week);

• classes (2 hours per week);

• weekly written home assignments, regularly checked and marked by theclass teacher and discussed in detail in class;

• essays writing in one of the course topics;

• teacher's consultations;

• self�study;

• intermediate control: one examination paper in the middle of the thirdsemester and a Mock exam in the University of London examinationformat not long before the end of the fourth semester;

• �nal control: an examination paper in the University of London exami-nation format following the third semester and the University of Londonexamination.

In total the course includes: 36 hours of lectures and 36 hours of regularclasses in the third semester and 24 hours of supporting classes in the fourthsemester. Self�study is a very important component for the course.

Main Reading

1. David Laidler, Saul Estrin. Introduction to Microeconomics. Fourthedition.Cambridge University Press, 1995 [L&E].

2. Hal R.Varian. Microeconomics. Fourth or �fth edition. � W.W. Nortonand Company, 1996, 2000. [HV]

3. Õýë Ð.Âýðèàí. Ìèêðîýêîíîìèêà. Ïðîìåæóòî÷íûé óðîâåíü.Ñîâðåìåííûé ïîäõîä. Ïåð. ñ àíãë. 4�îãî èçä. � Ì.: �ÞÍÈÒÈ�,1997.

4. Amos Witztum. Economics. An Analytical Introduction. - Oxford Uni-versity Press, 2005. [AW]

MICROECONOMICS 65


1. Jack Hirshhleifer, Amihai Glazer. Price Theory and Applications. Fifthedition. � Prentice�Hall Inc., 1992. [H&G]

2. Robert H. Frank. Microeconomics and Behaviour. Second edition. �McGraw�Hill. 1994.

3. Ãàëüïåðèí Â.Ì., Èãíàòüåâ Ñ.Ì., Ìîðãóíîâ Â.È. Ìèêðîýêîíîìèêà.Â 2�óõ òò. � Ñïá: Ýêîí. øê., 1996, 1997.[Ã&È&Ì]

4. ×åêàíñêèé À.Í., Ôðîëîâà Í.Ë. Ìèêðîýêîíîìèêà. Ïðîìåæóòî÷íûéóðîâåíü (ó÷åáíèê). � Ì., ÈÍÔÐÀ�Ì, 2005 [×&Ô - ó÷.].

5. ×åêàíñêèé À.Í., Ôðîëîâà Í.Ë. Ìèêðîýêîíîìèêà. Ïðîìåæóòî÷íûéóðîâåíü (ó÷åáíîå ïîñîáèå). � Ì., ÈÍÔÐÀ�Ì, 2005 [×&Ô - óï.].

Grade determination

The students sit the interim written exam in the middle and the �nal writtenexam - in the end of the third semester. Each of the exams is in the University ofLondon format, that is, includes only the free response questions, with choice forthe students. The grade given after the end of the third semester is determinedaccording to the following scheme: the �nal exam gives 50% of the grade, theinterim exam and home assignments - 25% of the grade each.

Final grading under the Higher School of Economics degrees takes place afterthe University of London written exam, according to the following scheme: theUniversity of London exam accounts for 30%, the third semester grade - for40%, the Mock exam - for 20%, essays and home assignments written in thefourth semester - for the remaining 10% of the �nal grade. The April Mockexam is held and marked by Russian professors in the UL exam format.

Course Outline

1. Theory of consumer choice and marketAssumptions of consumers' behaviour analysis and their role in

the consumer choice theory. General assumptions: principle of rationality.�Cost�bene�t� criterion of rationality: �self�interest� standard versus �presentaims� standard. �Choosing the best of the available� criterion of rationality.Causes of a consumer's possible irrationality. Sovereignty of a consumer. Othergeneral assumptions of consumers' behaviour analysis: ceteris paribus, certaintyand complete information. Speci�c assumptions (axioms of consumer choice)and their implications for preference ordering. The problem of bundles rankingand properties of consumption bundles. Axioms of completeness, transitivity

66 SECOND YEAR

and re�exivity: content and implications. Non�satiation axiom: ñontent andimplications. The notion of the marginal rate of substitution. Axioms of conti-nuity and strict convexity (diminishing marginal rate of substitution): ñontentand implications. Properties of standard indi�erence curves maps.

Linking preferences and utility. Comparing the cardinal and ordinalapproaches to the preferences analysis: historical and logical aspects. Prop-erties of preferences presented as properties of a utility function. Types ofutility functions and properties of indi�erence maps. The notion and exam-ples of homothetic preferences: Cobb�Douglas preferences, perfect substitutes,perfect complements. Examples of non�homothetic preferences: quasilinearpreferences, preferences in respect of a good and a bad.

Budget constraint. Budget constraint for income in cash: graphical pre-sentation and algebraic description. Economic meaning of the budget line slope.The impact of changes in income and prices. Budget constraint for income inkind: graphical presentation and algebraic description. The impact of changesin endowment structure and prices. Budget constraints for �mixed� income.

Consumer's choice. Interior optimum of a consumer. Economic mean-ing of equalizing the marginal rate of substitution with the goods' price ratio.Algebraic solution for the optimum of a consumer with Cobb�Douglas prefer-ences. Solution for the optimum in the case of perfect complements. Boundaryoptimum of a consumer. Economic meaning of the inequality of the marginalrate of substitution and the goods' price ratio. Examples: choice with perfectsubstitutes, neutrals, mutually exclusive goods, �good /bad� cases.

Individual demand function, comparative statics of individual de-mand and economic goods typology. Determinants and properties of anindividual demand function. Homogeneity of degree zero in prices and in-come. Deriving �income�consumption� and Engel curves. Engel expenditurecurves. The di�erence between normal and inferior goods, .necessity and luxurygoods in respect of marginal propensity to consume and income elasticity val-ues. �Income�consumption� and Engel curves for homothetic preferences cases:Cobb�Douglas preferences, perfect substitutes, perfect complements. Quasi-linear preferences case. Deriving �price�consumption� and individual demandcurves. The di�erence between ordinary and non�ordinary goods. The notionof a Gi�en good. Gross substitutes and complements. The two notions of realincome: in terms of Hicks and in terms of Slutsky. Substitution e�ect underHicks and under Slutsky. Explanation of the sign of a substitution e�ect. Dia-grams explaining price e�ect signs and derivations of individual demand curvesfor: a normal good, an inferior and ordinary good, a Gi�en good.

Slutsky identity and Slutsky equation. Derivation of the Slutskyidentity in absolute increments and increment ratios forms. Intuitively�logicalderivation of the Slutsky equation.on the basis of a diagram presenting Slutskysubstitution and income e�ects of a price change for a normal good. Economicmeaning of the Slutsky identity. Slutsky identity and equation with cross ef-

MICROECONOMICS 67

fects. Explanation of a cross substitution e�ect sign. net substitutes. Sign ofthe cross price e�ect. Gross and net substitutes, complements, independentgoods. Asymmetry of the cross price e�ect. Solving for a price e�ect and forsubstitution and income e�ects under Hicks and under Slutsky.

Measuring consumer bene�t. Marshallian consumer surplus, economicmeaning and graphical presentation.

Revealed preference approach in the consumer choice theory.Principle of revealed preference. Principle of rationality under revealed prefer-ence concept. Explaining the sign of substitution e�ect. Deriving indi�erencecurves. Explaining the convexity of indi�erence curves. Advantages and disad-vantages of the revealed preference concept versus the ordinal approach.

Market demand. and elasticity. Aggregation of demand. Originsof the price elasticity concept: the relation between the change of a good'sprice and total expenditure on this good. Graphical and algebraic approaches.Comparative analysis of di�erent regulatory measures on consumers' choice andwelfare: the impact of lump�sum and per unit taxes and subsidies, of subsidiesin kind. Explaining the lump�sum taxes and subsidies advantage principle.

L&E: pp.7�36, 38�41, 47�55; HV: ch.2 �8, 14, 15; AW: ch.2;H&G: ch.3 �5; RF: ch.1, 3 �5; Ã&È&Ì: ch.3, 4;×&Ô (ó÷., óï.):ch.1� 6.

2. Production and costs, behaviour of a �rm and market supplyProduction function and its properties. Concept of a production

function. Production function and factors of production. Ñonñept of short andlong runs. Graphical presentation of a production function. Technically e�-cient combinations (e�cient techniques) and isoquants. Kinked (engineering)and smooth convex isoquants. Isoquants maps. Negative slope of an isoquant.Marginal rate of technical substitution, its relationship with .marginal productsof labour and capital. Short�run production function: graphical presentationand properties. Dynamics and relationship of marginal and average returnsto a variable factor: increasing, constant and decreasing returns to a factor.Technically e�cient range of production. Long�run production function andits characteristics. Ñonñept and types of returns to scale: increasing, con-stant and decreasing returns. The graphical presentation. Factors explainingdi�erent returns to scale. Ñonñept of a homogeneous production function. Ho-mogeneity and returns to scale. Homogeneity and homotheticity as propertiesof production functions. Ñonñepts of factors substitutability and elasticity ofsubstitution. Production function and technical progress. Types of technicalprogress: capital�saving, labour�saving, neutral. Properties of certain produc-tion functions: Cobb�Douglas, Leontie� and linear technologies.

Cost functions and their derivation. Concept of costs. Isocosts andisocosts map. Choice of the optimal combination of inputs by a �rm. Costsminimization condition, its economic meaning. Expansion path in the long run:

68 SECOND YEAR

slope and shape for homogeneous and non�homogeneous production functions.Expansion path in the short run. Concept of a cost function. Returns toscale and graphical derivation of long�run cost curves. Deriving long�run costfunctions for homogeneous production functions: cases of increasing, constantand decreasing returns. Returns to scale and economies of scale. Shapes oflong�run total and average cost curves. Economies and diseconomies of scalesources. Returns to a variable factor and graphical derivation of short�run costcurves. Algebraic and graphical explanation of the relationship between: short�run marginal costs and marginal product of labour, short�run average costsand average product of labour; short�run marginal costs and short�run averagecosts. Short�run and long�run cost curves relationship for total, average andmarginal costs.

Pro�t�maximization by a �rm. Assumption of pro�t�maximization.Economic pro�ts versus accounting pro�ts. Conditions of pro�t�maximization.Relationship between cost�minimization and pro�t�maximization: pro�t�maximizing demand for factors of production.

The �golden rule� (necessary condition) of pro�t�maximization: MR=MC.Derivation and economic meaning, speci�city for a competitive �rm. Su�cientcondition of pro�t�maximization for a competitive �rm.

Market supply of a competitive �rm and industry. Short�run pro�t�maximizing choice of a competitive �rm and its short�run supply curve. Short�run equilibrium of a competitive industry. Types of �rms in the equilibrium.The industry short�run supply derivation. Long�run supply curve of a com-petitive �rm. Long�run equilibrium of a competitive industry: the process ofestablishing, conditions and their economic meaning. Price elasticity of supply:concept, geometric interpretation, possible values range. Deriving the long�runsupply curves of competitive industries with constant, increasing and decreas-ing costs. Deriving the long�run supply curve of a competitive industry withdi�erent e�ciency of established and entering �rms. Producers surplus in thelong�run and the Ricardian economic rent concept.

L&E: pp. 47�55, 133�152, 154�170, ch.13, 14;HV: ch.17-22;;AW:ch.3;H&G: ch.6, 7;RF: ch.9 -11;Ã&È&Ì: ch.7-9;×&Ô: (ó÷., óï.):ch.8-11.

3. Market structuresMarket structures classi�cation. Perfect competition as a type

of market structure. The concept and key features of a market structure.Types of market structures. Perfect competition as a market structure: keyfeatures and their implications. The productive and allocative e�ciency ofperfect competition. E�ciency consequences of regulation: the impact of perunit and lump sum taxes and subsidies, import tari�s and quotas, price controls.Tax burden sharing between consumers and producers.

Monopoly as a market structure. Key features of a monopoly market

MICROECONOMICS 69

structure. Sources of a monopoly. Types of barriers to entry. Monopolist'sdemand curve, total and marginal revenue. The relationship between marginalrevenue and elasticity. Pro�t maximization by a monopolist: speci�city of con-ditions and their implications. Monopoly power and its measurements. Pro�t�maximizing monopolist's choice in the short and in the long run. Choice ofa multi�plant monopolist. Social costs of a monopoly. Productive e�ciencyand allocative ine�ciency of monopolization. Price discrimination: conceptand conditions. Typology: �rst, second and third degree price discrimination.Classifying second degree price discrimination according to: volumes consumed,timing and terms of sales, types of goods, etc. Conditions of third degree pricediscrimination. Its graphical presentation for horizontal and upward�slopingmarginal cost curves cases. The concept of natural monopoly and subaddi-tivity of costs. Dilemma of natural monopoly regulation. Choice of a totalrevenue maximizing monopolist. Monopoly regulation and economic e�ciency:price controls, the impact of taxes and subsidies, import tari�s and quotas.

Monopolistic competition as a market structure. Basic key featuresand assumptions of analysis, their implications. Speci�city of the long�runequilibrium of �rms in the monopolistic competition and the problem of al-locative e�ciency. The impact of lump�sum and per unit taxes and subsidieson the choice of a �rm and e�ciency of long�run outcome in a monopolisticcompetition industry.

Oligopoly as a market structure. Key features and approaches tooligopoly models classi�cation.

Conjectural variations approach in oligopoly modelling. Pro�t�maximiza-tion condition and conjectural variations in models with output as a strategicvariable. Assumptions of the Cournot model. Conjectural variations approach:isopro�ts and reaction functions. Solving for the Cournot equilibrium. Graph-ical presentation of the Cournot duopoly. Properties of isopro�t curves forproducers of substitutes and their implications. The concept of Nash equilib-rium The Cournot � Nash equilibrium and its stability. Monopolist's residualdemand curve approach and the Cournot duopoly. Cournot duopolists strate-gic behaviour character and reaction functions derivation. Bertrand duopoly:assumptions, graphical presentation of a duopolist demand function and out-come of the strategic behaviour. Oligopoly dilemma: essence and.game theorypresentation. Pro�t� maximizing cartel (one�period model). Comparison ofequilibrium outcomes under perfect competiton, pure monopoly, Cournot andBertrand duopoly. Dominant price leader in the competitive fringe. Generalassumptions of the model. The closed entry and open entry cases.

L&:. ch.15, 16; pp.239�254; 267�272 (ch.17, 18);HV: ch. 22� 24, 26;AW: ch.4;RF: ch. 9 �14;H&G: Ñh.8�10;Ã&È&Ì: ch.7�12;×&Ô (ó÷., óï.): ch.13� 17.

70 SECOND YEAR

4. Factor marketsFactor supply. Individual labor supply curve derivation. Basic assump-

tions of the model: choice between leisure and other goods, speci�city of thebudget constraint. Graphical derivation of the backward�bending individuallabour supply curve on the basis of price�consumption curve for leisure deriva-tion. The dependence of substitution and income e�ects due to wage changeson the type of preferences in respect of leisure. The dual role of wages andits implications. Possibility of interpreting the model on the basis of cross ef-fects. The impact of wage and income taxes on individual labor supply curve.Competitive market labour supply.

Factor demand. Pro�t�maximizing inputs choice condition: derivationand economic meaning. Demand for factors as derived demand. Substitutionand output e�ects of a factor price change. Demand of a competitive �rm fora factor in the short and in the long run. Industry demand for a factor in theshort and in the long run. The industry demand for labour: �real wage� andmarginal revenue product approaches.

Equilibrium and pricing in factor markets. Competitive equilibriumin the labour market: the problem of stability, the impact of taxation and wagecontrols. Equilibrium in the labour market with a monopoly in a good's produc-tion. Outcome under monopoly of the trade�union in labour supply: modellinga wage�bill maximizing trade�union. Equilibrium in the factor market withconstant long�run factor supply. Rent.

L&E: ch.5 (pp.71 - 83), 21 (pp.309�315; 319�324), 25 (pp.367�370);HV: ch.9, 25;AW: ch.5;H&G: ch.11;RF: ch. 15;Ã&È&Ì: ch.14 (14.1);×&Ô (ó÷., óï.): ch.21� 23.

5. General equilibrium and e�ciencyWalrasian equilibrium. The concept of general competitive equilibrium.

Excess demand functions. Excess demand and partial equilibria. Excess de-mand functions and zero excess demand lines derivation for two substitutegoods. Existence and stability of simultaneous equilibrium in the markets fortwo substitute goods. Excess demand functions and zero excess demand linesderivation for two complement goods. Existence and stability of simultaneousequilibrium in the markets for two complement goods. Existence and stabilityof simultaneous equilibrium in the markets for two goods with asymmetry ofrelationship. Aggregate excess demand. Walras law. Conditions of generalcompetitive equilibrium.

General equilibrium and e�ciency modelling in Edgeworth box.General equilibrium in exchange economy. Contract curve. Conditions andprocess of reaching Pareto�e�ciency in consumption (exchange). General equi-librium in production. Production contract curve, conditions and process ofreaching Pareto�e�ciency in production. Deriving production possibility fron-tier on the basis of production contract curve. Conditions and process of reach-

MICROECONOMICS 71

ing Pareto�optimal product mix (simultaneous general equilibrium in produc-tion and consumption) in competitive markets.

L&E: ch.28�30;HV: ch. 28, 29;AW: ch. 6;H&G: ch. 13 (pp.357�387);RF: ch. 17;Ã&È&Ì: ch. 15;×&Ô (ó÷., óï.): ch.24, 25.

6. Externalities and public goodsExternalities. The concept of externalities and their typology. Externali-

ties in production and consumption. Positive and negative externalities. Net-work externalities. Allocative ine�ciency of competitive outcome with di�erenttypes of externalities. Externalities and taxation. Externalities and regulation:corrective (Pigouvian) taxes and subsidies.

Public goods. The concept of a public good and its main features. Non�rivalness and non�excludability and goods typology. Non�rivalness as the de�n-ing feature of a public good. Types of public goods. The willingness� to� payfor a public good consumed without choice aggregation. Public good's Pareto�e�cient provision condition. Public goods provision and market failures.

L&E: ch.31;HV: ch. 31, 34;AW: ch. 7;H&G: ch. 15 (15.3);RF:ch. 18, 19;Ã&È&Ì: ch. 17;×&Ô (ó÷., óï.): ch.27, 28.



1. Theory of consumer choice andmarket demand

78 16 12 50

2. Production and costs, behaviorof a �rm and market supply

44 12 6 26

3. Market structures 58 12 8 384. Factor markets 34 12 4 185. General equilibrium and

e�ciency34 12 4 18

6. Externalities and public goods 22 4 2 16

Total: 270 68 36 166

72 SECOND YEAR

Macroeconomics

Lecturer: Andrei V. DementievClassteachers: Andrei V. Dementiev, Tatiana Yu. Matveeva, Eugeny R. Nador-shin

Course description

Macroeconomics for the second�year students is a one�semester course, whichis taught in English. The course examines main principles of real income de-termination, basic concepts of general equilibrium in the economy with goodsand �nancial assets markets, as well as means and ends of monetary, �scaland redistribution policies. It deals with the stabilization policy problems in asimple IS�LM�AS framework leaving microeconomic foundations of consump-tion, investment, money demand etc. functions as well as long�run issues forthe third�year course. It also assesses the e�ectiveness of stabilization andre�distribution policies in the open economy setup by utilizing the IS�LM�BPmodel with full and no capital mobility and di�erent exchange rate regimes.

Prerequisites

For studying the course the knowledge of APT level of Economics and Mathe-matics for Economists is necessary. Since the course is taught in English andstudents also study for Russian degree in Economics, the knowledge of Russianterminology is necessary. In turn, the Introduction to Economics (Macroeco-nomics) is a pre�requisite for the third�year course on Macroeconomics as wellas Monetary Economics, International Economics, Economics of Transition.

Course objectives

The purpose of the course is to develop the economic way of thinking and makestudents ready to use logic and methods of economic analysis in their furtherstudies. Speci�cally the course aims at:

• giving students a solid grasp of macroeconomic analysis at theintermediate�level using both graphical and algebraic techniques;

• ensuring students can apply macroeconomic analysis to the study of con-temporary and historical economic problems;

• broadening the students' knowledge in the �eld of macroeconomics,

MACROECONOMICS 73

Intended Learning Outcomes

Having completed this course the student are expected to

• understand the IS�LM�AS model in the closed economy with �xed and�exible prices and wages and be able to apply it when analysing theimpact of monetary, �scal and redistribution policies;

• understand the IS�LM�BP model with full and no capital mobility andbe able to apply for the small open economy and two�country settingsunder di�erent exchange rate regimes;

• understand the theoretical and practical limitations of macroeconomicpolicy in stabilising the economy, for instance the impact on the economyof public debt and de�cits.

Methods

The following methods and forms of study and control are used in the course:Lectures (2 hours a week). Attendance at lectures is optional, but it is

strongly recommended. Lectures o�er a verbal presentation of the material tobe mastered. More importantly, they indicate the relative importance of sub�topics and o�er approaches to understanding the material that a reading of thenotes or textbook sometimes leaves obscure. Those who cannot attend a lectureshould endeavour to discuss its content with a fellow student who did attendand to borrow and copy notes. Because of the size of the class, questions anddiscussion are not encouraged during lectures. If lecture material is unclear,it is best to consult the tutor, preferably during tutorials or the tutor's o�cehours.

Classes (2 hours a week). Classes commence in the second week ofthe semester. Tutors provide an opportunity to discuss lecture material atthe beginning or end of their tutorials. The course emphasis is on conductingeconomic analysis rather than simply establishing a set of facts to be memorised.With this aim, a set of exercises (problem sets) is distributed each week anddiscussed in tutorials. Students are strongly encouraged to carefully preparewritten answers to home assignments in advance of attending tutorials.

Teachers' consultations. Unresolved questions on the lecture materialcan be addressed with tutors on appointment during their consultation times(o�ce hours).

Self�study. Before consulting a tutor, however, students are expected tomake a serious attempt to solve the problem. Since learning for understandingcan only be done by the student lecturers and tutors can do no more than o�eradvice as to how to go about it. Without prior e�ort to master a topic on thepart of the student, consultation is a wasteful repeat of the lecture experience.

74 SECOND YEAR

Written home assignments (problem sets). A set of home assignments(problem sets) is distributed each week (10 in total). Students are strongly en-couraged to have completed problem sets. Writing answers to questions beforethey are discussed in tutorials is the best way to master the course material.

Use of Internet resources. One can easily �nd plenty of useful materialsin the Internet by simply typing �interactive macroeconomics� in the searchbrowser. To avoid a waist of time students are recommended to begin with themost suitable links listed in the literature section.

Intermediate control.Students are expected to have a Mock exam in theUniversity of London (UL) examination format in the middle of semester. TheMock exam is set in April by local teachers, graded in accordance with ULexamination rules.

Final control.Students have joint examination paper in micro� andmacroeconomics in the University of London examination format following thesemester.

The structure of the �nal examination is standard as little in the contentof the course has been changing from year to year. Though some questionson earlier examination papers may not be an appropriate preparation for thenext year �nal examination, past examinations will nonetheless appear in thelibrary.

In total the course includes 30 hours of lectures and 30 hours of regularclasses in the fourth semester.

Main Reading

Main Text

1. Witztum A. (2005) Economics � An Analytical Introduction . OxfordUniversity Press (W)

Additional Texts

1. Blanchard O. (2000) Macroeconomics. 2nd edition, Prentice�Hall (B)

2. Begg, D., S. Fischer and R. Dornbusch (2005) Economics. Eighth edition,McGraw Hill (BFD).

3. Perlman M. (1996) Macroeconomics. Bath. M. Perlman Publishing. (P)

4. Blake D. (1993) A Short Course of Economics. McGraw Hill. (Blake)

5. Lipsey R.G., Chrystal K. (1995) Àn Introduction to Positive Economics.Oxford University Press. (LC)

MACROECONOMICS 75

It is worth mentioning here that UL lists the last four textbooks (Begget.al, Perlman, Blake and Lipsey) as essential for the course �Introduction toeconomics� while Witztum's book as additional reading. Admitting the impor-tance of studying macroeconomics from di�erent perspectives provided by anumber of various intermediate�level textbooks, we recommend to shape yourunderstanding of the subject, at �rst, on the basis of lecture notes which aresigni�cantly supported by the Witztum's Economics. You may bene�t from theusage of lecture notes (slides) when studying speci�c topics which are uniqueto this course (comparing to standard Intermediate Macroeconomics coursestaught outside ICEF and UL External Programme).

Most of data and case studies in Blanchard's Macroeconomics come from theUS. However, students may �nd helpful the similarity of notations and exchangerate de�nition used in this book and employed in the ICEF course. Moreover,the Blanchard's book provides a good example of internationally recognisedstandard one�year Intermediate Macroeconomics course (for instance, this bookhas been serving as a main text for the HSE students of Economics Depart-ment).

Begg's book (particularly chapters 20�29, 32, 34) is really essential becauseit covers almost all the material studied in the course. Nevertheless it does notprovide students with necessary analytical tools. It also oversimpli�es somemicro�foundations and behavioural functions that are ignored in our coursebecause they are thoroughly explained in the third�year course taught at ICEFduring Spring semester. Blake's textbook is good as a condensed summary butcan not be used without other suggested readings.


1. Barro R., Grilli V. (1994) European Macroeconomics, Macmillan.

2. Burda M., Wyplosz C. (2001) Macroeconomics: A European Text, 3rdedition, Oxford University Press,

3. Dornbusch R. (1980) Open economy macroeconomics, New York : BasicBooks (D).

4. Dornbush R., Fischer S., Startz R., Macroeconomiñs. 8th edition,MñGraw�Hill, 2001. (DFS).

5. Heijdra B., van der Ploeg F. (2002) Foundations of Modern Macroeco-nomics, Oxford University Press, ch. 1�11.

6. Mankiw N. G. (1992) Macroeconomics, NYWorth Publishers,. (M) /Rus-sian translation: Í.Ã.Ìýíêüþ, Ìàêðîýêîíîìèêà. Èçä�âî Ìîñêîâñêîãîóíèâåðñèòåòà, 1994/.

76 SECOND YEAR

7. Sachs J.D., Larrain F. (1993) Macroeconomics in the Global Econ-omy, (S&L) /Russian translation: Ñàêñ Äæ.Ä., Ëàððåí Ô.Á.Ìàêðîýêîíîìèêà. Ãëîáàëüíûé ïîäõîä. Ì., Äåëî, 1996.

8. Turner P. (1993) Modern Macroeconomic Analysis, McGraw�Hill.

Mankiw is slightly more basic than Blanchard. Barro�Grilli and Burda�Wyplosz are classical in spirit and more useful for the economy in the long run.Mathematically inclined students might also look at the concise treatment ofmany of the topics in this course in Turner.

Further Readings (Articles)

1. Blanchard O. J. (2000) �What Do We Know About Macroeconomics ThatFisher and Wicksell Did Not?� NBER Working Paper No. 7550.

2. Gordon R. J. (1990) �What is New�Keynesian Economics?�. Journal ofEconomic Literature, 28(3), pp. 1115�71.

3. Greenwald B., Stiglitz J. E. (1987) �Keynesian, New Keynesian, and NewClassical Economics�. Oxford Economic Papers, 39, pp. 119�32.

4. Greenwald B., Stiglitz J. E. (1993) �New and old Keynesians�. Journalof Economic Perspectives, 7(1), pp. 23�44. (Also NBER Working PaperNo. R1810.)

5. Phillips A. W. (1958) �The Relation between Unemployment and theRate of Change of Money Wage Rates in the United Kingdom, 1862�1957�. Economica, 25, pp. 283�99.

6. Romer D. (2000) �Keynesian Economics without the LM curve� Journalof Economic Perspectives 14 (Spring), pp.149�169.

Internet Resources

1. Russian Federal Educational Portal contains a brilliant collectionof various useful links to internet resources in macroeconomics(http://ecsocman.edu.ru/db/sect/23).

An interactive model of the Goods market equilibrium can be downloadedfrom http://www.ecsocman.edu.ru/db/msg/ 118753.More advanced students can �nd it interesting to look through othermacroeconomics topics such as Economic growth, Business cycles,Consumption and Investments, Money and In�ation, Unemployment,Open Economy Macroeconomics, Macroeconomics of �nancial markets,Macroeconomic policy, Applied macroeconomics, as well as New PoliticalEconomy in Macroeconomics on http://ecsocman.edu.ru/db/sect/3156

MACROECONOMICS 77

2. Companion Website for Blanchard's Macroeconomics, the basic textbookfor the course, o�ers interactive Multiple Choice Questions, Essay Topicsselected for each chapter of the textbook (27 in total) http://myphlip.pearsoncmg.com/cw/mpbookhome.cfm?vbookid=388

3. This site can be used to graphically analyse and explore micro� andmacroeconomic theories and concepts. The lessons are interactive andeach topic presents subsidiary issues that may be analysed by the studentand results are illustrated with a click. Simple Keynesian Cross Model,Consumption and Savings Functions, Goods Market Equilibrium, Supplyand Demand for Money, as well as Simultaneous Equilibrium in IS�LMModel are presented on http://nova.umuc.edu/~black/pageg.html

4. The following tutorial is primarily intended to serve as a path�nderthrough the tools part of Macroeconomics. Emphasising graphs and an-imations, it explains the essentials of macroeconomics, shows how thedi�erent building blocks are related, and o�ers interactive numerical ex-ercises. http://www.fgn.unisg.ch/eurmacro/macroeconomics.html

Students are expected to have a Mock exam in the University of London(UL) examination format in the middle of semester. The Mock exam is set inApril by local teachers, graded in accordance with UL examination rules.

Students have joint examination paper in micro� and macroeconomics inthe University of London examination format following the semester.

The structure of the �nal examination is standard as little in the contentof the course has been changing from year to year. Though some questionson earlier examination papers may not be an appropriate preparation for thenext year �nal examination, past examinations will nonetheless appear in thelibrary.

Grade determination

The UL exam gives 50% of ICEF grade and other 50% is provided by homeassignments (problem sets), essay and Mock exam. The Mock exam counts for30%, the rest 20% is equally distributed between 10 problem sets.

Course Outline

1. Basic macroeconomic concepts (a review)Macroeconomics and its central issues: in�ation, unemployment, economic

growth, stabilisation policy. Aggregation and the macroeconomic problem.Common denominator.

78 SECOND YEAR

Gross domestic product, value added, �nal and intermediate goods. Doublecounting. Savings and investment. The government, GDP at market prices andat factor costs. Personal disposable income. Foreign sector: exports, imports,net exports (trade balance). Gross national product, national income. Real vs.nominal variables. Some important national accounting identities.

(W ch. 8; Blake ch. 8)

2. Aggregate demand componentsNational accounts. Determinants of consumption (consumption function)

and marginal propensity to consume. Consumption function with income de-pendent MPC.

Savings and marginal propensity to save. Relationship between consump-tion and savings in a closed economy without government. Changes in MPCand the e�ect on savings.

Investment. Savings and transmission mechanism. Interest rate and thepresent value concept. Bonds of the console type (perpetuities). Internal rateof return. Paradox of thrift.

The government sector. Public consumption and marginal propensity tospend of the government. Government revenues and forms of taxation: lump�sum and proportional (marginal) taxes, progressive and regressive taxes, in-come and expenditure taxes, corporate tax and the dividends double taxationproblem. Budget surplus and government savings. Tax incentives to save.

The foreign sector. National accounts for the open economy. Demand forexport and import, marginal propensity to import. Net export function with a�xed exchange rate.

(W ch. 8, 14.1�14.2; Blake ch.5.1�5.2; P ch. 2.1�2.4)

3. Goods market equilibriumThe complete goods market and Keynesian Cross in the closed economy.

Characterisation of equilibrium and mechanism of adjustment. Autonomousexpenditure and the multiplier. Goods market equilibrium and the multiplierin the open economy.

Government spending and crowding out. The e�ects of government spend-ing and taxation on output. Balanced budget multiplier.

The IS representation of the goods' market equilibrium in the closed econ-omy. Derivation of the IS curve. Shifts in the IS schedule. The interest rateelasticity of investment expenditure function: extreme Keynesian and Classicalviews. The e�ects of change in the MPC.

(W ch. 10, 14.2; Blake ch. 5.3; P ch. 2.5�2.7;)

4. Redistribution policy in a macroeconomic contextTransfer payments, taxation and redistribution vs. �scal policies. Income

dependent MPC and income distribution. Heterogeneous agents and the totalconsumption function. Inequality, poverty, and transfer e�ect. Redistribution

MACROECONOMICS 79

policy and poverty�driven inequality. Redistribution and poverty alleviation.Income redistribution, changes in population composition and the consumptionfunction.

(W ch. 10, pp. 309�312)

5. Financial market equilibrium in the closed economyMoney and Banking. Functions of Money: a Numeraire, Means of Exchange

and Store of Value. Demand for Liquid Assets. Liquidity Preference Approach.Central Bank, Commercial Banks and Supply of Liquid Assets. Money

Base, Public Cash, Reserves, Deposits. Money Creation process. Deposit mul-tiplier. Loans multiplier.

Liquid Assets Market Equilibrium. The derivation of the LM curve. Slopeof the LM schedule. Excess demand and Excess supply. Monetary Policy andShifting in the LM schedule.

(W ch. 11; ch. 25�5; Blake ch. 5.5, ch.11; P ch.3)

6. General equilibrium and macroeconomic policies in the closedeconomy: IS�LM model

Notion of general equilibrium in a macroeconomics context. Algebra andgeometry of general equilibrium, IS�LM framework. Macroeconomic policiesand output determination. Classical and Keynesian views.

Expansionary and contractionary �scal policy: tax �nancing, internal debt�nancing, borrowing from the central bank. Expansionary and contractionarymonetary policy, policy mix.

(W ch. 12; Blake ch.6, 7.1; P ch.4�5; LC Ch. 24 pp. 418�422,Ch. 26 pp. 454�458)

7. AD - AS model (prices, wages and adjustment process)Prices and output. Aggregate demand derivation using IS�LM framework.

Aggregate supply and labour market. Short�run and long�run aggregate sup-ply. The AD�AS schedule.

Actual and potential output. Aggregate supply in Keynesian and classi-cal cases. Aggregate�supply shock and stag�ation. Changes in the potentialoutput: human capital and productive education, land stock and capital accu-mulation. Demand management and supply�side economics.

Say's law and general equilibrium in supply determined economy. Criticismof the say's law and market imperfections. (This material is not directly exam-inable and it o�ers interested students a better understanding of some of thecurrent debates.)

(W ch. 9, ch. 13; Blake ch. 7.1�7.2.2, 7.3; P ch. 6.1)

8. Open economy macroeconomics: exchange rate determinationBalance of payments: current account, capital account and foreign reserves.

Real and nominal exchange rate. Exchange rate determination and the money

80 SECOND YEAR

sector. Foreign exchange market, foreign currency reserves. Appreciation anddepreciation of the exchange rate. Exchange rate regimes: �xed and �exible.

(W Ch. 14.3; Blake Ch. 9.2�9.3; p Ch. 7; LC Ch. 22, 28�29)

9. General equilibrium in a small open economy: IS�LM�BPmodel

General equilibrium in an open economy and macroeconomic policies. Cap-ital mobility vs. capital controls. Mundell�Fleming model. Monetary and �scalpolicies under �xed and �exible exchange rates with perfect capital movementsand no capital mobility. The e�ects of the fall in international prices: thebenchmark case of a �small� open economy.

Introducing �exibility of prices and wages. E�ectiveness of macroeconomicpolicies under various institutional settings.

(W Ch. 14.4; Blake Ch. 9.4; p Ch. 7; LC Ch. 22, 28�29)

10. International macroeconomics and policy transmissionRelaxing assumption of a �small� open economy. Two�country setting and

simultaneous determination of income and exchange rate when countries aremain trading partners. Repercussion e�ects.

Monetary policy abroad: the case of perfect and no capital mobility underalternative exchange rate regimes. Policy transmission and repercussion e�ectsin the case of simultaneous changes in current account and capital account.

Social vs. �scal policy abroad: sensitivity of macroeconomic outcomes todistribution policy. A shift in demand and transfer problem.

(W Ch. 14, pp. 419�423, D ch. 3, pp. 33�56)

11. UnemploymentTypes of unemployment: frictional, structural, demand�de�cient (cyclical),

classical unemployment. Natural rate hypothesis. Voluntary and involuntaryunemployment. Private and social costs of unemployment.

Short�run and long�run unemployment, nominal and real wage rigidity.Trade union bargaining, e�ciency wage theory, implicit contracts, insider�outsider models, search and matching.

(W ch.9.3, ch.13; Blake ch. 7.2.2, 7.3�7.5; P ch. 8.3; LC Ch.23�24, 27 pp.469�474, 30�31)

12. In�ationIn�ation: CPI, PPI and GDP de�ator. Real money balances. Hyperin�a-

tion and �ight from money. The role of expectations and in�ation persistence.Output�in�ation trade�o�. Short�run and long�run Phillips curves. AS

shocks and stag�ation.(W ch.13; Blake ch. 7.2.3, 7.3�7.5; P ch. 8.3; LC Ch.23�24, 27

pp. 469�474, 30�31)

MACROECONOMICS 81



1. Basic macroeconomic concepts 12 2 2 82. Aggregate demand components 12 2 2 83. Goods market equilibrium 20 4 4 124. Redistribution policy in a

macroeconomic context20 4 4 12

5. Financial market equilibrium inthe closed economy

12 2 2 8

6. General equilibrium andmacroeconomic policies in theclosed economy: IS�LM model

18 4 2 12

7. AD � AS model (prices, wagesand adjustment process)

15 2 4 9

8. Open economy macroeconomics:exchange rate determination

12 2 2 8

9 General equilibrium in a smallopen economy: IS�LM�BPmodel

20 2 2 16

10. International macroeconomicsand policy transmission

24 4 4 16

11. Unemployment 12 2 2 812. In�ation 12 2 2 8

Total 189 32 32 125

82 SECOND YEAR

Mathematics for Economists

Lecturer: Grigoriy G. KantorovichClassteachers: Kirill A. Bukin, Je�rey Lockshin, Boris B. Demeshev

Course description

The studying course Mathematics for Economists is an important part of Bach-elor stage in economical education. The course has to give students skills ofimplementation of mathematical knowledge and practice to economic problemsboth theoretical and applied ones. Its prerequisites are both knowledge andskills of one�variable calculus and linear algebra including general theory ofsystems of linear equations and matrix algebra.

The course covers several variables calculus and selected topics of theory andapplication of di�erential and di�erence equations. The contents of the coursehave to teach students to investigate di�erent comparative�static problems,optimization problems and dynamic problems with developed mathematicaltools.

Course objectives

By the end of the autumn semester a student has to know the principal resultsof several variable calculi, including calculation of partial derivatives of bothexplicit and implicit functions, solving both unconstrained and constrained op-timization problems. A student has to be able to apply calculus to di�erentcomparative static problems, to �nd maximizes and/or minimizes of severalvariable functions; to apply the Lagrange multipliers approach to constrainedoptimization problems.

By the end of the spring semester a student has to know the principal meth-ods of dynamic analysis of economic processes, main concepts and results ofdi�erential and di�erence equations. A student has to be able to �nd solutionsof linear di�erential and di�erence equations, analyze their stability.

A student has to have skills of implementation above�mentioned mathemat-ical concepts to solution of microeconomics' and macroeconomics' problems.

Methods

The course program consists of lectures, classes and regular students' workwithout assistance. The latter means thinking over lectures' material, theirextension and doing of assignments given by the teacher. During each termthere will be two mid�session exams. Since the major part of the studentshas the �nal UoL exam �Mathematics�I� while the students specializing in

MATHEMATICS FOR ECONOMISTS 83

�Economics� have two UoL exams �Mathematics�I� and �Mathematics�II�, mid�session exams' formats are not the same as the �nal exams ones, thou the formerare close to the latter.

Main Reading

1. Carl P. Simon and Lawrence Blume. Mathematics for Economists, W.W. Norton & Company, 1994.

2. A. C. Chiang. Fundamental Methods of Mathematical Economics, 3�rdedition, McGrow�Hill, 1984.


1. Á. Ï. Äåìèäîâè÷. Ñáîðíèê çàäà÷ è óïðàæíåíèé ïî ìàòåìàòè÷åñêîìóàíàëèçó, Ì., �Íàóêà�, 1966.

2. À. Ô. Ôèëèïïîâ. Ñáîðíèê çàäà÷ ïî äèôôåðåíöèàëüíûì óðàâíåíèÿì.Ì., �Íàóêà�, 1973.

3. Anthony M. and Biggs N., Mathematics for Economics and Finance,Cambridge University Press, Cambridge, UK, 1996.

4. Anthony M., Reader in Mathematics, LSE, University of London; Math-ematics for Economists, Study Guide, University of London.

Grade determination

A current control of students' knowledge consists of weekly assessments of homeassignments, appraisal students' activity during classes, marks for mid�sessionexams. The �nal�exam mark of the �rst term gives 60% of the mark, 20% of thelatter is given by the home assignments' mark and the remaining 20% is givenby the mid�term exam's mark. The �nal mark of the course for the studentsspecializing in "Economics" is given by the UoL exam mark in �Mathematics�I�(20% of the course mark), by the UoL exam mark in �Mathematics�II� (50%of the course mark), by the mark of the �rst term (20% of the course mark)and the remaining 10% is given by the mid�term exam's mark. The �nal markof the course for the students of all other specializations is given by the UoLexam mark in �Mathematics�I� (40% of the course mark), by the mark of the�rst term (40% of the course mark) and the remaining 20% is given by themid�term exam's mark.

84 SECOND YEAR

Course Outline

Autumn semester

1. Main concepts of set theory. Set operations. Direct product of sets.Relations and functions. Domain and range of functions. Levels curvesand level sets. 1, 2.1 � 2.2, p. 10 - 20; 2, 1.1 � 2.7, p. 3 - 31.

2. Space Rn. Distance (metric) in Rn. The triangle inequality. Euclideanspaces. Neighbourhoods and open sets in Rn. Sequences in Rn and theirlimits. Closed sets in Rn. The closure and the boundary of a set. 1,10.1 - 10.4, p. 199 - 221; 12.1 - 12.6, p. 253 - 274.

3. Functions of several variables. Limits of functions of several variables.Continuity of functions of several variables. 1, 13.1 � 13.5, p. 273 -299; 2, 6.4 - 6.7, p. 132 - 154.

4. Partial derivatives of functions of several variables. Economic interpreta-tion, marginal products and elasticities. Chain rule for several�variablesfunctions. 1, 14.1 � 14.3, p. 300 - 306; 2, 7.4, p. 174 - 177.

5. Total di�erential. Geometric interpretation of partial derivatives andtotal di�erential. Linear approximation. Di�erentiability of functionsof several variables. C1 functions. Directional derivatives and gradients.. 1, 14.4 - 14.6, p. 307 - 322; 2, 8.1 - 8.7, p. 187 - 230.

6. Higher�order derivatives of functions of several variables. Young's theo-rem. Hessian matrix. Ck functions. Economic application. 1, 14.8 -14.9, p. 328 - 333; 2, 7.6, 9.3, p. 184 - 186, 239 � 244.

7. Implicit functions of several variables. The implicit function theorem. 1,15.1 - 15.2, p. 334 - 348; 2, 8.5, p. 204 - 210.

8. Vector�functions of several variables. The Jacobian matrix. Functionaldependence of functions and rank of the Jacobian matrix. 1, 14.7, p.323 - 327; 2, 8.5, p. 210 - 214.

9. Systems of implicit functions. The implicit vector�function theorem. Theinverse function theorem. . 1, 15.3, 15.5, p. 350 - 359, 364 � 368;2, 8.5, p. 210 - 214.

10. Economic application of the implicit function theorem (comparativestatic). 1, 15.4, p. 360 - 363, 368 � 374; 2, 8.6, p. 215 -230.


11. Unconstrained optimisation of several�variables functions. Stationarypoints. The �rst order conditions. 1, 17.1 - 17.2, p. 396 - 397;2, 11.1 - 11.2, p. 307 - 318.

12. The second di�erential of functions of several variables. Quadratic formsand de�nite matrices. De�niteness and semide�niteness of quadraticforms. Silvester criterion. The criterion for negative de�niteness, positiveand negative semide�niteness. The second order conditions for maximumand minimum. 1, 16.1 - 16.2, 17.3 -17.4, p. 375 - 385, 398 � 410;2, 11.3 - 11.7, p. 319 - 368.

13. Constrained optimisation. Lagrangian function and Lagrange multipliers.The �rst order conditions for constrained optimisation. 1, 18.1 - 18.2,p. 411 - 423; 2, 12.1 - 12.2, p. 369 - 378.

14. The second di�erential for a function of dependent variables. De�nitenessof a quadratic form under a linear constraint. The second order conditionsfor constrained optimisation. Bordered Hessian. 1, 16.3 - 16.4, 19.3,p. 386 - 395, 457 � 465; 2, 12.3, p. 379 - 386.

15. Economic meaning of a Lagrange multiplier. Economic application of La-grangian approach. Utility maximisation and a budget constraint. Slut-sky equation. 1 18.7 - 19.1, p. 442 - 452; 2, 12.5, p. 400 -409.

16. Smooth dependence on the parameters. The envelope theorem. 1, 19.2,19.4, p. 453 - 456, 469 - 471.

Spring semester

1. Economic dynamics. Concept of di�erential equations. First�order lineardi�erential equation with a constant coe�cient and a constant term. 1,24.1, 24.2, p. 633 - 639; 2, 13.6, 14.1, p. 465 - 475.

2. Price dynamics at a one�commodity market. Dynamic stability of a so-lution of a di�erential equation. Separable variables. 1, 24.2, p. 639 -647; 2, 13.6, 14.2, p. 475 - 479

3. First�order linear di�erential equation with a variable coe�cient and avariable term. Decomposition of a general solution into a sum of a generalsolution of the homogeneous equation and the partial integral of the non�homogeneous equation. 1, 24.2, p. 639 - 647; 2, 13.6, 14.3, p. 480- 483

4. Exact di�erential equations. Concept of an integrating multiplier.Bernoulli equation. 2, 14.4 -14.5, p. 483 - 493

86 SECOND YEAR

5. Sollow growth model. Elements of a qualitative theory of di�erentialequations. Phase diagram. 1, 24.5, p. 665 - 670; 2, 14.6, 14.7, p.493 - 501

6. Second�order linear di�erential equation with a constant coe�cient anda constant term. The characteristic equation. Real roots. 1, 24.3, p.647 - 657; 2, Ch. 15: 15.1, p. 502 - 511

7. Complex numbers and operations with them. Algebraic, polar and expo-nential representation of complex numbers. Euler's formula. De Moivretheorem. 1, A3, p. 859 - 886; 2, Ch. 15.2, p. 511 - 523

8. General solution of a second�order linear di�erential equation for a com-plex roots case. The intertemporal equilibrium. Stability conditions fora solution of a second�order linear di�erential equation. Model of a priceexpectation at a one�commodity market. 1, 24.3, p. 651 - 654; 2,15.3 - 15.5, p. 523 - 541

9. Higher�order linear di�erential equation with constant coe�cients. Thecharacteristic equation. The general solution. The method of undeter-mined coe�cients. Dynamic stability. Routh theorem without proof.2, 15.6 - 15.7, p. 541 - 548.

10. Discrete�time economic systems. Di�erence equations. Two principleexamples of �rst�order di�erence equations: arithmetic and geometricprogressions. Iterative method of solution. 1, 23.2, p. 585 - 586; 2,Ch. 16: 16.1 - 16.2, p. 549 - 554.

11. General method for solution of a �rst�order di�erence equations. Con-vergence and oscillation of a solution. A cobweb model. A market modelwith inventory. Qualitative, graphical analysis of a non�linear �rst�orderdi�erence equation. A market with a price ceiling. 2, 16.2 - 16.6, p.554 - 575.

12. Second�order linear di�erence equations with a constant coe�cient anda constant term. The characteristic equation. The general solution forreal and complex roots. Dynamic stability conditions. 2, Ch. 17, 17.1- 17.3, p. 576 - 596.

13. Higher�order linear di�erence equations with a constant coe�cient and aconstant term. The characteristic equation. The method of undeterminedcoe�cients. Stability conditions. 2, 17.4, p. 596 - 604.




1. Main concepts of set theory.Space Rn.

11 2 3 6

2. Limits and continuity of severalvariables functions.

11 2 3 6

3. Partial derivatives. 11 2 3 64. Di�erentiability of several

variables functions, totaldi�erential.

11 2 3 6

5. Higher�order derivatives offunctions of several variables,Hessian matrix.

11 2 3 6

6. Implicit functions of severalvariables. The implicit functiontheorem.

11 2 3 6

7. Functional dependence offunctions and rank of theJacobian matrix.

11 2 3 6

8. Systems of implicit functions.The implicit vector�functiontheorem.

11 2 3 6

9. Economic application of theimplicit function theorem(comparative static).

13 2 3 6

10. Unconstrained optimisation ofseveral�variables functions. The�rst order conditions.

11 2 3 6

11. The second order conditions forunconstrained optimisationproblem.

11 2 3 6

12. Constrained optimisation.Lagrange function and Lagrangemultipliers.

11 2 3 6

13. The second order conditions forconstrained optimisationproblem.

11 2 3 6

14. Economic meaning of a Lagrangemultiplier. Smooth dependenceon the parameters. The envelopetheorem.

11 2 3 6

15. Economic dynamics. Di�erentialequations. Separable variables.

10 2 2 6

88 SECOND YEAR


16. First�order linear di�erentialequation with a variablecoe�cient and a variable term.

10 2 2 6

17. Exact di�erential equations.Integrating multiplier. Bernoulliequation.

10 2 2 6

18. Solow growth model. Elementsof a qualitative theory ofdi�erential equations. Phasediagram.

10 2 2 6

19. Second�order linear di�erentialequation with a constantcoe�cient and a constant term.The characteristic equation.Real roots.

10 2 2 6

20. Complex numbers. Algebraic,polar and exponentialrepresentation. Euler's formula.De Moivre theorem.

10 2 2 6

21. General solution of asecond�order linear di�erentialequation for a complex rootscase.

9 2 2 5

22. Higher�order linear di�erentialequation with constantcoe�cients. The method ofundetermined coe�cients.Dynamic stability. Rouththeorem (without proof).

9 2 2 5

23. Discrete�time economic systems.Di�erence equations.

9 2 2 5

24. General method for solution of a�rst�order di�erence equation. Acobweb model.

9 2 2 5

25. Second�order linear di�erenceequations with a constantcoe�cient and a constant term.The characteristic equation.

9 2 2 5



26. Higher�order linear di�erenceequations with a constantcoe�cient and a constant term.The characteristic equation. Themethod of undeterminedcoe�cients. Stability conditions.

9 2 4 5

Total: 270 52 68 150

90 SECOND YEAR

Linear Algebra

Lecturer: Boris B. DemeshevClassteachers: Boris B. Demeshev, Je�rey Lockshin, Dmitriy D. Pervouchine

Course description

The course of Linear algebra is an element of ICEF programme. Some parts ofthis course are included in the University of London (UL) exams programmein Mathematics 1, Mathematics 2 and Further Mathematics for Economists.Studied topics are used in Econometrics, Time series analysis and Methods ofoptimization.

The requirements of the Higher School of Economics for the RussianDiploma are also taken into account.

Course objectives

The aim of this course is to give students basic elements of linear algebra,without which further studies of quantitative methods of economic analysis areimpossible.

Methods





• self�study


• tests

Main Reading

1. Chernyak V. Lecture Notes on Linear Algebra. Introductory course. Di-alog, MSU, 1998, 2000 (Chernyak)

LINEAR ALGEBRA 91


1. Carl P. Simon and Lawrence Blume. Mathematics for Economists, W.W.Norton & Company, 1994 [Simon, Blume]

2. Chiang, Fundamental Methods of Mathematical Economics, McGraw�Hill, 3rd ed., 1984.

3. R.O.Hill, Elementary Linear Algebra, Academic Press, 1986.

4. Ãåëüôàíä È.Ì. Ëåêöèè ïî ëèíåéíîé àëãåáðå, Ì., Íàóêà, 1999.

5. Èëüèí Â.À., Êèì Ã.Ä. Ëèíåéíàÿ àëãåáðà. Ì., Èçä-âî ÌÃÓ, 1998.

6. Ïðîñêóðÿêîâ È.Â. Ñáîðíèê çàäà÷ ïî ëèíåéíîé àëãåáðå. Ì., Íàóêà,1985.

Internet Resources

1. http://web.mit.edu/18.06/www/

2. http://www.numbertheory.org/book/

3. http://vergil.chemistry.gatech.edu/notes/linear_algebra/

Grade determination

Hometasks, which are due every week, give 20% of the �nal mark. Midtermexam, which is passed after 4 weeks, gives 30% of the �nal mark. Final examgives 50% of the �nal mark.

Course Outline

1. Vectors and matricesAddition and subtraction. Multiplication by scalar. Transpose. Dot prod-

uct. Matrix multiplication. Laws of matrix algebra. Special kinds of matrices.Square matrix. Triangular matrix. Echelon matrices. Identity matrix.(Chernyak, ch. 2, 3; Simon, Blume, ch. 8)

2. Systems of linear equations in matrix formNotation, basic notions. Systems with many or no solutions. Gaussian and

Gauss�Jordan elimination. Elementary row operations. Using matrix algebrato solve systems of linear equations. Application to input�output matrices andsimple production model.

(Chernyak, ch. 4, 5, 1; Simon, Blume, ch. 7)

92 SECOND YEAR

3. DeterminantsDe�ning the determinant. Computing the determinant. Main properties of

the determinant. Cramer's rule.(Chernyak, ch. 6, 7, 8; Simon, Blume, ch. 9)

4. Inverse matrix.Singular and non�singular matrix. De�nition of inverse matrix. Two ways

of calculation.(Chernyak, ch. 12; Simon, Blume, ch. 8)

5. Linear independence and rankDe�nition of linear dependence and linear independence. Properties of lin-

ear dependent and linear independent vectors. Spanning sets. Rank � thefundamental criterion.

(Chernyak, ch. 9, 10; Simon, Blume, ch. 7)

6. Linear spaceBasis and dimension. Coordinate. Subspace. General solution of a system

as a subspace.(Chernyak, ch. 11; Simon, Blume, ch. 11)

7. Linear transformationsLinear mappings. Matrix of linear transformation. Examples of linear op-

erators.Change of basis. How to transform vectors. How to transform matrices.(Chernyak, ch. 15)

8. Eigenvalues and eigenvectorsProperties of eigenvectors. Characteristic equation. Basis and dimension of

a proper subspace. Diagonalizing matrices. The power of a matrix.(Chernyak, ch. 13, 14; Simon, Blume, ch. 23)

9. Quadratic formsDe�nite symmetric matrices. Principal minors of a matrix. De�niteness

and optimality. Sylvester's criterion.(Simon, Blume, ch. 16)

10. Geometry of linear spaceScalar product. Norm of a vector. Distance and angle measurement. Pro-

jection. Orthogonalisation. Lines and planes equations.(Chernyak, ch. 16, Simon, Blume, ch. 10)

LINEAR ALGEBRA 93



1. Vectors and matrices 9 2 2 52. Systems of linear equations in

matrix form9 2 2 5

3. Determinants 9 2 2 54. Inverse matrix, Linear

independence and rank9 2 2 5

5. Linear space 9 2 2 56. Linear transformations 9 2 2 57. Eigenvalues and eigenvectors 9 2 2 58. Quadratic forms 9 2 2 59. Geometry of a linear space 9 2 2 5

Total 81 18 18 45

94 SECOND YEAR

Elements of Statistics

Lecturer: Anatoliy A. PeresetskiyClassteachers: Anatoliy A. Peresetskiy, Alexei Ivanov, Alexei Zabirnik

Course description

Elements of statistics is a two�semesters course for second year ICEF students.This is a course for students specializing in economics. The course is taughtin Russian and English. Basic ideas of statistics, such as descriptive statistics,population and sample, parameters estimation, statistical hypotheses checkingetc, are studied in the course, as well as elements of probability theory whichare necessary for understanding the course.

Course objectives

The main objective of the course is to give a sound and self�contained (in thesense that the necessary probability theory is included) description of classicalor mainstream statistical theory and its applications.

The students should learn to carry out a simple analysis of data (to �ndmean, median, standard deviation and other descriptive statistics), to presentthe data graphically (histograms, stemplots). They should understand the dif-ferences between population and sample, and theoretical and sample charac-teristics. Since it is not worth while to teach Statistics without elements ofprobability theory, studying its basic notions and results is a part of the course.Students should understand what probability space, random event, probabilityof an event are. They should know how to calculate probabilities of complexevents, solve elementary combinatorial problems, use the full�probability andBayes formulas. The students should have a clear understanding of what arandom variable and its distribution are.

The students should learn to formulate and solve basic problems of statis-tics, such as parameters estimation, statistical hypotheses checking, correlationanalysis, analysis of variance. One of the course aims is to prepare students forfurther studying of Econometrics on the basis of studying simple and multipleregression models.

The course is not mathematically rigorous. Proofs, and even exact state-ments of results, are often not given. The problems are an essential part of thecourse. A serious e�ort has been made in the problems to illustrate the varietyof ways in which the theory may be applied.

By the end of the course the students should have gained an understandingof the underlying theory and an ability to carry out relevant calculations andapply standard methods in practice.

ELEMENTS OF STATISTICS 95

In the end of the year students should pass an UL exam 'Elements of Statis-tics'.

Methods




• self study

• weekly written home assignments (to be graded)


In total the course includes 68 hours of lectures and 68 hours of classes.

Main Reading

1. P.Newbold. Statistics for Business and Economics. Prentice�Hall, 4thedt., 1995; (N) 5th edition, 2003.


1. Ñ.À. Àéâàçÿí, Â.Ñ. Ìõèòàðÿí. Òåîðèÿ âåðîÿòíîñòåé è ïðèêëàäíàÿñòàòèñòèêà. ÞÍÈÒÈ. Ìîñêâà, 2001.

2. Ãìóðìàí Â. Å. Òåîðèÿ âåðîÿòíîñòåé è ìàòåìàòè÷åñêàÿ ñòàòèñòèêà.Ì., �Âûñøàÿ øêîëà�, 1998.

3. Ãìóðìàí Â. Å. Ðóêîâîäñòâî ê ðåøåíèþ çàäà÷ ïî òåîðèè âåðîÿòíîñòåéè ìàòåìàòè÷åñêîé ñòàòèñòèêå. Ì., �Âûñøàÿ øêîëà�, 1998.

4. Øâåäîâ À.Ñ. Òåîðèÿ âåðîÿòíîñòè è ìàòåìàòè÷åñêàÿ ñòàòèñòèêà.ÂØÝ, 1995.

5. Hogg R.V. and Tanis E.A., Probability and Statistical Inference, PrenticeHall, 1993.

6. Johnston A.R. and Bhattacharyya G.K., Statistics. Principles and Meth-ods. 3rd edition, Wiley, 1996.

7. Elements of Statistics, Study Guide. University of London, 2006.

8. Statistics 2, Study Guide. University of London, 2006.

96 SECOND YEAR

Internet Resources

1. http://www.londonexternal.ac.uk/current_students/programme_resources/lse/exam_archive/exam_papers_2006.shtml

2. http://www2.gsu.edu/%7Edscbms/ibs/qcontent.html

3. http://www.math.uah.edu/stat/

4. http://www.math.yorku.ca/SCS/Gallery/

5. http://www.bbn�school.org/us/math/ap_stats/applets/applets.html

6. http://wise.cgu.edu/links/applets.asp

Grade determination

Approximate formula for the �nal grade in HSE program in statistics is givenat the table

Component Weight

Home assignments(total HA sum)/(total number of HA+Quizes = 19+2=21) 0.10Midterm 1 0.10Exam (winter) 0.15Midterm 2 0.10Final Exam 0.30Max(London Stat�1, London Stat�2) 0.25Extra adds to the scoreFor the activity in class (for each point) 0.80*Misprints (for each misprint) 0.80*

*to be revisedIf a student receives less than 25 points on the �nal exam, he is considered

to have FAILED the course, and he will have to retake the exam irregardlessof what his �nal score is.

Course Outline

1. Primary data analysis

• Graphical presentation of one variable data. Dotplot. Stemplot. His-togram.

• Data unregularities. Outliers. Clusters. Histogram's shape.


• Descriptive statistics. Measures of central tendency. Arithmetic mean,median, mode, geometric mean. Measures of variation. Range, samplestandard deviation, interquartile range, mean absolute deviation, meanrelative deviation.

• Descriptive statistics and linear transformation of data.

• Measures of the relative standing. Quartiles. Percentiles. Z�score.

• Grouped data.

(N Ch.1, 2)

2. Elements of Probability theory

• Probability. Outcome space. Events algebra. Independent events. Mutu-ally exclusive events. Conditional probability. Full probability formula.Bayes' formula.

• Discrete Random Variable. Probability density function (p.d.f.). Math-ematical Expectation. Variance. Standard deviation. Binomial distribu-tion.

• Continuous random variables. Distribution function. Probability densityfunction. Uniform distribution. Normal distribution.

• Law of large numbers. Normal approximation to binomial distribution.Linear transformation of a random variable.

• Two random variables. Covariation. Correlation. Uncorrelated and in-dependent random variables. Mean and Variance of a linear combinationof two random variables.

(N Ch.3, 4, 5)

3. Elements of Mathematical Statistics

• Random Samples. Duality of Interpretation. Estimation of populationparameters. Sample mean and sample variance. Mean and variance ofthe sample mean. Estimation of proportions.

• Point Estimation. Properties of the estimators. Unbiasedness, e�ciency,consistency, estimators for mean and variance .

• Interval estimation. Con�dence intervals. Estimation of the mean. Nor-mal approximation for large samples, small samples (Student distribu-tion). Di�erence of two means. Proportions.

98 SECOND YEAR

• Hypothesis testing. Hypothesis testing with con�dence intervals. Hy-pothesis testing with test�statistics. Two�sided and one�sided p�values.

• Chi�square goodness�of��t test. Contingency tables.

(N Ch.6 9, 11)

4. Models of simple regression

• X�Y graph. Line �tting. Ordinary Least Squares.

• Transformations of regressors.

• Outliers.

• Forecasts.

• Regression residuals. Residuals and errors.

• Statistical properties of the estimators. Hypothesis testing.

(N Ch.12)

5. Analysis of variance (ANOVA)

• One�factor analysis of variance.

• Two�factors analysis of variance.

• Con�dence intervals.

(N Ch.15)




1. Primary data analysis 26 6 6 142. Elements of Probability theory. 80 20 20 403. Elements of Mathematical

Statistics.110 30 30 50

4. Models of simple regression 28 6 6 165. Analysis of variance. 26 6 6 14

Total: 270 68 68 134

100 SECOND YEAR

Methods of Optimization

Lecturer: Grigoriy G. KantorovichClassteachers: Kirill A. Bukin, Je�rey Lockshin, Boris B. Demeshev

Course description

The studying course Methods of Optimization is a part of Bachelor stage ineconomical education. The course has to give skills of implementation of math-ematical knowledge and practice to economic problems both theoretical and ap-plied ones. Its prerequisites are knowledge and skills of both one�variable andseveral�variables calculus including optimization problems subject to equalityconstraints, linear algebra including general theory of systems of linear equa-tions and matrix algebra.

The course covers inequality�constraints optimization, linear programmingand selected topics of game theory. The contents of the course have to teachstudents to solve and analyze di�erent optimization problems using developedmathematical tools.

Course objectives

By the end of the semester a student has to know the principal ideas of linearand non�linear programming, to possess main concepts of static games withcomplete information. A student has to be able to investigate optimizationproblems in di�erent economic applications, to solve linear problems using du-ality theory, to �nd Nash and Von Neumann equilibrium in two�player game.

A student has to have skills of implementation above�mentioned mathemat-ical concepts to solution of microeconomics' and macroeconomics' problems.

Methods

The course program consists of lectures, classes and regular students' workwithout assistance. The latter means thinking over lectures' material, theirextension and doing of assignments given by the teacher. During the coursethere will be a mid�session exam.

Main Reading

1. Carl P. Simon and Lawrence Blume. Mathematics for Economists, W.W. Norton & Company, 1994.

2. A. C. Chiang. Fundamental Methods of Mathematical Economics, 3�rdedition, McGrow�Hill, 1984.

METHODS OF OPTIMIZATION 101


3. Á. Ï. Äåìèäîâè÷. Ñáîðíèê çàäà÷ è óïðàæíåíèé ïî ìàòåìàòè÷åñêîìóàíàëèçó, Ì., �Íàóêà�, 1966.

4. À. Ô. Ôèëèïïîâ. Ñáîðíèê çàäà÷ ïî äèôôåðåíöèàëüíûì óðàâíåíèÿì.Ì., �Íàóêà�, 1973.

5. Robert Gibbons. A Primer in Game Theory. Harvester Wheatsheaf, 1992

6. M. Anthony. Further mathematics for economists. University of London,2005



Grade determination

A current control of students' knowledge consists of weekly assessments of homeassignments, appraisal students' activity during classes, marks for the mid�session exam. The �nal�exam mark gives 60% of the course mark, 20% of thecourse mark is given by the home assignments' mark and the remaining 20% isgiven by the mid�term exam's mark.

Course Outline

1. Homogeneous functions. Cobb�Douglas production function. Propertyof homogeneous functions. Euler's theorem. 1, 20.1, p. 483 - 493; 2,12.6, p. 410 - 418

2. Inequality constrained maximizing problem of two�variable function.Modi�cation of the �rst�order necessary conditions for the Lagrangianfunction. The complementary slackness condition. 1, 18.3, p. 424 -430; 2, Ch. 21: 21.1, p. 716 - 722

3. Several variables and several inequality constraints generalization of the�rst�order necessary conditions for the Lagrangian function. Constraintsquali�cation. 1, 18.3, p. 430 - 434; 2, 21.3, 21.4, p. 731 - 738;6, p. 144 - 146

4. Inequality constrained minimizing problem of several variables function.Mixed constraints. Kuhn�Tucker formulation of the �rst�order necessaryconditions for the Lagrangian function under non�negativeness of the

102 SECOND YEAR

instrumental variables. 1, 18.4 - 18.6, p. 434 - 442; 2, 21.2, 21.4,p. 722 - 731, 738 - 744; 6, p. 146 - 150

5. Economic applications of non�linear programs. Utility maximization sub-ject to the budget constraint. Maximizing of sells taking into accountadvertising costs. . 1, 18.4 - 18.7, p. 442 - 447; 2, 21.6, p. 747 -754

6. The economic meaning of Lagrangian multipliers. The envelope theorem.Smooth dependence of the optimal value on parameters. 1, 19.1 - 19.2,19.4, p. 448 - 457; 6, p. 150 - 156

7. Linear programming. The diet problem. Optimal production under re-sources constraints. Graphical solution of a linear program for two in-strumental variables case. 2, 19.1, p. 651 - 661

8. Standard formulation of a general linear program. The �rst order condi-tions for a linear program, a solution's property. Concept of a simplexmethod. A dual program for a linear program. 2, 19.2 � 19.6, p. 661- 687; 6, p. 146 - 150

9. Theorems of linear programming. Existence theorem. Duality theorem.Complementary slackness theorem. 2, 20.2, p. 696 - 700; 6, p. 146- 150

10. Economic interpretation of the dual program. Dual variables and shadowprices. Pro�ts maximizing and costs minimizing. 2, 19.2 � 19.6, p.661 - 687

11. An example of game theory analysis of a real battle state during theWorld War II. Prisoners dilemma. Games, players and strategies. Normalform representation of a static game. Eliminating of strictly dominatedstrategies. Solution of a game. 5, 1.1.A - 1.1.B, p. 1 - 8

12. Nash equilibrium. Cournolt model. Bertrand model. Nash theorem.Pure and mixed strategies. Searching Nash equilibrium in 2*2 game. 5,1.1.C - 1.3.B, p. 8 - 48

13. Zero�sum games. Von Neumann equilibrium. Optimal strategies in zero�sum games and duality in linear programming. 6, p. 167 - 171

METHODS OF OPTIMIZATION 103



1. Homogeneous functions. 9 2 1 62. Inequality constrained

maximising problem oftwo-variable function.

7 2 1 4

3. Several variables and severalinequality constraintsgeneralisation of the �rst-ordernecessary conditions for theLagrangian function.

9 4 2 6

4. Kuhn-Tucker formulation of the�rst-order necessary conditionsfor the Lagrangian functionunder non-negativeness of theinstrumental variables.

9 4 2 6

5. Economic applications ofnon-linear programs.

7 2 1 4

6. Economic meaning ofLagrangian multipliers. Theenvelope theorem.

9 2 1 6

7. Linear programming. 7 2 1 48. Standard formulation of a

general linear program. A dualprogram for a linear program.

6 2 1 3

9. Theorems of linear programming. 9 2 1 610. Economic interpretation of the

dual program. Dual variablesand shadow prices.

9 2 1 6

11. Games, players and strategies.Normal form representation of astatic game. Eliminating ofstrictly dominated strategies.

9 2 1 6

12. Nash equilibrium. 9 4 2 613. Zero-sum games. Von Neumann

equilibrium.9 2 1 6

Total: 108 32 16 70

104 SECOND YEAR

Principles of Sociology

Lecturer: Olga E. KouzinaClassteachers: Olga E. Kouzina, Elena N. Danilova

Course description

The Principles of Sociology is a two�semester course designed to prepare stu-dents for the external examination of UoL. The course is taught in English.

Course objectives

This course helps students to be critical of the information they receive andencourages them to think logically and consistently. By the end of the unit youwill have gained knowledge and learnt some important skills:

• to be critical of any data and theories that you read or hear about and,of course, to be critical of your own work

• to be creative and able to link ideas from this unit and the other disciplinesyou are studying to create new ways of thinking about social phenomena

• to be challenged. This is not an easy subject and it requires you to thinkdeeply about the materials and be able to deal with more than one wayof thinking about the social world. Do the best that you can

• to be co�operative and share ideas and materials. It is a good idea tostudy with other students and friends, and to try to express your ideaswith them. (If this is not possible, try thinking aloud.) This is an impor-tant skill for the world of work where you are often required to work inteams.

The course is intended for two semesters. Throughout �rst semester, you willdeal with questions relating to the nature of sociology; the methods whichsociologists use; methodology and the major sociological perspectives. Thekey aspects in relation to individuals and society are examined through theconcepts of role, socialisation and identity. Second semester material builds onand reinforces the knowledge received in the �rst semester. Two main topicswill be covered in second semester:

1) Globalisation and social change2) Power in society.As a result, you must be able to discuss these topics and their treatment

by classical and modern sociologists in a written form. It is important to learnthe basic material, presented in class, and then, enhance this knowledge withapplicable examples of the Russian society.

PRINCIPLES OF SOCIOLOGY 105

Methods

In addition to the lectures, we will conduct seminars. You are expected toattend (i) a weekly lecture and (ii) a weekly class.

During the seminars, it is expected that students come prepared to discussa particular topic. Reading of the required material should be completed beforethe seminar. Short written assignments will be given on every seminar.

The main purpose of the seminars is discussion of the reading material aswell as focus on the past and contemporary Russian society. Self study will bethe main method of work in this course. Students must conduct three hoursof self study per each hour of lecture. Required readings are indicated below.However, student will be expected to read at least one major Russian newspaper(such as Izvestia, Kommersant, Vedomosti, etc) as well as a weekly journal(Itogi, Expert, etc.) and develop their sociological imagination by looking atcurrent social problems.

Main Reading

Main books in your syllabus are available in the library:

1. Fulcher, J and J. Scott Sociology. (Oxford: Oxford University Press,2003) second edition

2. Giddens, A. Sociology. (Cambridge: Polity Press, 2001) fourth edition

3. Macionis, J. and K. Plummer Sociology: a Global Introduction. (Har-low:Prentice Hall, 2005)

4. Berger, P. Invitation to Sociology. (Harmondsworth: Penguin, 1963)

5. Bryman, A. Social Research Methods. (Oxford: Oxford University Press,2001)

6. Denscombe M. The Good Research Guide. (Buckingham: Open Univer-sity Press, 2003) second edition

7. Marsh, I. (ed.) Theory and Practice in Sociology. (Harlow: Prentice Hall,2002)

8. McNeil, P. Research Methods. (London: Routledge, 1990).

9. Parker J. Social Theory: a Basic Tool Kit. (Houndmills: Palgrave, 2003)

10. Mills, C. Wright The Sociological Imagination. (Harmondsworth: Pen-guin, 1970)

106 SECOND YEAR

11. Cu�, E., W.W. Sharrock and D.W. Francis Perspectives in Sociology.(London:Routledge, 1998) fourth edition

12. Lee, D. and H. Newby The Problem of Sociology. (London: Routledge,2000)

13. Swingewood, A. A Short History of Sociological Thought. (Basingstoke:Macmillan, 2000) third edition

14. Waters, M. Globalization. (London: Routledge, 2001) second edition

15. Sklair, L. Globalisation: Capitalism and its Alternative. (Oxford: OxfordUniversity Press, 2002)

16. Robertson, R. Globalisation: Social theory and Global Culture. (London:Sage, 1992)

17. Hirst, P. and G. Thompson Globalisation in Question. (Cambridge:Polity Press,1999)

18. Ohmae, K. (ed.) The Evolving Global Economy: Making Sense of theNew World

19. Order. (Boston: Harvard University Press, 1995)

20. Haugaard, M. (ed.) Power: A Reader. (Manchester: Manchester Univer-sity Press, 2002)

21. Held, D. Models of Democracy. (Cambridge: Polity Press, 1987)

22. Dunleavy, P. and B. O'Leary Theories of the State. (Basingstoke:Macmillan Education,1987)

23. Lukes, S. Power: A Radical View. (Basingstoke: Macmillan, 1974)

24. Bilton, T. et al. Introductory Sociology. (Basingstoke: Macmillan, 2002).

Grade determination

This syllabus is designed based on the belief that far from being divorced fromeach other, testing and teaching are closely interrelated. A test is seen as anatural extension of classroom work, providing teacher and student with usefulinformation that can serve as a basis for improvement.

During both semesters, students will be tested twice: term and �nal exam.Term � a diagnostic test used to identify students strengths and weaknesses,

intended to ascertain what further teaching is necessary.


Final � an achievement/attainment test � designed to show mastery of thesyllabus.

University of London requirements:In end of the second semester, students will take a University of London

External Program Exam. University of London graders will grade this exam.In order to pass this exam successfully, students must receive 34

Higher School of Economics requirements:Final grade for the Russian curriculum will be composed of three parts:

• University of London exam 50

• First semester �nal 20

• Second semester �nal 20

• Seminars participation 10

Course Outline

Section A. Sociological Research and Methodology

0. What this unit is aboutWhat skills you will learn from studying this unit. The structure of the

unit. Reading advice and other resources. Hours of study and use of thesubject guide. The examination and examination advice.

1. Introduction to sociologyWhat is Sociology? In what respect sociology is di�erent from other social

disciplines? Is sociology a science or a commonsense?Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch. 1, pp.4�17.


1. P.Berger (1991) Invitation to Sociology, Ch.2 Sociology as a Form ofConsciousness, pp.37�67.

2. Mills, C. Wright (1970) The Sociological Imagination, Ch.1.

2. Social and Sociological ProblemsWhat are sociological problems? How the order of social life is possible?

How do societies change? How are our lives as individuals shaped by the soci-eties in which we live?

Main Reading

108 SECOND YEAR

1. Macionis, J. and K. Plummer (2005), Sociology: a Global Introduction.pp.4�7. Sociology: Issues and Debates, (1999) ed. by S.Taylor, pp. 2�5


1. P.Berger (1991) Invitation to Sociology, Ch.2 Sociology as a Form ofConsciousness, pp.49�50.

2. Macionis, J. and K. Plummer (2005), Sociology: a Global Introduction,p.45.

3. Bauman, Z. (1990) Thinking Sociologically.

3. Socialisation and Identity What is socialisation?Self and identity: personal and social identities, identities and roles. Theo-

ries of socialisation: role�taking (Parsons) versus role�making (Mead) theories.The role of others. Labelling theory.

Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Chapter 4, pp.121�139.


1. Giddens, A. (2001) Sociology, pp. 2-30.

2. Macionis, J. and K. Plummer (2005), Sociology: a Global Introduction.Ch. 7 Micro�sociology: the Social Construction of Everyday, pp.156�187.

4. Key principles of Sociological Research Key termsObjective and subjective knowledge. Standartisation. Reliability. Trans-

parency. Validity. Authenticity.Main Reading

1. Fulcher, J and J. Scott (2003) Sociology, Chapter 3, pp.97�98.

2. McNeil, P. Research Methods. (1990), pp.14�15.

3. Bryman, A. (2001), Social Research Methods, pp.28�33.


1. Macionis, J. and K. Plummer (2005), Sociology: a Global Introduction.Ch. 3, pp.46�52.

2. Marsh, I. et al. (2002), Theory and Practice in Sociology, pp.18�24, 31�32.


5. Research designs in Sociology What is a research design? Conceptsand conceptual thinking. Operationalisation and indicators. Descriptive andexplanatory research designs. Quantitative and Qualitative.

Main Reading

1. Fulcher, J and J. Scott (2003) Sociology, Chapter 3, pp.75�78, 98�104Sociology: Issues and Debates, (1999) ed. by S.Taylor, pp. 5�9



2. McNeil, P. Research Methods. (1990), pp.9�10, 23�26.

6. Major research designs ISurveys: sampling, longitudinal approaches. Research example: Townsend

on measuring poverty.Experimental and evaluative research: causality, independent and depen-

dent variables. Natural experiments in sociological research. Experiments andethics.

Main Reading

1. Fulcher, J and J. Scott (2003) Sociology, Chapter 3, pp.78�88.

2. Denscombe, M. (2003) The Good Research Guide, pp.6�7, 61�72


1. Marsh, I. et al. (2002), Theory and Practice in Sociology, pp.38�41.


7. Major research designs IIComparative research. Research examples: Durkheim on suicide rates. So-

cial meanings and suicide (Douglas). The social organisation of suicide (Atkin-son).

Ethnography. 'Verstehen': to understand the world from the insider's per-spective. Research example: Taylor (1982) on suicidal behaviour.

Main Reading

1. Fulcher, J and J. Scott (2003) Sociology, Ch. 3, pp. 88 .



2. Denscombe, M. (2003)The Good Research Guide, pp.84�95

110 SECOND YEAR

8. Research Methods IPrimary and secondary data. Questionnaires. Interviews: structured and

unstructured.Main Reading

1. Fulcher, J and J. Scott (2003) Sociology. Ch. 3, pp. 90�92, 95.



2. McNeil, P. Research Methods. (1990), pp.17�48, 99�114.

3. Denscombe, M. (2003) The Good Research Guide, pp.144�191.

9. Research Methods IIObservations: structured and participant. Ethics of covert research.Main Reading

1. Fulcher, J and J. Scott (2003) Sociology, Ch. 3, pp. 88�90, 114�116.




3. Denscombe, M. (2003)The Good Research Guide, pp.192�211.

10. Research Methods IIISocial statistics. Documents.Selection of methods. Research designs and research methods.Main Reading

1. Fulcher, J and J. Scott (2003) Sociology, Chapter 3, pp.110�113, 92�97.


1. Denscombe, M. (2003)The Good Research Guide, pp.212�229.

11. Methodology IWhat is methodology? Epistemology. Positivism.Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch. 1, pp.14�17, 24�25

2. Giddens, A. (2001) Sociology. pp. 7�8.

3. Macionis, J. and K. Plummer (2005), Sociology: a Global Introduction.pp. 46�47.


4. Marsh, I. et al. (2002), Theory and Practice in Sociology, pp.15�20


1. McNeil, P. Research Methods, (1990), pp.115�118.

2. Hughes, J. (1997) The Philosophy of Social Research, pp.24-73

12. Methodology IIInterpretivism. Realism.Main Reading

1. Giddens, A. (2001) Sociology. pp. 640-41. Macionis, J. and K. Plummer(2005), Sociology: a Global Introduction. pp. 44-69.


1. Marsh, I. et al. (2002), Theory and Practice in Sociology, pp.21�25

2. Parker J. (2003) Social Theory: a Basic Tool Kit. Ch. 11

13. Theories in SociologyOrigins of Sociology. The Enlightment. What is a theory. Ontological

assumptions.Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch. 2, pp.20�28.

2. Macionis, J. and K. Plummer (2005), Sociology: a Global Introduction.pp. 11-15 Giddens, A. (2001) Sociology. pp.6-8.


1. Swingewood, A. (2000)A Short History of Sociological Thought, pp.3�27

14. MarxMarx's in�uences: Georg Hegel, Ludwig Feuerbach. A Materialist Social

Ontology. Historical Materialism.The Critique of Capitalism. Class as a SocialRelation. The State and Politics.

Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch.2, pp. 28�32

2. Cu�, E., W.W. Sharrock and D.W. Francis (1998) Perspectives in Soci-ology. Chapter 2, pp. 9�35.


1. Lee, D. and H. Newby (2000) The Problem of Sociology, Part 4, pp.111�165 .

112 SECOND YEAR

15. DurkheimBiological analogy. Explanation of reality. Scienti�c methodology. The

relationship between the Individual and Society. Functionalist method of ex-planation. Three Studies of Social Solidarity.

Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch.2, pp. 33-39.

2. Macionis, J. and K. Plummer (2005), Sociology: a Global Introductionp. 92.



1. Swingewood, A. (2000) A Short History of Sociological Thought, pp.57�80.

2. Lee, D. and H. Newby (2000) The Problem of Sociology, Part 6, pp.209�258 .

16. WeberAction approach in sociology. Social action. Methodological individualism.

Objectivity in social sciences. Ideal types. The relationship between religionand economy. The disenchantment of the world and the rationalisation of life.

Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch.2, pp. 39�43.

2. Macionis, J. and K. Plummer (2005), Sociology: a Global Introduction,p. 88�91.



1. Lee, D. and H. Newby (2000) The Problem of Sociology, Part 5, pp.167�207.


17. Structural functionalism and ParsonsFunctional approach in sociology. 'Functional prerequisites'. 'Soft' ver-

sus 'hard' (normative) versions of structural functionalism. Parsons' sociology:


Social action and social system, moving equilibrium, status roles, social insti-tutions, pattern variables. Merton's ideas: �middle range theories�, manifestand latent functions: intended and unintended outcomes, positively functional/dysfunctional / non�functional levels of society, structural alternatives.

Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch.2, pp.45�52.

2. Lee, D. and H. Newby (2000) The Problem of Sociology, Part 7, pp.259�305.



2. Ian Craib (1992) Modern Social Theory Ch.3 pp. 37�67.

18. Bringing the individual back inSocial interactionism, symbolic interactionism and ethnomethodology.

Thomas Theorem. Taking the role of the other. The self is a process. Phe-nomenological approach. Labelling theory. A self�ful�lling prophecy. TheSocial Construction of Reality. 'Breaching experiments'. Structure or action?Structuration threories.

Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch.2, pp. 52�57, Ch. 4, pp.133-36.

2. Cu�, E., W.W. Sharrock and D.W. Francis (1998) Perspectives in Soci-ology, pp. 115�147, especially 143-47.


1. Ian Craib (1992) Modern Social Theory, Ch.5, pp.85�123


19. Postmodernity and SociologyModernity versus postmodernity. Information Society. Knowledge class.

Consumerism. Postmodern sociological theory. The Enlightenment as ModernProject. The reconstruction of the image of natural sciences in postmoderntheory. 'Grand naratives'. Cultural analysis.

Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Ch.2, pp. 65�67, 387�388.

114 SECOND YEAR

2. Macionis, J. and K. Plummer (2005), Sociology: a Global Introduction,pp.33�34, 686�688.


1. Cu�, E., W.W. Sharrock and D.W. Francis (1998) Perspectives in Soci-ology, pp. 291�305.


Section B. Globalisation and Social Change

20. Global sociology and classical theories of social change ISociological theories of social change: Marxist theory, Evolutionary theory,

Structural functionalism, Weberian theory.Main Reading

1. Waters, M. (2001) Globalization, Ch.1, pp.1�25.


1. I.Craib (1997), Classical Social Theory, pp.185�260.

21. Global sociology and classical theories of social change IIModernisation theory. Convergence theory, Dependency theoryMain Reading



1. Sklair, L. (2002) Globalisation: Capitalism and its Alternative, pp. 29�34.

22. Understanding globalizationDe�ning globalization. Hyperglobalisers, skeptics, transformationalists

(Held).Main Reading

1. Fulcher, J and J. Scott (2003), Sociology, Chapter 14: 'Globalisation',pp.539�550.



1. Held et al, (1999) Global Transformations, Introduction, pp. 1-10


23. Aspects of globalizationGlobalising technology. Economic globalization. Political globalization.

Cultural globalization.Main Reading

1. Start with reading the Study guide Chapter 7 Aspects of globalisation

2. Waters Chapter 3: 'Open spaces: the globalizing economy', p.60�93.

3. Waters Chapter 6: 'Clashing civilizations: international cultures'.

4. Waters Chapter 4: 'States of �ux: international politics'.



24. Theorising and researching globalization IWorld�Systems theory. Global capitalist theory.Main Reading


2. Sklair, L. (2002) Globalisation: Capitalism and its Alternative, pp. 40�42, 45�46.


1. Robert J.S. Ross (2001) No sweat: teaching globalization over twentyyears Radical Teacher, Summer.

25. Theorising and researching globalization IIGlobal society theory. Global culture theory.Main Reading


2. Waters, M. (2001) Globalization, Ch.5�6, pp.123�181.


1. Robinson W. (2001) Social theory and Globalization: the Rise of Transna-tional State, Theory and Society, Vol.30, No.2, 157�200.

116 SECOND YEAR

Section C. Power in Society

26. Introduction: power, modernity and sociologyDi�erent understandings of this term. Power as coercion. Power as domi-

nation. Power as in�uence. The problem of 'power'.Main Reading

1. Gouldner, A. (1971), Basic Assumptions. The Coming Crisis of WesternSociology, pp. 52�54.

2. Wrong, D. (1995), Power: Its Forms, Bases and Uses, pp. 1�20.


1. Simmel, Georg. �On Superordination and Subordination.� The Sociologyof Georg Simmel, pp. 181�189.

2. Stewart, A. (2001), 'Power and Domination: The Dominant Perspective'in Theories of Power and Domination, pp.11-34

27. Marxist account of powerHumanist versus structuralist (or 'scienti�c') Marxism. Theorising of tran-

sition theory (Lenin, radical democracy). Gramsci's theory of hegemony. Therole of intellectuals. The distinction between ideologies and ideology (Al-thusser).

Main Reading

1. Lee, D. and H. Newby (2000) The Problem of Sociology, Part 7, pp.115-123, 124-136.

2. Swingewood, A Short History of Sociological Thought, 2000, pp.49�56.

3. Held, D. (1987) Models of Democracy, pp. 108-113.


1. Dunleavy, P. and B. O'Leary (1987) Theories of the State. pp. 204-215,237-243

2. Lee and Newby, 2000, pp. 161-164

3. Gramsci, Antonio. 1971. �The Intellectuals�, in Selections from the PrisonNotebooks. Translated and Edited by Q. Hoare and G. N. Smith. NewYork: International Publishers, page 3�23

4. Scott, J. (1991), 'Networks of corporate power: A comparative assess-ment' Annual Review of Sociology, 17.


28. Weber: power, strati�cation and dominationPower versus domination. Legitimacy. Three types of authority. Bureau-

cracy. Weber's de�nition of the State.Main Reading

1. Swingewood, A Short History of Sociological Thought, 2000, pp. 107-111.

2. Lee, D. and H. Newby (2000) The Problem of Sociology, Part 7, pp.169�182


1. Held, D. (1987) Models of Democracy, pp. 150�154,

2. Bilton, T. et al. (2002) Introductory Sociology, pp. 192-205; 211-218.

3. M. Weber (1968) Economy and Society, Volume 1 Ch 1, section 16 andChapter III, sections 1�6.

29. The power of elitesThe key ideas of classical elitist theories: Mosca, Pareto, Michels. Neo�

elitist theory of C.Wright Mills.Main Reading

1. Scott, J, (1996) Strati�cation and Power: Structures of Class, Status andCommand, pp. 127-157

2. Lee, D. and H. Newby (2000) The Problem of Sociology pp. 198-99.


1. Dunleavy, P. and B. O'Leary (1987) Theories of the State. pp. 136-153.

2. J. Scott (1991) 'Is there still a ruling class?' in Who Rules Britain? Ch.6

3. J. Higley and L. Field (1980) Elitism Ch 1.

30. The pluralist model of powerOne, two and three dimensional view of power (Lukes). Power and compet-

ing epistemologies. The problem of 'real interests'.Main Reading

1. Bilton, T. et al. (2002) Introductory Sociology, pp. 201- 214

2. Held, D. (1987) Models of Democracy, pp. 189-206.


118 SECOND YEAR

1. Lukes, S. (1974) Power: A Radical View, pp.9-25

31. Power to and power overZero�sum conception of power versus variable sum conception of power.

Parsons's conception of power: as 'power to'.Main Reading

1. Haugaard, M. (ed.) (2002) Power: A Reader, pp. 67-112, 304�328


1. Barnes, B. (2002), 'from The Nature of Power' in M. Haugaard (ed.),pp.113�131

2. Giddens, A. (1968), �Power� in the Recent Writings of Talcott Parsons',Sociology 2: 257�272.

32. Foucault view on powerModernist vs. non�modernist perspectives on power. Foucault's concept

of power. Disciplinary power vs. Sovereign power. The social constitution ofactors . Foucault's concept of discourse. Knowledge as a form of power.

Main Reading

1. Giddens, A. (2001) Sociology. pp. 674-76

2. Foucault, M. (2002), 'from Discipline and Punish' in M. Haugaard (ed.)(2002), pp. 181�204


1. Barnes, B. (2002), 'from The Nature of Power' in M. Haugaard (ed.)(2002), pp.113�131

2. Callon, M. (1991), 'Techno�economic Networks and Irreversibility' in J.Law (ed.) (1991), A Sociology of Monsters: essays on power, technologyand domination, pp.132�164

3. Scott, J. (2001), 'Discipline and Expertise' in Power, pp.92�109.

33. Theories of the StateWhat states do? Instrumentalist and structuralist theories of the state

in Marxism. Weberian approach to the State: the control over a particularterritory.

Main Reading

1. Scott, J. (2001), 'States and state elites' and 'State power and class hege-mony' in Power, pp.33�37, 87�91


2. Domho�. G. W. (1991), 'Class, Power and Parties in the New Deal:A Critique of Skocpol's State Autonomy Theory' Berkeley Journal ofSociology 36: 1�49.

3. R. Miliband (1969) The State in Capitalist Society, Ch. 2


1. R. Miliband (1989), Divided Societies: Class Struggle in ContemporaryCapitalism Ch. 2.

2. N. Poulantzas (1972). 'The problem of the capitalist state' in R. Black-burn (ed) Ideology in Social Science:Readings in Critical Social Theory



1. What this unit is about 6 2 2 22. Introduction to sociology 6 2 2 23. Social and Sociological Problems 6 2 2 24. Socialization and Identity 6 2 2 25. Key principles of Sociological

Research6 2 2 2

6. Research designs in Sociology 6 2 2 27. Major research designs I 7 2 2 38. Major research designs II 7 2 2 39. Research Methods I 7 2 2 310. Research Methods II 7 2 2 311. Research Methods III 7 2 2 312. Methodology I 7 2 2 313. Methodology II 7 2 2 314. Theories in Sociology. 6 2 2 215. Marx 6 2 2 216. Durkheim 6 2 2 217. Weber 6 2 2 218. Structural functionalism and

Parsons6 2 2 2

19 Bringing the individual back in 6 2 2 220 Postmodernity and Sociology 7 2 2 321 Global sociology and classical

theories of social change I6 2 2 2

22 Global sociology and classicaltheories of social change II

6 2 2 2

120 SECOND YEAR


23 Understanding globalization 6 2 2 224 Aspects of globalization 6 2 2 225 Theorising and researching

globalization I7 2 2 3

26 Theorising and researchingglobalization II

7 2 2 3

27 Introduction: power, modernityand sociology

6 2 2 2

28 Marxist account of power 6 2 2 229 Weber power strati�cation and

domination6 2 2 2

30 The power of elites 7 2 2 331 The pluralist model of power 6 2 2 232 Power to and power over 6 2 2 233 Foucault view on power 6 2 2 234 Theories of the State 7 2 2 3

Total: 216 68 68 80

INTRODUCTION TO LAW 121

Introduction to Law

Lecturer: Oksana N. Lopatina

Course description

Comparative Law is a half semester course for 2�nd year ICEF students. Itis speci�cally designated so as not to require any prior exposure to law, anddoes not suppose that students will necessarily pursue any further law options.Nevertheless, it is designed in the belief that an acquaintance with core lawconcepts and processes is an essential element in the ICEF curriculum.

Course objectives

Comparative Law aims to develop student awareness and understanding ofissues that we regard as being central to the relationship between law andgovernment. It is also designed to develop a number of key skills:

1. research skills; �nding relevant cases and articles; e�ective use of a large(and highly technical) body of statutory material;

2. reasoning skills; understanding how judges can reach radically di�erentconclusions on the same facts;

3. problem�solving; understanding how many issues can be thrown up bythe same set of facts. Strong emphasis is placed on this in tutorials,and all tutorial sheets contain at least one detailed problem question foranalysis;

4. critical skills; assessing how e�ective the law is, and how it might be mademore e�ective.

Methods

One two�hour lecture per week plus one two�hour class per week. Detailedreading lists are provided and students are expected to be fully prepared be-forehand in order to be able to participate in class.

Main Reading

1. Öâàéãåðò Ê. Êåòö Õ. Ââåäåíèå â ñðàâíèòåëüíîå ïðàâîâåäåíèå â ñôåðå÷àñòíîãî ïðàâà. Ì., Ìåæä. îòíîøåíèÿ, 1995.

2. Äàâèä Ð. Îñíîâíûå ïðàâîâûå ñèñòåìû ñîâðåìåííîñòè. Ì., Ìåæä. îò-íîøåíèÿ, 1998.

122 SECOND YEAR

3. Ðîìàíîâ. À.Ê. Ïðàâîâàÿ ñèñòåìà Àíãëèè. Ì., 2000

4. Law for Business Studies Students. London, 1997.

5. James' Introduction to English Law. P. Shears and G. Stephenson. Lon-don, 1996.


1. Eric Barendt. An Introduction to Constitutional Law. Oxford UniversityPress, 1998.

2. Youngs. R. English, French & German Comparative Law.Cavendish,1997

3. Von Mehren, Arthur Taylor. The Civil Law System: An Introduction tothe comparative Study. Boston: Little, Brown , 1977.

4. Peter Cumper. Constitutional and Administrative Law, Blackstone PressLimited, 1999.

5. Janet Dine , Company Law, Sweet & Maxwell Textbook Series, London.2001

Grade determination

A �nal grade is calculated as weighted average with the following weights:

• 30% assessed written midterms (two � 10% each)

• 20% class attendance and performance

• 50% three hour �nal written examination.

Course Outline

Part 1 . The nature, classi�cation, and sources of law

The legal system. Common law and civil law. Common law systems and civillaw systems. Di�erences between civil law and common law. The relationshipbetween common law and equity. Classi�cation of law. Procedure and evidence.Substantive law and procedure. Civil and criminal proceedings.

Main Reading

1. Law for Business Studies Students, Chapter 1, pp. 1�10. 30 -34.


2. Ê. Öâàéãåðò, Ââåäåíèå â ñðàâíèòåëüíîå ïðàâîâåäåíèå, ñòð. 99 -118,272 -308


1. James' Introduction to English Law, pp. 23 - 44, 56�66.

Legislation of the European Union. Primary legislation. Secondary legis-lation. Types of legislation..The sources of law. Case law, governed by thedoctrine of binding precedent. How precedent works.

Main Reading

1. Law for Business Studies Students, Chapter 1 pp. 10 -25.

2. James' Introduction to English Law, pp. 3� 21.


1. Ðîìàíîâ À.Ê. Ïðàâîâàÿ ñèñòåìà Àíãëèè, ñòð. 4�6.

2. Penny Darbyshire, Eddey on the English Legal System, London, 1996,pp. 5�39.

Part 2. Constitutional law

Principles of constitutionalism. Constitutionalism and the Separation of Pow-ers. Constitutionalism and Democracy. De�nitions of constitutions. Classi�-cation. Sources of the UK Constitution. The character of the United KingdomConstitution. The doctrine of the separation of powers. Constitutional signif-icance of the separation of powers. The US Constitution, the Constitution ofthe Russian Federation and the UK model � the comparative analysis.

Main Reading

1. S. E. Finer, Comparing Constitutions, Oxford. 1998. pp.1� 39. 40�101.

2. James' Introduction to English Law., pp.105�113.


1. Peter Cumper. Constitutional and Administrative Law, pp.3�66.

Parliament and Legislative Power Parliament and the Law�making Process.The UK Parliament in a comparative perspective. Parliamentary Supremacyand political reality. European Community Law and Parliamentary Supremacy.The principle of Community Supremacy. Acceptance of Community Supremacyin the United Kingdom. The role and privileges of Members of Parliament.

Main Reading

124 SECOND YEAR

1. James' Introduction to English Law, pp. 115�120.


1. Peter Cumper, Constitutional and Administrative Law, pp. 81�160

Government and Executive Power. The formation of Governments in acomparative perspective. The UK Prime Minister and Cabinet. MinisterialResponsibility.

The Courts and Judicial Power. The separation of judicial power, the inde-pendence of the Judiciary and the scope of judicial power.

Main Reading

1. James' Introduction to English Law, pp.115�120.


1. Eric Barendt. An Introduction to Constitutional Law., pp.107�124, 129�143.

Part 3. The law of obligations : contract law

Historical development and the theories underlying contract. Classi�cation ofcontracts. Bilateral and unilateral contracts. Standard form contracts. Formaland informal contracts.

General principles. O�er and Acceptance. The o�er. Duration and termi-nation of o�er. Acceptance. Communication of acceptance. Certainty of termsand subject matter.

Consideration. Purpose of consideration, de�nition of consideration. Fourprinciples of consideration.

Intention to create legal relations. Domestic promises. Commercialpromises.

The terms of the contract. Conditions and warranties. Express and impliedterms.

Main Reading

1. Law for Business Studies Students, pp. 43�128.



Reality of Contract. Unenforceable, Voidable. Void and Illegal Contracts.Mistake. Misrepresentation. Disclosure of material facts. Duress and UndueIn�uence. Illegal Contracts Remedies for misrepresentation.

Main Reading


1. Law for Business Studies Students, pp. 147�153, 207�214, 253�255.

Discharge of Contract. Performance. Agreement. Termination by Notice.Acceptance of Breach. Frustration. Remedies for Breach of Contract.

Main Reading




Part 4. Company law

Nature. Formation, and Powers. Corporate attributes. Classi�cation of com-panies. Companies and partnerships contrasted. Formation of a company.Formalities of incorporation. Piercing the Corporate Veil. Liability for tortsand crimes.

Main Reading

1. Law for Business Studies Students, pp. 467�473


1. Reader. Introduction to Company Law, pp. 1�36

Financial Structure. Share capital and dividends. Types of capital. Is-suance of shares. Classes of shares. The transfer of shares. Maintenance ofcapital. Dividends.

Main Reading


2. Reader. Introduction to Company Law. pp. 36�50.

Loan Capital and Charges. Debt Securities. Types of debt securities.Comparison of shares and debentures. Charges..Types of charges. Priorityof charges.

Main Reading

1. Reader. Introduction to Company Law, pp. 51�58.

Management Structure. Corporate Governance..Role of shareholders. Vot-ing rights of shareholders.. Meetings. Directors. Exercise of directors' func-tions. .Duties of directors and o�cers.

Main Reading

126 SECOND YEAR

1. Reader. Introduction to Company Law, pp. 58�73, 74�94.


1. Janet Dine. Company Law, pp. 41�137.

Fundamental Changes. Charter Amendments. Combinations. Liquidationsand other insolvency procedures.

Main Reading

1. Reader. Introduction to Company Law, pp. 94�105.



1. The Legal System. 8 2 2 42. Types of legislation.The sources

of law.8 2 2 4

3. Principles of constitutionalism. 8 2 2 54. Legislative Power and the

Law-making Process.8 2 2 4

5. Government and ExecutivePower.

8 2 2 4

6. The Courts and Judicial Power 8 2 2 47. Contract law. 8 2 2 48. Consideration. 8 2 2 49. Intention to create legal

relations.8 2 2 4

10. Discharge of Contract.Performance

8 2 2 4

11. Corporate attributes 9 2 2 412. Classi�cation of companies. 8 2 2 413. Financial Structure. Share

capital and dividends8 2 2 4

14. Share capital and dividends 6 2 2 215. Corporate Governance 6 2 2 216. Voting rights of shareholders 6 2 2 217. Management Structure.

Corporate Governance.Role ofshareholders

6 2 2 2



18. Fundamental Changes. CharterAmendments. Combinations.Liquidations and otherinsolvency procedures.

6 2 2 2

Total: 135 36 36 63

128 SECOND YEAR

Philosophy and Methodology of Social Sciences

Lecturer: Vladimir N. PorusClassteachers: Konstantin A. Zouev, Simon Skempton, Lolita B. Makeeva

Course description

Philosophy and methodology of social sciences is a one semester course forthe second year ICEF students. The course of intellectual history of Europeis a pre�requisite. The course is taught in Russian, English equivalents ofbasic concepts are explained. The stress in the course is laid on philosophicalexplanation of basic trends and peculiarities of historical process of developmentcontemporary science.

Course objectives

The course should give an understanding of fundamental philosophical conceptsand ability to use them in methodological analysis of various forms and types ofknowledge. Students should get basic knowledge in philosophy and methodol-ogy of social sciences. Such knowledge is an important element of their generaland professional culture, a necessary condition of success in future studies andwork.

Methods


• lectures (2 hours per week)

• guided classes (2 hours per week)


• self study with literature

• Internet resources use

In total the course includes: 32 hours of lectures, 32 hours of classes. Duringsemester students write an essay (6�8 pages).

Main Reading

1. Philosophy. Reader. ICEF, 2003.

2. Ñòåïèí Â. Ñ. Ôèëîñîôèÿ íàóêè. Îáùèå ïðîáëåìû. Ì., 2006.

PHILOSOPHY AND METHODOLOGY OF SOCIAL SCIENCES 129

3. Íèêèôîðîâ À. Ë. Ôèëîñîôèÿ íàóêè: èñòîðèÿ è ìåòîäîëîãèÿ. Ì.,1998; 2�å èçä. Ì., 2006.

4. Ëåáåäåâ Ñ. À., Èëüèí Â. Â. è äð. Ââåäåíèå â èñòîðèþ è ôèëîñîôèþíàóêè. Ì.,2005.

5. Èâèí À. À. Ñîâðåìåííàÿ ôèëîñîôèÿ íàóêè. Ì., 2005.

6. Ïîðóñ Â. Í. Ðàöèîíàëüíîñòü, íàóêà, êóëüòóðà. Ì., 2002.

7. Êîõàíîâñêèé Â. Ï., Ëåøêåâè÷ Ò. Ã. Îñíîâû ôèëîñîôèè íàóêè.Ðîñòîâ�íà�Äîíó, 2004.

8. Ôèëîñîôèÿ è ìåòîäîëîãèÿ íàóêè. Ïîä ðåä. Â.È. Êóïöîâà. Ì.,Àñïåêò�ïðåññ, 1996.

9. Ñîâðåìåííàÿ ôèëîñîôèÿ íàóêè: çíàíèå, ðàöèîíàëüíîñòü, öåííîñòè âòðóäàõ ìûñëèòåëåé Çàïàäà. Õðåñòîìàòèÿ. Ì., Ëîãîñ, 1996.

Grade determination

Course grade consists of three parts:

• �nal exam (50%)

• essay (35%)

• classes (15%)

Course Outline

1. Science � a special form of activity aiming at accumulation ofknowledge

The genesis of scienti�c knowledge. From development of ideal objects andoperations with them as guides for practical activities - to theoretical knowledgebasing on experiment.

Social and cultural background of emergence of science. How did naturebecome an object of scienti�c inquiry. The value orientations (?) of EuropeanRenaissance and Modernity - the premises of theoretical natural science. Sci-ence as a worldoutlook (weltanschauung). Relation between science, religionand philosophy.

Historical and cultural premises of technical and social sciences. Interre-lation between scienti�c knowledge of nature, human and society. Machineryand technology - arti�cial world created by humanity with the help of science.Basic traits of technological civilization.

[2, pp. 91�105, 119�153, ], [4, pp. 33�64], [7, pp. 36�50].

130 SECOND YEAR

2. Science - a social instituteCollective nature of scienti�c cognition. Principles of rational communica-

tion in science. Disciplinary nature of contemporary science. Forms of organi-zation of scienti�c inquiry. Academies and universities.

Science as profession. Social characteristics of professional scienti�c ac-tivities. Science and education. Problems of choice of scienti�c developmentstrategy. Science and economy. Science and culture.

Notion of social responsibility of science: legal, political and ethical aspects.Ideal model of scienti�c ethics (R. Merton) and its practical implications. �Free-dom of research� principle in social context.

Scienti�c and technological progress, its social, political and ethical prob-lems. Scienti�c and technological progress as an indicator of country's place inthe world community. Ambivalence of progress and its possible solutions.

[4, pp.303�366], [7, pp. 541�576]

3. Structure of scienti�c cognitionEmpirical and theoretical levels of investigation, their interrelation.Scienti�c observation and experiment: basic traits. Concept of scienti�c

fact. Empirical generalizations and laws.Theory as a model. Application of theoretical model for description and

explanation of empirical facts. Systematic nature of theories in natural sciences.Structure of scienti�c theories. �The law of nature� and its place in scienti�c

theory. Math and logic in scienti�c theories. The problem of validity of scienti�ctheories: basic concepts.

The language of science, its structure and basic characteristics.[7, pp. 168�206], [ 4, pp.144�196].

4. Grounds for scienti�c activitiesA. Ideals and norms of investigation. What is �a scienti�c explanation�?

Types of scienti�c explanation. Theory of scienti�c explanation of C. G. Hempeland its limitations.

Problem of proof and foundation of scienti�c knowledge. Fundamental andapplied scienti�c theories.

Historical change of ideals and norms of scienti�c inquiry.B. Scienti�c worldoutlook (weltanschauung). �Fundamental objects� and

patterns of their interaction - focus of this outlook. Scienti�c worldoutlook(weltanschauung) as a research program.

C. Philosophical foundations of science. Mutual interdependence of philo-sophical and scienti�c notions. Dialog of philosophy and science as a mean oftheir further development.

[7, pp. 216�240], [2, pp. 191�206].

5. The concept of scienti�c rationality

PHILOSOPHY AND METHODOLOGY OF SOCIAL SCIENCES 131

What is �scienti�c rationality.� Problem of criterion of scienti�c rationality.Historical types of scienti�c rationality.

Limitations of scienti�c rationality. The problem of �demarcation� betweenscience and non�science 9metaphysics, ideology etc.). Non�positivist programof empiric foundation of scienti�c knowledge, and reasons of its implausibil-ity. �Critical rationalism� of K. Popper and I. Lakatos. T. Khun's concept of�scienti�c revolutions�: relativist interpretation of scienti�c rationality.

Global scienti�c revolutions: classical, non�classical, post�non�classical (V.S. Stepin).

[7, pp. 380�404], [3, pp. 14�101], [6, pp. 13�30, 54�68, 91�106],[2, pp. 267�330].

6. Basic methodological characteristics of social and humanitar-ian sciences

Sciences of nature and culture: similarities and di�erences. Methodologicalpeculiarities of social and humanitarian sciences. The problem of understandingin social cognition (M. Weber, W. Dilthey). Objective nature of values and theirrole in understanding of cultural phenomena (E. Cassirer). Hermeneutics andhumanitarian knowledge.

The problem of explanation in social sciences. Can the explanation of socialphenomenon be reduced to natural�scienti�c? The problem of dialog betweennatural and humanitarian sciences.

Synergetics as a heuristic method of social and humanitarian research.[7, pp. 475�540], [3, pp. 172�190].



1. Science � a special form ofactivity aiming at accumulationof knowledge

23 4 4 15

2. Science � a social institute 23 4 4 153. Structure of scienti�c cognition 29 6 6 174. Grounds for scienti�c activities 29 6 6 175. The concept of scienti�c

rationality29 6 6 17

6. Basic methodologicalcharacteristics of social andhumanitarian sciences

29 6 6 17

Total: 162 32 32 98

132 SECOND YEAR

English Language

Course coordinator: Elena V. VelikayaClassteachers: Helen�Mary Jones, Helen�Mary Owen, Mark Dunnett, JenniferLockshin

Course description

The 2�nd year course is aimed to revise, expand and develop the academic skillsoutlined in the 1st year syllabus. The purpose of it is to equip students withthe skills necessary for conducting research and producing a piece of extendedwriting (project) in their own subject�speci�c area. The course involves anintegrated approach, with a particular focus on the writing and research skillsnecessary for such a task. The course is designed to encourage critical thinkingand get students to be evaluative in their approach to writing. There is also astrong oral component to the course through discussion of the students' workin classrooms, and a �nal conference at the end of the course when they presenttheir work.

Course objectives

The main objectives of this course are:

• to enable students to produce an extended piece of writing in their ownsubject area within the academic conventions of higher education in theWest;

• to develop students' discursive skills - to communicate e�ectively bothorally and in writing;

• to develop students' critical thinking skills;

• to develop learner autonomy.

Methods

The general input will take the form of 2 hours per fortnight in each group (16hours in the 1st semester and 12 � in the 2nd) with an English tutor workingin close cooperation with subject teachers to develop the skills required.

Main Reading

1. Haarman, L. (1988) Reading Skills for the Social Sciences. CUP.

ENGLISH LANGUAGE 133

2. Hartmann, P., Blass,L. (1999) Quest: Reading and Writing in AcademicWorld. Book 3. McGraw�Hill.

3. Sim, D., Laufer�Dvorkin, B. (1987) Vocabulary Development. Collins.

4. Trzeciak, J., Mackay, S. (1998) Study Skills for Academic Writing. Pren-tice Hall.

5. Waters, M. and A. (1998) Study Tasks in English. CUP

6. Ellis, M., O'Driscoll, Nina (1997) Giving Presentations. Addison WesleyLongman Ltd.

7. The Economist. Weekly issues.

Grade determination

The following system of testing is used:End of the 1st semester test - Project 1 (1500-1800 words) - an achieve-

ment/attainment test to show mastery of the syllabus and students' ability towrite an extended essay and to use resources in their work.

End of the 2nd semester test - Project 2 (2500-3000 words) a pro�ciencytest designed to measure students' competence in the form of an extended essayin their own area and its presentation at the �nal conference.

Students' assessment includes continuous assessment and assessment of thetwo projects they write as well as the presentation. At each stage of the processstudents get feedback.

Course Outline

The course includes:

1. Extended Writing developmentExtended Writing development is based on research which shows that the

process of doing helps the development of organization as well as meaning. Itis expected that writing skills development occurs through the process of stu-dents completing their project, through drafting and redrafting their work. Ateach stage of writing, students are encouraged and expected to generate ideas,organize them, evaluate what they are writing and identify clearly what theirwriting purpose is. At every stage of the process, students are also encouragedto critically assess what they have written and to develop this critically throughdiscussion in class. The course strongly emphasizes the importance of the endproduct. This is in line with the needs of the students on their future academiccourses in other subjects. Final project is evaluated taking into account notonly the content, the use of source materials, the text organization and the

134 SECOND YEAR

language of the �nal draft, but also the actual written presentation of the textand the degree of learner independence exercised by students in producing the�nal product.

2. Discursive skills developmentIn the complexity of the writing process, students will �nd it challenging

to formulate their own ideas. This course aims to voice their ideas beforewriting them, a process which helps to clarify their own ideas, to be able toexplain them to others. Verbalisation of their ideas before writing can helpto combat plagiarism. Good presentation skills are viewed in this course asan ability to organise points so that the audience will �nd it easy to follow thestudents' argumentation, as an ability to deliver a presentation in an interestingand engaging way, to keep the audience listening and to answer the audiences'questions.

3. Study SkillsStudents are expected to be independent learners in higher education and

to acquire study competences which involve working autonomously. They needto work on their study skills techniques and:

• to be able to �nd out information from di�erent sources;

• to read complicated texts to �nd the gist of what they are saying;

• to compare di�erent opinions and decide what are the best grounds fordeciding who is right;

• to be able to weigh up the 'pros' and 'cons', the good points versus thebad;

• to write things in their own words;

• to be able to argue their points of view and to give good reasons.

INTRODUCTION TO BUSINESS AND MANAGEMENT 135

Introduction to Business and Management

Lecturer: Sergey R. FilonovichClassteacher: Sergey A. Barcov

Course description

The course provides a review of management as a area of theoretical develop-ment as well as a �eld of practice. It comprises classical management theo-ries and modern approaches to organisation and business. Main blocks of thecourse are functions of management, managerial processes and interaction be-tween organisations and their environment. The course includes elements oforganisational behaviour. Business cases are used as application of theoreticalconcepts.

Course objectives

The main objective of the course is to present modern concepts of managementto the students and help the to develop skills in analysis of business organ-isations both in terms of their internal functioning and interaction with theenvironment.

Methods



• classes (2 hours per week)

• written home assignments (1 per month)

• self study

Main Reading

1. Daft R.L. Management. 5th ed. - Fort Worth: The Dryden Press, 2000.

2. Mullins L.J. Management and Organisational Behaviour. 5th ed. - Har-low (England): Prentice Hall, 1999.

3. Needle D. Business in Context. An Introduction to Business and ItsEnvironment. 3rd ed. - London: Business Press, 2000.

136 SECOND YEAR

4. Robbins S.P., Coulter M. Management. 7th ed. - Upper Saddle River:Prentice Hall, 2002.

5. Rosenfeld R.H., Wilson D.C. Managing Organizations. 2nd ed. - London:McGraw�Hill, 1999.


1. Àãååâ À.Ñ. Ïñèõîëîãèÿ ìåæãðóïïîâûõ îòíîøåíèé. - Ìîñêâà, 1989.

2. Àêîôô Ð. Ïëàíèðîâàíèå áóäóùåãî êîðïîðàöèè. - Ì., 1985.

3. Àëåêñååâ À., Ïèãàëîâ Â. Äåëîâîå àäìèíèñòðèðîâàíèå íà ïðàêòèêå(èíñòðóìåíòàðèé ðóêîâîäèòåëÿ).� Ì., 1994.

4. Àëåêñååâà Ì.Ì. Ïëàíèðîâàíèå äåÿòåëüíîñòè ôèðìû.� Ì., 1997.

5. Àíäðååâ Â.È. Êîíôëèêòîëîãèÿ: èñêóññòâî ñïîðà, âåäåíèÿïåðåãîâîðîâ è ðàçðåøåíèÿ êîíôëèêòîâ.� Êàçàíü, 1992.

6. Àíñîôô È. Ñòðàòåãè÷åñêîå óïðàâëåíèå. - Ì., 1989.

7. Áàëàáàíîâ È.Ò. Ðèñê�ìåíåäæìåíò.� Ì., 1996.

8. Áåíâåíèñòå Ã. Îâëàäåíèå ïîëèòèêîé ïëàíèðîâàíèÿ. - Ì., 1994.

9. Áëåéê Ð.Ð., Ìîóòîí Ä.Ñ. Íàó÷íûå ìåòîäû óïðàâëåíèÿ.� Êèåâ, 1990.

10. Áîâûêèí Â.È. Íîâûé ìåíåäæìåíò: óïðàâëåíèå ïðåäïðèÿòèÿìè íàóðîâíå âûñøèõ ñòàíäàðòîâ; òåîðèÿ è ïðàêòèêà ýôôåêòèâíîãî óïðà-âëåíèÿ.� Ì., 1997.

11. Áîéäåëë Ò. Êàê óëó÷øèòü óïðàâëåíèå îðãàíèçàöèåé.� Ì., 1995.

12. Áóðêîâ Â.Ï., Èðèêîâ Â.À. Ìîäåëè è ìåòîäû óïðàâëåíèÿîðãàíèçàöèîííûìè ñèñòåìàìè. - Ì., 1994.

13. Âàñèëüåâ Þ.Ï. Óïðàâëåíèå ðàçâèòèåì ïðîèçâîäñòâà: îïûò ÑØÀ.�Ì., 1989.

14. Âàõðóøåâ Â. Ïðèíöèïû ÿïîíñêîãî óïðàâëåíèÿ.� Ì., 1992.

15. Âåñíèí Â.Ð. Îñíîâû ìåíåäæìåíòà. Êóðñ ëåêöèé äëÿ ñòóäåíòîââûñøèõ ó÷åáíûõ çàâåäåíèé.� Ì., 1996.

16. Âèõàíñêèé Î.Ñ. Ñòðàòåãè÷åñêîå óïðàâëåíèå.� Ì., 1995.


17. Âèõàíñêèé Î.Ñ., Íàóìîâ À.È. Ìåíåäæìåíò: ÷åëîâåê, ñòðàòåãèÿ,îðãàíèçàöèÿ, ïðîöåññ.� Ì., 1995.

18. Ãâèøèàíè Ä.Ì. Îðãàíèçàöèÿ è óïðàâëåíèå.� Ì., 1972.

19. Ãåð÷èêîâà À.Í. Ìåíåäæìåíò: Ó÷åáíèê.� Ì., 1995.

20. Ãèáñîí Ä.Ë., Èâàíöåâè÷ Ä., Äîííåëëè Ä.Õ., ìë. Îðãàíèçàöèè:ïîâåäåíèå, ñòðóêòóðà, ïðîöåññû. - Ì.: Èíôðà�Ì, 2000.

21. Ãëóõîâ Â.Â. Îñíîâû ìåíåäæìåíòà. Ó÷åáíî�ñïðàâî÷íîå ïîñîáèå.�ÑÏá, 1995.

22. Ãðà÷åâ Ì. Ñóïåðêàäðû: óïðàâëåíèå ïåðñîíàëîì â ìåæäóíàðîäíîéêîðïîðàöèè.� Ì., 1993.

23. Ãðåéñîí Äæ. Ìë., Î Äåëë Ê. Àìåðèêàíñêèé ìåíåäæìåíò íà ïîðîãåÕÕI âåêà. - Ì., 1991.

24. Ãðîóâ Ý.Ñ. Âûñîêîýôôåêòèâíûé ìåíåäæìåíò. - Ì., 1996.

25. Äàíèåëñ Äæ.Ä., Ðàäåáà Ë.Õ. Ìåæäóíàðîäíûé áèçíåñ: âíåøíÿÿ ñðåäàè äåëîâûå îïåðàöèè. - Ì., 1994.

26. Äðàêêåð Ï.Ô. Óïðàâëåíèå, íàöåëåííîå íà ðåçóëüòàòû.� Ì., 1994.

27. Äðóæèíèí Ì.Â., Êîíòîðîâ Ä.Ñ., Êîíòîðîâ Ì.Ä. Ââåäåíèå â òåîðèþêîíôëèêòà.� Ì., 1989.

28. Äðóêåð Ï.Ô. Íîâûå ðåàëüíîñòè.� Ì., 1994.

29. Äðóêåð Ï.Ô. Ðûíîê. Êàê âûéòè â ëèäåðû. Ïðàêòèêà è ïðèíöèïû.�Ì., 1992.

30. Äðóêåð Ï.Ô. Ýôôåêòèâíûé óïðàâëÿþùèé.� Ì., 1994.

31. Äóä÷åíêî Â.Ñ. Èííîâàöèîííûå èãðû.� Òàëëèí, 1989.

32. Äóíêàí Ó.Äæ. Îñíîâîïîëàãàþùèå èäåè â ìåíåäæìåíòå.� Ì., 1996.

33. Çäðàâîìûñëîâ À.Ã. Ñîöèîëîãèÿ êîíôëèêòà.� Ì., 1995.

34. Çèãåðò Â., Ëàíã Ë. Ðóêîâîäèòü áåç êîíôëèêòîâ.� Ì., 1990.

35. Èâàíöåâè÷ Äæ.Ì., Ëîáàíîâ À.À. ×åëîâå÷åñêèå ðåñóðñû óïðàâëåíèÿ.�Ì., 1993.

36. Êàáàêîâ Â.Ñ., Ïîðîõîâñêèé È.Ì., Çóáîâ È.Ï. Ìåíåäæìåíò:ïðîáëåìû, ïðîãðàììà, ðåøåíèå.� Ë., 1990.

138 SECOND YEAR

37. Êàîðó È. ßïîíñêèå ìåòîäû óïðàâëåíèÿ êà÷åñòâîì. - Ì., 1988.

38. Êàðëîô Á. Âûçîâ ëèäåðîâ.� Ì., 1996.

39. Êàðëîô Á. Äåëîâàÿ ñòðàòåãèÿ: êîíöåïöèÿ, ñòðàòåãèÿ, ñèìâîëû. - Ì.,1991.

40. Êîðïîðàòèâíîå óïðàâëåíèå/ Ïîä ðåä. Ì.Õåññåëÿ/ Ïåð ñ àíãë.� Ì.,1996

41. Êíîððèíã Â.È. Èñêóññòâî óïðàâëåíèÿ: Ó÷åáíèê.� Ì., 1997.

42. Êðàâ÷åíêî À.È. Èñòîðèÿ çàðóáåæíîé ñîöèîëîãèè òðóäà. Îáùèåïðèíöèïû. - Ì., 1991.

43. Êðàâ÷åíêî À.È. Ïðèêëàäíàÿ ñîöèîëîãèÿ è ìåíåäæìåíò: Ó÷åá.Ïîñîáèå. Ì., 1995.

44. Êðàâ÷åíêî À.È. Òðóäîâûå îðãàíèçàöèè. Ñòðóêòóðà. Ôóíêöèè.Ïîâåäåíèå.� Ì., 1991.

45. Êðàñîâñêèé Á.Ä. Ðóêîâîäèòåëü òðóäîâîãî êîëëåêòèâà: èç îïûòàïñèõîëîãî�óïðàâëåí÷åñêîãî êîíñóëüòèðîâàíèÿ.� Ì., 1989.

46. Êðîññ Ï.À. Îá óïðàâëåíèè ôèíñêèìè ôèðìàìè.� Òàëëèí, 1989

47. Êóäðÿøîâà Å.Â. Ëèäåð è ëèäåðñòâî. Èññëåäîâàíèÿ ëèäåðñòâàâ ñîâðåìåííîé çàïàäíîé îáùåñòâåííî�ïîëèòè÷åñêîé ìûñëè. -Àðõàíãåëüñê, 1996.

48. Êóçüìèí È. Ïñèõîòåõíîëîãèè è ýôôåêòèâíûé ìåíåäæìåíò. - Ì.,1994.

49. Êóíö Ã., Î Äîííåë Ñ. Óïðàâëåíèå. Ñèñòåìíûé è ñèòóàöèîííûéàíàëèç óïðàâëåí÷åñêèõ ôóíêöèé. Ò.1�2.� Ì., 1981.

50. Êóðèöèí À.Í. Ñåêðåòû ýôôåêòèâíîé ðàáîòû: îïûò ÑØÀ è ßïîíèèäëÿ ðåäïðèíèìàòåëåé è ìåíåäæåðîâ. - Ì., 1994.

51. Ëàäàíîâ È.Ä. Ïðàêòè÷åñêèé ìåíåäæìåíò. Ïñèõîòåõíèêà óïðàâëåíèÿè ñàìîòðåíèðîâêè. - Ì., 1995.

52. Ëþòåíñ Ô. Îðãàíèçàöèîííîå ïîâåäåíèå. - Ì.: Èíôðà�Ì, 1999.

53. Ìàñòåíáðóê Ó. Óïðàâëåíèå êîíôëèêòíûìè ñèòóàöèÿìè è ðàçâèòèåîðãàíèçàöèè. - Ì., 1996.


54. Ìåñêîí Ì.Õ., Àëüáåðò Ì., Õåäîóðè Ô. Îñíîâû ìåíåäæìåíòà. - Ì.,1992.

55. Ìîíäåí ß. "Òîåòà": ìåòîäû ýôôåêòèâíîãî óïðàâëåíèÿ.�Ì, 1989

56. Îó÷è Ó. Ìåòîäû îðãàíèçàöèè ïðîèçâîäñòâà: ÿïîíñêèé è àìåðèêàí-ñêèé ïîäõîäû. - Ì., 1984.

57. Ïàïóëîâ Ï.À. Êàäðû óïðàâëåíèÿ ïðîèçâîäñòâîì: äåÿòåëüíîñòü èôîðìèðîâàíèå.� Ì., 1985.

58. Ïèòåðñ Ò. Óîòåðìåí Ð. Â ïîèñêàõ ñîâåðøåíñòâà óïðàâëåíèÿ.� Ì.,1986.

59. Ïîïîâ À.Â. Òåîðèÿ è îðãàíèçàöèÿ àìåðèêàíñêîãî ìåíåäæìåíòà. - Ì.,1991.

60. Ðàäóãèí À.À., Ðàäóãèí Ê.À. Ââåäåíèå â ìåíåäæìåíò: ñîöèîëîãèÿîðãàíèçàöèé è óïðàâëåíèÿ. - Âîðîíåæ, 1995.

61. Ðîäæåðñ Ñ.Ý, Àãàðâàëà - Ðîäæåðñ Ð. Êîììóíèêàöèè â îðãàíèçàöèÿõ.- Ì., 1980.

62. Ðîäæåðñ Ô.Äæ. IBM. Âçãëÿä èçíóòðè: ÷åëîâåê � ôèðìà ìàðêåòèíã.�Ì,1990

63. Ðóìÿíöåâà Ç.Ï., Ñàëîìàòèí Í.À., Àêáåðäèí Ð.Ç è äð. Ìåíåäæìåíòîðãàíèçàöèè. Ó÷åáíîå ïîñîáèå.� Ì., 1995.

64. Ñàéìîí Ã., Ñìèòáóðã Ä., Òîìïñîí Â. Ìåíåäæìåíò â îðãàíèçàöèÿõ. -Ì., 1995.

65. Ñàíòàëàéíåí Ò., Âîóòèëàéíåí Ý. è äð. Óïðàâëåíèå ïî

66. ðåçóëüòàòàì.� Ì,1993

67. Ñîâðåìåííûé áèçíåñ: Ó÷åáíèê. Òò. 1�2. / Ïîä ðåä. Ä. Ðå÷ìåí è äð.- Ì., 1995.

68. Còàðîáèíñêèé Ý.Å. Êàê óïðàâëÿòü ïåðñîíàëîì. - Ì., 1995.

69. Ñòýê Äæ. Áîëüøàÿ èãðà â áèçíåñ.� Ì., 1994

70. Òåéëîð Ô.Ó. Ìåíåäæìåíò. - Ì., 1992.

71. Òåéëîð Ô.Ó. Ïðèíöèïû íàó÷íîãî ìåíåäæìåíòà. - Ì., 1992.

72. Òðàâèí Â.Â., Äÿòëîâ Â.À. Îñíîâû êàäðîâîãî ìåíåäæìåíòà.� Ì., 1995.

140 SECOND YEAR

73. Òðåéñè Ä. Ìåíåäæìåíò ñ òî÷êè çðåíèÿ çäðàâîãî ñìûñëà.� Ì., 1993.

74. Ôàéîëü À. Îáùåå è ïðîìûøëåííîå óïðàâëåíèå. � Ì., 1992.

75. Ôàòõóòäèíîâ Ð.À. Ðàçðàáîòêà óïðàâëåí÷åñêîãî ðåøåíèÿ; ó÷åáíîå ïî-ñîáèå. Ì., 1997.

76. Ôèëèïïîâ À.Â. Ðàáîòà ñ êàäðàìè: ïñèõîëîãè÷åñêèé àñïåêò.� Ì,1990

77. Ôèøåð Ð., Þðè Ó. Ïóòü ê ñîãëàñèþ. Èëè ïåðåãîâîðû áåç ïîðàæåíèÿ.�Ì., 1990

78. Õîñêèíã À. Êóðñ ïðåäïðèíèìàòåëüñòâà.� Ì,1993

79. ×åðíèêîâ Ã.Ï. Ïðåäïðèíèìàòåëü � êòî îí? Èç îïûòà ðîññèéñêîãî èçàðóáåæíîãî ïðåäïðèíèìàòåëüñòâà.� Ì., 1992.

80. Øàëåíêî Â.Í. Êîíôëèêòû â òðóäîâûõ êîëëåêòèâàõ.� Ì., 1992.

81. Øâàëüáå Á., Øâàëüáå Õ. Ëè÷íîñòü, êàðüåðà, óñïåõ. - Ì., 1993.

82. Øåêøíÿ Ñ.Â. Óïðàâëåíèå ïåðñîíàëîì ñîâðåìåííîé îðãàíèçàöèè.�Ì., 1997.

83. Øåïåëü Â.Ì. Íàñòîëüíàÿ êíèãà áèçíåñìåíà è ìåíåäæåðà:Óïðàâëåí÷åñêàÿ ãóìàíèòàðîëîãèÿ.� Ì,1992

84. ßêîêêà Ë. Êàðüåðà ìåíåäæåðà.� Ì., 1991.

Grade determination

A grade is calculated as weighted average with the following weights:1st semester:

• 30% � classworks + written home assignments;

• 30% � midterm examination;

• 40% � winter examination.

Final grade:

• 35% � �rst semester;

• 5% � spring classworks + written home assignments;

• 10% � spring midterm examination;

• 50% � �nal examination.


Course Outline

1. De�nition of Business and ManagementDe�nition of management. Di�erences between manager and entrepreneur.

Intrapreneurship. Manager as a decision maker. Manager and property rights.Hierarchy of management in organisation: top�management, middle manage-ment, junior�level managers. Four management functions. Management inpractice: management dilemma.

Social and economic role of management. Management and modern civili-sation. Manager's revolution. Business management and politics. Managers intransition economy.

[Daft, Ch. 1], [Ìåñêîí, ãë. 1].

2. The Evolution of Business organisations and the ManagementThought

Examples of e�ective management in earlier epochs. Business and industrialrevolution. Businessmen and managers in XVIII and XIX centuries. Nationalpeculiarities in the development of business organisations. Russian business inpre�revolution epoch. Soviet style of management.

Scienti�c management. Bureaucratic organisations. Administrative princi-ples. Human relation movement. Behavioural science approach. Managementscience perspective. System theory. Contingency approach. Total quality man-agement. The learning organisation.

[Daft, Ch. 2], [Mullins, Ch. 3], [Rosenfeld, Ch. 2].

3. The Management RoleManager as a strategic thinker. Manager as a leader. Manager as a coach.

Manager as a controller. Manager as a communicator. Manager as administra-tor.

Counterparts of managers: shareholders, personnel, trade�unions, local andcentral government, non�pro�t organisations, politicians ect.

Manager's skills.[Daft, Ch. 1], [Mullins, Ch. 6, 7], [Rosenfeld, Ch. 23].

4. Functional Areas of ManagementMarketing. Operation management. Human resource management. Infor-

mation management. Financial management. Co�ordinating of di�erent func-tions. Social and technical elements of the �rm. Personnel as a key element ofcontemporary business.

[Needle, Ch. 6, 7, 8, 9], [Daft, Ch. 13, 20�23], [Mullins, Ch. 19,20], [Rosenfeld, Ch. 3].

5. Organisation Structure and Power

142 SECOND YEAR

Work specialisation. Chain of command. Span of management. Delega-tion. Types of the organisation structures. Centralisation and decentralisation.Departmentalisation. Organisation structure and environment.

Power, authority and responsibility. Perspectives on organisational power.French�Raven model. Managerial control. Classi�cation of control systems.

[Daft, Ch. 10, 11], [Mullins, Ch. 16, 17, 21], [Rosenfeld, Ch. 11,12,15], [Needle, Ch. 3].

6. Communication in the OrganisationCommunication as a feedback process. Information noise. Interpersonal

communication and communication skills.Organisational communication. Vertical and horizontal �ows of informa-

tion. Information technology: advantages and problems.[Daft, Ch. 18], [Ëþòåíñ, ãë. 15], [Robbins, Ch. 11].

7. Managerial Decision�makingTypes of decisions and problems. Decision�making models: classical, ad-

ministrative, political. Decision�making steps. Vroom�Jago model. Risk indecision�making. Garbage�can theory. Group decision�making techniques.Conformity and groupthink.

[Daft, Ch. 9], [Rosenfeld, Ch. 10], [Robbins, Ch. 6].

8. Strategy and the OrganisationConcept of strategic management. Strategy and organisational domain.

Mission and vision. Steps of strategic management. Scenario versus strategicplanning. Levels of strategy. Implementing strategy.

[Daft, Ch. 8], [Mullins, Ch. 5 ], [Rosenfeld, Ch. 18], [Needle,Ch. 4].

9. MotivationThe concept of motivation. Historical evolution of the approach to motiva-

tion. Content perspectives on motivation. Maslow hierarchy of needs theory.Alternative content theories. Process perspectives on motivation. Equity the-ory. Expectancy theory.

Reinforcement perspective on motivation. Job design for motivation. Jobrotation. Job enlargement. Job enrichment. Job characteristics model.

[Daft, Ch. 17], [Mullins, Ch. 12], [Rosenfeld, Ch. 5].

10. Managing Groups and TeamsGroup behaviour. Roles and role behaviour. Multiple roles: con�ict and

ambiguity. Socialisation and the pressure to conform in groups. Milgram stud-ies of obedience to authority.

What is team. Types of teams. Team's role structure (Belbin model).Stages of team development. Team building. Bene�ts and costs of teams.

[Daft, Ch. 19], [Mullins, Ch.14], [Rosenfeld, Ch. 8, 9].


11. Managing Organisational Change and InnovationLevels of organisational change. Levin's three step model: unfreezing, mov-

ing, refreezing. Planned change and contingency approach. Sources of re-sistance to change. Organisation development as a method of organisationalchange. Reengineering. Sustem approach to organizational change.

Learning organisation and continuous organisational change.[Daft, Ch. 12], [Mullins, Ch. 22], [Rosenfeld, Ch. 14], [Needle,

Ch. 5].

12. Corporate and National CultureThe concept of corporate culture. Shein's model of corporate culture: arte-

facts, values, basic assumptions. Morgan's images of the organisation. Func-tions of the corporate culture. Developing corporate culture.

National culture and management. Hofstede's dimensions of national busi-ness culture. Trompenaars's approach to culture types. Culture shock. Uni-versalism versus particularism in management.

[Daft, Ch. 3, 4], [Mullins, Ch. 22], [Rosenfeld, Ch. 13,20, 21].

13. Approaches to understanding business organisationAmultidisciplinary view of business and management. Sociological interpre-

tation of business processes. The anthropology of organisations. Managementand modern psychology. Economic approaches to organisation. The �rm inmarket economy. Objectives of the �rm. Market structures. Competition.

[Needle, Ch. 2], literature on economics.

14. Ethics in ManagementEthical approaches: utilitarian approach, social rights approach, justice ap-

proach, individualism approach. Factors a�ecting ethical choices. Social re-sponsibility. Sponsorship. Corporation as a member of society.

Business and social problems: social insurance, health care, ecology, humanrights ect. Business and arts, sports, religion. Corporate ethics. Codes ofethics. Evaluation of corporate social performance.

[Daft, Ch. 5], [Ìåñêîí, ãë.5], [Robbins, Ch. 5].

15. Management in the 21st CenturyManagement in post�industrial society. Small and large organisations. New

organisational structure. Problems of carrier making. Pro�t�sharing and newpatterns of motivation. Participation�management. Corporate governanceproblem. New roles of managers. Globalisation and management. Knowledgemanagement.

[Rosenfeld, Ch. 22, 23, 24], [Robbins, Ch. 4].

144 SECOND YEAR



1. De�nition of Business andManagement

8 2 2 4

2. The Evolution of Businessorganisations and theManagement Thought

16 4 4 8

3. The Management Role 24 6 6 124. Functional Areas of Management 16 4 4 85. Organisation Structure and

Power16 4 4 8

6. Communication in theOrganisation

16 4 4 8

7. Managerial Decision�making 22 6 6 108. Strategy and the Organisation 16 4 4 89. Motivation 14 4 4 1010. Managing Groups and Teams 22 6 6 1011. Managing Organisational

Change and Innovation22 6 6 10

12. Corporate and National Culture 22 6 6 1013. Approaches to understanding

business organisation16 4 4 8

14. Ethics in Management 22 6 6 1015. Management in the 21st Century 22 6 6 10

Total: 270 68 68 134

PRINCIPLES OF BANKING AND FINANCE 145

Principles of Banking and Finance

Lecturers: Artem V. Arkhipov, Viktor K. SpringelClassteachers: Artem V. Arkhipov, Anna Bogdyukevich, Yulia A. Chekunaeva

Course description

The course Principles of Banking and Finance is an introductory course onbanking and �nancial markets for students. The course is taught both in Rus-sian and in English, because 1) most students will work in Russia and mustknow the tendencies and the peculiarities of the Russian banking system and�nancial markets; 2) students need to pass a respective exam of the LSE.

The course applies analytical approach, aimed at developing the economicway of thinking, makes the careful step�by�step introduction of di�erent analyt-ical models, uses a number of applications and examples from di�erent bankingsystems.

Course objectives

The objective of the course is to acquaint students with the principles of the�nancial theory, traditional and modern �nancial assets, types of �nancial in-termediaries and the ways of their functioning in the modern �nancial markets.

The study of banking and �nancial markets has become one of the mostinteresting topics in economics. Financial markets are changing rapidly, andnew �nancial instruments appear almost daily. The once staid �nancial in-dustry has become highly dynamic. Well�functioning international trade and�nancial markets have created an integrated world economy in which events inone country's �nancial markets have a major impact on �nancial markets inother countries. The development of the economic systems are determined bythe international capital �ows, channeled by banks and other �nancial inter-mediaries.

The course's analytical framework uses a few basic economic principles toorganize students' thinking about bank management and the structure of �-nancial markets. The basic principles are a transactions cost and asymmetricinformation approach to �nancial structure, pro�t maximization, basic supplyand demand analysis to explain behavior in �nancial markets, and aggregatesupply and demand analysis.

We aim to prepare students to study more complicated courses of the �nan-cial management and BORA. As a result, they must be given the principles ofthe investor's behavior, of the banking regulation; taught the types of �nancialrisks and the basic methods of their assessment and management. The semi-nars are based both on the detailed analysis of the banking practice and theanalysis of the case studies.

146 SECOND YEAR

The course includes 68h of lectures and 68h of seminars.

Internet Resources

1. www.imf.org

2. www.worldbank.org

3. econ.lse.ac.uk

4. www.bis.org

5. www.nber.org

6. www.thebanker.com

Grade determination

Students should pass the 2 intermediate mocks written exam in the end of eachsemester. The �nal exam will be held by the LSE. Each exam includes the list of8 questions, from which the students will be asked to answer 4. Some questionsmay contain both numerical and essay�based parts. Each intermediate examaccounts for 20% of the �nal grade. Homework grades and graded received atclasses account for 10% of the �nal grade. The rest of the �nal grade will bedetermined by the results of the �nal exam.

Course Outline

Part I. Principles of Finance

1. Consumption and investment with and without capital mar-kets.

Consumption and investment without capital market (one person/one�goodeconomy). Production possibility frontier. The condition of the optimal allo-cation (utility maximization).

Consumption with capital markets. Interest rate as the price of deferredconsumption or the rate of return on investment. Fisher separation theorem.The condition of the optimal allocation (utility maximization). Types ofconsumers.

Main Reading

1. Copeland, T.E., Weston, J.F. Financial Theory and Corporate Policy.Addison�Wesley Publishing Company, 1998, Ch. 1


2. Buckle, M., Thompson, J. The UK �nancial system: theory and practice.Manchester University Press, 1998, Ch. 1,2.

2. Capital Budgeting and ValuationMethods of project's valuation. Cash Flows. The concept of present value.

Discount rate. NPV. IRR and required rate of return. Payback period.

Main Reading

1. Brealey, R.A., Myers S.C. Principles of Corporate Finance. McGrawHill/Irwin, 2003, Ch. 3�5

2. Mishkin F., Eakins S. Financial Markets and Institutions. Addison�Wesley Publishing Company, 2003, Ch. 3, 10.

3. Risk and returnMathematical characteristics of risk and return. Risk�adjusted return.

Risk�free instruments.Utility maximization. Risk�return trade�o�. Individual risk�aversion.

Risk�averse, risk�neutral and risk�seeking investors. Risk premium. he riskand return of the portfolio. Correlation of returns.

Bene�ts of diversi�cation. Systematic and non�systematic risks. Mean�variance portfolio theory.

Main Reading

1. Mishkin F., Eakins S. Financial Markets and Institutions. Addison�Wesley Publishing Company, 2003, Ch. 3,4.

2. Ôðýíê Äæ. Ôàáîööè. Óïðàâëåíèå èíâåñòèöèÿìè. Èíôðà�Ì, Ìîñêâà2000, Ãë. 4

3. Óèëüÿì Ô. Øàðï, Ãîðäîí Äæ. Àëåêñàíäåð, Äæåôôðè Â. Áýéëè. Èí-âåñòèöèè. Èíôðà�Ì, Ìîñêâà 2001, Ãë. 8

4. Asset pricing modelsIntroduction of a risk�free asset: the capital market line. CAPM and

securities market line. Assessment of beta. Single� and multi�factor models.Factor�replicating portfolios. Arbitrage. APT. Theoretical and empiricalvalidation of APT.

Main Reading

1. Mishkin F., Eakins S. Financial Markets and Institutions. Addison�Wesley Publishing Company, 2003, Ch. 4.

148 SECOND YEAR

2. Óèëüÿì Ô. Øàðï, Ãîðäîí Äæ. Àëåêñàíäåð, Äæåôôðè Â. Áýéëè. Èí-âåñòèöèè. Èíôðà�Ì, Ìîñêâà 2001, Ãë. 9, 10, 12.

5. Financial Markets, Securities and DerivativesClassi�cation of the �nancial markets. Money and capital markets.

Primary and Secondary Markets. Debt and Equity Instruments. Common andPreferred Stocks. Coupon and Discount Bonds. Valuation of Financial Assets:Fair Price. DCF Models. Gordon Growth Model. Yield Curve. Derivatives:Forwards, Futures, Options, Swaps.

Main Reading

1. Mishkin F., Eakins S. Financial Markets and Institutions. Addison�Wesley Publishing Company, 2003, Ch. 1, 2, 9.

2. Óèëüÿì Ô. Øàðï, Ãîðäîí Äæ. Àëåêñàíäåð, Äæåôôðè Â. Áýéëè. Èí-âåñòèöèè. Èíôðà�Ì, Ìîñêâà 2001, Ãë. 14, 15, 18, 20, 21.

3. Buckle, M., Thompson, J. The UK �nancial system: theory and practice.Manchester University Press, 1998, Ch. 9, 10, 13, 14.

6. E�cient marketsOperational and informational e�ciency. Excess return. Weak, semi�

strong, strong e�ciency.Rational expectations. Random walk theory.Weak�form market e�ciency. Technical analysis: �lters, moving averages,

relative strength, Semistrong�form market e�ciency. Small��rm e�ect, ne-glected �rm e�ect, low price�earnings ratio, calendar e�ects.

Strong�form market e�ciency. Insider trading.Speculative bubbles. Herd behavior.

Main Reading


2. Ôðýíê Äæ. Ôàáîööè. Óïðàâëåíèå èíâåñòèöèÿìè. Èíôðà�Ì, Ìîñêâà2000, Ãë. 13.

3. Buckle, M., Thompson, J. The UK �nancial system: theory and practice.Manchester University Press, 1998, Ch. 11.

Part II. Principles of Banking


7. Economic analysis of �nancial structureWhy do �nancial intermediaries exist? Transaction costs. Asymmetric

information: adverse selection and moral hazard, principal�agent problem.Maturity, size and risk transformation. Economy of scale and economy ofscope. The ways to minimize principal�agent costs: collateral, guarantees,capital requirements, self�regulation, credit bureaus.

Main Reading


8. Financial intermediaries.Direct and indirect �nance. Banks. S&L institutions. Co�operative banks.

Mutual funds. Pension funds. Insurance companies. Term structure of liabili-ties.

The problem of excess regulation. Disintermediation.

Main Reading


2. Ôðýíê Äæ. Ôàáîööè. Óïðàâëåíèå èíâåñòèöèÿìè. Èíôðà�Ì, Ìîñêâà2000, Ãë. 8�11.

3. Buckle, M., Thompson, J. The UK �nancial system: theory and practice.Manchester University Press, 1998, Ch. 2.

9. Bank management. Retail, wholesale and investment banking.Retail banking: current account and time deposits, micro�nancing, con-

sumer loans, mortgages, asset�backed securities, payment and credit cards.Wholesale banking: large�scale loans, trade �nancing, loan commitments,

commercial and standby letters of credit, asset management, syndicated loans,arrangement and underwriting of corporate bonds.

Investment banks: structure of transactions, risk sharing, syndicated loans,arrangement and underwriting of bonds.

At present�time one could register the shift of banking activities towardswider use of o��balance sheet instruments. The corporate appetite for long�term funds is satis�ed both through loans (loan commitments and syndicatedloans) and through issuing of long�term bonds. Banks cooperate often to sharerisks and to lend large�scale funds.

150 SECOND YEAR

Main Reading

1. Buckle, M., Thompson, J. The UK �nancial system: theory and practice.Manchester University Press, 1998, Ch. 3, 4, 11.

10. Risk management and internal control in banking.Asset�side and liability�side liquidity risks. Liquidity gaps. Liquidity man-

agement and the role of reserves. Asset�liability management. Purchase offunds. Treasury.

Interest rate margin. Interest rate risk. Fixed� and �oating�rate assets andliabilities. Interest rate gaps.

Credit risk. Types of credit risk (industrial, regional and country risks).Diversi�cation of loan portfolio.

Currency risk. Long and short open positions.Capital adequacy. Economic capital.

Main Reading


2. Anthony Saunders. Financial institutions management. McGraw�HillHigher Education, 2000, Ch. 4�6.

11. Banking regulationBanking supervision and inspection (on�sight and o��sight regulation).

Capital adequacy ratio. The Basel accords on risk�based capital require-ment (Basel I and Basel II). Liquidity ratios. Open currency positions.CAMEL+COM. Disclosure requirements. Free banking. Government safetynet. Deposit insurance.

Main Reading


2. Buckle, M., Thompson, J. The UK �nancial system: theory and practice.Manchester University Press, 1998, Ch. 17, 18.

12. Comparison of Financial SystemsBank�based and market�based systems. Islamic banking. Emerging

markets. Financial crises: banking, currency and debt crises. The peculiaritiesof the Russian banking systems.

Main Reading



2. Allen, F., Gale, D. Comparing �nancial systems. MIT Press, 2001, Ch.1, 2, 3.



1. Consumption and investmentwith and without capitalmarkets.

18 4 4 10

2. Capital budgeting and valuation 20 4 6 103. Risk and return 24 6 6 124. Asset pricing models 24 6 6 125. Financial Markets, Securities

and Derivatives28 8 6 14

6. E�cient markets 22 6 6 107. Economic analysis of �nancial

structures18 4 4 10

8. Financial intermediaries 24 6 6 129. Bank management. Retail,

wholesale and investmentbanking

22 6 6 10

10. Risk management and internalcontrol in banking

24 6 6 12

11. Banking regulation 24 6 6 1212. Comparison of �nancial systems 22 6 6 10

Total: 270 68 68 134

152 SECOND YEAR

Research Seminar in Economic Theory

Lecturers: Vladimir N. Sokolov, Alexis V. Belyanin

Course description

The course is designed to introduce students to the nature of the economicresearch and the approaches that economists employ in writing their papers.The Fall semester develops the understanding of the correct model speci�cation,introduces the e�cient market hypothesis and a number of approaches to testit.

The main focus of the Spring semester will be on the decision under un-certainty and risk management. Decision under uncertainty is a basic theoryunderlying a broad range of applied models in economics and �nance, includingportfolio selection, insurance, production management, contract theory, assetpricing, banking, international �nance etc. The course will cover these andmore topics, �rst from theoretical perspective, and then from the applicationsviewpoint with empirical examples that are in the focus of current research.

Since the course is innovative the sequence of the topics presented is ten-tative. Depending on the student interests there might be some variations inthe coverage. In addition to the lectures there will be classroom games anddiscussions.

Course objectives

The goal of this course is to introduce students to contemporary research prob-lems and methods in economics and �nance. Students will enhance their under-standing of the various analytical and empirical methods and techniques, andgain the intuition of developing their own research ideas. The course materialis intended to develop the set of analytical skills that will facilitate writing theresearch paper in the area of student's choice. In addition, at the end of thesemester students will get practical guidelines on writing their own yearpaper.

Language

The course is a part of the Russian programme at ICEF, so all Russian. Mostreadings and assignments, however, will be in English.

Methods



RESEARCH SEMINAR IN ECONOMIC THEORY 153

• written home assignments (2 per semester)

• written proposal of the term-paper (1 per semester)

• teacher's consultations (2 hours per week)

• self-study (4 hours per week)

Forms of control

The current control includes written home assignments, results of the classgames, and the termpaper proposal. There is a winter test at the end of theFall semester and the �nal exam at the end of the Spring semester.

The course is mandatory for students with specialization in economics. Stu-dents who are not attending the class do so at their own risk.

Main Reading

There is no required text�book. The main source of information for youwill be the lecture notes. You should also regularly check the web resourcehttp://mief.hse.ru where we will regularly post lectures presented in the class.

The following sources will be valuable for some parts of the course:

1. Spanos A. Probability Theory and Statistical Inference, Oxford, 2000.(S)

2. Finance. The New Palgrave Dictionary. MacMillan, 1989. (F)

3. Campbell J., Lo A., and MacKinlay C., Econometrics of Financial Mar-kets, Princeton, 1996. (EcF)

4. McCloskey D. Economical Writing, Waveland, 2000. (MC)

5. Bailey S., Academic Writing. A Practical Guide for Students, Routledge-Falmer, 2003. (B)

6. C.J.McKenna. The Economics of Uncertainty. Harvester Wheatsheaf,1986. (MK)

7. J.Hirschleifer and J.G.Riley. The analytics of Uncertainty and Informa-tion. CUP, 1994. (HR)

8. Hey J.D. Uncertainty in microeconomics. Oxford, 1979. (H)

154 SECOND YEAR

Grade determination

Students will receive a mark at the end of the Fall semester and the �nal gradeat the end of the Spring semester.

The Fall mark is determined according to the following criteria: maximumscore per semester is 50 which includes 45 points for the test and 5 points forthe class games. The result of the Fall semester constitutes 40% of the totalgrade.

The maximum number of points a student can get for the Spring semesteris 75. This includes 50 points for the �nal exam, 10 points for the year paperproposal, 10 points for the home assignments and 5 points for the class games.The result of the Spring semester constitutes 60% of the total grade.

Course Outline

Autumn semester

1. Research paper outlineGeneration of ideas, choosing a research topic, questions to ask yourself,

empirical or theoretical, nature of the project, tools to use.

2. Elements of econometric modellingModel speci�cation, inductive and deductive methods of the research,

causality, endogeneity problem, a priori information.

3. Modeling expectations in economicsForward�looking property of economic models. Adaptive versus rational

expectations and their relative advantages. Conditional information set.

4. Information cascadesGet the taste of application of economic ideas to the real world situations.

Concepts of the collective rationality and group interaction.

5. E�cient market hypothesisThree versions of the hypothesis, technical versus fundamental analysis,

public and private information. Grossman�Stiglitz paradox. Stock marketsimulation.

6. Portfolio maximizationRisk and return trade�o�. Markowitz problem formulation. Optimal solu-

tion of the problem.

7. Overcon�dence and bubblesIntroduction to theories explaining deviations from the market e�ciency

hypothesis. Calibration exercise of individual con�dence in own forecastingability. Stock bubble simulation.

RESEARCH SEMINAR IN ECONOMIC THEORY 155

Spring semester

8. Theory of choice under risk and uncertaintyRisk and uncertainty: basic de�nitions. Foundations of expected utility.

Axioms of von Neumann�Morgenstern and vNM utility function. Propertiesof utility function: certainty equivalent, risk premium, probability premium.Risk aversion and coe�cient of risk aversion: examples of utility functions.Ordering of risky prospects: mean�preserving increases of risk. Subjectiveexpected utility; state�dependent expected utility.

Examples: insurance problem, portfolio selection problem

9. Generalized expected utility theoriesExperimental economics: choice under risk and its paradoxes. Generalized

expected utility theories: rank dependent expected utility, dual utility, prospecttheory, weighted expected utility, implicit utility theory, intransitive expectedutility. Empirical comparisons between alternative theories.

10. Choice under uncertainty in consumption and productionConsumption under uncertainty: optimization of uncertain consumption

stream. Exchange under uncertainty: state�dependent approach and optimalrisk�sharing. The insurance problem. Production under demand and costuncertainty. Optimal decisions under di�erent decision rules. Uncertainty andovercon�dence: applied models of economic research.

11. Contracts under asymmetric informationBasic paradigms of contract theory: moral hazard and adverse selection.

Game theory and information asymmetries. Optimal contracts under moralhazard and adverse selection.

Examples: banking contract, labor contractExperiment: optimal contract

12. Risk management in �nancial marketsPortfolio selection problem: connection between expected utility and mean�

variance approach. CAPM; ICAPM, APT. Arbitrage and market completeness.Financial markets and investment strategies. Management of �nancial risks.

13. International �nanceUncertainty in a small open economy. Determinants of exchange rate in

an open economy: exchange rates parity. Exchange rate risk. Financial assetsmanagement in international �nancial markets.

14. Year paper proposalWritten proposal of the topic. Idea description. Data used. Litreture

references. Comments on the proposal.

156 SECOND YEAR



Fall semester1. Research paper outline 15 5 102. Elements of econometric

modelling13 5 8

3. Modeling expectations ineconomics

10 5 5

4. Information cascades 10 4 65. E�cient market hypothesis 15 5 106. Portfolio maximization 11 4 77. Overcon�dence and bubbles 12 4 8

Total: 86 32 54

Spring semester8. Theory of choice under risk and

uncertainty12 5 7

9. Generalized expected utilitytheories

12 5 7

10. Choice under uncertainty inconsumption and production

12 5 7

11. Contracts under asymmetricinformation

10 4 6

12. Risk management in �nancialmarkets

11 5 6

13. International �nance 10 4 614. Year paper proposal 19 4 15

Total: 86 32 54

Third Year

Microeconomics

Lecturer: Alla A. FriedmanClassteachers: Alla A. Friedman

Course description

Microeconomics�3 is a two�semester course for third year students divided intotwo parts. The �rst part covers all topics of the syllabus and the second partis devoted to supporting lectures. In the course of Microeconomics�3 studentsare expected to deepen their understanding of basic concepts, add further toolsof analysis and develop their skills in applying theory to economic problems.The course pays special attention to problems of uncertainty, inter�temporalchoice, general equilibrium and e�ciency, asymmetric information and publicchoice.

The assessment of the students will be by the University of London (UL)examinations at the end of the sixth semester. During the sixth semester stu-dents are specially prepared to the University of London examination in thecourse of supporting classes.

Intermediate Microeconomics is a core discipline under world standards.It forms the basis of further economic studies in applied disciplines such as:courses in industrial organisation, public �nance, labour economics, interna-tional economics, corporate �nance, development economics, etc. The course istaught in English. The students are also studying for Russian degree in Eco-nomics, and knowing Russian terminology through reading in Russian is alsorequired.

Prerequisites

Students are supposed to be competent in basic economic analysis up to thelevel of the Introductory Microeconomics and in calculus taught in the �rstyear of studies. Students are also expected to be familiar with constrainedmaximisation/minimisation problems studied in the course of Mathematics forEconomists during the second year of study.

157

158 THIRD YEAR

The course itself provides a basis (and so serve as a prerequisite) for suchcourses as Industrial Economics, Public Sector Economics, International Trade,Labour Economics.

Course objectives

The objectives of the course are:

• to expand the students' knowledge in the �eld of microeconomics and tomake them ready to analyze real economic situations;

• to provide students with the knowledge of basic microeconomic models'assumptions, internal logic and predictions, grounding the explanationson intuitive, graphical and analytical approaches;

• to develop the students' ability to apply the knowledge acquired to theanalysis of speci�c economic cases, recognising the proper frameworkof analysis and constructing the adequate economic models within thisframework.

By the end of the course students are expected to have necessary skills forwriting essays and reading economic literature.

Methods

While teaching the course the following teaching methods and forms of studyand control are used:

• lectures (2 hours a week);

• classes (2 hours a week);

• weekly written home assignments, regularly checked and marked by theclass teacher and discussed in class;

• self�study;

• teachers' consultations;

• essay writing (1 per semester);

In total the course includes 36 hours of lectures and 36 hours of regularclasses in the �fth semester, 16 hours of supporting classes in the sixth semester.

Self�study is extremely important in studying the course.

MICROECONOMICS 159

Main Reading

1. Microeconomics. Study Guide. University of London, 2003.http://www.londonexternal.ac.uk/current_students//programme_resources/lse/index.shtml

2. Katz M.L. and Rosen M.S., Microeconomics, Homewood, Irwin, 3rd edi-tion, Irwin/McGraw�Hill, 1998 is available in Russian translation. [KR]

3. Varian H.R., Intermediate Microeconomics. A modern approach. 7thedition. W.W. Norton and Company, 2006. [V](is available in Russian translation: Õýë Ð.Âýðèàí. Ìèêðîýêîíîìèêà.Ïðîìåæóòî÷íûé óðîâåíü. Ñîâðåìåííûé ïîäõîä. Ïåð. ñ àíãë. 4�îãîèçä. � Ì.: �ÞÍÈÒÈ�, 1997.)

4. Pindyck R.S. and Rubinfeld D.L., Microeconomics. 2nd edition, NewYork, Macmillan, 1992. [PR] (is available in Russian translation: Ð.Ñ.Ïèíäàéê è Ä.Ë. Ðóáèíôåëüä, Ìèêðîýêîíîìèêà. Ïåð. ñ àíãë. 3�îãîèçä. � Ì.: �Äåëî�, 2000.)

5. Eaton B. C., Eaton D.F., Allen D.W., Microeconomics, 6th edition,Toronto: Prentice Hall/Pearson, 2005. (EE&A)

6. Laidler D., S. Estrin, Introduction to Microeconomics, London:Pearson,1995, �fth edition. (L&E)


1. Hirshleifer Y. And Glazer A., Price Theory and Applications, 5th edition,London, Prentice�Hall International, 1992.

2. Nicholson W., Microeconomic Theory. Basic principles and extensions.7th edition, Dryden Press, 1997.

3. Gravelle H. and Rees R., Microeconomics. 2nd edition, Longman, 1992.

4. F.A.Cowell Microeconomics: Principles and Analysis, Oxford Univer-sity Press 2005. http://darp.lse.ac.uk/Frankweb/courses/EC202 (Lec-ture notes)

Books and Articles

On consumer theory

1. Chipman J. and J. Moore, Compensating variation, consumer's surplusand welfare, American Economic Review, 70, 933�948, 1980.

160 THIRD YEAR

2. Deaton A., and J.Muellbauer, Economics and Consumer Behavior, Cam-bridge University Press, 1980.

3. Hausman J., Exact consumer surplus and deadweight loss, American Eco-nomic Review, 71, 662�676, 1981.

4. M.Richter, Revealed preference theory, Econometrica, 34, 635�645, 1966.

5. Vives X., Small income e�ects: A Marshallian theory of consumer surplusand downward sloping demand. Review of Economic Studies, 54, 87�103,1987.

On the theory of �rm

1. A.Alchian, H.Demsetz (1972), �Production, Information costs and eco-nomic organization�, American Economic Review, 62, 777�795

2. G.Calvo and S.Wellisz (1978), Supervision, Loss of Control, and the Op-timal Size of the Firm, Journal of Political Economy, 86, 943�952.

3. R.H. Coase, The nature of the �rm, pp. 37�57 in S. Estrin, A. Marin,Essential Readings in Economics, 1995.

Choice under uncertainty

1. Machina M., Choice under uncertainty: problems solved and unsolved.The Journal of Perspectives, 1, 121�154, 1987.

2. Pratt J., Risk aversion in the small and in the large, Econometrica, 32,122�136, 1964.

3. Rothschild M., J.Stiglitz, Increasing risk I: A de�nition, Journal of Eco-nomic Theory, 2, 225�243, 1970.

Market structures

1. Adams W. and J.Yellen, Commodity Bundling and the Burden ofMonopoly, Quarterly Journal of Economics, Vol.90, 1976.

2. Baron D., R. Myerson, Regulating a Monopolist with Unknown Costs,Econometrica, 50, pp.911�930, 1983.

3. A.Bergson (1973), �On monopoly welfare losses�, American Economic Re-view, 63, 853�870.

4. K.Cowling, D.Mueller (1978), �The Social costs of monopoly power�, Eco-nomic Journal, 88, 724�748

MICROECONOMICS 161

5. Encaoua D. and A. Jacquemin, Degree of Monopoly, Indices of Concen-tration and Threat of Entry, International Economic Review, 21, 1980.

6. Green E. and R. Porter, Non�cooperative Collusion under Imperfect PriceInformation, Econometrica 52, 1984.

7. Harberger, Monopoly and resource allocation, pp. 77�91 in S. Estrin, A.Marin, Essential Readings in Economics, 1995.

8. Lambson V., Self�Enforcing Collusion in Large Dynamic Markets, Jour-nal of Economic Theory, 34, 1984

9. Lerner, The concept of monopoly and the measurement of monopolypower, pp.55�77 S. Estrin, A. Marin, Essential Readings in Economics,1995.

10. Katz.M, The welfare e�ects of third degree price discrimination in inter-mediate goods markets, American Economic Review, 77, pp. 154�167,1987.

11. Kreps D., J. Scheinkman, Quantity Precommitment and Bertrand Com-petition Yield Cournot Outcomes, Bell Journal of Economics, 14, pp.326�337, 1983.

12. Rotemberg J. and G. Saloner, Collusive Price Leadership, Journal of In-dustrial Economics, 1990

13. Spence, M. �Product di�erentiation and welfare�, American EconomicReview, 66, pp. 407�414, 1976.

14. J. Vickers. Strategic Competition among the few�some recent develop-ment in the economics of Industry, pp. 91�129 in S. Estrin, A. Marin,Essential Readings in Economics, 1995.

Market failures

1. Akerlof G., The market for lemons: Quality uncertainty and the marketmechanism, Quarterly Journal of Economics, 89, 488�500, 1970.

2. Coase R., The problem of social cost, Journal of Law and Economics, 3,1�44, 1960.

3. Spence, M. �Job Market Signaling�, Quarterly Journal of Economics, 87,pp. 355�374, 1973.

4. Rothschild, M. and Stiglitz, J. E. �Equilibrium in competitive insurancemarkets; An essay on the economics of imperfect information.� QuarterlyJournal of Economics, 1976. Vol.90.Nov., pp.629�649.

162 THIRD YEAR

Forms of Control

• intermediate control: one examination paper in the middle of the �fthsemester and a Mock exam in the University of London examinationformat in the middle of the sixth semester;

• �nal control: examination paper in microeconomics in the University ofLondon examination format following the sixth semester for the third�year students.

Grade determination

The UL examination is provided in a written form and is taken at the end ofthe academic year. The UL exam gives 50% of ICEF grade (from 2 to 5) andthe other 50% is provided by the grade in Fall semester (35%) and Mock examgrade (15%). The Fall semester grade is comprised from mid�term exam grade(20%), home assignments (15%), essay (5%), winter exam grade (60%). TheMock exam is set in April by local teachers and graded in accordance with ULexam rules.

Course Outline

Part I. Individual choice under certainty and uncertainty

1. Consumer Behaviour Under CertaintyAssumptions underlying indi�erence curves. Budget constraints (including

cases of kinked budget constraints). Composite commodity. Optimal choice(interior and corner solutions). Utility maximisation and expenditure minimi-sation problems. Marshallian and Hicksian (compensated) demand functions.Slutsky equation for the case of in�kined income. Sign of wealth e�ect. Ap-plication: The individual's supply of labour. Comparison of overtime premiumwith an increase in the basic wage rate. Measuring changes in consumer welfare.Compensating variation, equivalent variation and consumer surplus: de�nitionsand graphical representation. Relationships between the three measures for dif-ferent types of commodities (normal and inferior goods). Change in the cost ofliving and price indexes: Laspeyres and Paasche.

(KR Chs.2�5; V Chs.2�9,14; EE&A Chs.2�4; PR Chs.3,4; L&EChs.2�5).

2. Choice Under UncertaintyContingent commodities model. States of nature, concept of contingent

commodities, budget constraint with contingent commodities (slope and posi-tion). Probability of a given state of the world, expected value and fair odds

MICROECONOMICS 163

line. Attitude to risk and preferences over contingent commodities. Certaintyline and marginal rate of substitution along the certainty line. Graphical rep-resentation of the model. Example: optimal bet in a �ipping�coin game (caseof fair and unfair game). Application of the model: demand for insurance (fairand unfair insurance).

Expected utility model: additional assumptions that allow to get utilityfunction linear in probabilities (von Neumann�Morgenstern expected utilityfunction). Attitude to risk and shape of the Bernoully utility function. Ap-plication 1: optimal portfolio problem in terms of maximisation of expectedutility of investor. Necessary condition for diversi�cation. Application 2: rein-terpretation of insurance problem in terms of expected utility. Application 3:cost of additional information.

(KR. Ch.6; EE&A. Ch.17; PR. Ch.5; V. Ch.12; L&E Ch.8)

3. The FirmObjectives of the �rm: principal�agent problem (contradiction between the

objectives of owners and managers). Possible solutions: internal mechanisms(corporate governance scheme, performance�based compensation scheme), ex-ternal mechanisms (discipline from capital suppliers, market for corporate con-trol, highlly competitive product market). Review: cost functions, cost curvesand relationship between di�erent cost curves.

(EE&A Chs.6�7; PR Chs.6,7; V Chs.17,20; KR Chs.7�9; L&EChs.10�12,24)

Part II. Partial equilibrium

4. Competition and MonopolyPerfect competition when �rms have identical costs: constant cost, increas-

ing cost and decreasing cost industries. Perfect competition when �rms havedi�erent costs. Bene�ts of exchange in a competitive market and the e�ects ofgovernment policies: total surplus and deadweight losses.

Ine�ciency of pure monopoly: dead weight losses and losses from rent seek-ing activity. Di�erent types of monopoly power and regulatory responses: gov-ernment franchise monopoly, resource�based monopoly, patent monopoly, nat-ural monopoly and monopoly by good management. Average cost pricing, rateof return regulation. E�cient regulatory solutions: regulation based on infor-mation about marginal cost and demand (per unit subsidy) and regulation,based on information about market demand only (subsidy, equal to consumersurplus).

Welfare implications of perfect price discrimination, multi�part pricing andmarket segmentation. Welfare implications of market segmentation in case oflinear demand functions.

164 THIRD YEAR

(EE&A Chs.8�10, 14; PR Chs.8�11; V Chs.21�24; KR Chs.10�11,13; L&E Chs.13�16)

5. Strategic Behavior and OligopolyRe�nement of Nash equilibrium: concept of sub�game perfect Nash equilib-

rium (extensive form of the game and backward induction). Prisoners' dilemmain Cournot Model and Bertrand Model. Possible solution of Prisoners' dilemmain in�nitely repeated games with Nash reversion strategies, Credible punish-ment. The Stackelberg Model: �rst mover advantage.

Entry, market structure and Strategic Entry Deterrence. Credible threat,strategic pre�commitment and monopoly by good management.

Product di�erentiation. Chamberlin models (small�number case and large�number case). Problem of optimality of the product variety in monopolisticallycompetitive industry. Address models: Hotelling location model and the ideaof the circle city model.

(EE&A Chs.15�16; PR Chs.12�13; V Chs.26�27; KR Ch.14�16;L&E Chs.17�19)

6. Factor MarketsRelationship between �rm's and aggregate demand for factor of production.

The elasticity of demand for product and elasticity of demand for a factor.Short�run and long�run elasticity of demand for a factor. Absence of Gi�enfactor. Elasticity of demand for a factor and elasticity of supply of other factors.The supply of factors and equilibrium in a competitive factor market: economicrent, transfer earnings and quasi�rent. Monopsony and monopoly in factormarkets.

(EE&A Ch.11; PR Ch.14; V Ch.25; KR Chs.10�11,14; L&EChs.21�25)

7. Saving, Investment and Allocation over TimeIntertemporal consumption and production: current and future consump-

tion, rate of time preference.Investment decisions and the present value rule. Separation theorem.Renewable and non�renewable resources: equilibrium extraction paths.Determinants of interest rate: default risk, risk variability; nondiversi�able

(systematic) and diversi�able (nonsystematic) risk.(EE&A Ch.5; PR Ch.15; V Ch.10, 11, 13; KR Ch.5; L&E Chs.6�

7)

Part III. General equilibrium, e�ciency and market fail-

ures

MICROECONOMICS 165

8. General Equilibrium and Welfare EconomicsCompetitive general equilibrium. Pareto e�cient allocation of resources:

e�ciency in consumption, e�ciency in production, e�ciency in product mix(analytical derivation and graphical representation of conditions). Pareto e�-ciency and competitive general equilibrium. First fundamental theorem of wel-fare economics. Proof based on the �rst order conditions. Second fundamentaltheorem of welfare economics. Market failure and theory of second�best.

General equilibrium under uncertainty: Arrow Debreu equilibrium in amodel with contingent commodities.

Equity and distribution: utility possibility curve, social welfare function(additive function and maximin criterion). Redistributionist principle and pro-ductivity principle.

(EE&A Chs.12�13; PR Ch.16; V Chs.28�30; KR Ch.12; L&EChs.27�32)

9. Asymmetric Information: Basic IdeasClassi�cation of the models: situation with hidden characteristics and situ-

ation of hidden action.Adverse selection problem. Examples: market for lemons, labour market

with workers of di�erent productivity, insurance market with buyers charac-terised by di�erent risk of accident. Possible responses of informed side of themarket: market signaling (brand reputation, guarantees, acquiring education).Possible responses of uninformed side of the market: screening via designing selfselective menu of contracts, group insurance plan, government intervention inform of setting quality standards, compulsory insurance, mandatory disclosureof certain facts.

Moral hazard problem. Examples: insurance market, principal�agent prob-lem in labour market (shirking model). Possible responses: co�insurance anddeductibles, residual claimants schemes.

(EE&A Ch.20; PR Ch.17; V Ch.35; KR Ch.17; L&E Chs.8,26)

10. Externalities and Public GoodsExternalities: positive and negative. Ine�cient allocation of resources in

presence of positive and negative externalities. Regulatory solutions: directcontrol, assignment of property rights, marketable pollution permits, bargaining(Coase theorem), internalization, Pigouvian taxes/subsidies. Comparison of thesolutions. Problems with bargaining: free�rider and hold�out problems.

Public goods, non�rival and non�excludable goods. E�ciency conditionin presence of public goods (Samuelson equation). Equilibrium with non�cooperative �nancing of public good: free�rider problem. Possible solution:personalised Lindahl prices.

(EE&A Ch.18; PR Ch.18; V Chs.31, 34, K&R. Ch.18; L&ECh.31)

166 THIRD YEAR

11. Government and Public ChoicePreferences, voting and decisions. Unanimity rule. Majority voting rule,

voting paradox. Single�peaked preferences and median voter theorem. Laf-fer curve and analysis of income distribution policies. Special interest grouppolitics: rent seeking.

(V Ch.33; L&E Chs.33�35)


No Topic Lectures Classes Self-study Total

Part I. Individual choice undercertainty and uncertainty

1. Individual Behaviour UnderCertainty

6 4 20 30

2. Choice Under Uncertainty 6 4 20 303. The Firm 3 2 10 15

Part II. Partial equilibrium4. Competition and Monopoly 5 4 20 295. Strategic Behavior and Oligopoly 7 5 25 376. Factor Markets 3 2 10 157. Saving, Investment and

Allocation over Time3 2 10 15

Part III. General equilibrium,e�ciency and market failures

8. General Equilibrium and WelfareEconomics

6 4 20 30

9. Asymmetric Information: BasicIdeas

7 5 25 37

10. Externalities and Public Goods 3 2 12 1711. Government and Public Choice 3 2 10 15

Total: 52 36 182 270

MACROECONOMICS 167

Macroeconomics

Lecturer: Alla A. FriedmanClassteachers: Alla A. Friedman

Course description

Macroeconomics is a two�semester course for the second year and third yearstudents divided into two parts. The second part is taught for the third yearstudents in the sixth semester. The course examines the main principles ofdetermination of real income, employment and unemployment, the price leveland in�ation in an open mixed economy, and the conduct of macroeconomicpolicy.

This part of the course is devoted to microeconomics foundations of macroe-conomics, demand management policy, the neo�classical (Solow) growth model,in�ation and unemployment.

The assessment of the students will be by the University of London (UL)examinations at the end of the sixth semester. The course is taught in English.The students are also studying for Russian degree in Economics, and knowingRussian terminology through reading in Russian is also required.

For studying the course the knowledge of introductory level Economics andMathematics for Economists is necessary. In turn, the Macroeconomics courseis a pre�requisite for Monetary Economics, International Economics, Develop-ment Economics.

Course objectives

The purpose of the course is to develop the economic way of thinking andmake the students ready to use logic and methods of economic analysis in theirfurther studies. Speci�cally the course aims at:

• giving students a solid grasp of macroeconomic analysis at theintermediate�level using both graphical and algebraic techniques;

• ensuring students can apply macroeconomic analysis to the study of con-temporary and historical economic problems;

• broadening the students' knowledge in the �eld of macroeconomics;

• developing the students' abilities to write essays and understand andcritically discuss economic literature.

168 THIRD YEAR

Methods

The following methods and forms of study and control are used in the course:

• Lectures (2 hours a week)

• Classes (2 hours a week)

• Teachers' consultations

• Self�study

• Written home assignments (one per week)

• Essay writing

• Intermediate control

• Final control

In total the course includes 32 hours of lectures and 32 hours of regularclasses in the sixth semester.

Main Reading

1. Macroeconomics. Study Guide. University of London, 2001.

2. Blanchard O., Macroeconomics, 2nd edition, Prentice Hall, 2000. [B]

3. Dornbush R. and S. Fisher., Macroeconomics. 6th edition. New York,McGraw�Hill Book Company, 1994. (DF) (Russian translation: Ð. Äîðí-áóø, Ñ. Ôèøåð, Ìàêðîýêîíîìèêà. Èçä�âî Ìîñêîâñêîãî óíèâåðñèòåòà,1997).

4. Dornbush R., S. Fisher and R.Starz., Macroeconomics. McGraw�HillBook Company, 2001, eight edition. (DFS)

5. Sacks J.D. and F.B. Larrain, Macroeconomics in the Global Economy.Hemel Hempsted, Harvester Wheatsheaf, 1993. (SL) (Russian trans-lation: Ñàêñ Äæ.Ä., Ëàððåí Ô.Á. Ìàêðîýêîíîìèêà. Ãëîáàëüíûéïîäõîä. Ì., Äåëî, 1996.)

6. Mankiw, N.G., Macroeconomics. Worth, 1999, fourth edition. (Russiantranslation: Í.Ã.Ìýíêüþ, Ìàêðîýêîíîìèêà. Èçä�âî Ìîñêîâñêîãî óíè-âåðñèòåòà, 1994).

MACROECONOMICS 169


1. Abel A., Bernanke B.S. (2000) Macroeconomics, Addison�Wesley, fourthedition.

2. Estrin S, A.Marin, Essential Readings in Economics, MacMillan Press,1995.

3. Froyen R.T., Macroeconomics, 6th edition, Prentice�Hall, 1999.

4. Gordon R.J., Macroeconomics, 6th edition, New York, Harper Collins,1993 (G)

5. Mankiw G., A Quick Refresher Course in Macroeconomics, Journal ofEconomic Literature, 1990, 28, 1645�1660.

Further reading

Textbooks:1. Abel A., Bernanke B., McNabb R. (1998) Macroeconomics: European

edition, Prentice Hall.

2. Heijdra B., van der Ploeg F. (2002) Foundations of Modern Macroeco-nomics, Oxford University Press, ch. 1�11.

3. Leslie D. (1993) Advanced Macroeconomics. Beyond IS/LM. McGraw�Hill Book Company: London.

4. Mankiw G., Romer D. (1991) New Keynesian Economics, Cambridge,MA, MIT Press.

5. McCa�erty (1990) Macroeconomic Theory. Harper & Row, Publishers:New York.

6. McCallum, B.T. (1989) Monetary Economics: Theory and Policy.Macmillan Publishing Company: New York, Ch. 9�10

7. Romer D. (2001) Advanced Macroeconomics. McGraw Hill Book Com-pany: London, Ch. 5.

Articles: Aggregate demand, aggregate supply and macroeco-nomic policies

1. Blanchard O.J. (2000) �What Do We Know About Macroeconomics ThatFisher and Wicksell Did Not?�. NBER Working Paper No. 7550(http://papers.nber.org/papers/w7550).

170 THIRD YEAR

2. Clarida R., Gali J., Gertler M. (1999) �The Science of Monetary Policy:A New Keynesian Perspective�. Journal of Economic Literature, 37(2).(See also NBER Working Paper No. 7147.)

3. Friedman M. (1968) �The Role of Monetary Policy�. American EconomicReview, 58, pp. 1�17.

4. Gordon R.J. (1981) �Output Fluctuations and Gradual Price Adjust-ment�. Journal of Economic Literature, 19(2), pp. 493�530.

5. Gordon R.J. (1990) �What is New�Keynesian Economics?�. Journal ofEconomic Literature, 28(3), pp. 1115�71.

6. Greenwald B., Stiglitz J. E. (1987) �Keynesian, New Keynesian, and NewClassical Economics�. Oxford Economic Papers, 39, pp. 119�32.

7. Greenwald B., Stiglitz J. E. (1993) �New and old Keynesions�. Journal ofEconomic Perspectives, 7(1), pp. 23�44. (See also NBER Working PaperNo. R1810.)

8. Mankiw N.G. (1989) �Real Business Cycles: A New Keynesian Perspec-tive�. Journal of Economic Perspectives, 3(3), pp. 79�90.

9. McCallum B.T. (1986) �On �Real� and �Sticky�Price� Theories of theBusiness Cycle�. Journal of Money, Credit, and Banking, 18(4), pp. 397�414.

10. McCallum B.T. (1988) �Postwar Developments in Business Cycle The-ory: A Moderately Classical Perspective�. Journal of Money, Credit, andBanking, 20(3�2), pp. 459�71.

11. Romer D. (1993) �The New Keynesian Synthesis�. Journal of EconomicPerspectives, 7(1), pp. 5�22.

12. Romer D. (2000) �Keynesian Economics without the LM curve�. Journalof Economic Perspectives 14 (Spring), ñòp.149�169.

13. Stiglitz J. E. (1986) �Theories of Wage Rigidity� in J. L. Butkewicz, Ko-ford K. J., Miller J. B. Eds Keyen's Economic Legacy: ContemporaryEconomic Theories, pp. 153�206. (See also NBER Working Paper No.1442)

14. Stiglitz J. E. (1992) �Methodological Issues and the New Keynesian Eco-nomics� in A. Vercelli and N. Dimitri eds. Macroeconomics - A Surveyof Research Strategies, pp. 38�86. Oxford University Press: New York.(See also NBER Working Paper No. 3580)

MACROECONOMICS 171

Articles: Microeconomic foundations of macroeconomics

1. Bernheim D., Ricardian Equivalence: An Evaluation of Theory and Evi-dence, NBER Macroeconomics Annual, Vol.2,1987. (http://nber.org/)

2. Hall R., Stochastic Implications of the Life Cycle�Permanent Income Hy-pothesis: Theory and Evidence, Journal of Political Economy, Decem-ber,1978.

3. Mankiw N. G., Small Menu Costs and Large Business Cycles: A Macroe-conomic Model of Monopoly, Quarterly Journal of Economics, 100, May1985.

4. Tobin J. (1969) �A General Equilibrium Approach to Monetary Theory�.Journal of Money, Credit and Banking 1, (February), pp. 15�29.

5. Tobin J., Brainard W. (1963) �Financial Intermediaries and the E�ec-tiveness of Monetary Control�. American Economic Review 53(May), pp.383�400.

Articles: Discretionary policy and policy rules

1. Taylor J.B. An historical analysis of monetary policy rules, NBER work-ing paper, w6768, 1998 (http://papers.nber.org/papers/w6768)

2. K.Rogo�, The Optimal Degree of Commitment to an Intermediate Mon-etary Target, Quarterly Journal of Economics,100, November1985.

3. C.Walsh, Optimal Contracts for Central Bankers, American EconomicReview, March 1995.

Articles: Problems of in�ation and unemployment

1. Akerlof G. A. (1969) �Relative Wages and the Rate of In�ation�. Quar-terly Journal of Economics, 83(3), pp. 353�74.

2. Lipsey R. G. (1960) �The Relation between Unemployment and the Rateof Change of Money Wage Rates in the United Kingdom, 1862�1957: AFurther Analysis�. Economica, 27, pp. 1�31.

3. Lucas R. E., Rapping L. A. (1969) �Price Expectations and the PhillipsCurve�. American Economic Review, 59(3), pp. 342�50.

4. Nickell S., Unemployment and Labor Market Rigidities: Europe versusNorth America, Journal of Economic Perspectives, Vol.11, N3, Summer1997, pp.55�74.

172 THIRD YEAR

5. Phelps E. S. (1968) �Money�Wage Dynamics and Labor Market Equilib-rium�. Journal of political Economy, 76, pp. 678�711.

6. Phillips A. W. (1958) �The Relation between Unemployment and the Rateof Change of Money Wage Rates in the United Kingdom, 1862�1957 �.Economica, 25, pp. 283�99.

7. Samuelson P. A., Solow R. M. (1960) �Analytical Aspects of Anti�In�ation Policy�. American Economic Review, 50, pp. 177�94.

8. Siebert H., Labor Market Rigidities: At the Root of Unemployment inEurope, Journal of Economic Perspectives, Vol.11, N3, Summer 1997,pp.37�54.

Articles: Long run economic growth

1. Barro R.J., Economic Growth in a Cross Sections of Countries, QuarterlyJournal of Economics, 106, 1991.

2. Grossman G., E.Helpman, Endogenous Innovation in the Theory ofGrowth, Journal of Economic Perspectives, Winter 1994, Vol.8, N1,pp.23�44.

3. Griliches Z., Productivity Puzzles and R&D: Another Nonexplanation,Journal of Economic Perspectives, Vol.2, N4, Autumn 1988, pp.9�21.

4. Jorgenson D., Productivity and Postwar US Economic Growth, Journalof Economic Perspectives, Vol.2, N4, Autumn 1988, pp.23�41.

5. Lucas R., Making a Miracle, Econometrica, 61, #2, 1993.

6. Romer P., The Origins of Endogenous Growth, Journal of Economic Per-spectives, Winter 1994, Vol.8, N1, pp.3�22.

Grade determination

The �nal (external) examination is held by University of London (UL) at theend of semester and provided in a written form. The structure of the �nal ex-amination is standard as little is the content of the course changed from year toyear. Though some questions on earlier examination papers may not be appro-priate preparation for the next year �nal examination. Past examinations willnonetheless appear in the library. The sample examination paper is providedin the Appendix 2.

The UL exam gives 50% of ICEF grade and other 50% is provided by: homeassignments (15%), the essay (5%) and the Mock exam grade (30%). The Mockexam is set in March�April by local teachers, graded in accordance with ULexamination rules.

MACROECONOMICS 173

Course Outline

1. Aggregate demand in closed economy: IS�LM model (review)Goods market and IS curve derivation. Assets market and LM curve deriva-

tion. Equilibrium in IS�LM model. E�ectiveness of �scal and monetary poli-cies. Limitations of the model.

(DF Ch.4�5; DFS Ch.9�11; B Ch.3�5; SL Ch.12)

2. Aggregate demand in an open economy: the IS�LM�BP ModelThe IS curve in an open economy. The foreign exchange market and ex-

change rate terminology. The foreign exchange market and LM curve. Externalbalance and BP curve. BP curve under imperfect capital mobility. Properties ofBP curve. Macroeconomic policy under imperfect capital mobility (comparisonwith perfect capital mobility and capital control).

(DF Ch.6, 20.1; DFS Ch.12, 19; B Ch.18�20; SL Ch.10, 13�14)

3. Aggregate Supply and Aggregate DemandThe aggregate demand curve. The aggregate supply (AS) curve. The long

run aggregate supply curve and short run AS curve.Explanations of upward sloping short run aggregate supply curve. Sticky

wages (Keynesian) model. Classical worker misperception model, new Keyne-sian sticky price model, new classical imperfect information model of short runAS. Expectations and short run AS.

Equilibrium in aggregate supply� aggregate demand model: long run andshort run equilibrium.

(DF Ch.1, 7�9, 16�18; DFS Ch.5,6; B Ch.7�9; SL Ch.3,11�12,16�17)

4. Demand management policyAggregate demand (AD) shocks. Responses to AD shocks: non�

intervention, activist policy. Implementation or inside lags (recognition lag,decision lag, action lag) and outside lag. Uncertainty and models predictionsof macroeconomic policies. Lucas critique.

Rules versus discretion. Time or Dynamic consistency. Barro�Gordonexample. Solutions to time�inconsistency problem: constitutional rules,reputation, delegation to an independent authority with di�erent prefer-ences/incentives (independent central banker).

Examples of policy rules: constant rate of money growth, nominal GNPtarget, in�ation target.

(DF Ch.15, 18.3; DFS Ch.8, 20; B Ch.25; SL Ch.19)

5. Unemployment and In�ationThe types and causes of unemployment: frictional, structural and classical

(or real wage) unemployment. Policies to reduce unemployment.

174 THIRD YEAR

Dynamic aggregate demand dynamic aggregate supply model. Policies toreduce in�ation and the sacri�ce ratio. Policy ine�ectiveness proposition.

The costs of expected in�ation: �shoe�leader� costs, menu costs, tax dis-tortions. The costs of unexpected in�ation: redistribution of wealth betweendebtors and creditors, redistribution of incomes between those, who get �xedincome (in nominal terms) and others, uncertainty about relative prices.

(DF Ch.14�15, 17; DFS Ch.7, 18; B Ch.6, 9, 22; SL Ch.3, 11,15�16)

6. The Neoclassical (Solow) Growth ModelStylized facts of economic growth. Factors of economic growth, Solow resid-

ual.Assumptions of the Solow model. Derivation of the capital accumulation

equation for the model with labour augmenting technological progress. Steadystate. Conditions that guarantees existence, uniqueness and stability.

Comparative statics (predictions of the model): changes in saving rate, inpopulation growth rate and the rate of technical progress.

The golden rule of capital accumulation.Absolute and conditional convergence.Endogenous growth theory.(DF Ch.10 and Appendix; DFS Ch.3�4; B Ch.10�12; SL Ch.18)

7. Microfoundations of aggregate consumptionKeynesian consumption function and Kuznets puzzle. Intertemporal choice

model. Life Cycle and Permanent Income theories.The theories implications: short run and long run multiplier e�ects of

changes in autonomous expenditure; e�ect of permanent versus temporarychanges in income on consumption).

Barro�Ricardo equivalence and its implications for �scal policy. Reasonsfor the failure of Barro�Ricardian equivalence: liquidity constraints, myopia,distortionary taxes, uncertainty.

Real wealth e�ect. Current consumption and past incomes: dynamic ele-ment in the macro model.

(DF Ch.3, 11; DFS Ch.13, 18; B Ch.16, 27; SL Ch.4)

8. Microfoundations of aggregate investmentThe components of investment spending.Neoclassical model of investment. The desired capital stock and its deter-

minants (marginal product of capital, depreciation rate, expected real interestrate, relative price of capital goods).

Tobin's q�theory. Accelerator models of investment (simple and �exibleaccelerators).

(DF Ch.12; DFS Ch.14; B Ch.16; SL Ch.5)

MACROECONOMICS 175

9. The Demand for moneyFunctions of money. The transactions demand (Baumol�Tobin model). De-

terminants of money demand according to Baumol�Tobin model: transactioncosts, interest rate and income.

The speculative theory of money demand: demand for money as a safe asset.Precautionary theory of money demand: costs of illiquidity.The modern quantity theory of money.(DF Ch.13 and Appendix; DFS Ch.15; B Ch.26; SL Ch.8)

10. The Supply of moneyThe monetary base and the money supply. The money multiplier model.

The e�ect of currency to deposits and reserves to deposits ratios on moneysupply.

Control of the central bank over the money supply: open market opera-tions, reserve requirements, discount rate, foreign exchange market interven-tions. Sterilisation.

The public sector de�cit and high powered money.(DF Ch.14 and Appendix; DFS Ch. 16; B Ch. 26; SL Ch. 9)



1. Aggregate demand in closedeconomy: IS�LM model

14 2 2 10

2. Aggregate demand in an openeconomy: the IS�LM�BP model

28 4 4 20

3. Aggregate Supply and AggregateDemand

28 4 4 20

4. Demand management policy 14 2 2 105. Unemployment and In�ation 36 6 6 246. The Neoclassical (Solow) Growth

Model28 4 4 20

7. Microfoundations of aggregateconsumption

28 4 4 20

8. Microfoundations of aggregateinvestment

14 2 2 10

9. The Demand for money 14 2 2 1010. The Supply of money 12 2 2 8

Total: 216 32 32 152

176 THIRD YEAR

Principles of Accounting

Lecturers and classteachers: Victoria V. Dobrynskaya, Nikita K. Pirogov

Course description

The course develops background for understanding and reading companies'�nancial reports and for assessing company's �nancial position and makingmanagerial decisions. The course covers basic concepts of modern �nancialreporting, essentials in UK standard of �nancial and managerial accounting.It provides basic knowledge in preparing, processing and interpreting the dataabout business transactions for di�erent types of external as well as internalinvestors, management and other accounting information users. The course re-quires the knowledge in micro and macroeconomics and banking. The course isbased on lectures, seminars, case studies and self�study. Elements of account-ing and �nance is a two�semester course designed to prepare students for ULexamination.

Course objectives

The course is focused on developing skills in preparing and analyzing companies'�nancial statements and data for decision�making purposes. By the end ofautumn semester students are expected to be able to apply a set of accountingconcepts to read annual �nancial report of a corporation and �nancial ratiosto assess its position. By the end of spring semester students are expected toapply managerial accounting analytical tools for internal control, pricing anddeveloping di�erent budgets for �nancial planning purposes as well as to getessential skills in capital budgeting techniques.

Methods



• classes (2 hours a week);

• teacher's consultations;

• self�study;

• written home assignments;

• essay writing.

PRINCIPLES OF ACCOUNTING 177

In total the course includes 36 hours of lectures, 36 hours of classes in the �fthsemester and 32 hours of lectures, 32 hours of classes in the sixth semester.

Main Reading

1. M.W.E. Glautier and B. Underdown. Accounting Theory and Practice.6th edition. Pitman Publishing. (GU)

2. J. Ireland. Principles of Accounting. Study guide. University of London.2005 (SG)

3. Accounting and Finance. Reader for the 3rd year students. Prepared byV. Dobrynskaya. 2004


1. J. Arnold, T. Hope, A. Southworth, L. Kirkham. Financial accounting.2 edition. Prentice Hall. (AHSK)

2. Reader in Managerial Accounting. (R)

3. F.Wood, A. Sangster. Business Accounting. 8th edition. FinancialTimes. Pitman Publishing.1999.

4. A.H.McLaney. Accounting. ACCA. 3rd edition. Longman.

5. D.Alexander, A.Britton. Financial Reporting. Chapman & Hill. 1999

6. C.Stickney. Financial Statement Analysis. A Strategic Perspective. 2ndEdition. The Dryden Press.

7. Íèêîëàåâà Î.Å., Øèøêîâà Ò.Â.. Óïðàâëåí÷åñêèé ó÷åò. Ìîñêâà:ÓÐÑÑ. 1997

8. ×.Ò.Õîðíãðåí, Äæ. Ôîñòåð. Áóõãàëòåðñêèé ó÷åò: óïðàâëåí÷åñêèéàñïåêò. Ìîñêâà: �Ôèíàíñû è ñòàòèñòèêà�. 1995

9. Ò.Êàðëèí,À.Ìàêìèí. Àíàëèç ôèíàíñîâûõ îò÷åòîâ. Ìîñêâà,ÈÍÔÐÀ�Ì. 1998

10. Ñ.È.Ïó÷êîâà, Â.Ä.Íîâîäâîðñêèé. Êîíñîëèäèðîâàííàÿ îò÷åòíîñòü.ÔÁÊ Ïðåññ. 1999.

11. Ë.À.Áåðíñòàéí.Àíàëèç ôèíàíñîâîé îò÷åòíîñòè. Ìîñêâà: �Ôèíàíñûè ñòàòèñòèêà�. 1996

12. Ä.Øèì, Ä.Ñèãåë. Îñíîâû êîììåð÷åñêîãî áþäæåòèðîâàíèÿ. ÇÀÎ�Áèçíåñ Ìèêðî�. 2001

178 THIRD YEAR

Grade determination

Current control includes: written home assignments (WHA), essays and theirassessment, participation in classwork by solving exercises and case presenta-tions.

Intermediate control is based on mid�term exam in each semester plus �rst�term exam in January in UOL format or MOCK exam in March/April.

Final exam is set by the University of London.The �rst term grade is calculated as weighted average with the following

weights:10% � for written home assignments (WHA)10% � for class participation and team working30% � for the mid�term exam50% � for the �rst�term exam in January.The �nal grade is based on the �nal UoL exam (50%) and the remaining

50% is given for performance evaluation during the course including:20% for the �rst term grade20% for the spring MOCK exam grade10% for home assignments and class participation in the second term.

Course Outline

Part 1. Accounting Model of the Organization

1. Introduction to the Course. The Scope of AccountingAccounting as an information system. Functions of accounting. Users of

accounting information and their requirements: investors and investment ana-lysts, creditors and lenders, managers, customers, employees, government, com-petitors and public. Types of accounting. Major di�erences between accountingand �nancial accounting, �nancial accounting versus management accounting..Accounting entities. Major types of organizations: the sole proprietorship, thepartnership, the limited companies (corporations). The type of organizationand the scope of accounting information. Accounting leaders and institutions.The regulation of �nancial reporting: institutional framework and the role. Theusefulness of accounting standards. Generally Accepted Accounting Principlesand accounting policies. The need for harmonization of �nancial accountingstandards: what has been done in IAS and under European Directives.

(GU Ch.1�3; SG; AHSK Ch.1�3)

2. Basic Accounting Elements and Accounting EquationAssets and their recognition criteria. Types of assets: current and non-

current, liquid and illiquid, tangible and intangible. Claims on organization'sassets. Liabilities and their recognition criteria. Types of liabilities. Owner'scapital (equity) and its forms. Accounting equation: initial version. Revenues


and expenses: the criteria and in�uence on owner's capital. Drawings (with-drawals) and owners investments. The expanded accounting equation. Typesof accounts. Main T�accounts. Double entry bookkeeping techniques. Apply-ing double�entry rule to expanded accounting equation. Accounting equationand basic statements. The balance sheet - the statement of �nancial position.Pro�t and loss statement - the statement of performance.

(GU Ch.4; SG; AHSK Ch.4)

3. The Framework for Conventional Accounting ModelThe role of accounting theory. The GAAP and fundamental accounting

concepts. Entity concept and its requirements. Going � concern concept. Costconcept, money measurement concept and conventional accounting. Accrualconcept versus cash accounting: advantages of accrual accounting, its limita-tions. Realization concept and revenue recognition criteria. Matching principle.Prudence concept and its constrains. The relevance and reliability of account-ing information. Disclosure principle and the need for additional accountinginformation for limited company (corporation).

(GU Ch.5�7; SG; AHSK Ch.3)

4. Building Accounting CycleAccounting cycle within the Organization. The accounting period. Ac-

counting data processing. Balancing o� the accounts. Closing entries. Thetrial balance and footing. The role of the trial balance. Accrual and matchingconcepts and the reasons for adjusting accounts and trial balance.

(GU Ch.8�9; SG; AHSK Ch.5)

5. Periodic measurement and identi�cation of revenues and ex-penses

Accounting concepts and the need to adjust revenues and expense accounts.Adjusting revenues accounts for amounts owing. at the end of the period. Theuse of debtors' accounts. The types of debtors and the types of debts. Thereasons for bad debts and accounting for bad debts. Provisions for doubtfuldebts. Adjusting accounts for prepayments. Adjusting accounts for accruals.The introduction to the concept of depreciation expense: the useful life, andthe need for allocation of acquisition cost of �xed asset. The residual valueof �xed asset and its depreciable value. Traditional method of depreciation �straight line. The accounting entries for depreciation.

(GU Ch.10; SG; AHSK Ch.6 (pp.144�158), Ch.7)

6. Preparing Balance Sheet and Pro�t and Loss StatementPreparing Trading and P&L statements. Adjusting revenues for returns

inwards and for discounts allowed. Gross trading pro�t. Net pro�t. Di�erentlayouts for P&L: horizontal and vertical formats. Preparing balance sheet.The role of the trial balance.. The types of adjustments to the trial balance.

180 THIRD YEAR

Accounting errors. The suspense account. Di�erent layouts for the balancesheet: horizontal and vertical formats. Net working capital. Capital employed.

(GU Ch.11; SG)

7. Accounting and Reporting the Asset of Stock (Inventory)The asset of stock and the need for closing stock adjustments. Perpetual

and periodic stock (inventory) measurement. The need for stock (inventory)valuation. The type of the business and the stock �ows. Stock (inventory) cost-ing: �rst�in, �rst out (FIFO); last�in, �rst �out (LIFO); average cost (AVC).The choice of stock �ow assumptions and accounting policies. The in�uence ofinventory costing over the reported pro�ts. Inventory (illusory) pro�ts. Lowerof costs or market rule. Net realizable value of stocks.

(GU Ch.11; SG)

8. Accounting and Reporting Noncurrent Assets: Fixed AssetsCapital and revenue expenditures and their accounting treatment. Tradi-

tional method of depreciation for �xed assets: units of production (YOP). Ac-celerated depreciation: reducing (declining) balance (DB), sum of years digits(SYD). Factors a�ecting the choice of �xed assets depreciation methods. Fixedasset disposal. Disposal account. Recording changes in remaining useful lifeand residual value. Accounting for �xed assets and accounting policies. Fixedassets revaluation. Accounting treatment of leased assets. Operating leasesand their in�uence on �nancial reports. Finance leases and their accountingproblems. Principles of reporting �nancial investments in securities (bonds andshares).

(GU Ch.12; SG; AHSK Ch.6, pp.160�173)

9. Accounting and Reporting Intangible AssetsMajor types of intangibles (patents, licenses, trademarks and brands, soft-

ware, goodwill) and their role in new economy. Internally created intangiblesand acquired intangibles. The asset recognition criteria and accounting treat-ment of intangibles. The methods of writing o� the intangibles. Amortizationof intangible assets and the accounting entries. Types of R&D expenditures.The asset recognition criteria and accounting treatment of R&D expenditures.Development cost. Goodwill and brands reporting. The choice of accountingpolicies for intangibles and iys e�ect upon the Balance sheet and P&L state-ment.

(GU Ch.12; SG; AHSK Ch.6, pp.160�173)

10. Elements of Accounting and Financial Reporting in LimitedCompanies (Corporate Enterprises)

The sources of �nancing in a limited company / corporation. The types ofloan capital (debt �nance). The issue of corporate bonds (debentures). Ac-counting treatment of debt �nance. Preference shares and ordinary shares.


The issue of shares. Authorized capital, issued capital, called up capital, callsin arrears. Accounting entries for dividend payments. Cash dividend, stockdividend, share repurchase. Bonus shares (scrip dividend). The types of re-serves of limited company. Revenue reserves and their role. General reserve.Capital reserve.


11. Basic Financial Statements of Limited CompaniesThe �nal accounts of limited companies. The structure of Appropriation

account and its role. Pro�t and Loss Statement of corporate �rm. The rela-tionship between Appropriation account and Pro�t and loss statement. Thestructure of the balance sheet of limited company. Conceptual framework forregulation of �nancial reporting for corporations. Published �nancial state-ments, directors reports and accompanying notes. The disclosure principle andpublished �nancial reports.


Part 2. Interpretation of Financial Reports

12. The Cash Flow StatementThe need for the Statement of cash �ows. Accounting de�nition of cash

and cash equivalents. Types of company's activities and cash �ows: cash �owfrom operating, investing and �nancing activities. Net (gross) cash �ow. Directmethod of operating cash �ow calculation. Indirect method of operating cash�ow computation and working capital adjustments. Advantages of cash �owover net income for �nancial analysis. The reconciliation of cash �ows from op-erating activities to the pro�t. The cash �ow statement formats: UK standardas compared to international standard.


13. Analysis of Financial PerformanceHorizontal and vertical analysis of �nancial statements. Ratio analysis.

Types of �nancial ratios: liquidity, solvency, gearing, activity, pro�tability. Ra-tio analysis from lenders, owners and managers points of view. Du Pont earningpower analysis. EPS computations. Advantages of ratio analysis. Limitationsfor ratio analysis: the type of industry, accounting policies. The sources ofinformation for comparative ratio data.


14. Alternative Approaches to Valuation in Financial Accounting.Capital Maintenance

The holes in conventional accounting model. Economic measures of incomeand capital and their role in accounting. Capital maintenance concept. Fi-nancial capital maintenance versus operational capital maintenance. Elements

182 THIRD YEAR

of accounting for changing prices. Current purchasing power (CPP) account-ing: major principles, advantages and disadvantages. Current market valuesaccounting: major principles, advantages and disadvantages. Replacement costaccounting. Main di�erences between historical cost and replacement cost ac-counting.

(GU Ch.19�21; SG; AHSK Ch.12�14)

Part 3. Accounting and Managerial Decision�Making

15. Managerial Accounting: Costing Concepts and Costing SystemsThe organizations, their objectives and structure. The management need for

information. A perspective for cost Analysis and classi�cation. General costclassi�cations: manufacturing, nonmanufacturing, product and period costs.Costs for planning and control: direct and indirect, controllable and noncon-trollable, di�erential costs. Types of costing systems. Job � order costing andthe �ow of costs. Measurement and application of manufacturing overheads.Process costing: the �ow of costs, the problem of overheads. Advantages anddisadvantages of traditional costing systems.

(GU Ch.25�26; SG; R)

16. Advanced Costing Systems: ABCDesign of activity�based costing (ABC). Assumptions of activity based cost-

ing. Tracing costs to activity centers. Application of overheads in ABC. Bene-�ts and limitations of activity�based costing. Just�in�time inventories and itsin�uence over costing systems.

(GU Ch.27; SG)

17. Cost � Volume � Pro�t Relationship and AnalysisCost behavior analysis. Variable cost, �xed cost and mixed cost. Methods

of mixed costs analysis. The contribution margin. The contribution formatof P&L. Operating leverage, its use in risk assessment. Break�even analysis.The margin of safety. The sales mix and break�even analysis. Target pro�tanalysis. Limitations in CVP analysis.

(GU Ch.28; SG; R)

18. Variable CostingVariable (marginal) costing compared to absorption (full) costing. Variable

costing and stock valuation. Variable costing and activity�based costing. Thebene�ts and limitations of variable costing. Variable costing controversy.

(GU Ch.29; SG; R)

19. Accounting Data and Pricing


Accounting treatment of pricing problems. �Cost plus� formula for pricing.Absorption pricing. Variable pricing. Mark � ups in di�erent pricing methods.Target pricing and target costs.

(GU Ch.30; SG; R)

20. Pro�t Planning and BudgetingMaster budget and its structure. Steps in budgeting. Types of budgets.

Cash budget and its role in planning and control. Cash budget and �nancingchoices. The budgeted balance sheet and the budgeted P&L. Budgeting sys-tems. The role of budgeting in planning and control. Using ratios in planning.

(GU Ch.30; SG; R)

21. Standard Cost and Variance AnalysisStandard costs and budgeted costs. Variance analysis for direct costs and

overheads. Sales variance analysis. The in�uence of variances on income. Re-sponsibility for variance analysis. Flexible budgets. Fixed cost and �exiblebudget. Activity based costing and �exible budgets.

(GU Ch.335�36; SG; R)

22. Basics of Capital BudgetingCharacteristics of investment project. The project physical life. Types of

project's cash �ows: initial outlay, cash �ows over the life, terminal (resid-ual) cash �ows.. The nature of relevant costs. Sunk costs. Di�erential costs.Traditional approaches to capital budgeting: accounting (simple) payback, ac-counting rate of return. Basics of discounted cash �ow techniques. Net presentvalue rule, its assumptions and limitations. IRR, its advantages and disadvan-tages. Discounted payback. Pro�tability index. Terminal value. Adding anddropping product lines. Make or buy decisions. Economic life of the project.

(GU Ch.31�32; SG; R)

23. Using Accounting Data in Performance EvaluationLeadership style and the problem of control. Budget information and per-

formance evaluation. Performance measurers. Segment reporting. Assigningcosts to segments. Segment margin. The use of accounting data in strategicplanning. Customer pro�tability analysis. Elements of responsibility account-ing.

(GU Ch.37�38; SG; R)

184 THIRD YEAR



1. Introduction to the Course. TheScope of Accounting

10 2 2 6

2. Basic Accounting Elements andAccounting Equation

12 4 2 6

3. The Framework for ConventionalAccounting Model

10 2 2 6

4. Building Accounting Cycle 14 4 4 65. Periodic measurement and

identi�cation of revenues andexpenses

10 2 2 6

6. Preparing Balance Sheet andPro�t and Loss Statement

16 4 4 8

7. Accounting and Reporting theAsset of Stock (Inventory)

8 2 2 4

8. Accounting and ReportingNon�current Assets: FixedAssets

14 4 4 6

9. Accounting and ReportingIntangible Assets

8 2 2 4

10. Elements of Accounting andFinancial Reporting in LimitedCompanies (CorporateEnterprises)

14 4 4 6

11. The Cash Flow Statement 14 4 4 612. Analysis of Financial

Performance14 4 4 6

13. Alternative Approaches toValuation in FinancialAccounting. CapitalMaintenance

14 4 4 6

14. Analysis of Financial Reports(essay)

6 � � 6

15. Managerial Accounting: CostingConcepts and Costing Systems

14 4 4 6

16. Advanced Costing Systems:ABC

12 4 2 4

17. Cost � Volume � Pro�tRelationship and Analysis

12 2 4 6

18. Variable Costing 8 2 2 4



19. Accounting Data and Pricing 6 � 2 420. Pro�t Planning and Budgeting 12 2 4 621. Standard Cost and Variance

Analysis14 4 4 6

22. Basics of Capital Budgeting 16 4 4 823. Using Accounting Data in

Performance Evaluation8 2 2 4

Total 270 68 68 134

186 THIRD YEAR

Econometrics

Lecturer: Oleg O. ZamkovClassteachers: Oleg O. Zamkov, Vladimir I. Tcherniak

Course description

Econometrics is a two semesters course for the 3-rd year ICEF students. This isan introductory Econometrics course for the students specializing in Economics.Statistics course is a pre-requisite, as well as Economics, Mathematics andComputers courses. The course is taught in English and �nally examined bythe University of London external programme.

The stress in the course is done on the essence of statements, methodsand approaches of econometric analysis. The conclusions and proofs of basicformulas and models are given which allows the students to understand theprinciples of econometric theory development. The main accent is done oneconomic interpretations and applications of considered econometric models.The course is mostly oriented at cross-sections econometrics; some topics oftime series and panel data econometrics are also taught in the course.

Course objectives

The students should get the basic knowledge and skills of econometric analy-sis. They should be able to apply it to the investigation of economic relation-ships and processes, and also understand the econometric methods, approaches,ideas, results and conclusions met in the majority of economic books and arti-cles. In the course the students should study traditional econometric methodsdeveloped mostly for the work with cross-sections data. At the same timethe students should understand essential di�erences between the time seriesand cross sections data and those speci�c econometric problems met in thework with these types of data. The students should get the skills of construc-tion and development of simple and multiple regression models, get acquaintedwith some non-linear models and special methods of econometric analysis andestimation, understanding the area of their application in economics. The con-sidered methods and models should be mastered practically on real economicdata bases with modern econometric software.

Methods



ECONOMETRICS 187

• classes (2 hours a week, half of the classes is devoted to theoretical andapplied analysis, and another half is conducted in the computer room andis devoted to practical applications of the econometric methods studiedin the course)

• home assignments for each topic consisting of theoretical and appliedparts


• self study, which can be conducted with the course materials and in acomputer room, making home assignments using Excel and EconometricViews, work with economic data bases, with ICEF, UoL, LSE and othercourse materials through the Internet and ICEF information system.

In total the course includes: 68 hours of lectures, 68 hours of classes.

Main Reading

The Third edition of textbook �Introduction to Econometrics� by Christo-pher Dougherty is the main textbook for the course. The second edition ofDougherty's textbook, as well as its Russian translation, can also be used. TheUniversity of London Study Guide, as well as Examination papers and Exam-iners' Report are also widely used in the course. Another (supplementary) rec-ommended textbook is �Basic Econometrics� by D.N.Gujarati containing someextra course information, derivations, tests, proofs and applications. ICEFteaching materials (4�5) are also used in the course. The books by Greene andKennedy are recommended as supplementary reading: the �rst contains deeperpresentation of course materials, the second � useful comments.

1. Dougherty, Christopher. Introduction to Econometrics. Oxford Univer-sity Press, 2002 (3rd edition) (CD3)

2. Dougherty, Christopher. Introduction to Econometrics. Oxford Univer-sity Press, 2002 (2nd edition) (CD2). Russian translation: Äîóãåðòè Êð.Ââåäåíèå â ýêîíîìåòðèêó. Èçä.2. Ì., ÈÍÔÐÀ-Ì, 2004.

3. Dougherty, Christopher. Elements of econometrics. Study Guide. Uni-versity of London, 2004.

4. Gujarati D.N. Basic Econometrics. McGraw-Hill, 4th edition, 2003 (Gu-4) and earlier editions (3rd edition - Gu-3, if chapter di�ers from Gu-4).

5. Zamkov, Oleg. Econometric Methods in Macroeconomic Analysis.Moscow, Dialog-MGU, 1999 (OZ). Russian translation: Çàìêîâ Î.Î.Ýêîíîìåòðè÷åñêèå ìåòîäû â ìàêðîýêîíîìè÷åñêîì àíàëèçå. Ì., ÃÓÂØÝ, 2001.

188 THIRD YEAR

6. Zamkov O.O. Introduction to Econometrics. Lecture notes. I-4, 2004. InEnglish and in Russian.


1. Ìàãíóñ ß.Ð., Êàòûøåâ Ï.Ê., Ïåðåñåöêèé À.À. Ýêîíîìåòðèêà.Íà÷àëüíûé êóðñ. Èçä. 7. Ì., Äåëî, 2005 (MKP).

2. Econometric Views 5.1 User's Guide. Quantitative Micro Software, LLC.

3. Greene W.H. Econometric Analysis. Prentice Hall int. 5th ed., 2003, andearlier editions (Gr).

4. Kennedy P. A Guide to Econometrics. MIT Press, 5th edition, 2003, andearlier editions (K).

5. J.M.Wooldridge. Introductory Econometrics. A modern approach. 2nded. Thompson South-Western, 2003 (W).

Internet Resources

1. http://econ.lse.ac.uk/ie/ (I-1)

2. http://www.oup.com/uk/orc/bin/9780199280964/ (I-2)

3. http://highered.mcgraw-hill.com/sites/0072335424/ (I-3)

4. http://www.londonexternal.ac.uk/current_students/programme_resources/lse/index.shtml (I-4)

5. http://www.worthpublishers.com/mankiw (I-5)

6. http://www.gks.ru (I-6)

7. http://www.cbr.ru (I-7)

8. http://mief.hse.ru (I-8)

9. http://crow.academy.ru/econometrics (I-9)

Software and Data Bases

The main software used in the course is Econometric Views (version 3.1 andlater ones). Spreadsheet Excel is also used in the course. For making class andhome assignments the following data bases are used:

data prepared by Chr.Dougherty at the LSE (data for estimation of earningsfunctions based on NSLY survey at the USA;

ECONOMETRICS 189

Annual data on demand, disposable income and relative prices for aggre-gated goods and services in the USA, for 1959-2003 � the data are available atI-1);

Annual data for main macroeconomic indicators for the USA, 1931�2005,the data are available at I-3;

Monthly data for main macroeconomic indicators for Russia, 1992�2007;Data of Russian Longitudinal Monitoring Survey (RLMS).Annual data for estimated GNP, labour and capital in USSR economy for

1928�1987.

Grade determination

The students sit two mid-term written exams in November and in April, �rstsemester written exam in January, and University of London external exam inMay. November and January exams include multiple choice and free responseparts. April and May exams are free response (open questions) exams. The�rst semester grade is determined as follows: January exam grade gives 50%of the grade, November exam � 30%, and 20% is given for home assignments.In the �nal course grade the University of London exam grade gives 40%, the�rst semester grade gives 30%, and 30% is given for the second semester (20%� for April exam and 10% for home assignments).

Course Outline

1. Introduction to EconometricsStatistical Investigation of Economic Variables' Relationships. Relation-

ships in the economy: examples, problems of estimation and analysis (demandfunctions, earnings functions, economic growth models). Economic data: crosssections and time series. Main statistical concepts and facts used in the course.Data bases. Software. Course materials presentation.

Review (CD-3), Review, Chapter 1 (CD-2), L.1 (OZ)

2. Simple Linear Regression Model (SLR). OLS estimation.Proposals and notation in SLR. SLR Model Estimation using Ordinary

Least Squares (OLS). Expressions for the OLS estimators of slope coe�cientand intercept: derivation and interpretation. Gauss-Markov conditions andthe properties of OLS estimators. Gauss-Markov theorem (formulation). Stan-dard deviations and standard errors of regression coe�cients: derivation andinterpretation. Statistical signi�cance of OLS estimators: hypotheses testingusing t-tests. Derivation and interpretation of con�dence intervals. The gen-eral quality of regression: determination coe�cient R2. F-statistics and F-tests.Relationship of R2 with correlation coe�cients. SLR model without intercept.OLS-estimation, properties and applications.

190 THIRD YEAR

Chapter 1, Chapter 2 (CD�3), Chapter 2 (2.1�2.7), Chapter3 (3.1�3.11) (CD�2), Chapter 3, Chapter 6 (6.1, Appendix 6A.1)(Gu), L.2 (OZ)

3. Multiple Linear Regression Model (MLR): two explanatoryvariables and k explanatory variables

Derivation and properties of OLS-estimators of MLR with two explanatoryvariables. Determination coe�cient R2. Adjasted R2. Testing hypothesesusing t- and F-statistics. OLS-estimation of the model with k explanatoryvariables in vector-matrix form. Properties of coe�cients' estimators. F-test forgroups of variables. Multicollinearity. Its consequences, detection and remedialmeasures. Estimation of production functions in volumes and growth rates'forms as multiple regression models.

Chapter 3 (CD�3), Chapter 4 (4.1�4.5, CD�2), L.2,4 (OZ), Chap-ters 7�8, 10 (Gu), Chapter 3 (MKP)

4. Variables Transformations in Regression AnalysisLinearisation of non-linear functions and their estimation using Ordinary

Least Squares. Disturbance term speci�cation. Interpretation of linear, loga-rithmic and semi-logarithmic relationships. Estimation of functions with con-stant elasticity and exponential time trends. Comparison of the quality ofregression relationships: linear and semi-logarithmic functions. Zarembka scal-ing. Box-Cox method.

Chapter 4 (CD�3), Chapter 5 (CD�2), Chapter 6 (6.5�6.7) (Gu),L.4 (OZ)

5. Dummy VariablesDummy variables in linear regression models. Reference category and

dummy variables' trap. Types of dummy variables: intercept and slopedummies. Interaction dummies. Multiple sets of dummies. Chow test.Dummy variables in economic models: earnings functions, production func-tions. Dummy variables in seasonal adjustment. Dummy variables in combin-ing time series and cross-sectional data.

Chapter 5 (CD�3), Chapter 6 (6.1�6.4, CD�2), Chapter 9 (Gu)(Chapter 15 (Gu�3)))

6. Linear Regression Model Speci�cationConsequences of Incorrect Speci�cation. Omitting signi�cant explanatory

variable. Including unnecessary explanatory variable in the model. Monte-Carlo method in econometric analysis: general principles, areas of applicationand examples. Proxy Variables. Testing of linear constraints on parameters ofMLR. F-test and t-tests. Role and examples of linear constraints in economicmodels. Lagged Variables in economic models. Gauss-Markov conditions' vio-lation. General principles of consequences' analysis, detection and correction.Generalised Least Squares (GLS).

ECONOMETRICS 191

Chapter 6 (CD�3), Chapter 7 (7.1�7.6, CD�2), Chapter 13 (13.3�13.4) (Gu) ( Chapter 11 (11.3) (Gu�3))

7. HeteroscedasticityConcept, consequences and detection of heteroscedasticity. Goldfeld-

Quandt, Park, Breusch-Godfrey, White, Spearman, Glejzer tests. Model Cor-rection.Weighted Least Squares (WLS) method as a special case of GLS. White'sheteroscedasticity-corrected standard errors. Reasons and examples of het-eroscedasticity in economic models.

Chapter 7 (CD�3), Chapter 8 (8.1�8.3, CD�2), Chapter 11 (Gu)

8. Stochastic Explanatory VariablesStochastic explanatory variables in LR models. Properties of OLS-

estimators and test statistics of stochastic explanatory variables' coe�cients.Measurement errors. Milton Friedman's critique on consumption function esti-mation. Instrumental variables. Using instrumental variables in M.Friedman'sconsumption model and in other economic models.

Chapter 8 (CD�3), Chapter 9 (9.1�9.4, CD�2), Chapter 13 (13.5�13.6) (Gu)

9. Simultaneous Equations ModelsConcept of simultaneous equations model. Exogenous and endogenous vari-

ables. Predetermined variables. The simultaneous equations bias. Inconsis-tency of OLS estimators. Structural and reduced forms of the model. Modelof demand and supply and simple Keynesian equilibrium model as simultane-ous equations models. Identi�cation problem. Rules of identi�cation. Testingexogeneity: Hausman test. Methods of estimation. Indirect Least Squares(ILS). Instrumental Variables. Two-Stages Least Squares (TSLS). Examples ofsimultaneous equations models estimation: IS/LM model, Klein's model.

Chapter 9 (CD�3), Chapter 10 (10.1�10.3, CD�2), Chapters 18�20 (Gu), L.5 (OZ)

10. Maximum Likelihood EstimationThe idea of maximum likelihood estimamion (ML). SLR and MLR Models

Estimation using ML. ML Estimators' properties. Test statistics (z-statistics,pseudo�R2, LR�statistic) and statistical tests. Chapter 10 (10.6) (CD�3),Chapter 11 (11.6) (CD�2), Chapter 4 (4.4, Appendix 4A) (Gu)

11. Binary Choice Models, Limited Dependent Variable ModelsLinear probability model: problems of estimation. Logit�analysis. Probit-

analysis. Using Maximum Likelihood for logit and probit models' estimation.Censored samples. Direct and truncated estimation. Tobit-model. Sampleselection bias. Heckman two-step procedure.

192 THIRD YEAR

Chapter 10 (CD�3), Chapter 11 (CD�2), Chapter 15 (Gu) (Chap-ter 16 (Gu�3))

12. Autocorrelated disturbance termSigns and consequences of disturbance term's autocorrelation in LR model.

Durbin�Watson d�test for �rst order autocorrelation. Breusch�Godfrey (BG)test of higher-order autocorrelation. Autocorrelated disturbance term andmodel misspeci�cation. Model correction: Autoregressive transformation.Cochrane�Orcutt (CO) procedure. CO as a special case of GLS. Prais�Winstencorrection. AR, MA, ARMA models. Autocorrelated disturbance term ina model with lagged dependent variable as one of the explanatory variables.Durbin h�statistic and test. Autoregressive Conditional Heteroscedasticity(ARCH) model.

Chapter 12 (12.1�12.5, CD�3), Chapter 13 (13.1�13.6, CD�2),Chapter 12 (Gu), L.3 (OZ)

13. Modelling with Time Series Data. Dynamic Processes Mod-els. Forecasting

Distributed lag models: geometrically distributed lags, polynomial lags.Koyck transformation and estimation of geometrical lag's parameters. Polyno-mially distributed (Almon) lag (PDL). Autoregressive Distributed Lag (ADL)model. Common factor test. Partial adjustment. Adaptive expectations. Ca-gan hyperin�ation model estimation. M.Friedman's permanent income model:problems of estimation and analysis. Forecasts and prediction. Con�denceintervals. Salkever's method. Stability tests. Chow test of predictive fail-ure. Forecasts' quality indicators. Theil coe�cients. Causality in Economics:Granger test.

Chapter 11, Chapter 12 (12.6�12.8) (CD�3), Chapter 12 (12.1�12.6), Chapter 13 (13.5�13.7, Box 13.2) (CD�2), Chapters 17, 22(Gu), L.5 (OZ)

14. Time Series Econometrics: Nonstationary Time SeriesStationary and nonstationary time series. De�nitions and examples of sta-

tionary and nonstationary time series. Random walk. Drifts and trends. Conse-quences of nonstationarity. Spurious regressions. Detection of nonstationarity.Correlograms. Unit root tests. Cointegration. Fitting models with nonstation-ary time series. Detrending. Error-correction models.

Chapter 13 (CD�3), Chapter 14 (CD�2), Chapter 21 (Gu)

15. Panel Data ModelsIntroduction to panel data and economic examples. Random e�ects. Fixed

e�ects. Chapter 14 (CD�3), Chapter 13 (MKP), Chapter 16 (Gu)

ECONOMETRICS 193



1. Introduction to Econometrics. 8 2 2 42. Simple Linear Regression Model

(SLR). OLS-estimation.16 4 4 8

3. Multiple Linear RegressionModel (MLR): two explanatoryvariables and k explanatoryvariables.

30 8 8 14

4. Variables Transformations inRegression Analysis.

8 4 4 4

5. Dummy Variables. 16 4 4 86. Linear Regression Model

Speci�cation.16 4 4 8

7. Heteroscedasticity. 16 4 4 88. Stochastic Explanatory

Variables.8 2 2 4

9. Simultaneous Equations Models. 32 8 8 1610. Maximum Likelihood

Estimation.8 2 2 4

11. Binary Choice Models, LimitedDependent Variable Models.

24 6 6 12

12. Autocorrelated disturbanceterm.

16 4 4 8

13. Modelling with Time SeriesData. Dynamic ProcessesModels. Forecasting.

40 10 10 20

14. Time Series Econometrics:Nonstationary Time Series.

24 6 6 12

15. Panel Data Models. 8 2 2 4

Total: 270 68 68 134

194 THIRD YEAR

Public Sector Economics

Lecturer: Natalia V. RakoutaClassteachers: Natalia V. Rakouta, Natalia A. Khorkina, Vladimir A. Bragin

Course description

This course provides a basis for the economic analysis of public policy issues.It analyzes the role of public sector in the economic system, its functions,management techniques, the sources of current resources and the estimation ofresources' e�ciency.

The focus of the course is on the main parts of public �nance - taxationand spending. It is also examines issues related to the role of the state, publicchoice, management of public assets and liabilities, and �scal federalism.

The prerequisites of the course are intermediate microeconomics andmacroeconomics, economic policy theory, taxation theory, calculus.

Course objectives

The main aim of the course is in the development of analytical tools and theirapplication to key policy issues relating to the spending, taxing an �nancingactivities of government. After studying the course students should know maintheoretical concepts and models, be able to analyze the in�uence of taxationand public spending on the economy, discuss di�erent questions, connected withpublic sector economics, and solve problems.

Methods

During the course following methods and teaching forms are used:

• Lectures (2 hours per week)

• Classes (2 hours per week)

• Tutorials

• Self study tasks

• Writing and presentation of the essay.

In total the course consists of 36 hours of lectures and 36 hours of seminars.Student's self�independent study includes mastering of theoretical materials,publications about current economic problems (which are interconnected withpublic sector), answers to home tasks, and writing the essays.

PUBLIC SECTOR ECONOMICS 195

Main Reading

1. Atkinson, A. and J.Stiglitz, Lectures in Public Economics, McGraw�Hill,1980. /Ðóññêèé ïåðåâîä: Àòêèíñîí Ý.Á., Ñòèãëèö Äæ. Ëåêöèè ïîýêîíîìè÷åñêîé òåîðèè ãîñóäàðñòâåííîãî ñåêòîðà. Ì.: Àñïåêò Ïðåññ,1995 (AS).

2. Connolly, S. and A. Munro, Economics of the Public Sector. PrenticeHall Europe, 1999 (CM).

3. Stiglitz, J. Economics of the public Sector, (3rd ed.), Norton, 1999. /Ðóñ-ñêèé ïåðåâîä: Ñòèãëèö Äæ. Ýêîíîìèêà ãîñóäàðñòâåííîãî ñåêòîðà.Èçä�âî Ìîñêîâñêîãî óíèâåðñèòåòà: ÈÍÔÐÀ�Ì, 1997 (ST).

4. ßêîáñîí Ë.È. Ãîñóäàðñòâåííûé ñåêòîð ýêîíîìèêè. Ýêîíîìè÷åñêàÿòåîðèÿ è ïîëèòèêà. Ì.: ÃÓ�ÂØÝ, 2000 (ßÊ).


1. Auerbach and M. Feldstein, Handbook of Public economics. Vol. 1�2.(2nd ed.). North�Holland, 1990.

2. Barr, N. The Economics of the Welfare State, (3rd ed.), Oxford UniversityPress, 1998.

3. Brown, Ñ. and P. Jackson, Public Sector Economics. (4th ed.) Blackwell,1996.

4. Cullis, J. and P. Jones, Public Finance and Public Choice: AnalyticalPerspectives. London: McGraw�Hill, 1992.

5. Le Grand, J. and W. Barlett, eds. Quasi�Markets and Social Policy,Macmillan, 1993.

6. Hyman Public Finance: A Contrporary Application of Theory to Policy.(3rd ed.), 1990.

7. Kienzle, E. Study Guide and Readings for Stiglitz's Economics of thePublic Sector. (2nd ed.) W.W. Norton and Company, 1989.

8. Mueller, Public Choice - 2. Cambridge University Press, 1989.

9. Musgrave, R. and P. Musgrave, Public Finance in Theory and Practice.(5th ed.) McGraw�Hill, 1989.

10. Niskanen, W. Bureaucracy and Public Economics. The Locke institute,1994.

196 THIRD YEAR

11. Public Finance: Selected readings. Edited by R.W. Houghton, PenguinBooks, 1970.

12. Rosen, H. Public Finance. (2nd ed.), Irwin, 1988.

Internet Resources

1. http://www.aspe.spb.ru/

2. http://www.repec.org/

3. http://www.ippr.org.uk

4. http://www.nber.org/papers/

5. http://www.ce�r.ru/papers.html

6. http://www.iet.ru

Grade determination

The �nal mark consists of the marks for:

• Homework and participation in class activities � 20%

• Writing and presentation of the essay � 15%

• Midterm written examination � 25%

• Final written examination � 40%

Course Outline

Part 1. The Role of the State

1. Equity and E�ciency PrinciplesPareto e�ciency versus alternative criteria. Equity and e�ciency. De�ning

a social welfare function. Alternative theories of the role of the state. Verticalequity and horizontal equity. Redistribution and its e�ects. The Lorenz curve.

(ST chs. 3, 5; Barr chs. 3, 4, 6; AS ch.11; ßÊ ãë. 1, 3)


2. Market FailureThe �rst and the second fundamental theorems of welfare economics. Source

of market failure: competition failure, incomplete markets, information failure,externalities, public goods. The theory of externalities. Private bargainingsolutions versus government intervention. Pigovian taxes. Alternative govern-ment policies for pollution control. Coase theorem. The theory of public goods.E�ciency conditions for public goods. Lindahl equilibrium. Second�best prin-ciple.

(ST chs. 3, 4, 6; AS chs. 1 (� 1�2), 9, 16; ßÊ ãë. 1, 2)

3. Public ChoicePublic mechanisms for allocating resources: problems of eliciting preferences

and reconciling di�ering views. Majority voting: the median voter theory andthe voting paradox. Arrow's Impossibility Theorem. Special interest groups.Rent�seeking behaviour. Theory of bureaucracy. "Principal�agent" problem.Government failure.

(ST chs. 7, 8; AS ch. 10; ßÊ ãë. 4, 5)

Part 2. The economics of taxation

4. Introduction to TaxationTypes of taxes. The �ve desirable characteristics of a tax system. Tax

incidence in competitive and monopolised markets. DWL and price elasticity.Equivalent taxes.

(ST chs. 17, 19; AS chs. 2, 5; ßÊ ãë. 6)

5. Taxation and economic e�ciencyTaxation of products. Taxes and labour supply: taxes and the individual

budget constraint; income and substitution e�ects; non�linearities due to pro-gressive taxation. Taxation of capital. Taxes and savings: di�erent models ofsavings; national savings versus personal savings. Impact on risk taking. Taxesand investment: domestic and international issues. Achieving tax neutrality.E�ects of globalisation.

(ST ch. 18, 21, 23; AS chs. 6, 7; ßÊ ãë. 7, 8)

6. Optimal Taxation and Tax evasionOptimal commodity taxation: the Ramsey rule. Distributional considera-

tions. Modelling tax evasion. Policies to reduce tax evasion.(ST chs. 20, 25; AS chs. 12, 14; ßÊ ãë. 9)

198 THIRD YEAR

Part 3. The economics of spending

7. The Analysis of Expenditure PolicyAlternative forms of government intervention. Bene�ts in cash and in kind.

Interdependent preferences. Private sector responses to government programs.Income and substitution e�ects. Distributional consequences. Poverty trap.

(ST ch. 10; ßÊ ãë. 10)

8. Social Insurance, Welfare Programs and the Redistribution ofIncome

Information problems and the market for insurance. The role of social insur-ance. The case of unemployment insurance. Health care. Retirement pensions:funded and "pay�as�you�go" state pensions. E�ciency: e�ects on savings andretirement decisions. Approaches to income support. Welfare programs, tar-geting and incentives. Means�testing. The contributory principle. Integratingtaxes and bene�ts.

(ST chs. 14, 15; Barr chs. 5, 8, 9, 10, 12; ßÊ ãë. 10)

9. Cost�Bene�t AnalysisPrivate cost�bene�t analysis. NPV and IRR methods. Social cost�bene�t

analysis. Measuring non�monetized costs and bene�ts. Shadow prices andmarket prices. Discount rate for social cost�bene�t analysis. The evaluation ofrisk.

(ST ch. 10; AS ch. 15; ßÊ ãë. 12)

Part 4. Organization and management in public sector

10. Fiscal FederalismThe division of responsibilities. Principles of �scal federalism: club theory

and local public goods, Tiebout hypothesis. Production versus �nance. Theincidence applied to local public �nance. Capitalisation. Problems of multi�jurisdictional taxation.

(ST chs. 26, 27; AS ch. 17; ßÊ ãë. 13)

11. Managing the Public Sector's Assets and LiabilitiesPrivatisation: e�ciency and equity arguments about state intervention.

Forms of intervention. Public versus private ownership. Competition andquasi�markets. Regulation. Managing public sector liabilities: issues in do-mestic and external debt management.

(ST ch. 28; ßÊ ãë. 11)




1. Equity and E�ciency Principles 16 2 2 82. Market Failure 10 2 2 63. Public Choice 18 4 4 104. Introduction to taxation 10 2 2 85. Taxation and economic e�ciency 17 4 4 96. Optimal Taxation and Tax

evasion14 2 2 10

7. The Analysis of ExpenditurePolicy

18 4 4 10

8. Social Insurance, WelfarePrograms and the Redistributionof Income

18 4 4 10

9. Cost�Bene�t Analysis 18 4 4 1010. Fiscal Federalism 14 2 2 1011. Managing the Public Sector's

Assets and Liabilities11 2 2 7

Total: 162 32 32 98

200 THIRD YEAR

History of Economic Thought

Lecturer and classteacher: Revold M. Entov

Course description

History of Economic Thought is a one�semester course for the third�year stu-dents. The course is taught in Russian and English.

Course objectives

The purpose of the course is to give the audience an overview of the growthand development of the economic thought. Studying the history of economictheory is helpful for understanding of the modern economic problems and thelogic of the evolution of Economics.

Methods



• classes (8 hours per semester)

• teacher's consultations

• self�study

• essay writing

In total the course includes 60 hours of lectures and 8 hours of classes.Self�study is the main method of study in the course.

Main Reading

1. M. Blaug, �Economic Theory in Retrospect�, 5�th ed. Cambridge Uni-versity Press 1991. (Russian translation: Ì. Áëàóã. �Ýêîíîìè÷åñêàÿòåîðèÿ â ðåòðîñïåêòèâå�. Ìîñêâà. Äåëî.1994)

2. R. Ekelund, R. Hebert, �A History of Economic Theory and Method�.McGraw Hill Publ. Co. 1990

3. T. Negishi, �History of Economic Theory�. North�Holland, 1989. (Rus-sian translation: Ò. Íåãèøè. �Èñòîðèÿ Ýêîíîìè÷åñêîé Òåîðèè�.Ìîñêâà. Àñïåêò ïðåññ. 1995.)

HISTORY OF ECONOMIC THOUGHT 201

4. J. Schumpeter, �A History of Economic Analysis�. Oxford UniversityPress, 1954.

5. G. Stigler, �Production and Distribution Theories: the Formative Period�.Macmillan, 1941.

6. �Èñòîðèÿ ýêîíîìè÷åñêèõ ó÷åíèé� Ó÷åáíîå ïîñîáèå Ïîä. Ðåä. Â.Ñ.Àâòîíîìîâà, Î.È. Àíàíüèíà, Í.À. Ìàêàøåâîé Ìîñêâà Èíôðà�Ì 2000


1. Â. Øòåéí. Ãóàíü Öçû: èññëåäîâàíèå è ïåðåâîä. ÌîñêâàÈçäàòåëüñòâî âîñòî÷íîé ëèòåðàòóðû 1959

2. Plato. �Protagor�. (vol.1) �State�. (vol.3) (Russian translation: Ïëàòîí.�Ïðîòàãîð� (ñî÷., ò. 1), �Ãîñóäàðñòâî� (ò. 3(1))).

3. Aristotle. �Nichomachus' Ethics�(Russian translation: Àðèñòîòåëü. �Íè-êîìàõîâà Ýòèêà� (ñî÷., ò. 4))

4. T. Aquinas �Summa Teologica� (Russian translation: Ôîìà Àêâèíñêèé�Ñóììà òåîëîãèè� Êèåâ Ýëüãà 2002)

5. K. Pribram �A History of Economic Reasoning� John Hopkins UniversityPress 1983

6. �Ìåðêàíòèëèçì�. Ëåíèíãðàä.1935.

7. A. Murphy. � R. Cantillon�. Oxford. 1986.

8. Ô. Êåíý. �Èçáðàííûå ýêîíîìè÷åñêèå ïðîèçâåäåíèÿ�. Ìîñêâà. 1960.

9. W. Petty �The Economic Writings of Sir W. Petty� 2 vols. A. Kelly1963 (Russian translation: Â. Ïåòòè. �Ýêîíîìè÷åñêèå è ñòàòèñòè÷åñêèåðàáîòû�. Ìîñêâà. 1940).

10. A. Smith, �Wealth of Nations� Modern Library 1937. (Russian transla-tion: À. Ñìèò, �Èññëåäîâàíèå ïðèðîäû è ïðè÷èí áîãàòñòâà íàðîäîâ�.Ìîñêâà, 1962.)

11. D. Ricardo. �On the Principles of Political Economy and Taxation�(Russian translation: Ä. Ðèêàðäî. �Íà÷àëà ïîëèòè÷åñêîé ýêîíîìèèè íàëîãîâîãî îáëîæåíèÿ�. Ñî÷èíåíèÿ. Òîì 1. Ìîñêâà. 1955)

12. T. Malthus. �Principles of Political Economy Considered with a View totheir Practical Application� Marray 1820

202 THIRD YEAR

13. T. Malthus �An Essay on the Principle of Population as it A�ects theFuture Improvement of Society. . . � (Îòðûâîê â ðóññêîì ïåðåâîäå â�Àíòîëîãèÿ ýêîíîìè÷åñêîé êëàññèêè� ò.2 Ìîñêâà Ýêîíîâ 1993)

14. J. S. Mill �Principles of Political Economy� (Russian translation: Äæ.Ñò. Ìèëëü. �Îñíîâû ïîëèòè÷åñêîé ýêîíîìèè�, ò. 1. Ìîñêâà Ïðîãðåññ1980.)

15. Æ. Ñ. Ñèñìîíäè, �Íîâûå íà÷àëà ïîëèòè÷åñêîé ýêîíîìèè�. Ìîñêâà,1937.

16. Ê. Ìàðêñ, �Êàïèòàë�, ò.1

17. M. Morishima �Marx's Economics: A Dual Theory of Value and Growth�Cambridge University Press 1973

18. Ô. Ëèñò �Íàöèîíàëüíàÿ ñèñòåìà ïîëèòè÷åñêîé ýêîíîìèè�. ÑÏá., 1981.

19. Â. Ðîøåð, �Íà÷àëà íàðîäíîãî õîçÿéñòâà�. Ìîñêâà, 1860;

20. Ã. Øìîëëåð, �Íàðîäíîå õîçÿéñòâî, íàóêà î íàðîäíîì õîçÿéñòâå è ååìåòîäû�. Ìîñêâà, 1902.

21. À. Cournot �Researches into the Mathematical Principles of the Theoryof Wealth� McMillan 1897

22. �Àâñòðèéñêàÿ øêîëà â ïîëèòè÷åñêîé ýêîíîìèè� Ìîñêâà. 1992;

23. Å. Áåì�Áàâåðê �Êàïèòàë è ïðèáûëü� Ñïá. 1909.

24. W. Jevons, �The Theory of Political Economy� 5th edition McMillan 1957

25. L. Walras, �Elements of Pure Economics�. Irwin 1954 (Russian trans-lation: Ë. Âàëüðàñ �Ýëåìåíòû ÷èñòîé ïîëèòè÷åñêîé ýêîíîìèè èëèòåîðèÿ îáùåñòâåííîãî áîãàòñòâà� Ìîñêâà Ýêîíîìèêà 2000)

26. A. Marshall �Principles of Economics� (Russian translation: À.Ìàðøàëë, �Ïðèíöèïû ïîëèòè÷åñêîé ýêîíîìèè�, ò.2. Ìîñêâà Ïðîãðåññ1983).

27. J. Clark �The Distribution of Wealth� (Russian translation: Äæ. Êëàðê,�Ðàñïðåäåëåíèå áîãàòñòâà�. Ìîñêâà Ýêîíîìèêà 1992).

28. T. Veblen. �The Theory of the Leisure Class�. (Russian translation: Ò.Âåáëåí �Òåîðèÿ ïðàçäíîãî êëàññà�. Ìîñêâà Ïðîãðåññ 1984).

29. Ä. ÌàêÊëîñêè, �Ïîëåçíî ëè ïðîøëîå äëÿ ýêîíîìè÷åñêîé íàóêè�.�Òåçèñ�, ò.1, âûï. 1, (1993 ã.).


30. R. Frisch, �K.Wicksell: a Cornerstone in Modern Economic Theory�. Oslo1951

31. I. Fisher �The Theory of Interest� McMillan 1930

32. J.M.Keynes, �General Theory of Employment, Interest and Money.�McMillan 1936. (Russian translation: Äæ. Ì. Êåéíñ, �Îáùàÿ òåîðèÿçàíÿòîñòè, ïðîöåíòà è äåíåã� (ðàçëè÷íûå èçäàíèÿ)).

33. À. Leijonhufvud, �On Keynesian Economics and the Economics ofKeynes�. NY, 1968.

Grade determination

Written exam is set in the end of the semester. Final grade in based on theresults of the exam and essay. The exam grade gives 60% of total grade, andessay and its presentation at a seminar give 40% of total grade.

Course Outline

1. The topic and purpose of the courseThe importance of original sources. The structure of Economic Theory and

models of scienti�c knowledge growth.(Main reading: [3] Ch.1, Supplementary reading: [29])

2. Economic thought of Ancient ChinaEconomic ideas of confusianstvo. The role of state regulations. Principles

of economy's balancing.(Supplementary reading: [1])

3. The particular qualities of antic social�economic teachings.Public values and principles of division of labour. The role of housekeeping.

Platon's economic system of state. Trade and role of money.(MR: [4] t.1 part 2, Ch.1; SR: [2])

4. Aristotle's economic theoryCommon principles of analysis. Private and state property. Aristotle's value

theory. His role in the later development of economic theory.(SR: [3]; MR: [4] t.1 part 2, Ch. 1)

5. Economic thought in the Middle AgesThe in�uence of the Early Christianity and scholastics. The logics of scholas-

tic analysis. The evolution of the concepts of money, value, usury and market.The concept of fair price.

(MR: [4] t.1 part 2, Ch. 2; SR: [4], [5])

204 THIRD YEAR

6. MercantilismThe development of the international market and formation of the trade

and payment balances. The correlation between Nationalism and Liberalism:economic aspects of the problem. The crisys of mercantilism theory and policy.

(MR: [4] t.1, part 2 Ch.7, SR: [6])

7. Economic theory of PhysiocratsAn attempt to de�ne labour productivity and production e�ciency.

�Tableau Economique�of Canais: a model of goods and money �ows. Devel-opment of the theory of value. The principles of economic policy.

(MR: [4] t.1, part 2 Ch.4; SR: [8])

8. Cantillion's Theory: an insightful sketch of General Equilib-rium Theory

General Structure of economy: Cantillion's scheme. The importance of landand labour. Cantillion's theoretical model. The concept of �land value�.

(MR: [4] t.1 part 2, Ch.4; SR: [7])

9. English economic theory before Smith.Empirical method in Economic Theory. �Political Arithmetic� of W. Petty.

The problem of money in the works of Petty and Lock. The search for sourcesof value. �Demand laws� of H. King and Ch. Dovenut.

(MR: [4] t.1 part 2, Ch.4; SR: [9])

10. Classical school of Political EconomyIdiosyncrasies of the school's method. Studies of the nature and reasons

of wealth of nations. Analysis and classi�cation of production factors. Theconcept of �homo economicus�. �Natural Law� and private property. The im-portance of utility (Bentham). An attempt to create a non�contradictionarytheoretical scheme. Traditions of classical school and neoclassic theory.

(MR: [3] Ch.3, [1] Ch.2)

11. Smith's economic theoryA relation between moral philosophy and economic theory: normative and

positive concepts. Division of labour: the importance and limitations. Marketprice and �natural price�. Creation of integral theory of value. Competition andMonopoly. The image of invisible hand and future development of the theory.

(SR: [10]; MR: [1] Ch.2)

12. Ricardo's economic modelRicardian model of the market system: a general overview. The theory of

value. Labour and non�labour income: a distribution system . Internationaldivision of labour and relative advantages. The theory of Finance, �Ricardo'sprinciple�, tax exertion problems. Ricardian traditions in Economic Theory.

(SR: [11]; MR [1] Ch.4)


13. Th. Malthus: a search for general theory of accumulationand population

Demographical problems in Economic Theory: the role of Th. Malthus.Malthus's value theory. A search for valid methods in economic analysis:Malthus and Ricardo. Capital accumulation and consumption.

(SR: [12], [13]; MR [1], Ch.3)

14. The problems of money and credit relations in English Polit-ical Economy in XVIII�XIX centuries

Historical conditions of forming �Quantity theory of money�. Problems ofmoney circulation in Lokk's and Um's works. Credit money and market equi-librium . The �natural� interest rate: the theoretical discussions. Thornton'smodel. The principles of money�and�credit policy.

(MR: [3] Ch.2, [4] t.2, part 3 Ch.7)

15. G. S. Mille: the attempt of classical theory synthesisMille's theoretical system: structure, logic and limitations. The crisis of

classical school; classical and neo�classical analysis Mille's concepts. Theoret-ical discussions about the sources of market imbalance and nature of marketregulation mechanisms.

(SR: [14])

16. Opposition to the classical school: Sysmondi and socialistsSen�Simon's attempt to comprehend the nature of �industrialism�. Political

economy as a social management science: Sysmondi's approach. The problemof capital overaccumulation: how realistic is Say's model? Deductive and In-ductive methods in Economics. The nature of economic utopia.

(SR: [15]; MR: [4] t.1, part 3. Ch.3)

17. Economic Theory of K.MarxCan Marx be considered as a representative of the classical school? Marxian

theory as the political economy of growing social con�ict. Main assumptionsof the theory of surplus value. Developing dynamic models: gains and losses.Some results of revolutionalist experiments: theory and practice of Marxism.

(SR: [16], [17]; MR: [3] Ch.6)

18. The Historic SchoolThe problem of economic revolution: the role of institutions. The old his-

toric school as a reaction on �excess rationalism� of classical foundations. �Eco-nomic person� in the framework of the historic school

Ways of development of the historic school. Schmoller and �Methoden-streit�. Schemes of periodization of economic history. The concept of �Nationaleconomy� and problems of economic policy. �The crisis of economic theory�and ways to get over it recommended by the historic school.

(SR: [18], [19], [20]; MR: [4] t.3, part 4, Ch.4)

206 THIRD YEAR

19. The Historic School

20. The role of Mathematical Methods in Economic Investiga-tions

The response of the economic theory on the achievements of science. O.Cournot on the method of economic investigation. The concept of economicequilibrium. The analysis of the monopoly and oligopoly. The concept ofconsumer surplus.

(SR: [21], MR: [3] Ch. 7)

21. Austrian schoolGossen and the sources of �marginalize revolution�. Karl Menger's core

methodological principles. Revolution in the value theory. Role of utility func-tion. Value of consumer goods. Imputable value and value of capital goods.

Capital and interest rate in the Bohm�Bowerk's theoretical system. Friedrihvon Wieser: antinomy included in value. Historical evolution of Austrian ver-sion of marginalism.

(SR: [22], [23], [31]; MR: [2] Ch.21, [5])

22. William Jevons: theory of political economyPeculiarities of Jevons' macroeconomics concept. Theoretical model of ex-

change. Jevons vs Ricardo. Function of utility and costs in value determinationprocess. Capital theory. Jevons' empirical investigations.

(SR: [24], MR: [3] Ch.9, [5])

23. General equilibrium model: Leon WalrusPeculiarities of Walrus' analytical method. Elements of general equilibrium

model. Walrus's law. Equilibrium: existence and stability. Further evolutionof general equilibrium models: Hicks and Arrow - G. Debre.

(SR: [25]; MR: [3] Ch.7 [5])

24. Partial equilibrium models: Alfred MarshallRole of the empirical tradition in the development of the English economic

school. Marshall's conception as a reaction on the Austrian subjectivism andvulgar ricardianism. Neoclassical synthesis. Partial equilibrium method. Newdevelopments in value theory. Consumer surplus and producer surplus. Theoryof welfare.

(MR: [3] Ch. 10, [5]; SR: [26])

25. Principles of factor market pricing: John Bates ClarkGood's utility as the aggregate of consumer characteristics. Developing

the theory of marginal productivity as the �nal stage of forming the marginalconcept. The law of 3 rents. Static and dynamic analysis in the theory of Clark.

(SR: [27]; MR [5], [4] t.3, part 4, Ch.5, � 7)


26. American institutionalismThe notes of Veblen about speci�c features of social and economic research.

The impact of the institutions on behaviour of economic agents. The formsof interactions of technological and �ritual� institutions. Relationship betweenindustry and commerce. The theory of J. Commons. The legislation's role forthe economy.

(SR:[28]; MR: [1] Ch.17)

27. Economic theory of K. WicksellRelation of microeconomics and macroeconomics in the theory of Wicksell.

Theorem of �depletion�. Monetary theory of Wicksell. Capital and interest rate,the e�ect of the real interest rate. Dynamics in Wicksell's models. The impactof cumulative processes. K.Wicksell and developing of Stockholm School.

(SR: [30] Ch. 1�2; MR: [2], Ch.20)

28. Keynesian revolutionSocial and economic conditions which had been prepared the appearance of

non�equilibrium macroeconomic theory. The evolution of Keynes' position.Monetary theory of Keynes. The principles of Keynesian model. Interac-tion of aggregate demand and aggregate supply in this model. Mechanismsof multiplier�accelerator. The impact of investment. Recommendations foreconomic policies.

(SR:[32], [33]; MR: [1], Ch.16)



1. The topic and purpose of thecourse

6 2 4

2. Economic thought of AncientChina

6 2 4

3. The particular qualities of anticsocial-economic teachings.

6 2 2 2

4. Aristotle's economic theory 6 2 45. Economic thought in the Middle

Ages6 2 4

6. Mercantilism 6 2 2 27. Economic theory of Physiocrats 6 2 48. Cantillion's Theory: an

insightful sketch of GeneralEquilibrium Theory

6 2 4

9. English economic theory beforeSmith.

6 2 2 2

208 THIRD YEAR


10. Classical school of PoliticalEconomy

6 2 4

11. Smith's economic theory 6 2 412. Ricardo's economic model 6 2 2 213. Th. Malthus: a search for

general theory of accumulationand population

6 2 4

14. The problems of money andcredit relations in EnglishPolitical Economy in XVIII-XIXcenturies

6 2 4

15. G. S. Mille: the attempt ofclassical theory synthesis

6 2 2 2

16. Opposition to the classicalschool: Sysmondi and socialists

6 2 4

17. Economic Theory of K.Marx 6 2 418. The Historic School 6 2 2 219. The role of Mathematical

Methods in EconomicInvestigations

6 2 4

20. Austrian school 6 2 421. William Jevons: theory of

political economy6 2 2 2

22. General equilibrium model: LeonWalrus

6 2 4

23. Partial equilibrium models:Alfred Marshall

6 2 4

24. Principles of factor marketpricing: John Bates Clark

6 2 2 2

25. American institutionalism 6 2 426. Economic theory of K. Wicksell 6 2 427. Keynesian revolution 6 2 2 2

Total: 162 54 18 90

POLITICAL SCIENCE 209

Political Science

Lecturer and classteacher: Valeri G. Ledyaev

Course description

The aim of the course is to give students basic knowledge of politics and gov-ernment. In the �rst section of the course we will analyse major approachesto studying politics and basic political concepts. In the second section of thecourse we will focus on political values and ideologies. Topics covered in thethird part of the course include political power and major political institutions(parties, preassure groups, elections, etc.). The last section examines politicalregimes and transition to democracy. Throughout the course we will discussmajor themes and issues in Russian politics.

The course is taught in Russian and in English.

Course objectives

By the end of this course the students will have learned about

• basic political concepts (politics, power, authority, state, government,political regime, democracy, political culture etc.)

• major theories of politics and ideologies (Marxism, elitism, pluralism,liberalism, conservatism, socialism)

• political values (freedom, equality, justice, etc.)

• contemporary political systems

• political process in modern Russia

Methods

The following methods of teaching will be used:



• participant presentation

• teacher's consultations

• small group work

• essay writing

210 THIRD YEAR

• self�study

Main Reading

1. Tansey S. Politics: The Basics. 2nd ed. L., 2000 (T).

2. Ïîëèòîëîãèÿ: ó÷åáíèê /Ïîä ðåä. Ì.À. Âàñèëèêà. Ì., 2003 (Ï).

3. Ïîëèòè÷åñêèé ïðîöåññ: îñíîâíûå àñïåêòû è ñïîñîáû àíàëèçà (Ïîäðåä. Ìåëåøêèíîé Å.Þ. Ì., 2001 (Ì).

4. Birch A.H. The Concepts and Theories of Modern Democracy. L., 1999(Â).

5. Politics UK. L., 1998 (UK).

6. Hague R. and Harrop M. Comparative Government and Politics. L., 1987(HH).


1. Barry N. (ed.) An Introduction to Modern Political Theory. L., 1984.

2. The Blackwell Encyclopaedia of Political Thought /Ed. by David Milleret al. Oxford, 1995.

3. A Companion to Contemporary Political Philosophy /Ed. by Robert E.Goodin and Philip Pettit. Oxford, 1995.

4. A New Handbook of Political Science /Ed. by Goodin R.E., KlingemannH.�D. NY, 1996.

5. The Oxford Companion to the Politics of the World. Oxford, 1993.

6. Marsh D. and Stoker G. Theory and Methods in Political Science. L.,1995.

Internet Resources

1. http://plato.stanford.edu/contents.html

2. http://www.politstudies.ru

3. http://www.proetcontra.ru

4. http://www.jstor.org

5. http://www.gov.ru


Grade determination

Course grade consists of three parts:

• �nal exam (50%)

• essay (25%)

• classes (25%)

Course Outline

Part I. Politics and political science

1. Politics as a subject of study.Politics as a subject of study. Origin of political science. History of the dis-

cipline. Political science in Russia. Structure and methods of political science.Political science and other social sciences. Reasons for studying politics in uni-versities. Major themes and issues in the study of Russian politics. Perspectivesin political science. Di�erent approaches in the study of politics. Normativeapproach. Institutionalism. Behavioralism. Structural functionalism. Rationalchoice theory. New institutionalism. Post�modernism.

T (4�23); Ï (6�40).

2. Terms of political discourse.Conceptual framework. Basic problems in de�ning political concepts. Idea

of essential contestedness of political concepts. Basic political concepts. Pol-itics. Policy. Polity. Political actor. Political institutions. Political system.Political process. Government. Political values. Power, its forms, bases anduses. Force, coercion, inducement, persuasion, manipulation, authority. Powerand control. Power and domination. Political and economic power.

Ëåäÿåâ Â.Ã. Ïîëèòèêà è âëàñòü êàê îáùåñòâåííûå ÿâëåíèÿ// Ïîëèòîëîãèÿ /Ïîä ðåä. Â.È. Áóðåíêî è Â.Â. Æóðàâëåâà.Ì., 2004. 64�71; Ëåäÿåâ Â.Ã. Î ñóùíîñòíîé îñïàðèâàåìîñòèïîëèòè÷åñêèõ ïîíÿòèé // Ïîëèñ. 2003. � 2.

Part II. Political values and ideologies

3. Human nature and politics.Concept of human nature. Man as a political animal (Aristotle). Man in

a �natural� state (Hobbes, Locke, Rousseau). Man as a set of social relations(Marx). �Pessimistic� vs �optimistic� view of human nature. Rational and irra-tional in human nature. Modern explanations of human nature: psychoanalyst

212 THIRD YEAR

tradition (S. Freud, G. Marcuse, E. Fromm) and existentialism (J.P. Sartre).Human nature and political arguments.

UK (83�85); T (49�50); Àëåêñååâà Ò.À. Ñîâðåìåííûå ïîëèòè-÷åñêèå òåîðèè. Ì., 2000 (58�75).

4. Political authority and legitimacy.Concept of authority. Main traditions in de�ning authority. De jure au-

thority and de facto authority. In authority and an authority. Authority andcoercion. Authority and persuasion. Authority and power. Forms of authority.Personal authority. Traditional authority. Legal authority. Institutionalisationof authority. Political authority. Political authority and political power. Dom-ination. Authority and legitimacy. Legitimacy of di�erent political regimes.Challenges to political authority. Crisis of legitimacy. Rejection of politicalauthority. Anarchism.

T (50�56); Â (28�42); Ëåäÿåâ Â.Ã. Ãîñïîäñòâî // Áîëüøàÿðîññèéñêàÿ ýíöèêëîïåäèÿ. Ò. 5.

5. Freedom.Conceptions of freedom in the history of political thought (Plato, T. Hobbes,

J. Locke, J.�J. Rousseau, I. Kant, J.S. Mill). Liberalism and freedom. Nega-tive vs positive freedom. Freedom and necessity. Freedom and responsibility.Freedom and equality. Freedom and democracy. Personal freedom and freesociety. Conditions of freedom. Freedom and law. Political rights and liberties.Political freedom and political regime.

UK (85�87); Â (95�134).

6. Equality.Conceptions of equality in the history of political thought. Equality and

inequality. Egalitarianism. Human nature and equality. Foundational equality.�All men are created equal�. Left and right interpretations of equality. Formsof equality and inequality. Equality of outcome. Equality of opportunity. So-cial equality. Natural inequalities and social inequality. Economic equality.Political equality and political inequality. Liberal equality. Democratic equal-ity. Decentralisation of political and economic power and equality. Genderinequality. Racial inequality. Reverse discrimination.

Barry N. An Introduction to Modern Political Theory. L., 1984(169�190); Gutmann A. Equality // Blackwell Encyclopaedia of Po-litical Thought. Blackwell, 1995 (136�139).

7. Justice.Social justice. Distributive justice. Procedural justice. Principles of justice.

�From each according to his ability, to each according to his needs� (Marx).Merit and desert as principles of just distribution of goods and services. Util-itarianism and justice. Rawls' theory of justice. Justice as fairness. Com-munitarianism, libertarianism and anarchism against Rawls' theory of justice.


Theory of minimal state (R. Nozick). F. Hayek on totalitarian potential ofsocial justice theories.

Àëåêñååâà Ò.À. Ñîâðåìåííûå ïîëèòè÷åñêèå òåîðèè. Ì., 2000.Ñ. 136�168; Ðåàëå Äæ. è Àíòèñåðè Ä. Çàïàäíàÿ ôèëîñîôèÿ îòèñòîêîâ äî íàøèõ äíåé. Ò. 4. Ì., 1994 (759�768).

8. Political ideologiesConcept of ideology. Basic theories of ideology (K. Marx, K. Mannheim,

K. Popper). Ideology and political theory. Functions of political ideologies.Classi�cation of ideologies. The future state of ideologies. Liberalism. Clas-sical and modern liberalism. Variations in modern liberalism. Libertarianism.Conservatism. Traditionalism and fundamentalism. Thatcherism. Christiandemocracy. New Right. Socialism and communism. Classical and modernMarxism. Leninism. �Command socialism�. Revisionism. Social democracy.Market socialism. Ethical socialism. Communitarianism. Fascism and right�wing ideologies. Italian fascism and German national�socialism. Modern fas-cism and nazism. Islamic fundamentalism. Left radicalism. Feminism. Ecologyas political radicalism. Anarchism.

Ï ( 406�447); T (70�103).

9. Political culturePolitical culture as a subject of study. The structure of political culture.

Procedural and substantial aspects of political culture. Political attitudes andorientations. Political socialisation. Political culture and political institutions.Political culture and political change. Types of political culture. Parochial cul-ture, subject culture, participant culture and their combinations. Civic culture.Dominant culture and subcultures. Homogeneous and fragmented political cul-tures. Western and oriental political culture. �Clash of civilisations�.

Ï (363�386); HH (71�87).

10. Political values and ideology in Russia: continuity and changeDominant political culture in Russia: continuity and change. Historical,

geographical, religious and other factors of Russian politics and culture. Polit-ical culture and ideology in the USSR. Political ideologies in modern Russia.Liberalism. Ideology of Russian communists. Decline of communist ideology.Variations of conservatism in modern Russia. Ideology of power elite. Socialcleavages, ideological pluralism and lines of political con�ict in modern Rus-sia: market economy vs state economy, democracy vs authoritarianism, elitismvs egalitarianism, modernisation vs traditionalism, orientation to the West vsnational priorities. Political subcultures in Russia. Political culture and per-spectives of liberal democracy in Russia.

Ìàëèíîâà Î.Þ. Èññëåäîâàíèÿ ïîëèòè÷åñêîé êóëüòóðû. Ì.,2002 (55�74); ßñèí Å. Ïðèæèâåòñÿ ëè äåìîêðàòèÿ â Ðîññèè.Ì., 2005 (219�233).

214 THIRD YEAR

Part III. Power and political institution

11. Classical and modern theories of political powerTwo main traditions in de�ning political power. �Sectional� (zero�sum)

view of power (T. Hobbes, M. Weber, H. Lasswell and A. Kaplan, R. Dahl).Alternative views on power (T. Parsons, H. Arendt, M. Foucault). Power andpolitical power. Basic forms of political power. Political coercion. Political au-thority. Political in�uence. Multi�dimensional view of power (S. Lukes). Powerand decision�making. Power and non�decisionmaking. Political manipulation.Disciplinary power (M. Foucault). Distribution of political power in modernsociety. Marxist theory of power. Social class and political power. Economicpower and political power. Classical and modern pluralism. Pluralism andcorporatism. Modern elitism. Empirical studies of political elites in Russia.

B (137�159); Marsh D. and Stoker G. Theory and Methods in Po-litical Science. L., 1995 (208�286); Êðûøòàíîâñêàÿ Î. Àíàòîìèÿðîññèéñêîé ýëèòû. Ì., 2005 (218�366).

12. Political representationRepresentation in politics. Models of political representation. Basic rep-

resentative institutions. State as a representative institution. Representativefunctions of political elites. Political parties. Pressure groups. Articulationand aggregation of interests. Classi�cation of parties and pressure groups. Po-litical participation. Forms of political participation. Absenteeism. Votingbehaviour. Rational and irrational in voting behaviour. Sociological theoriesof voting behaviour. Party identi�cation theory. Theories of rational votingbehaviour. Ideology and voting behaviour. Issue voting. Retrospective voting.

Ï (386�405); HH (114�137); M (152�190).

13. Political institutions in RussiaOrigin and evolution of political parties in Russia. Modern party system.

Classi�cation of political parties in Russia. �Party of power�. Pressure groups.Business groups in politics. Corporatism. Political participation in Russia.Sociological characteristics of political participation. Forms of participation inRussia. Voting behaviour. Explanatory power of western theories of votingbehaviour in the study of Russian politics.

Ï (291�297, 352�362, 401�405).

Part IV. Political regimes and transition to democracy

14. Political regimesConcept of political regime. Basic elements of political regime. Classi�-

cations of political regimes. Totalitarian regimes. Sources of totalitarianism.


Origin of totalitarianism. Fascist and communist totalitarian regimes. Post�totalitarian regimes. Sovietological theories of political regime in the USSR.Authoritarian regimes. Types of authoritarianism. Absolute monarchy. Mili-tary regimes. Bureaucratic regimes. Oligarchy. Populist regimes. Sultanisticregimes. Authoritarianism and economic growth.

Ò (152�163); Ï (231�271).

15. Transition to democracyConcept of democracy. Direct and representative democracy. Modern the-

ories of democracy. Procedural democracy. Polyarchy as modern democracy.�Waves of democratisation�. The third wave. Economic, social and politicalpreconditions of democracy. Stages of democratic transitions. Liberalisation,democratisation, consolidation. Democratisation and globalisation. Global un-democratic wave. Non�liberal democracies. �Defect democracies�. Perspectivesof democracy.

Ï (458�480); The Oxford Companion to the Politics of the World.Oxford, 1993 (220�227).

16. Evolution of political regime in Russia.Absolute monarchy in Russia. Changes in political regime in 1905�1917.

October revolution and the origin of totalitarianism in Russia. Political regimeunder Stalin. Khruschev's �spring� and Brezhnev's �stagnation�. �Perestoyka�and democratisation in Russia. Transformation of political regime after 1991.Political regime under Yeltsin and Putin. Authoritarian tendencies after 2000.Perspectives of liberal democracy in Russia.

Áàëçåð Õ. Óïðàâëÿåìûé ïëþðàëèçì: ôîðìèðóþùèéñÿ ðåæèìÂ. Ïóòèíà // Îáùåñòâåííûå íàóêè è ñîâðåìåííîñòü. 2004. �4;Ìåðêåëü Â., Êðóàññàí À. Ôîðìàëüíûå è íåôîðìàëüíûå èíñòèòó-òû â äåôåêòíûõ äåìîêðàòèÿõ // Ïîëèñ. 2002. � 1�2.



1. Politics as a subject of study 16 4 4 82. Terms of political discourse 12 4 2 63. Human nature and politics 4 2 44. Political authority and

legitimacy4 2 4

5. Freedom 4 2 46. Equality 4 2 47. Justice 4 2 48. Political ideologies 16 6 2 8

216 THIRD YEAR


9. Political culture 8 4 410. Political values and ideology in

Russia: continuity and change8 4 4

11. Classical and modern theories ofpolitical power

24 6 6 12

12. Political representation 12 6 613. Political institutions in Russia 8 4 614. Political regimes 8 4 615. Transition to democracy 4 2 616. Political regime in Russia 8 4 4

Total: 162 36 36 90

ECONOMIC HISTORY 217

Economic History

Lecturer: Rustem M. NureevClassteachers: Rustem M. Nureev, Yuriy V. Latov

Course description

The Economic History is a one semester course for forth year students.The course is taught in Russian. The students are studying for Russian de-

gree in Economics, but knowing English terminology through reading in Englishis also required.

Course objectives

The purpose of the course is to give students a thorough understanding ofthe economic development of mankind in historical dynamics and geographicalvariety. This course is devoted to the study pre�industrial, industrial and post�industrial societies.

Methods



• classes (1 hours a week, the main problems of home assignments arediscussed);

• paper in Russian (1 per semester);

• presentation of paper;


• self�study.

In total the course includes 32 hours of lectures, 16 hours of classes. Self�study is the main method.

Main Reading

Textbooks:

1. Atack J., Passel P. A New Economic View of American History: formColonial Time to 1940. 2�nd ed. W.W.Norton&Co. 1994.

218 THIRD YEAR

2. Baines D.E. Economic history. L.: University of London, 1996.

3. Bently and Ziegler Traditions and Encounters: A Global Perspective onthe Past. McGraw�Hill, 2000. ISBN: 0�07�243160�1.

4. Bulliet, Crossley, Headrick, Hirsch, Johnson and Northurp. The Earthand its Peoples. Houghton Mi�n, 2001. ISBN: 0�618�00073�0.

5. Chandler A.D., Jr. Scale and Scope. The Dynamics of Industrial Capi-talism. Ñambridge, Mass.: Harvard University Press, 1990.

6. The Economic History of Britain since 1700. Ed. by Floud R. and Mc-Closkey D. Second edition. vol. 1: 1700�1860; vol. 2: 1860�1939; vol. 3:1939�1992. Cambridge University Press, 1994.

7. Gregory P.R., Stuart R.S. Russia and Soviet Economic Performance andStructure. 6th ed., 1998.

8. Hobsbawm E. Industry and Emire 1850 - 1950. Penguin, any print-ing 1969�1986 (èëè ðóñ. èçäàíèå 3�õ òîìíèêà: Õîáñáàóì Ý. Âåêðåâîëþöèè 1789 - 1848, Âåê êàïèòàëà 1848� 1875; Âåê èìïåðèé 1875�1914 Ðîñòîâ�íà�Äîíó, 1999).

9. Kenwood A.L. The growth of the International Economy, 1820�1980. 2�nd (1983) or latest ed. Allen&Unwin.

10. McCloskey, Donald N. (1987). Econometric History. London: MacMillian

11. More C. The Industrial Age. Economy and Society in Britain, 1750�1985.Longmans, 1985.

12. Sterns, Adas, Schwartz and Gilbert. World Civilizations. The Global Ex-perience. Addison/Wesley/Longman, 2001. ISBN: 0�321�03819�3 vol.1.

13. Áðîäåëü Ô. Ìàòåðèàëüíàÿ öèâèëèçàöèÿ, ýêîíîìèêà è êàïèòàëèçì /Ïåð ñ ôðàíö.: Â 3 ò. Ì., 1986�1992.

14. Âàí äåð Bee Ã. Èñòîðèÿ ìèðîâîé ýêîíîìèêè. 1945�1990. Ì., 1994.

15. Ãëîâåëè Ã.Ä. Èñòîðèÿ ìèðîâîé ýêîíîìèêè. Ì.: ÑÃÓ, 1997.

16. Ãëîâåëè Ã.Ä. Èñòîðèÿ ýêîíîìèêè Ðîññèè. Ì.: ÑÃÓ, 1997.

17. Ãóñåéíîâ Ð. Èñòîðèÿ ýêîíîìèêè Ðîññèè. Íîâîñèáèðñê, 1998.

18. Äèäåðèêñ Ã.À. è äð. Îò àãðàðíîãî îáùåñòâà ê ãîñóäàðñòâó âñåîáùåãîáëàãîñîñòîÿíèÿ. Ìîäåðíèçàöèÿ Çàïàäíîé Åâðîïû ñ XV â. äî 1980�õãã. Ì. 1998.


19. Äðîçäîâ Â.Â. Èñòîðèêî�ýêîíîìè÷åñêèå äèñöèïëèíû. Ó÷åáíîåïîñîáèå. - Ì.: 2001.

20. Èñòîðèÿ ìèðîâîé ýêîíîìèêè / Ïîä ðåä. Ã. Á. Ïîëÿêà, À. Í.Ìàðêîâîé. Ì.,1999.

21. Êîíîòîïîâ Ì.Â., Ñìåòàíèí Ñ.È. Èñòîðèÿ ýêîíîìèêè. Ì., 1999.

22. Òîéáíè À., Ïîñòèæåíèå èñòîðèè / Ïåð ñ àíãë. Ì., 1991.

23. Ôèøåð Â. Åâðîïà: ýêîíîìèêà, îáùåñòâî è ãîñóäàðñòâî. 1914 - 1980.Ì.: Ãóìàíèò. èçä. öåíòð ÂËÀÄÎÑ, 1999.

Readers:

1. Andrea and Over�eld. The Human Record. Houghton Mi�n, 2001.ISBN: vol.1. 0�618�04245�8 and vol.2. 0�618�04247�4.

2. Maddison A. The World Economy: A Millennial Perspective. P., OECD,2001

3. Reilly, Wimmer and Wolf. Worlds of History. A Comparative Reader,St.Martins Press, ISBN: vol.1. 0�312�15789�4 and vol.2. 0�312�15788�6.

4. The Reader to the Course �The Economic History�.Part 1, 2. M., 2001,2003.

5. Ðåøåíèÿ ïàðòèè è ïðàâèòåëüñòâà ïî õîçÿéñòâåííûì âîïðîñàì. Ò. 1�14. Ì., 1967�1983


1. Ashworth W. A short history of the international economy since 1850.L.;N.�Y., 1978

2. Baines D. The Onset of Depression in Twentieth�Century Britain: Eco-nomic, Social and Cultural Change. Ed. by Johnson P., 1996.

3. Bairoch P. Economics and World History. Myths and Paradoxes. L.,1993

4. Broadberry S.N. How Did the US and Germany Overtake Britain? ASectoral Analysis of Comparative Levels, 1870�1990 // The Journal ofEconomic History, vol.58, No 2, June 1998, pp.375�407.

5. Brus W. Geschichte der Wirtschaftspolitik in Osteuropa. Kuln, 1987.

6. Cameron R. Geschichte der Weltwirtschaft. Bd. 2. Stuttgart, 1992.

220 THIRD YEAR

7. Collins W.J., Williamson J.G. Capital�Goods Prices and Investment,1870 - 1950 // JEH. 2001. � 1. Ð. 59 - 94.

8. Deane P., Cole W.A. British Economic Growth, 1688�1959: Trends andStructure. Cambridge [Eng.] University Press, 1962. xvi, 348 p. diagrs.,tables. 25 cm.

9. Eichengreen B. Globalizing Capital: A History of The International Mon-etary System. 1994.

10. Fogel R. W. Railroads and American Economic Growth: Essays in Econo-metric History.

11. The Fontana Economic History of Europe. Editor Carlo M. Cipola. L.,Glasgow, 1973�1978.

12. Gardner S. H. Comparative Economic Systems. 2nd. ed. 1998.

13. Gerschenkron A. Economic Backwardness in Historical Perspective: ABook of Essays. Cambridge: Belknap Press of Harvard University Press,1962. 456 p. 24 cm.

14. Grafts N.F.R. The Human Development Index and changes in standartsof Living: Some historical comparisons // European Review of EconomicHistory, 1, 1997, pp.299�322.

15. Hatton T.J., Williamson J.G. The Age of Mass Migration. N.Y., Oxford,Oxford University Press, 1998.

16. Kuznets S. Modern Economic Growth: Rate, Structure and Spread. NewHaven: Yale University Press, 1966. xvii, 529 p. 21 cm.

17. Lee S. P., Passell P. Economic Growth Before 1860. A New EconomicView of American History. W.W.Norton&Company, New York, London

18. Mathias P. The First Industrial Nation, Methuen, 2nd edition 1983.

19. North D., Thomas R.P. The Rise of the Western World: A New EconomicHistory. Cambridge [Eng.] University Press, 1973. viii, 170 p. illus. 24cm.

20. Piquet M., Histoire economique de l'Europe des dix: de la Seconde Guerremondiale a aujourd'hui. P., 1985.

21. Walton G., Robertson R History of the American Economy. HarcourtBrace, 5th edition 1983.


22. Ðîçåíáåðã Í., Áèðäöåëë Ë.Å. ìë. Êàê Çàïàä ñòàë áîãàòûì. Ýêîíîìè-÷åñêîå ïðåîáðàçîâàíèå èíäóñòðèàëüíîãî ìèðà. Íîâîñèáèðñê, 1995.

23. Âåáåð Ì. Èñòîðèÿ õîçÿéñòâà. Ì., 2001.

24. Âîùàíîâà Ã. Ï., Ãîäçèíà Ã. Ñ. Èñòîðèÿ ýêîíîìèêè. Ì., 2001.

25. Èñòîðèÿ ýêîíîìèêè / Ïîä ðåä. Î. Ä. Êóçíåöîâîé è È. Í. Øàïêèíà.Ì., 2000.

26. Êðàñèëüùèêîâ Â.À. Ïðåâðàùåíèÿ äîêòîðà Ôàóñòà (Ðàçâèòèå÷åëîâåêà è ýêîíîìè÷åñêèé ïðîãðåññ Çàïàäà). Ì.: �Òàóðóñ�, 1994.

27. Ëèëëè Ñ. Ëþäè, ìàøèíû, èñòîðèÿ. Ì., 1970

28. Ëîéáåðã Ì. ß. Èñòîðèÿ ýêîíîìèêè. Ì., 1997

29. Íóðååâ P.M. Ïîëèòè÷åñêàÿ ýêîíîìèÿ. Äîêàïèòàëèñòè÷åñêèå ñïîñîáûïðîèçâîäñòâà. Îñíîâíûå çàêîíîìåðíîñòè ðàçâèòèÿ. Ì.: Èçä�âî ÌÃÓ,1991.

30. Òèìîøèíà Ò. Ì. Ýêîíîìè÷åñêàÿ èñòîðèÿ çàðóáåæíûõ ñòðàí. Ì.,2000.

31. Òèìîøèíà Ò. Ì. Ýêîíîìè÷åñêàÿ èñòîðèÿ Ðîññèè. Ì., 1998.

32. Òüþãåíäõåä Ê., Ãàìèëüòîí À. Íåôòü. Ñàìûé áîëüøîé áèçíåñ. Ì.,1978.

33. Ýããåðòññîí Ò. Ýêîíîìè÷åñêîå ïîâåäåíèå è èíñòèòóòû. Ì.: Äåëî, 2001.

34. Ýêîíîìè÷åñêàÿ èñòîðèÿ çàðóáåæíûõ ñòðàí / Ïîä ðåä. Â. È.Ãîëóáîâè÷à. Ìèíñê, 2000.

35. Ýêîíîìè÷åñêàÿ èñòîðèÿ êàïèòàëèñòè÷åñêèõ ñòðàí / Ïîä ðåä. Ô. ß.Ïîëÿíñêîãî, Â. À. Æàìèíà. Ì., 1986.

Internet Resources

Professional organizations:

1. The Cliometric Society (North Carolina State University) -http://cs.muohio.edu/Clio/;

2. The International Economic History Association -http://cs.muohio.edu/IEHA/;

222 THIRD YEAR

3. Economic History Association (University of Kansas) -http://cs.muohio.edu/EHA/;

4. Business History Conference - http://cs.muohio.edu/bhc/;

5. European Historical Economic Society - http://www.eh.net/EHES/;

6. European Business History Association (University of Toulouse 1 Grad-uate School of Management) - http://www.univ-tlse1.fr/EBHA/;

7. Economic History Society (UK) � http://www.ehs.org.uk/.

Journals

1. Explorations in Economic History:http://www.apnet.com/www/journal/eh.htm;

2. Journal of Economic History (èçäàåòñÿ Economic History Association �http://cs.muohio.edu/EHA/);

3. Journal of World�Systems Research: http://csf.colorado.edu/jwsr/

4. Business History � http://www.frankcass.com/jnls/bh.htm;

5. Economic History Review - http://www.blackwellpublishers.co.uk/ehs.htm(èçäàåòñÿ Economic History Society);

6. European Review of Economic History - http://www.econ.ku.dk/ereh/(èçäàåòñÿ European Historical Economic Society).

Personal pages

1. Roy Davies' �History of Money� Page �http://www.ex.ac.uk/~RDavies/arian/money.html

2. Francois Micheloud's History of the Bimetallic System �http://www.micheloud.com/FXM/MH/index.htm

Data

1. The Historical Data Archive at the University of Essex �http://hds.essex.ac.uk/

2. Great Britain Historical Database Online �http://hds.essex.ac.uk/gbh.asp The Great Britain Historical Database isa large database of British nineteenth and twentieth�century statistics.(Ñîçäàòåëü ñàéòà - University of Essex.)

Special servers


1. Èíñòèòóöèîíàëüíàÿ ýêîíîìèêà http://ie.boom.ru/;http://institutional.narod.ru http://www.isnie.org.

2. Ìîñêîâñêèé Ëèáåðòàðèóì: http://www.libertarium.ru/

3. Öåíòð àãðàðíîé èñòîðèè: http://aghistory.ucdavis.edu/

4. Öåíòð ýêîíîìè÷åñêîé èñòîðèè ïðè Èñòîðè÷åñêîìôàêóëüòåòå ÌÃÓ èì. Ì.Â. Ëîìîíîñîâà:http://www.hist.msu.ru/Labs/Ecohist/index.htm

5. Àññîöèàöèÿ �Èñòîðèÿ è êîìïüþòåð�: http://kleio.dcn-asu.ru

6. Èñòîðèÿ ÑØÀ â ÌÃÓ: http://www.amstud.msu.ru/

7. Àðõèâ ôèëîñîôèè èñòîðèè: http://src.nsu.ru/�lf/rpha/

8. EH.Net (ñåðâåð ñïîíñèðóåòñÿ ñëåäóþùèìè îðãàíèçàöèÿìè: the Busi-ness History Conference, The Cliometric Society, the Economic HistoryAssociation, the Economic History Society, and the History of EconomicsSociety) - http://www.eh.net/

9. Economic and Social History (University of Oxford):http://www.history.ox.ac.uk/ecohist/index.htm

10. National Bureau of Economic Research (Working Papers - ðàçäåë �Eco-nomic History�) � http://papers.nber.org/jel/N_index.html

Texts

1. DeLong B.J. Slouching Towards Utopia: The Economic History of theTwentieth Century: http://www.j-bradford-delong.net/TCEH/Slouch_Old.html

2. Globalization in Historical Perspective:http://www.nber.com/books/global/

3. White M. Legal Practice and Economic Adaptation. �http://econwpa.wustl.edu/eprints/eh/papers/9703/9703001.abs

Grade determination

The students sit a �nal exam, estimated on a 100�point scale.The �nal grade point is constructed as follows:

• Home works � 10%

• Mid�term test � 20%

224 THIRD YEAR

• Paper�10%

• Presentation of paper�10%

• Final exam � 50%

Course Outline

1. Introduction to economic historyThe scope and the method of economic history. Factors of economic history.The grounds of methodology. The problems of periodization of economic

history. Methodological development of economic history.Comparative analyses. Models and their types. Games with the past. New

economic history. Clio metrics.

Part 1. World Economic History.

2. The Middle AgesAgriculture. The dominance of the rural economy. Agrarian feudal econ-

omy.The manorial system. Unity of political and economic spheres. The formsof the feudal rent.

Towns as urban centers: guilds. Medieval technology. Urban feudal econ-omy. Economic culture of Western Europe in the Middle Ages. Common anddistinct features of feudalism economic history (by the example of England).The decline of feudalism.

3. Capitalism genesis in Western EuropeNon�economic derivations and consequences of economic growth from po-

verty to welfare. High value of humans' lives ( Demographic e�ect: populationgrowth, duration of life) Urbanisation. The role of political institutes. Theindustry and trade independence from political institutes. Laissez�faire policy.

Markets as a powerful organising force . Di�erent combinations of hierarchyand markets.

An explanation from history: a western growth system. Growth deriva-tions are innovations in trade, technology and organisation. The role of �rms,markets and competition in the process of innovation.

The emergence of an autonomous economic sphere and a merchant class.Innovation by extension of trade and discovery of new resources. Innovation bylowering the cost of production. Innovation by introducing new products. Un-certainty and Experiment. Di�usion of authority, experiment, and responsibil-ity as experiment conditions. The development of property rights. OvercomingResistance to Innovation: the di�usion of authority helps to initiate innovation,


the judges independence Innovation in Organisation: Diversity (Forms of en-terprise, Organisation of groups of workers, Organisation of scientists' activity,Owners' organisation).

The evolution of institutions favourable to commerce. The Changing LegalStructure.

The creating of precedents (relatively to: insurance, bills of exchange, af-freightment, sales agreement, partnership agreement, patent agreement, arbi-trage agreement). The clari�cation of law from discretionary, ritual, religiousadulterants (law, anchored like watch).

The development of money, credits, changind in the �nance system. Bills(since the 13th century instead of chink, since the 17th century - negotiability ofbills). Bills trading - evasion of church interdict on carrying charge. Insurance.The end of 12th century - the separating of insurance from �nancing (Italian).

Absolutism. The union of noblesse and trade bourgeoisie. Substitution ofTaxation for Con�scation (In England and Holland - the government loss of therights for uncontrolled charge; Tax assessment - the right of Parliament).

Formation of New Kinds of Enterprise. Double entry. Separating of industrytransactions from personal transactions ( Legal entity; Credit practice - analysisof �nance position and �rm's outlook).

Economic association not based on kin relationship The Role of Reforma-tion. The Formation of New social entrepreneurs class. Moral code, new ethics(industry ful�lling of the commitments fair punctuality). The Protestant ethic.Democratisation of the church in the interests of the bourgeois Political prereq-uisites. Political pluralism in Europe as the beginning of growth An examplefrom history: Main features of formation of capitalism in England and Spain(comparative analysis).

Main factors of capitalism genesis: the controversy. Common and distinctfeatures of capitalism genesis (by the example of Great Britain).

4. Industrial revolution and economic growth of the industrialsociety (by the example of Great Britain in XVIII - XIX)

Prerequisites of the genesis of the industrial system. Industrial revolution.Rates and factor of economic growth. Courses of �nancing investments. Stagesof industrial revolution. The results of industrial revolution. The factories.Labour movement. Working time regulation. Diversity of organization: thecorporation. General corporation laws. Great Britain: the historical featuresof the economic development. �The Great Transformation.�

The industrial revolution - rise of the industrial society. Economic cultureof Modern Age. Common and distinct features of Modern Age economic de-velopment (by the example of Great Britain). Controversial problems of theindustrial revolution.

5. O��center relations in the Modern Age (by the example ofAmerican Slavery)

226 THIRD YEAR

The American Revolution. American economy in the �rst half of the XIXcentury. O��center relations in the Modern Age. Plantation slavery of theModern Age. American slave system and its productivity. The collapse ofplantation slavery. The civil war. Controversial problems of the o��centrerelations analysis.

Westward expansion in the USA in the XIX century. Agriculture in theUSA. Banking and �nance.

6. International exports of institutions and labour resources (bythe example of immigration to the USA)

Colonialism of the Modern Age: common and distinct features (by the ex-ample of the British Empire). Immigration into the USA. Emigrant capitalism- common and distinct features (by the example of North America). Migrationto the USA in XIX - early XX.

7. Developed Industrial SocietyFree competition era decline. Monopolies emergence. Antitrust laws.

QWERTY�e�ects. Common and distinct features of imperialism development.(by the example of Great Britain and USA). Controversial problems of economichistory of imperialism era analysis.

British industry and British economy 1870�1914. International trade andcolonial policy. British imperialism. Imperialism of the others countries.

The twofold mission of capitalism in colonies: Destroying (The Highercrafts, the Land and tax Reform). and Creating: (The development of the�trade� agriculture; the creation of a �European�like� industry and planta-tions). The peculiarities of the so called previous capital accumulation processin colonies.

The feudal methods of the bourgeoisie private ownership fostering. �Non-proletarian pauperization.� The false market and capitalist economy's develop-ment. Interconnection with the foreign markets, but not with the internal one.The reversibility of the industry's development stages. The colonial economybraking role

8. The First World War and its economic consequencesEconomic reasons for the First World War. �Military capitalism� of the

First World War. Economic results of the war. Capitalist World�Economy inthe Interwar Period. Common and distinct features of the developed countrieseconomic history in the 1920s.

9. The Great DepressionAmerican and British economies in the twentieth century. Slump and re-

covery in British and the USA 1929�39. The Great Depression : the end ofthe free competition era. Discussion about the reasons for the Depression. Thedevelopment of government control as a reply to the �challenge� of the GreatDepression - common and distinct features.


Keynsian revolution. Government intervention in the British economies inthe twentieth century.

10. Economic growth after the Second World War. Its peculiari-ties in countries of the Capitalist World�Economy core

Economic results of the Second World War. The forming of national mixedeconomy models (1950s � 1970s). Mixed economy. General features and dis-tinguish between American, Japanese and West European model of markedeconomy.

Scienti�c�technical revolution. Development of human capital. Informa-tional society. Globalisation. Modernization of national models of mixed econ-omy (1980s - 1990s). The discussion about the Scienti�c and Technical Revo-lution and postindustrial society.

11. Economic development of the periphery of contemporaryWorld�System in the second half of XX

Prerequisites and peculiarities of the periphery capitalism formation. Mainproblems of the development countries: food problems, brain drain, dept prob-lem etc. Di�erent models of the development: keynsian, neoclassical, institu-tional and radical.

Evolution of �overtaking development� theoretical models. Evolution of�overtaking development� practical programs. New industrial state. Perspec-tive of the development.

Part 2. Economic History of Russia.

12. Russia in the Middle AgesSpeci�c factors of Russian economic history. Russia between Europe and

Asia. Moscow kingdom. Power�property as economic institute. Russian andforeign historians: evolution of views on socio�economic development of Russiaunder the Old Regime.

13. Contradiction of Catch development in pre�revolutionaryRussia

Modernization and demodernization during the era of Peter The Great.Russian mercantilism. The State as a major power of the social and economicdevelopment. Selective Borrowing from the West�European capitalist experi-ence. Asynchrony in the XVII - 1�st half of. XIX cc.: the capitalist developmentand the strengthening of serfdom. The Technical and Economic modernizationto The Monarchy and The Nobles Support.

Liberal reforms in 1762�1861. Russia at the close of XIX - beginning of XXat the second stage of capitalism development. The Retrogressive Role of TheNobles in Economic, Social and Political Life. The Weakness of the National

228 THIRD YEAR

Bourgeoisie in Economic, Social and Political Life. The Strong Acuity of socialcontradictions and contrasts.

14. The Rise and Decline of command economy USSREconomic reasons for 1917 revolution. Economy governmentalization during

the civil war. Military communism. Centralized food dictatorship. Labormilitarization. Low wage rate as the main reason of desertion. Growth ofshadow economy. Dichotomy of government centralized barter economy andprivate dissipated market.

Achievements and failures of the New Economic Policy. Administrative�planned system of Stalin. Process of increasing government role in the economyand the administrative�plan system genesis. Spurred industrialization. Mak-ing the administrative�plan system under spurred industrialization. Featureof spurred industrialization (Wide use of manual labour; Universal equipment;New building construction; ). Gigantomania ( prevalence of huge scale in econ-omy): economies of scale; communistic oriented; comparative simplicity in plan-ing and procurement of production: notably from �above�. Con�icts betweenregional and national requirements increase in product de�cit. Problems be-tween industrial and regional development ? Con�icts center� province. Longterm building In�ation. Monopoly in production; Problems in procurementsecondary universalization of production. Total collectivization.

The administrative�plan system genesis. General planning based on indus-trial projects. �striking nose and non striking tail� (L.N. Kriczman). Incompletebalance and partial disproportions on pre�war �ve�years and early post�war�ve�years. Integrated multiple�choice planning. Method of balances.: Sovieteconomy structure. Command model. Permanently conservative of the plannedindicators. Decrease in growth rate of National Income.

Monopolization. Features of administrative monopoly. Di�erence fromordinary monopoly: Based on state property; Run under production de�citand limited market; Run under closed economy (based on state foreigntrade monopoly), Protected from competition: ( Substitutions; Technologicalprogress; Foreign competitors).

Reasons for technological progress deceleration. Monopoly in all industries.Absence of economic responsibility of ministries for technological progress. Nocorrelation between R&D budget and implementation of new inventions.

De�cit economy and its �shadow�. Free consumer choice and its limitationin the time of socialism. De�cit and quality. Requiring payment and free ofcharge systems. Allocation by �common mess�. Queues. The queue in a case ofthe �xed price. Allocation vs demand price and queue length. Queue in case ofinde�nite equilibrium. Allocation vs demand price and queue length when theequilibrium price is ine�ective. Time in the queue elasticity of demand. Queuetypes and its discipline. Mediation and speculation. Black market.

Rationing and its types. Ration card system. Rationing by means of checks.


Rationing by means of coupons. The reform in retail prices. Increase of thegovernment price followed by the increase of income. Government price increasefollowed by fully compensating income increase The choice of forms of the socialsupport (grants, increase in money income).

Soviet command economy: crisis and collapse.

15. Transition economy in Russia in 1990sThe failure of attempts to reform soviet command economy. Radical reforms

in 1990s. Main features of contemporary institutional environment.Features of Russian mentality: fraterniteiness, communiteiness � individual

as a part of the whole; humility tendencies do not let individuals being inde-pendent agents; leading role of reciprocation and redistribution processes moralvalues absolutization in contrast to wealth (the role of orthodoxy); low rang ofhard working success (lack and fortune, as result of personal connexion, naivebelieves in easy money); saving and property are negative values; freedom - likeanarchy. The majority population's reaction on the troubles with transition tothe market economy is not the market adaptation but market evasion.

Social market adaptation. Under transformational recession shrinkage ofeconomic freedoms were more signi�cant then enhancement of social and po-litical ones. Single side freedom understanding (getting new rights and goodswithout loosing old guarantees and possibilities). Absence of understandingintercorrelation between �freedom - independence - liability�.

Government were unable to maintain new proclaimed rights and by itselfsystematically injured these new rights (Illegal budget spending, Selling of na-tional property under conditions which are disadvantageous from the very be-ginning, Enter into foreing contract which are unpro�table from the very be-ginning).

Pronounced and desirable freedom gap. Legal norms rejection has becomea new special norm and norm following became an exception (Society criminal-ization; Illegal freedom development; New formal rules rejection is becomingnew informal rule).

Society marginalization. Already there is no government employment guar-antee and there are some risk of unemployment. Main employee's determinants:Job loosing fear; Semilegal secondary employment orientation.

Absence of organised social movements for human rights: Makes peopleadapted by themselves, � Makes people struggle for personal rights by them-selves. Strengthening of the economic dependency of population from govern-ment: Government no more guarantees not even stable income which helps tolive well but even its minimum. They lay on the help from outside, on thosewho hold the power. There is a tendency to relay one's responsibility on others.

Polarization of the society vs its adaptation to the market. Three populationcategories: �progressive adaptation�, �regressive adaptation�, �regressive non�adaptation�.

230 THIRD YEAR

Cost comparative analysis. Between legal and shadow sector of economy.Correlations between political and economical instability. Distribution of mon-etary income of people in Russia. Shift of Lorenz curve in Russia since 1991 to1999. Sources of earnings in Russia.

Increasing share of property incomes and entrepreneur incomes. Decreasingshare of wage. The same share of social transfers. Increasing the percentagesof people with two and more sources of earnings. Poverty in Russia. Nationalpoverty line. Main reasons: High level of in�ation; Downfall in real wage rate;(especially in military�industrial complex); Increase of unemployment; Depre-ciation of social transfers. Structural Changes of poverty in modern Russia.

Firm activity in post soviet Russia: main features. State in transitioneconomy: generator of institutional environment. Prospects of economic devel-opment in the Post�Soviet Space.



1. Introduction. What is economichistory?

8 2 6

2. Regress and progress in feudalsociety.

11 2 1 8

3. The genesis of capitalism inWest Europe (15th � 17th cent).

12 2 2 8

4. Industrial Revolution andeconomic growth in Industrialsociety (by the example of GreatBritain in 18th � 19th cent).

12 2 2 8

5. Neotraditional relations in theModern World (by the exampleof American Slave Society).

9 2 1 6

6. International export ofinstitutions and labor force (bythe example of the USAimmigration).

11 2 1 8

7. Developed Industrial Society. 11 2 1 88. World War I and its economic

consequences.11 2 1 8

9. Great Depression. 11 2 1 810. Economic growth after WW II

and its peculiarities in the corecountries of the Modern worldsystem.

12 3 1 8



11. Economic development of ThirdWorld countries in the secondhalf of the 20th cent.

12 3 1 8

12. Russia in the Middle Ages. 9 2 1 613. Development of 'peripheral'

capitalism in pre�revolutionaryRussia.

11 2 1 8

14. The USSR command economy. 11 2 1 815. Transition economy of Russia in

the 1990�s.11 2 1 8

Total: 162 32 16 114

232 THIRD YEAR

Further Mathematics

Lecturer and classteacher: Grigoriy G. Kantorovich

Course description

The course is an extension of course Further Mathematics for students of spe-cialization `Economics'.

The structure of the course includes advanced elements of linear algebra,calculus of functions of several variables, a general optimization problem offunction of several variables without restrictions and with restrictions such asequalities and inequalities. The course material should teach students to un-derstand and prove the basic formulas of linear algebra and calculus, and alsoto investigate the economic problems of comparative statics and optimizationwithin the framework of a advanced tools of mathematical models.

The course program provides lecturing and teaching classes, and also regularself�study of students. Self-study includes deepening of theoretical materialo�ered at lectures, and solutions of the o�ered home assignments. During eachsemester 1 intermediate examination is set.

Course objectives

The purpose of the course is not so much acquisition of new skills in a solutionof mathematical problems with an economic applications, but study of methodsof proofs and more strict reviewing of some sections of mathematics.

As a result of study of material of Fall semester the student should masterand be able to prove the basic facts of strict abstract construction of linearalgebra.

As a result of study of material of Spring semester the student should knowthe basic facts of calculus of functions of several variables, including calculationof partial derivatives of explicit and implicit functions, solutions of problemsof unconditional and conditional optimization. The student should be able toinvestigate economic problems of comparative statics with the methods of acalculus, to discover points of maximum and minimum of functions of severalvariables, the method of Lagrange multiplier, to �nd extreme points of functionssubject to constraints. He should master the basic facts of nonlinear and linearprogramming, be able to investigate economic problems of optimization, tosolve problems of linear programming with application of concepts of the dualitytheory, to discover Von Neumann and Nash equilibrium in matrix games of twopersons.

The student should have skills of application of the indicated mathematicaltools and methods to solution of problems in Micro� and Macroeconomics.

FURTHER MATHEMATICS 233

Methods


• lectures;

• classes;

• homework;


• self study.

Main Reading

1. Carl P. Simon and Lowrence Blume. Mathematics for Economists, W.W. Norton & Company, 1994.

2. A. C. Chiang. Fundemental Methods of Mathematical Economics, 3�rdedition, McGrow�Hill, 1984.

3. B.P.Demidovich. The collection of problems and exercises on a calculus,Ì., Science, 1966.

4. I.M.Gelfand. Lectures on linear algebra. Ì., Science, 1999.




7. Robert Gibbons. A Primer in Game Theory. Harvester Wheatsheaf, 1992

8. M. Anthony. Further mathematics for economists. University of London,1999

9. Leon, S. j., Linear Algebra with Applications (5th edition). Prentice Hall,New Jersey, 1998

10. Il'in, Kim. Linear algebra and analytical geometry. Ì., Publishing houseof the Moscow university, 1998

11. Proskuriakov. Collection of problems in linear algebra. M.Nauka. 1985

12. Faddeev, Sominsky. The collection of problems in algebra. M.Nauka.1998

234 THIRD YEAR

Grade determination

Monitoring of knowledge of students provides an evaluation of carried out homeassignments, of activity of students at classes, of intermediate examinations.Final monitoring is carried out by results of examination written paper whichmakes 70% of �nal mark. 30% of �nal mark are determined by home assign-ments done and activity of students during classes.

Course Outline

V semester

1. Linear (a�ne) n�dimensional spaceDe�nition of a vector space. Linear independence of a system of vectors.

Dimension of a linear space. Bases and coordinates in n�dimensional space.Isomorphism of n�dimensional spaces.

1, 27.1 � 27.2, p. 750 � 756; 4, page 7 � 20

2. Subspaces of a vector spaceA linear span of a system of vectors. The subspaces connected with matrices.

Direct lines and planes in a vector space. Expansion of a space in the direct sumof sub�spaces. The union and the intersection of subspaces. A transformationof coordinates under a change of a basis.

1, 27.3 � 27.5, p. 757�770; 4, page 21 � 30

3. Euclidean spacesAn inner (dot) product. Distance and an angle in Euclidean spaces.

Cauchy�Bunyakovsky�Schwarz inequality. A triangle inequality. Orthogonalbasis. Gram Matrix. Gram�Schmidt orthogonalization process. Isomorphismof Euclidean spaces.

1, 10.1 � 10.7, p. 199 � 236; 4, page 30 � 54

4. Linear transformationsMatrices and linear transformations. Addition and multiplication of lin-

ear transformations. Inverse transformation. A Null�space and a Range of atransformation.

8, p. 30 � 36; 4, page 95 � 110

5. Eigenvalues and eigenvectors of a matrixA characteristic equation. Complex eigenvalues and eigenvectors. Diago-

nalization of a square matrix. Orthogonality of eigenvectors of a symmetricmatrix. The matrices which are not diagonalizable.

1, 23.1 � 23.9, p. 579 � 632; 4, page 111 � 122


6. Application of diagonalisation of a matrixPowers of matrices. Solution of homogeneous systems of di�erence equa-

tions. Solution of homogeneous systems of linear di�erential equations.Quadratic forms. De�niteness of quadratic forms and eigenvalues.

1, 25.2, p. 678 � 681; 8, ð. 56 � 74VI semester

7. The basic concepts of Set TheoryProperties of real numbers: a supremum and an in�mum. A limit of a se-

quence. A limit and continuity of real�valued functions of one variable. Neigh-borhoods and open sets in Rn. Sequences in Rn and their limits. Closed setsin Rn. Closure and boundary of sets. Compact sets.

1, 2.1 � 2.2, p. 10 � 20; 10.1 � 10.4, p. 199 � 221; 12.1 � 12.6,p. 253 � 274; 2, 1.1 � 2.7, p. 3 � 31

8. Number seriesConverging series. Criteria of convergence of series. Functional sequences

and series. Convergence of functional sequences and series. Ascending powerseries. A radius of convergence. The formula of Cauchy � Hadamard. Expan-sion of functions in ascending power series. Taylor series.

1, 30.2, p. 827 � 831; 2, 9.5, p. 254 � 262

9. Functions of several variablesFunctions from Rn to R1 . Functions from Rn to Rk (vector functions of

several variables). Level sets of functions of several variables. Continuity of afunction of several variables. Partial derivatives of functions of several variables.Geometrical interpretation of partial derivatives. Chain rule for functions ofseveral variables. A total di�erential. Geometrical interpretation of partialderivatives and a total di�erential. Linear approximation. A di�erentiabilityof functions of several variables. C1 functions. Directional derivatives and agradient of function of several variables. Meaning of a gradient.

1, 14.1 � 14.6, p. 300 � 322; 2, 7.4, p. 174 � 177, 8.1 � 8.7, p.187 � 230

10. Optimization of functions of several variablesStationary points and �rst order conditions. The second di�erential of func-

tions of several variables. Second order conditions for a maximum and a mini-mum of functions of several variables.

1, 16.1 � 16.2, p. 375 � 385; 17.1 � 17.4, p. 396 � 410; 2, 11.1 �11.7, p. 307 � 368

11. A constrained optimizationLagrangean function and Lagrange multipliers. First order conditions. Reg-

ularity conditions of systems of restrictions. The second di�erential in case of

236 THIRD YEAR

dependant variables. De�niteness of quadratic form at linear constraints. Sec-ond order conditions for a problem of a constrained extremum. The borderedHessian. Type of an extremum and signs of minors of the bordered Hessian.

1, 16.3 � 16.4, p. 386 � 395; 18.1 � 18.2, p. 411 � 423; 19.3, p.457 � 465; 2, 12.1 � 12.3, p. 369 � 386

12. Economic meaning of Lagrange multipliersEconomic examples of application of method of Lagrange. A maximization

of Utility function and a consumer demand. Slutsky Equation. Smooth de-pendence on parameter of a solution of a problem of constrained optimization.The Envelope Theorems.

1, 18.7 � 19.2, p. 442 � 456; 19.4, p. 469 � 471; 2, 12.5, p. 400� 409

13. A maximization of a function of several variables with in-equality constraints

Complementary slackness condition. A problem of constrained minimiza-tion. Kunn�Tacker formulation of the �rst order conditions under non�nega-tiveness restrictions for all variables. The mixed constrained: inequalities andequalities.

1, 18.3 � 18.6, p. 424 � 442; 2, Ch. 21: 21.1 � 21.4, p. 716 �744) (1, 18.3, p. 430 � 434; 2, 21.3, 21.4, p. 731 � 738; 6, p. 144 �150

14. Economic applications of nonlinear programmingEconomic meaning of Lagrange multiplier. The Envelope Theorem. Smooth

dependence of an extreme value on parameters.1, 18.4 � 18.7, p. 442 � 447; 19.1 � 19.2, 19.4, p. 448 � 457; 2,

21.6, p. 747 � 754

15. Homogeneous functionsProperties of homogeneous functions. Homogenizing of functions. Homoth-

etic functions.1, 20.1 � 20.4, p. 483 � 504; 2, 12.6 � 12.8, p. 410 � 434

16. Convex and concave functionsProperties of convex functions. Quasiconvex and quasiconcave functions.

Pseudoconvex functions. Convex programming.1, 21.1 � 21.6, p. 505 � 543; 2, 12.6 � 12.8, p. 410 � 434

17. Linear programmingThe standard form of a general linear program. The �rst order conditions

for a linear program, and properties of a solution. Dividing and supportinghyperplanes.

2, 19.1 � 19.6, p. 651 � 687; 6, p. 146 � 150


18. A dual problem for linear programTheorems of a linear programming. An existence theorem. A duality theo-

rem. The complementary slackness theorem.2, 20.2, p. 696 � 700; 6, p. 146 � 150

19. GamesPlayers and strategies. Representation of static game in a normal form.

Elimination of strictly dominated strategy. Solution of a game. Zero�sumgames. Von Neumann equilibrium. Optimal strategies in zero�sum games anddual problems of linear programming. Nash equilibrium. Cournaut Model.Bertrand Model. Nash theorem. Existence and �nding of equilibria in pureand mixed strategies.

6, p. 167 � 171; 7, 1.1. A � 1.1. C, p. 1 � 48



1. Linear (a�ne) n�dimensionalspace.

2 2 2 6

2. Subspaces of a vector space. 2 2 2 63. Euclidean spaces. A scalar

product.2 2 2 6

4. Linear transformations. 2 2 2 65. Eigenvalues and eigenvectors of a

matrix.2 2 2 6

6. Applications of digitalization ofa matrix.

4 4 4 12

7. A limit of sequence. A limit anda continuity of real�valuedfunctions of one variable.

2 1 2 5

8. Numerical series. Convergingseries. Criteria of convergence ofseries. Functional sequences andseries.

2 1 2 5

9. Functions of several variables. Atotal di�erential. DirectionalDerivatives and a gradient offunction of several variables.

2 1 2 5

10. Optimization of functions ofmany variables.

2 1 2 5

238 THIRD YEAR


11. A conditional extremum.Lagrangean Function andLagrange multipliers.

2 1 2 5

12. Economic sense of Lagrangemultiplier. The Envelopetheorem.

2 1 2 5

13. A maximization of function ofseveral variables subject toinequality constraints.Kuhn�Tacker conditions.

2 1 2 5

14. Homogeneous functions.Homothetic functions.

2 1 2 5

15. Convex and concave functions.Quasiconvex and quasiconcavefunctions. Pseudoconvexfunctions. Convex programming.

2 1 2 5

16. The standard form of a generallinear program.

2 1 2 5

17. A dual problem in linearprogramming. Theorems oflinear programming.

2 1 2 5

18. Games. Zero�sum games.Optimum strategy in zero�sumgames and dual problems oflinear programming. NashEquilibrium.

2 1 2 5

Total 102 26 38 38

Fourth Year

Industrial Organization

Lecturer: Alexis V. BelianinClassteachers: Rinat V. Kirdan

Course description

Industrial Organization (IO), aka Industrial Economics, or Economics of In-dustry, is a one�year course which is one of 'further units' of the externalprogramme of the University of London (UoL). IO is one of the main 'special'economics courses which applies techniques from microeconomic theory andeconometrics to the study of �rms as organizations, market structures, strate-gic interaction, market e�ciency and industrial policy. An undergraduate IOcourse at ICEF is based on students' knowledge of Intermediate Microeconomicsand the �rst course of Econometrics. Inasmuch as many topics in modern IOrequire extensive use of game�theoretic tools, a few introductory classes willbe used to review the relevant techniques and applications. Further reviewsof speci�c topics from economic theory and econometrics will be included incourse curriculum whenever necessary.

The programme of this course follows the requirements of the University ofLondon external programme as covered by the Study Guide by G.Symeonidis.The course consists of three major parts.

The �rst part of the course constitutes a methodological and theoreticalintroduction into the tools, methods and approaches used all over the course.It provides a quick review of game theoretic concepts, followed by the discus-sion of the nature of markets, the �rm and the agency relations within businessorganizations. The second part constitutes the core of the course, and coversimperfect competition in static and dynamic settings, theoretical and empiricalstudies of collusion, entry and accommodation, product di�erentiation, monop-olistic behaviour, vertical integration and determinants of market structure.The third part is devoted to industrial policy and e�ciency analysis, includ-ing government regulation and natural monopolies reforms with examples andapplications.

239

240 FOURTH YEAR

Course objectives

• Give a simple yet thorough introduction into the main methods of eco-nomic analysis of industry structure and �rm behaviour under variousconditions of technology, competition, and organization;

• Elaborate students' skills and abilities to use modern theoretical and em-pirical tools to formulate and solve economic problems;

• Explore in details how economists approach and answer speci�c empiricalquestions, such as whether a particular industry is vertically integrated,whether there are is evidence of price collusion, or whether the industryhas features of natural monopoly;

• Provide the students with a sound intuition into the speci�c features ofparticular markets, including those of transitional Russia.

Methods



• classes (2 hours a week, devoted to discuss home assignments and sup-plementary questions)

• home assignments (1 per theme, to be submitted before class)

• self�study.

There will be approximately 60 hours of lectures and 60 hours of classes over theyear. In the Autumn semester, classes will be held on Saturdays, while lectureswill normally be held on Mondays. Timetable for the Spring semester, thewill be announced in due course. Given the limited number of contact hours,regular self study is crucial for successful completion of the course, includingexternal examination.

Main Reading

There is no single textbook for the course. Several texts will be used throughoutthe course at a regular basis - these are listed below as the main textbooks(available at ICEF library). Some more texts will be used occasionally or forthe sake of references - these are listed as supplementary readings. Furtherreferences for each theme (mostly journal articles, with the relevant weblink)can be found below. Compulsory readings are starred (*). Published sourcesmay be complemented by lecture notes and other teaching material available at

INDUSTRIAL ORGANIZATION 241

http://mief.hse.ru. Please check this source at regular rate, and pay attentionto the other sources suggested by the course instructors.

1. Tirole, Jean (Tir) The Theory of Industrial Organization. MIT Press,1992.

2. Church J., and R.Ware. (CW) Industrial Organization. A StrategicApproach. Irwin. 2000.

3. Symeonidis, George. Industrial Economics. University of London StudyGuide (SG), 1999 and Examiners' reports (ER), various years.


1. Schmalensee, Richard, and Robert Willig, eds. (HB) Handbook of Indus-trial Organization. Vols. 1�2. North�Holland, 1989.

2. Shy, Oz. (Shy) Industrial Organization. Theory and Applications. MITPress. 1995.

3. Carlton, Dennis W., and Je�rey M. Perlo� (CP) Industrial Organization.3d ed. Addison�Wesley, 1999.

4. Martin, Stephen. (Mar) Industrial Economics. 2d ed. Prentice Hall.1994.

5. Pepall, Lynne; Daniel J. Richards; George Norman. (PRN) Industrial Or-ganization: Contemporary Theory and Practice. 2d. ed. South�Western,2002.

6. Hay, D., and D.Morris. Industrial Economics and Organization. 2d ed.Oxford. 1996.

7. Milgrom, Paul, and John Roberts. Economics, Organization and Man-agement. 1998. (Ìèëãðîì Ï., Ðîáåðòñ Äæ. Ýêîíîìèêà, îðãàíèçàöèÿè ìåíåäæìåíò. Äåëî, 1999)

8. Sherer, F.M. and D.Ross. Industrial market structure and economic per-formance. Houghton Mi�in, 1990 (Øåðåð Ô.Ì. è Ä. Ðîññ. Ñòðóêòóðàîòðàñëåâûõ ðûíêîâ. Èíôðà�Ì, 1997.)

9. Sutton, John. Sunk cost and market structure. MIT Press, 1991.

10. Armstrong, Mark, Simon Cowan and John Vickers. Regulatory Reform:economic analysis and British experience. MIT Press, 1994.

Other readings, including journal articles, are assigned to particular topics, andconstitute essential part of the course assignments.

242 FOURTH YEAR

Grade determination

Two examinations: the winter examination at the end of the Autumn semester,and the �nal examination at the end of the Spring semester (this latter coversall course material). Besides, there will be one control work in the middle ofthe Autumn semester. Home assignments are to be handled regularly, and alsocontribute to the �nal grade for the course.

External examination at the University of London takes place in May�June;its results do not count towards the �nal grade for the course at SU�HSE. IOis an integral part of the separately graded State Graduate Examination forthe Russian degree programme (to be held in June 2007); this examination willconsist of the same type of questions as those in the other papers.

Course grades are determined as follows:Autumn semester:

• Home assignments - 15%

• Midterm control work - 25%

• Winter examination - 60%

Spring semester and �nal grade:

• Home assignments - 15%

• Autumn semester grade - 25%

• Final examination - 60%

Course Outline

1. Noncooperative games for applied analysis

* Gibbons, Robert J. A primer in game theory (aka Game theory for appliedeconomists). Addison-Wesley, 1993, ch.1 & 2.

* [Tir], Appendix on game theory.

• Osborne, Martin J., and Ariel Rubinstein. A course in game theory. MITPress, 1995.

• Fudenberg, Drew, and Jean Tirole. Noncooperative game theory for IO:introduction and overview. In: [HB], ch.5.

2. Introduction to Industrial Organisation

* [Mar], Ch. 1.


* [PRN], Ch. 1.

3. Size and structure of the �rm

* [Tir], The theory of the �rm (Introductory chapter)

* [SG], ch.1

* Williamson O. Transaction cost economics. In: [HB], ch.3, èëèWilliamson O. Economic institutions of capitalism. Free press, 1985, ch.2-3 (ðóñ.ïåð: Î.Óèëüÿìñîí, Ýêîíîìè÷åñêèå èíñòèòóòû êàïèòàëèçìà,ÑÏá, 1997; THESIS, 1993, #3, c.39-49.

* Hart O. Firms, contracts and �nancial structure. OUP, 1995, ch.1-3.

* Monteverde, Kirk, and David J.Teece. Supplier Switching Costs andVertical Integration in the Automobile Industry. The Bell Journal ofEconomics, Vol. 13, No. 1 (Spring, 1982), pp. 206-213

* Joskow, Paul L. Contract Duration and Relationship-Speci�c Invest-ments: Empirical Evidence from Coal Markets. The American EconomicReview, Vol. 77, No. 1 (Mar., 1987), pp. 168-185

• [CP], ch.2

• Grossman, Sanford, and Oliver Hart. The Costs and Bene�ts of Owner-ship: A Theory of Vertical and Lateral Integration. Journal of PoliticalEconomy (1986) 94(4): 691-719.

• Hart, Oliver, and John Moore. Property rights and the nature of the�rm. Journal of Political Economy, 1990, v.98, p.1119-1158.

• Klein, Benjamin; Robert G. Crawford; Armen A. Alchian. Vertical Inte-gration, Appropriable Rents, and the Competitive Contracting Process.Journal of Law and Economics, Vol. 21, No. 2 (Oct., 1978), pp. 297-326

• Klein, Benjamin, and Kevin M. Murphy. Vertical Restraints as ContractEnforcement Mechanisms. Journal of Law and Economics, Vol. 31, No.2 (Oct., 1988), pp. 265-297

4. Agency theory, ownership and control

* [Tir], The theory of the �rm (Introductory chapter)

* [SG], ch.2

* Nickell, Stephen J. Competition and Corporate Performance The Journalof Political Economy, Vol. 104, No. 4 (Aug., 1996), pp. 724-746

244 FOURTH YEAR

• Holmstrom, Bengt and Jean Tirole. The theory of the �rm. In: [HB],ch.2

• [CP], ch.2

• La�ont, Jean-Jacques and Ramon Martimort. The Principal-Agent the-ory. PUP, 2002.

• Hart, Oliver, Jean Tirole, Dennis Carlton, Oliver Williamson. Vertical in-tegration and market foreclosure. Brookings papers on economic activity,1990, p.205-286.

• Salanie, Bertrand. Contract theory: a primer. MIT Press, 1997.

• Gibbons, R. Incentives between �rms (and within). Management Science,v.51 , No.1, 2005, p. 2-17.

• Nickell S., Nocolitsas D., Dryden N. What makes �rms perform well?European Economic Review, 1996, v.41, p.783-796.

5. Static price competition in oligopoly models

* [Tir], ch.5

* [SG], ch.3

• [CP], ch.7

• [Shy], ch.6

• [Mar], ch.5

• Chapiro, Carl. Theory of oligopoly behavior. In: [HB], ch.6

• Kreps, David M., and Jose Scheinkman. Quantity precommitment andBertrand competition yield Cournot outcomes. Bell Journal of Eco-nomics, vol.14, no.3, Autumn 1983, p.326-337.

• Bresnahan, Timothy F. Duopoly Models with Consistent Conjectures.The American Economic Review, Vol. 71, No. 5 (Dec., 1981), pp. 934-945

6. Dynamic price competition

* [Tir], ch.6

* [SG], ch.4

* [CP], ch.6-7


* Porter, Robert H. Study of Cartel Stability: The Joint Executive Com-mittee, 1880-1886. The Bell Journal of Economics, Vol. 14, No. 2 (Au-tumn, 1983), pp. 301-314

* Green, Edward J., and Robert Porter. Noncooperative Collusion underImperfect Price Information. Econometrica, 1984, vol. 52, p.87-100.

* Rotemberg, Julio J., and Garth Saloner. A Supergame-Theoretic Modelof Price Wars during Booms. The American Economic Review, Vol. 76,No. 3 (Jun., 1986), pp. 390-407.

* Slade, Margaret E. Strategic pricing models and interpretation of price-war data. European Economic Review, 1990, v.31 p.524-537.

• Ellison, Glenn. Theories of Cartel Stability and the Joint Executive Com-mittee. The RAND Journal of Economics, Vol. 25, No. 1 (Spring, 1994),pp. 37-57

• Sherer and Ross, 1990, Ch. 7-8.

• [Shy], ch.6

• Levenstein, Margaret C. Price Wars and the Stability of Collusion: AStudy of the Pre-World War I Bromine Industry. The Journal of Indus-trial Economics, Vol. 45, No. 2 (Jun., 1997), pp. 117-137.

• Slade, Margaret E. Inter�rm Rivalry in a Repeated Game: An EmpiricalTest of Tacit Collusion. The Journal of Industrial Economics, Vol. 35,No. 4, The Empirical Renaissance in Industrial Economics (Jun., 1987),pp. 499-516

• Slade, Margaret E. Vancouver's Gasoline Price Wars: An Empirical Ex-ercise in Uncovering Supergame Strategies. Review of Economic Studies,1987, vol.59, no.2, p.257-276.

7. Econometric methods for applied work with application toprice collusion

* Brensahan, Timothy. The Oligopolistic Solution Concept is Identi�ed.Economic Letters (1982), 87-92.

* Nevo, Aviv. Identi�cation of the Oligopoly Solution Concept in a Di�er-entiated Products Industry. Economic Letters, 59:3 (1998)

• Bresnahan, Timothy. Empirical Studies of Industries with Market Power,in [HB], Vol. 2.

246 FOURTH YEAR

• Verbeek, Martin. A guide of modern econometrics. OUP, 1999.

8. Entry deterrence and entry accommodation

* [Tir], ch.8

* [SG], ch.5

* Fudenberg, Drew, and Jean Tirole. The Fat-Cat E�ect, the Puppy-DogPloy, and the Lean and Hungry Look. The American Economic Review,Vol. 74, No. 2, Papers and Proceedings of the Ninety-Sixth AnnualMeeting of the American Economic Association (May, 1984), pp. 361-366

* Dixit, Avinash. The Role of Investment in Entry-Deterrence. The Eco-nomic Journal, Vol. 90, No. 357 (Mar., 1980), pp. 95-106

• [CP], ch.10

• Bulow, Jeremy I.; John D. Geanakoplos; Paul D. Klemperer Multimar-ket Oligopoly: Strategic Substitutes and Complements. The Journal ofPolitical Economy, Vol. 93, No. 3 (Jun., 1985), pp. 488-511

• Lieberman, Marvin B. Excess Capacity as a Barrier to Entry: An Empir-ical Appraisal. The Journal of Industrial Economics, Vol. 35, No. 4, TheEmpirical Renaissance in Industrial Economics (Jun., 1987), pp. 607-627

9. Product di�erentiation

* [Tir], ch.7

* [SG], ch.6

* Shaked, Avner, and John Sutton. Relaxing Price Competition ThroughProduct Di�erentiation. The Review of Economic Studies, Vol. 49, No.1 (Jan., 1982), pp. 3-13

• [Shy], ch.7

• [CP], ch.8

• Salop, Steven C. Monopolistic Competition with Outside Goods. TheBell Journal of Economics, Vol. 10, No. 1 (Spring, 1979), pp. 141-156

• D'Aspremont, Claude, J.J.Gabszewicz, Jean-Francois Thisse. OnHotelling's 'Stability in competition'. Econometrica, v.47, 1979, p.1145-1150.


• Perlo�, Je�rey M, and Steven C. Salop. Equilibrium with Product Di�er-entiation. The Review of Economic Studies, Vol. 52, No. 1 (Jan., 1985),pp. 107-120

• Judd, Kenneth L. Credible Spatial Preemption. The RAND Journal ofEconomics,Vol. 16, No. 2 (Summer, 1985), pp. 153-166

• Shaked, Avner, and John Sutton. Product Di�erentiation and IndustrialStructure. The Journal of Industrial Economics, Vol. 36, No. 2 (Dec.,1987), pp. 131-146

10. Advertising

* [CP]

* [Shy]

* Gabaix, Xavier, and David Laibson. Consumer Myopia, Shrouded At-tributes, and Information Suppression in Competitive Markets. QuarterlyJournal of Economics, 121 (2), May 2006, p. 505-540.

• Bagwell K. The economics analysis of advertising. Mimeo, ColumbiaUniversity, 2005.

• Lancaster, Kelvin. The Economics of product variety: a survey. Market-ing Science, 1990, vol.9, no.3, p.189-203.

• Eaton, B.Curtis and Richard G.Lipsey. Product di�erentiation. In: [HB],ch.12 item Klemperer, Paul. Markets with Consumer Switching Costs.Quarterly Journal of Economics, 102 (1987), 375-394.

11. Monopoly and price discrimination

* [SG], ch.7

* [CP], ch.11-12

* [Tir], ch.3

* [Mar], ch.15

• Sherer and Ross, ch.13

• Oi, Walter Y. A Disneyland Dilemma: Two-Part Tari�s for a MickeyMouse Monopoly. The Quarterly Journal of Economics, Vol. 85, No. 1(Feb., 1971), pp. 77-96.

• Varian, Hal R. Price Discrimination and Social Welfare. The AmericanEconomic Review, Vol. 75, No. 4 (Sep., 1985), pp. 870-875

248 FOURTH YEAR

• Verboven, Frank. International Price Discrimination in the EuropeanCar Market. The RAND Journal of Economics, Vol. 27, No. 2 (Summer,1996), pp. 240-268

• Graddy, Kathyn. Testing for imperfect price competition at the Fulton�sh market. The RAND Journal of Economics, 1995, Vol.26, no.1, p.75-92.

12. Vertical integration and vertical restraints

* [Tir], ch.4

* [SG], ch.8

* [Mar], ch.17

* Mathewson, G.Frank, and Ralph A. Winter. An Economic Theory ofVertical Restraints. The RAND Journal of Economics, Vol. 15, No. 1(Spring, 1984), pp. 27-38.

* Mathewson, G.Frank, and Ralph A. Winter. On Vertical Restraints andthe Law: A Reply. The RAND Journal of Economics, Vol. 19, No. 2(Summer, 1988), pp. 298-301.

* Mathewson, G.Frank, and Ralph A. Winter. The Competitive E�ects ofVertical Agreements: Comment. The American Economic Review, Vol.77, No. 5 (Dec., 1987), pp. 1057-1062.

• [CP], ch.13

• Sherer and Ross, ch.15

• Katz, M.L. Vertical contractual relations. In: [HB], ch.11

• Antitrust Cases: Monopolies and Mergers Commission (MMC) New Mo-tor Cars, Cm 1808 (London: H. M. S. O., 1992).

• Rey, Patrick, and Joseph E. Stiglitz. The Role of Exclusive Territories inProducers' Competition. The RAND Journal of Economics, Vol. 26, No.3 (Autumn, 1995), pp. 431-451.

13. The determinants of market structure

* Bain, Joe S. Economies of Scale, Concentration, and the Condition ofEntry in Twenty Manufacturing Industries. The American Economic Re-view, Vol. 44, No. 1 (Mar., 1954), pp. 15-39

* Sutton, John. Sunk cost and market structure. MIT Press, 1991


* Sutton, John. Game-theoretic models of market structure. In: KrepsD.M. and Wallis K.F., eds. Advances in economics and econometrics.The VIIIth world congress. v.1, CUP, 1997

* Sutton, John. Technology and market structure. European EconomicReview, 1996, v.40, p.511-530.

* [SG], ch.9

• [Mar], ch.8

• Sherer and Ross, ch.3-4

14. Competition and industrial policy

* [Mar], various chapters.

* [SG], ch.10

• [CP], ch.17, 20

• Sherer and Ross, ch.3-4.

15. Regulation and natural monopolies

* Armstrong, Mark, Simon Cowan and John Vickers. Regulatory Reform:economic analysis and British experience. MIT Press, 1994.

* [SG], ch.11

• La�ont J.J. and Tirole J. Theory of incentives for procurement and reg-ulation. MIT Press, 1999.

• Winston, Cli�ord. US industry adjustment to economic deregulation.Journal of Economic Perspectives, 1998, v.12, no.3, p.89-110.

• Christensen, Laurtis R., and William H, Greene. Economies of scale inUS electric power generation. Journal of Political Economy, 1973, v.84,no.4, p.655-676.

• Evans, David S. and James J.Heckman. A test for subadditivity of thecost function with an application to the Bell system. American EconomicReview, 1984, vol.74, p.615-623. and (erratum)

250 FOURTH YEAR



1. Noncooperative games forapplied analysis

18 4 4 10

2. Introduction to IndustrialOrganization

14 2 2 10

3. Size and structure of the �rm 26 4 6 164. Agency theory, ownership and

control14 2 2 10

5. Static price competition inoligopoly models

18 4 4 10

6. Dynamic price competition 28 6 6 167. Econometric methods for applied

work with application to pricecollusion

14 2 2 10

8. Entry deterrence and entryaccommodation

18 4 4 10

9. Product di�erentiation 34 8 8 1810. Advertising 18 4 4 1011. Monopoly and price

discrimination28 6 6 16

12. Vertical integration and verticalrestraints

18 4 4 10

13. The determinants of marketstructure

30 6 6 18

14. Competition and industrialpolicy

14 2 2 10

15. Regulation and naturalmonopolies

32 8 6 18

Total: 324 66 66 192

CORPORATE FINANCE 251

Corporate Finance

Lecturer: Irina V. IvashkovskayaClassteachers: Irina V. Ivashkovskaya, Nikita K. Pirogov

Course description

The course develops theoretical framework for understanding and analyzingmajor �nancial problems of modern company in market environment. Thecourse covers basic models of valuation of corporate capital, including pric-ing models for primary �nancial assets, real assets valuation and investmentprojects analysis, capital structure and various types of corporate capital em-ployed, derivative assets and contingent claims on assets. It provides necessaryknowledge in evaluating di�erent management decisions and its in�uence oncorporate performance and value. The course requires the knowledge in microand macroeconomics, accounting and banking. The course is based on lectures,seminars, case studies and self�study. Corporate �nance is a two�semestercourse designed to prepare students for UOL examination.

Course objectives

The course is focused on developing skills in analyzing corporate behavior incapital markets and the relationship of agent and principal in raising funds,allocating capital, distributing the returns. The main objective of the courseis to provide the conceptual background for corporate value analysis. By theend of autumn semester students are expected to be able to apply a set ofmodels � pricing primary assets, cost of capital and capital structure, developskills in capital budgeting, optimal capital structure planning and principles ofcorporate �nancial strategy analysis. By the end of spring semester students areexpected to be able to apply option pricing models to �nancial and real assets,understand the basics of real options and their role in corporate valuation, beable to analyze �nancial aspects of agency problem and corporate control.

Main Reading

1. Grinblatt/Titman. Financial Markets and Corporate Strategy. McGrawHill.� G&T

2. Brealey/Myers. Principles of Corporate Finance.6th Edition. � B&M

3. P.Frantz. Study Guide. Corporate Finance. 2005.

252 FOURTH YEAR


1. Fama E.F. �Market E�ciency. Long Term Returns, and Behavioral Fi-nance�. Journal of Financial Economics, � 49 (1998), pp.283�306

2. Fama E.F. �E�cient Capital Markets: II� The Journal of Finance, Vol.46, �.5, 1991, pp.1575�1617

3. Fama E.F. �The Behavior of Stock�Market Prices� Journal of BusinessVol. 38, �1. (Jan., 1965), pp. 34�105

4. Fama E.F. �E�cient Capital Markets: A Review of Theory and EmpiricalWork�, Journal of Finance Vol. 25, �2. (1969), pp. 383�417

5. French K.R., Fama E.F.�Financing decisions: who issues stock?� Journalof Financial Economics, �76 (2005), pp.549�582

6. French K.R. �The weekend e�ect on the distribution of stock prices�.,Journal of Financial Economics, �13 (1984), pp.547�559

7. French K.R., Fama �Dividend yields and expected stock returns� Journalof Financial Economics, �22 (1988), pp.3�25

8. Lo A.W., MacKinlay �Stock Market Prices do not Follow Random Walks:Evidence from a Simple Speci�cation Test� The Review of Financial Stud-ies Vol. 1, �1. (Spring, 1988), pp. 41�66

9. Poterba J. M., Summers L.H. �Mean reversion in stock prices� Journal ofFinancial Economics, �22 (1988), pp.27�59

10. Ball R. �The Theory of Stock Market E�ciency: Accomplishments andLimitations�. The Revolution in Corporate Finance / edited by Joel M.Stern and Donald H. Chew,Jr.�4th ed., pp.10�24

11. Cli�ord D. Smith, Jr., Charles W. Smithson, D. Sykes Wilford . �Man-aging Financial Risk�. The Revolution in Corporate Finance / edited byJoel M. Stern and Donald H. Chew,Jr.�4th ed., pp. 345�367

12. FT Mastering Series. Finance. The Complete Finance Companion. FTPitman Publishing. Russian Version. Moscow: Olimp�Business. 1998.Ch. 8

13. Guide,ch.2

14. FT Mastering Series. Finance. The Complete Finance Companion. FTPitman Publishing. Russian version. Moscow: Olimp�Business. 1998.Ch. 1, p. 25�61 Guide,ch.2


15. Roll, R �A Critique of the Asset Pricing Theory's Texts. Part 1: On Pastand potential Testability of the Theory� Journal of Financial Economics(1977) 4: 129�176

16. S. P. Kothari, F. Shanken �In Defense of Beta�. The Revolution in Cor-porate Finance / edited by Joel M. Stern and Donald H. Chew,Jr.�4thed., pp.63�69

17. Ìàñóä Ìóññàâèàí, �Ìåòîä ÀÐÒ: àëüòåðíàòèâíûé ïîäõîä ê îöåíêåðèñêà� FT Mastering Series. Finance. The Complete Finance Compan-ion. FT Pitman Publishing. Russian version. Moscow: Olimp�Business.1998, pp. 44�53

18. M.Harris, A.Raviv. �The Theory of Capital Structure�. The Journal ofFinance, vol.46,�1, 1991, pp.299�350

19. Àñâàò Äàìîäàðàí, �Èííîâàöèè Ôèíàíñèðîâàíèÿ è Âûáîð ÑòðóêòóðûÊàïèòàëà� Journal of Applied Corporate Finance, Spring 1999, Vol.12No.1

20. Ðîáåðò Ñ. ×èðèíêî, Àíóäæà Ð. Ñèíõà, �Âåðèôèêàöèÿ ñòàòè÷åñêîéêîì- ïðîìèññíîé ìîäåëè ñòðóêòóðû êàïèòàëà îòíîñèòåëüíî ìîäåëèèåðàðõèè ôèíàíñèðîâàíèÿ: êðèòè÷åñêèå çàìå÷àíèÿ� Journal of Fi-nancial Economics, � 58 (2000) pp. 417�425

21. Merton H. Miller �The Modigliani�Miller Propositions After ThirtyYears�. The Revolution in Corporate Finance / edited by Joel M. Sternand Donald H. Chew,Jr.�4th ed., pp.129�141

22. Stewart S. Myers. �Still Searching for Optimal Capital Structure�. TheRevolution in Corporate Finance / edited by Joel M. Stern and DonaldH. Chew,Jr.�4th ed., pp.142�152

23. Michael F. Barclay, Cli�ord W. Smith, Jr. . �The Capital Structure Puz-zle: Another Look at the Evidence� The Revolution in Corporate Finance/ edited by Joel M. Stern and Donald H. Chew,Jr.�4th ed., pp.153�166

24. Gustavo Grullon, David L. Ikenberry. �What Do We Know About StockRepurchases?�. The Revolution in Corporate Finance / edited by Joel M.Stern and Donald H. Chew,Jr.�4th ed., pp.167�189

25. French K.R., Fama E.F �Disappearing dividends: changing �rm charac-teristics or lower propensity to pay?� Journal of Financial Economics,�60 (2001), pp.3�43

254 FOURTH YEAR

26. DeAngelo H., DeAngelo L., Stuls R.M. �Dividend policy and the earn-ed/contributed capital mix: a test of the life�cycle theory�. Journal ofFinancial Economics, � 81 (2006), pp.227�254

27. Healy P.M., Palepu L.G. �Earnings information conveyed by dividendinitiations and omissions�. Journal of Financial Economics, �21 (1988),pp.149�175

28. Jagannathan M., Stephenes C. P., Weisbach M.S. �Financial �exibilityand the choice between dividends and stock repurchases�. Journal ofFinancial Economics, �57 (2000), pp.355�384

29. Parrino R.,Weisbach M. Measuring investment distortions arising fromstockholder�bondholder con�icts Journal of Financial Economics, �53(1999), pp.3�42

30. Ãîâàðä Êàóôîëä, Àéçèê Èíñåëüáàã, �Îöåíêà îïåðàöèé ïî âûêóïóïðåäïðèÿòèé â êðåäèò� FT Mastering Series. Finance. The CompleteFinance Companion. FT Pitman Publishing. Russian version. Moscow:Olimp�Business. 1998, pp.34�44

31. Shleifer A., Vishny R.W. Large shareholders and corporate control TheJournal of Political Economy Vol. 94, �3.Part 1 (Jun., 1986), pp. 461�488

32. Stoughton N.M., Zechner J. IPO�mechanisms, monitoring and ownershipstructure Journal of Financial Economics, 49 (1998), pp.45�77

33. FT Mastering Series. Finance. The Complete Finance Companion. FTPitman Publishing. Russian version. Moscow: Olimp�Business. 1998.Ch. 5�6

Internet Resources

1. www.c�n.ru

2. www.damodaran.com

Grade determination

Current control includes: written home assignments (WHA), essays and theirassessment, participation in classworks and case presentations. Essay's markinginvolves the evaluation of the logic, the structure of presentation, as well as thedepth of argumentation and the ability to discuss di�erent points of views.


Intermediate control is based on mid�term exam in each semester plusmidyear exam in January in UOL format or MOCK exam in March/April.

Final exam is set by the University of London.Grades are calculated as weighted average with the following weights:Grades are calculated as weighted average with the following weights:First term:

• For written home assignments (WHA) - 20%

• For classworks: 15% (problem and exercises solving plus attendance)

• For midterm exam - 15%

• Midyear exam in January - 50%

The �nal grade is based on �nal exam 60% and the remaining 40% is givenfor performance evaluation during the annual course with the following weights:

• 20% for the �rst semester,

• 10% for class participation in term 2 (problem�solving and attendance).

• 10% for written home assignments of the term 2

Course Outline

Part I. Understanding Principles of Valuation

1. Introduction to the Course. Why is Finance Corporate? TheRole of Basic Capital Market Concepts in Corporate Analysis

The advantages of corporate �rm over the sole traders and partnerships.The life�cycle of the corporation at the capital market: funds raising, investingand benchmarks, returning money to investors at the capital market. The func-tions of corporate �nancial manager. The role of capital market in explainingcorporate performance: main assumptions. The consumption choice and the�rst Fisher separation theorem. No arbitrage rule and the principle of track-ing (replicating) portfolio. Net present value rule of corporate analysis. Thesources of NPV. The second Fisher separation theorem.

The di�erences between �nancial model of corporate analysis and account-ing model: the concept of cost and pro�ts, the concept of money measurement,the concept of return and corporate performance measurement. The value cre-ation and building blocks in corporate �nance. The mission of Chief FinancialO�cer of the Corporation (CFO). The role of corporate �nance in building�nancial model of the �rm. Corporate Finance and proper �nancial analysis ofany �rm in market economy.

B&M ch.1�3 and 11; G&T ch.1; 9.2; 11.1; Guide,ch.1,pp.5�15.

256 FOURTH YEAR

2. Fundamentals of Corporate Debt Valuation: Bonds Values,Prices and Yields

The yield curve. Spot rates and forward rates. De�ning forward rate fromthe yield curve. The term structure of interest rates: theoretical explanation.The role of term structure of interest rates in constructing tracking (repli-cating) portfolio for Corporate Bonds. Intrinsic value of stand�alone bond.Discounted cash �ow valuation of corporate bonds. Corporate bond's types.Bond's covenants: assets covenants, dividend covenants, �nancing covenants.The in�uence of covenants over bond's valuation. Bond's yields: promised yieldto maturity, realized (horizon yield), promised yield to call. Theorems of bond'spricing. Bond's rating and yields to maturity.

B&M ch.4 (4.1 ), 23 (23.1�23.3); G&T ch.2 (2.4, 2.8�2.9); Appendix toch.9 (9A); Guide,ch.1,pp.15�17.

3. Fundamentals of Equities Valuation: Preferred and CommonStock

Types of preferred stock by voting rights, dividend rates and dividend pay-ments. Discounted dividend model (DDM) for preferred (preference) shares.Discounted dividend model for common stock (ordinary shares): the criteriafor stable growing company, Gordon constant growth dividend rate model.Multistage DDM: 2 stages dividend growth, negative rate of dividend growth.Growth opportunities value. The limitations of DCF valuation.

B&M ch.4 G&T Appendix A , pp.825�837; Guide,ch.1.

4. The role of E�cient Market Hypothesis in Corporate Analysis:Theory and Evidence

The types of information for investor's decision�making. The value of infor-mation for the investor. The e�cient market hypothesis (EMH). The di�erentforms of market e�ciency and their criteria: weak, semi�strong, strong e�-ciency. The role of EMH in corporate analysis. The practical implications ofEMH. Empirical testing of EMH: methods to test weak form e�ciency, methodsfor semi�strong e�ciency testing.

B&M ch.13Fama E.F. �Market E�ciency. Long Term Returns, and Behavioral Fi-

nance�. Journal of Financial Economics, � 49 (1998), pp.283�306Fama E.F. �E�cient Capital Markets: II�� The Journal of Finance, vol.46,

�.5, 1991, pp. 1575�1617Fama E.F. �The Behavior of Stock�Market Prices� Journal of Business Vol.

38, �1. (Jan., 1965), pp. 34�105Fama E.F. �E�cient Capital Markets: A Review of Theory and Empirical

Work�, Journal of Finance Vol. 25, �2. (1969), pp. 383�417French K.R., Fama E.F.�Financing decisions: who issues stock?� Journal

of Financial Economics, �76 (2005), pp.549�582


French K.R. �The weekend e�ect on the distribution of stock prices�., Jour-nal of Financial Economics, �13 (1984), pp.547�559

French K.R., Fama �Dividend yields and expected stock returns� Journal ofFinancial Economics, �22 (1988), pp.3�25

Lo A.W., MacKinlay �Stock Market Prices do not Follow Random Walks:Evidence from a Simple Speci�cation Test� The Review of Financial StudiesVol. 1, �1. (Spring, 1988), pp. 41�66

Poterba J. M., Summers L.H. �Mean reversion in stock prices� Journal ofFinancial Economics, �22 (1988), pp.27�59

Ball R. �The Theory of Stock Market E�ciency: Accomplishments andLimitations�. The Revolution in Corporate Finance / edited by Joel M. Sternand Donald H. Chew,Jr.�4th ed., pp.10�24

5. Risk and Expected Return: Principles of Portfolio AnalysisSeparation theorems. The principles and assumptions of mean�variance

analysis. Asset's risk and variance of returns. Expected portfolio returns.Portfolio risk and assets's covariances. Mean - standard deviation diagram ofrisky assets. The feasible set of assets and the diversi�cation. The e�cientfrontier of risky assets. The e�cient frontier with risk�free asset. The Capitalmarket line (CML): the slope, borrowing/lending opportunities. The tangencyportfolio. Two�funds separation.

B&M ch.7 and 8.1; G&T ch.4 and 5.1�5.7.Cli�ord D. Smith, Jr., Charles W. Smithson, D. Sykes Wilford . �Managing

Financial Risk�. The Revolution in Corporate Finance / edited by Joel M. Sternand Donald H. Chew,Jr.�4th ed., pp. 345�367

FT Mastering Series. Finance. The Complete Finance Companion. FTPitman Publishing. Russian Version. Moscow: Olimp�Business.1998.Ch. 8

Guide,ch.2

6. Capital Asset Pricing Theory: CAPMThe role of CML in pricing models derivation. Assumptions for capital

asset pricing model. The market portfolio. Security market line (SML): theslope, the comparison to CML. The stock's beta: true beta, factors a�ectingtrue beta. Improving the beta estimated from regression (top down beta). Theproblem of adjusted beta. Estimating the market risk premium. Critiques ofthe CAPM. The tests of the CAPM: cross�sectional tests, time�series tests.Empirical evidence on the CAPM.

B&M ch.8 (8.1�8.3); G&T ch.5.FT Mastering Series. Finance. The Complete Finance Companion. FT

Pitman Publishing. Russian version. Moscow: Olimp�Business.1998.Ch. 1,p. 25�61 Guide,ch.2

Roll, R �A Critique of the Asset Pricing Theory's Texts. Part 1: On Pastand potential Testability of the Theory� Journal of Financial Economics (1977)4: 129�176

258 FOURTH YEAR

S. P. Kothari, F. Shanken �In Defense of Beta�. The Revolution in Cor-porate Finance / edited by Joel M. Stern and Donald H. Chew,Jr.�4th ed.,pp.63�69

7. Capital Asset Pricing Theory: Arbitrage Pricing TheoryThe assumptions for factor pricing models. The single factor model (the

market model). The multifactor models. Systematic risk and diversi�cationin arbitrage pricing theory. The methods of factor's estimation: factor analy-sis, macroeconomic variables approach, sorted portfolio approach. Betas andfactor� risk premiums. Estimating factors betas. The arbitrage price theorywith no��rm speci�c risk. The risk�expected return relationship for stockswith �rm speci�c risk. Empirical tests on APT: factor studies, macroeconomicvariables studies, �rm characteristics studies. Comparison of CAPM and APT.

B&M ch. 8 (8.4.); G&T ch.6; Guide,ch.3.Ìàñóä Ìóññàâèàí, �Ìåòîä ÀÐÒ: àëüòåðíàòèâíûé ïîäõîä ê îöåíêå

ðèñêà� FT Mastering Series. Finance. The Complete Finance Companion. FTPitman Publishing. Russian version. Moscow: Olimp�Business.1998, pp.44�53

Part II. Corporate Financial Strategy and Corporate

Value

8. Capital Structure Choice and Corporate ValueThe assumptions of Modigliani&Miller theorem on capital structure. The

arbitrage argument and replicating portfolio of investor in M&M world. TheM&M propositions I and II. The cost of capital: traditional and M&M ap-proaches. The propositions I and II with corporate income taxes. The e�ectof personal taxes on capital structure. Miller equilibrium for the �rm and forthe investor. Financial distress' direct and indirect costs. Debt holder � equityholder con�icts: debt overhang problem, shareholder's incentives, the ways tominimize the con�icts. The trade�o�s theory of capital structure. The peckingorder of �nancing theory. The stakeholders theory of capital structure. Thedynamic capital structure theory versus static. The information conveyed by�nancing choices decision. Signaling concept of capital structure.

B&M ch.17�18; G&T ch.13,15,16; Guide,ch.6.M.Harris, A.Raviv. �The Theory of Capital Structure�. The Journal of

Finance, vol.46,�1, 1991, pp.299�350Àñâàò Äàìîäàðàí, �Èííîâàöèè Ôèíàíñèðîâàíèÿ è Âûáîð Ñòðóêòóðû

Êàïèòàëà� Journal of Applied Corporate Finance, Spring 1999, Vol.12 No.1Ðîáåðò Ñ. ×èðèíêî, Àíóäæà Ð. Ñèíõà, �Âåðèôèêàöèÿ ñòàòè÷åñêîé

êîìïðîìèññíîé ìîäåëè ñòðóêòóðû êàïèòàëà îòíîñèòåëüíî ìîäåëè


èåðàðõèè ôèíàíñèðîâàíèÿ: êðèòè÷åñêèå çàìå÷àíèÿ� Journal of FinancialEconomics, � 58 (2000) pp. 417�425

Merton H. Miller �The Modigliani�Miller Propositions After Thirty Years�.The Revolution in Corporate Finance / edited by Joel M. Stern and Donald H.Chew,Jr.�4th ed., pp.129�141

Stewart S. Myers. �Still Searching for Optimal Capital Structure�. TheRevolution in Corporate Finance / edited by Joel M. Stern and Donald H.Chew,Jr.�4th ed., pp.142�152

Michael F. Barclay, Cli�ord W. Smith, Jr. . �The Capital Structure Puzzle:Another Look at the Evidence� The Revolution in Corporate Finance / editedby Joel M. Stern and Donald H. Chew,Jr.�4th ed., pp.153�166

Gustavo Grullon, David L. Ikenberry. �What Do We Know About StockRepurchases?�. The Revolution in Corporate Finance / edited by Joel M. Sternand Donald H. Chew,Jr.�4th ed., pp.167�189

9. Capital Market Benchmarking: Corporate Cost of Capital.Patterns of corporate �nancing. The many kinds of debt �nancing. The

corporate cost of debt. The debt tax shield. Equity �nancing. The corporatecost of retained earnings. The issuance of new equity and corporate cost ofequity. The weighted average cost of capital (WACC) and corporate hurdlerate. The WACC and the principles of corporate return analysis. The volumeof �nancing and the marginal corporate cost of capital.

B&M ch.14�15, 22, 23(23.4, 23.5), 24, 26; G&T ch. 12 (12.1; 12.3);Guide, ch. 6.

10. Corporate Investing Policies and Value Creation: The Ana-lytical Tool Kit for Riskless Projects

Weighted average cost of capital. net present value rule, its assumptionsand the additivity of value. The cost of debt for corporate bonds, bank's loans,lease �nancing. The cost of equity. The use of after�tax cost of capital incapital budgeting decisions. The impact of �nancing on real asset valuation.Discounting cash �ows to equity holders (equity residual approach).

B&M ch.5�6, 9�10, 19; G&T ch.9�10, ch.11(11.2), 12(12.2, 12.4).FT Mastering Series. Finance. The Complete Finance Companion. FT

Pitman Publishing. Russian version. Moscow: Olimp�Business.1998.Ch. 4,pp.170�196

11. Corporate Investing Policies and Value Creation: TraditionalAnalytical Tool Kit for Risky Projects

The risk� adjusted discount rate method of evaluating risky projects. Cer-tainty equivalents cash �ows and their use in risky project's analysis. Valuationof risky projects: sensitivity analysis, simulation, decision trees.

B&M ch.5�6, 9�10, 19; G&T ch.9�10, ch.11(11.2), 12(12.2, 12.4).

260 FOURTH YEAR

FT Mastering Series. Finance. The Complete Finance Companion. FTPitman Publishing. Russian version. Moscow: Olimp�Business.1998.Ch. 4,pp.170�196

12. Dividend Policy and Corporate Value: Theory and EvidenceTypes of dividend: cash dividend, scrip dividend, forms of share repur-

chase. The Modigliani& Miller dividend irrelevance theorem. The e�ect ofmarket imperfections (taxes and transaction costs) on dividend policy. Thee�ect of market frictions on distribution policy. The dividend controversy. Therightists concepts of dividends. Clientele theory: assumptions, empirical ev-idence. Signaling theory of dividends: the information content of dividends,dividends as mixed signal, empirical evidence. The leftists on dividend policy.Lintner stylized facts modelling. Empirical research on distribution policies.

B&M ch.16; G&T ch.14; Guide,ch.8.French K.R., Fama E.F �Disappearing dividends: changing �rm charac-

teristics or lower propensity to pay?� Journal of Financial Economics, �60(2001), pp.3�43

DeAngelo H., DeAngelo L., Stuls R.M. �Dividend policy and the earn-ed/contributed capital mix: a test of the life�cycle theory�. Journal of FinancialEconomics, � 81 (2006), pp.227�254

Healy P.M., Palepu L.G. �Earnings information conveyed by dividend initi-ations and omissions�. Journal of Financial Economics, �21 (1988), pp.149�175

Jagannathan M., Stephenes C. P., Weisbach M.S. �Financial �exibility andthe choice between dividends and stock repurchases�. Journal of Financial Eco-nomics, �57 (2000), pp.355�384

Parrino R.,Weisbach M. Measuring investment distortions arising fromstockholder�bondholder con�icts Journal of Financial Economics, �53 (1999),pp.3�42

13. Interaction of Investing and Financing DecisionsPortfolio approach to the asset's risk (asset's beta). The �nancial leverage

and the adjustments to the equity beta (Hamada adjustments): the �nancialleverage, the risk�free corporate debt and the equity beta; the �nancial leverage,the corporate tax rates and the equity beta. The adjusted present value model(APV, Myers) for capital budgeting decisions: the base cash �ow and sidee�ects; the di�erent discount rates. The APV versus the weighted average costof capital model.

B&M ch.16; G&T ch.14; Guide,ch.8.

14. Option Pricing ModelsPricing models and the principle of tracking portfolio. Risk�neutral option

valuation. Black�Scholes model and its assumptions. The methods of stock


volatility estimation. Option values and dividends on underlying stock. Em-pirical biases in Black�Scholes formula.

B&M ch.20, 22l; G&T ch. 7(7.1�7.3), ch.8(8.1�8.8); Guide,ch.4.

15. Valuing Corporate Strategic Opportunities and Flexibility:Corporate Real Options.

Strategic options of the corporation and the limitations of DCF analysis.Real option valuation: main assumptions, the di�erence in treatment of pa-rameters between �nancial and real options. The use of risk neutral approach,binomial and Black�Scholes models in real option valution. Valuing option toabandon, to postpone, to expand. OPM as a tool of quantifying managerial�exibility. The bene�ts of real option valuation over DCF project analysis. Theuse of OPM in corporate valuation. Put�call parity and its application to thecorporation: corporate securities as options. The use of OPM in the analysisof corporate cost of capital: warrants and convertibles.

B&M ch.21; G&T ch. 11 (11.1�11.2); Guide,ch.4.

16. Risk Management and Value CreationRisk and the M&M theorem. The motivation to hedge. Hedging and the

�rm's stakeholders. The methods of interest rate risk management. Foreignexchange risk management.

B&M ch.22; G&T ch.20�21; Guide,ch.8.

Part III. Corporate Value Creation and Corporate Control

17. The Market for Corporate Control: Mergers, Takeovers andLeveraged Buyouts.

Types of mergers and takeovers. The principles of valuation of mergers andtakeovers. Stand � alone value of the target and of the buyer. E�ciency theo-ries of M&A activities: di�erential e�ciency, ine�cient management, synergye�ects theory. The sources and types of synergy. Agency theories of M&A.Signaling theories of M&A. Hostile takeovers and free � rider problem. Man-agement defenses. Valuing synergy on the basis of DCF. The use of real optionsin synergy's valuation.

B&M ch.33; G&T ch.19; Guide,ch.

18. Strategic and Financial RestructuringThe methods of corporate restructuring. Corporate divestitures and the

problem of control. The sources for synergy in restructuring. Bankruptcy andcorporate control. Restructuring distressed companies. LBOs: the e�ect onstock prices. Financial analysis of e�ciency in case of restructuring.

B&M ch.33; G&T ch.19.

262 FOURTH YEAR

Ãîâàðä Êàóôîëä, Àéçèê Èíñåëüáàã, �Îöåíêà îïåðàöèé ïî âûêóïó ïðåä-ïðèÿòèé â êðåäèò� FT Mastering Series. Finance. The Complete FinanceCompanion. FT Pitman Publishing. Russian version. Moscow: Olimp�Business.1998, pp.34�44

Shleifer A., Vishny R.W. Large shareholders and corporate control TheJournal of Political Economy Vol. 94, �3.Part 1 (Jun., 1986), pp. 461�488

Stoughton N.M., Zechner J. IPO�mechanisms, monitoring and ownershipstructure Journal of Financial Economics, 49 (1998), pp.45�77



1. Introduction to the Course. Whyis Finance Corporate? The Roleof Basic Capital MarketConcepts in Corporate Analysis

12 2 2 8

2. Fundamentals of Corporate DebtValuation: Bonds Values, Pricesand Yields

18 4 4 10

3. Fundamentals of EquitiesValuation: Preferred andCommon Stock

20 6 4 10

4. The role of E�cient MarketHypothesis in CorporateAnalysis: Theory and Evidence

20 4 4 12

5. Risk and Expected Return:Principles of Portfolio Analysis

22 4 6 12

6. Capital Asset Pricing Theory:CAPM

22 6 6 10

7. Capital Asset Pricing Theory:Arbitrage Pricing Theory

12 2 2 8

8. Capital Structure Choice andCorporate Value

26 6 6 14

9. Capital Market Benchmarking:Corporate Cost of Capital

16 4 4 8

10. Corporate Investing Policies andValue Creation: The AnalyticalTool Kit for Riskless Projects

12 2 2 8

11. Corporate Investing Policies andValue Creation: TraditionalAnalytical Tool Kit for RiskyProjects

14 2 2 10



12. Dividend Policy and CorporateValue: Theory and Evidence

22 4 4 14

13. Interaction of Investing andFinancing Decisions

18 4 4 10

14. Option Pricing Models 26 6 6 1415. Valuing Corporate Strategic

Opportunities and Flexibility:Corporate Real Options

14 2 2 10

16. Risk Management and ValueCreation

14 2 2 10

17. The Market for CorporateControl: Mergers, Takeovers andLeveraged Buyouts

22 4 4 14

18. Strategic and FinancialRestructuring

14 2 2 10

Total: 324 66 66 192

264 FOURTH YEAR

Monetary Economics

Lecturer: Maxim I. NikitinClassteachers: Artem V. Arkhipov, Vladimir N. Sokolov

Course description

Monetary Economics is a two-semester course designed for the fourth-year stu-dents studying Economics, and Finance and Banking. The course is taught inEnglish.

Monetary Economics is one of the core courses taught to the fourth-year stu-dents at ICEF. The course examines the role and functions of money, the issuesin monetary policy and the relationships among monetary and real variablesin the closed and open economy contexts. The prerequisites for the course areone semester of intermediate microeconomics and one semester of intermediatemacroeconomics. Some familiarity with principles of banking is helpful, butnot essential. Students are expected to have the knowledge of basic calculusand econometrics.

The course stresses microfoundations of monetary economics, including adiscussion of money and the �nancial system, the determination of interestrates, money creation and the monetary transmission mechanism. It also dealswith the macroeconomic aspects of monetary policy, including a discussion ofneutrality of money, in�ation and expectations, the Phillips curve, exchangerates and currency unions.

Course objectives

The purpose of the course is to provide students with the comprehensive analy-sis of the money markets and modern monetary policy. The course is designed toequip students with the theoretical background necessary to analyze problemsinvolving the demand for money, the determination of interest rates, monetarypolicy and international �nance.

This course will improve students' understanding of contemporary monetarypolicy: what, if anything, governments and/or central banks can do to improvethe way in which economies perform through the use of the monetary policyinstruments.

Methods




MONETARY ECONOMICS 265

• written home assignments (1 per 1�2 weeks)

• teachers' consultations (2 hours per week)

• self study (4�6 hours per week)

The course is taught during two semesters of the 4�th year of education atICEF. There are 34 hours of lectures and 34 hours of classes in the Fall term,and 28 hours of lectures and 28 hours of classes in the Spring term. Lecturesare designed to help students to understand the main concepts of the course.The classes are used to illustrate the theory with references to policy issues,empirical studies and quantitative tasks. The home assignments have two goals:they prepare the students for the external examination, and they are used tomonitor the students' progress in the course. The home assignments have theformat of the University of London examination: essay questions (open�endquestions) to analyze a particular problem in detail, quantitative problems andtrue/false/uncertain evaluations of given statements.

Main Reading

1. Lewis M. and Mizen P. Monetary Economics. Oxford University Press,2002. (LM)

2. Goodhart C. Money, Information and Uncertainty. MacMillan, 1989. (G)

3. Krugman P. and M. Obstfeld. International Economics: Theory andPolicy. Addison� Wesley, 2003. (KO)


In some topics the students may �nd it useful to consult the following textbooks:

1. Mishkin F. The Economics of Banking and Financial Markets. 6th ed.rev., Boston., 2003. (Mishkin)

2. Miller R., Van Hoose D. Modern Money and Banking. 3d ed., L., 1993.(Russian translation: 2000) (MH)

These books provide discussions mostly at a non�technical level which is belowthe level of the course, although they give useful examples and interesting expla-nations of some problems. Additional readings are required for several topics.The required journal articles are available online (via jstor or sciencedirect) orwill be distributed by the lecturer.

266 FOURTH YEAR

Internet Resources

1. http://econ.lse.ac.uk/courses/ec321/

2. http://mief.hse.ru

3. http://wps.aw.com/aw_mishkin_econmbfm_8

4. http://wps.aw.com/aw_krgmnobstf_interecon_7

Grade determination

There are several forms of current, intermediate and �nal control in the course.The current control includes written home assignments and evaluation of theparticipation in class discussions. The intermediate control includes the mid�term test in Fall term and the Winter exam. The �nal control includes the �nalexam in April and the University of London examination.

In the Fall term the grade is given on the basis of the following criteria:

• 10% � home assignments

• 5% � class activity

• 35% � mid�term test

• 50% � winter examination

The �nal grade is given on the basis of the following criteria:

• 10% � home assignments in the Spring semester

• 5% � class activity in the Spring semester

• 35% � the �rst term grade.

• 50% � �nal exam

Course Outline

Part I. Basic concepts of Monetary Economics

1. The nature of money

• De�nition and functions of money

• Reasons to have money

• Types of money

LM, ch.1; G, ch. 2


2. Demand for money

• The transactions demand for money

• Keynes' speculative demand for money and its criticisms

• Baumol�Tobin model and Tobin's model of portfolio selection

• Macroeconomic determinants of money demand

• Testing demand for money function

LM, ch.5�6; 11, 12; G, ch. 3, 4; Laidler D. The Demand for Money.Harper Collins, 1993.

3. Money supply

• The role of banking system and �nancial intermediation

• The base�multiplier approach to money supply determination

• The �ow of funds approach to money supply determination

G, ch. 5, 6 and 10; MH, ch. 4; 5; 6; 8; 9; Mishkin. ch. 15, 16

4. Classical theory of money

• The quantity equation of money

• The velocity of money;

• The classical dichotomy and monetary neturality

• Money in general equilibrium

LM, ch. 3�4

Part II. Monetary Policy in Closed Economy

5. Money, In�ation and Welfare

• Neutrality of money

• Real and nominal interest rates

• Introduction to Dynamic Optimising Models of Monetary Economics

• Superneutrality of money

• The welfare costs of in�ation and the optimal quantity of money

• High in�ation and hyperin�ation

LM, ch.7; MH. Ch. 21 McCallum Bennett T. In�ation: Theory andEvidence. In: Handbook of Monetary Economics, Vol. II. ElsevierScience Publishers, 1990.

268 FOURTH YEAR

6. Classical Models and Monetary Policy

• The classical model revisited

• Real business cycle theory

• Lucas misperceptions model

• Cash�in�advance models

Hoover, K.D. The New Classical Macroeconomics. Blackwell, 1988,ch. 3. Plosser, C. Understanding Real Business Cycles, Journal ofEconomic Perspectives, 1989, Summer.

7. Monetary policy in Keynesian models

• Keynesian aggregate supply function and the Phillips curve

• Menu costs and sticky prices

• Multi�period pricing model

LM, ch. 3, 5. Hargreaves Heap, S.P. The New Keynesian Macroeco-nomics: Time, Belief and Social Independence. Edward Elgar Pub-lishing, 1992, ch. 5 and 6.

8. Conduct of monetary policy in a closed economy

• Policy ine�ectiveness proposition (PIP)

• Rational expectations models and monetary policy

• Lucas critique

• Time inconsistency and in�ation bias

• Central bank independence: a discussion

• Friedman's rule of constant money growth

LM, ch. 9 and 10; MH. Ch. 22; 24; 25; 26

9. The term structure of interest rates

• The yield curve

• The expectations hypothesis

• The segmentation hypothesis

• The preferred habitat theory

G, ch. 11, LM, ch. 5; Mishkin. ch. 6

Part III. Monetary Policy in Open Economy


10. Balance of Payments, Nominal and Real Exchange Rates

• Income accounting in an open economy

• The balance of payments

• Nominal exchange rates

• Real exchange rates

KO, ch. 12; LM, ch.15

11. Prices and Exchange Rates

• The law of one price (LOOP)

• Purchasing power parity (PPP)

• Relative purchasing power parity

• Empirical evidence on PPP and the Balassa�Samuelson theory

• The monetary approach to the exchange rate determination

KO, ch. 12 and 15

12. Money, Interest Rates and Exchange Rates

• Uncovered Interest Parity (UIP)

• Covered Interest Parity (CIP)

• Money Market Equilibrium in an open economy

KO, ch. 13 and 14; Mishkin, ch. 8

13. Monetary Policy and Output in an Open Economy

• Exchange rate regimes and monetary policy

• The arguments for and against monetary policy coordination amongstcountries

• The AA�DD model of an open economy

KO, ch. 16; MH. Ch. 27; 28; 29

270 FOURTH YEAR

14. Exchange Rate Regimes and Monetary Unions

• The Gold standard

• The Bretton Woods system

• Costs and bene�ts of a monetary union. European Monetary Union

KO, ch. 18,19,20; LM, ch.15

15. Goals, Targets and Instruments of Monetary Policy in anOpen Economy

• Instruments of Monetary Policy

• Intermediate Targets of Monetary Policy

• In�ation Targeting

Mishkin, ch. 18, 20



1. The nature of money 12 3 3 62. Demand for money 12 3 3 63. Money supply 12 3 3 64. Classical theory of money 16 4 4 85. Money, in�ation and welfare 16 4 4 86. Classical models and monetary

policy16 4 4 8

7. Monetary policy in keynesianmodels

14 4 4 6

8. Conduct of monetary policy in aclosed economy

12 3 3 6

9. The term structure of interestrates

12 3 3 6

10. Balance of payments, nominaland real exchange rates

12 3 3 6

11. Prices and exchange rates 12 3 3 612. Money, interest rates, and

exchange rates12 3 3 6

13. Monetary policy and output inan open economy

12 3 3 6



14. Exchange rate regimes andmonetary unions

12 3 3 6

15. Goals, Targets and Instrumentsof Monetary Policy in an OpenEconomy

14 4 4 6

Total: 196 50 50 96

272 FOURTH YEAR

International Economics

Lecturer: Natalya A. VolchkovaClassteachers: Konstantin K. Kozlov, Dmitriy V. Levando, Natalia A. Tour-dyeva

Course description

This course will introduce both the microeconomic and macroeconomic issuesrelevant to the economic relations among countries. The �rst half of the coursedeals with the microeconomic issues of international trade, and covers suchissues as (i) why countries trade, (ii) how the gains from trade are distributed,and (iii) the theory and practice of protectionism. The second half of the coursedeals with issues in international �nance and macroeconomics, and covers suchissues as (i) the markets for currencies, (ii) balance of payments de�nitions, (iii)adjustment processes, and (iv) monetary unions.

Prerequisites for the course are Microeconomics 1�2, Macroeconomics 1�2,and Applied Econometrics.

Course objectives

The course aims to provide a framework for consistent reasoning about inter-national �ows of goods, factors of production, and �nancial assets, and theirimplications for the national economy, as well as to give a sense of the main�ndings of empirical work in these areas.

Methods

The teaching is based on the principle that mathematical models and graph-ical analysis have value insofar as they allow given economic problems to beanalyzed in a coherent and rigorous manner. Thus formal mechanics and geo-metrical methods are complements to verbal exposition, which is most usefulfor conveying key insights and discussing empirical evidence. The approachencourages the development of economic intuition as well as some formal skills.


• lectures

• seminars


• oral presentations (1 per course)

• self�study

INTERNATIONAL ECONOMICS 273

In total the course includes 66 hours of lectures and 66 hours of classes.Self�study (219 hours) is extremely important in studying the course.

Main Reading

1. Krugman P., Obstfeld M. (KO) International Economics: Theory andPolicy. Ed. 3�7. /Russian translation: Ï.Êðóãìàí, Ì.Îáñòôåëüä.Ìåæäóíàðîäíàÿ ýêîíîìèêà. Òåîðèÿ è ïîëèòèêà. Ì., 1997/.

2. Sodersten B., Reed G. (SR) International Economics, 3rd ed. Macmillan,1994.

3. Appleyard D., Field A. (A) International Economics,

4. Vanags A. (UL) International Economics. University of London, SubjectGuide, 2001.

5. Vousden N. (V) The Economics of Trade Protection, Cambridge Univer-sity Press, 1990

6. Krugman P. (K), Pop Internationalism, MIT Press, 1997

7. Copeland, L. (C) Exchange Rates and International Finance. Addison�Wesley, 1994 4th ed. 2004

Students are required to read regularly international newspapers and maga-zines such as The Financial Times, The Economist, or The Wall Street Journaland Russian Vedomosti.


1. Ethier W. (E) Modern International economics, 3rd edition. W.W. Nor-ton & Co., 1997.

2. Winters, A. (W) International Economics, 4th edition.

3. Handbook of International Economics (HIE), Vol. 3, Elsevier ScienceB.V., Amsterdam 1997

4. Bowen H., Hollander A., Viaene J. (BHV) Applied international tradeanalysis. Macmillan.

274 FOURTH YEAR

Internet Resources

1. Economist www.economist.com (I�1)

2. World Bank www.worldbank.org (I�2)

3. International Monetary Fund www.imf.org (I�3)

4. United Nations www.un.org (I�4)

5. WTO www.wto.org (I�5)

6. WTO -Russia www.wto.ru (I�6)

Grade determination

Students sit an an end�of�term exam at the end of the �rst semester, the �nalexam and University of London exam in May. The �nal grade for the courseconsists of 5% of the oral presentation mark, 20% of end�of�term exam mark,45% of the mark for the �nal exam and of 30% of the home assignment and classactivity mark. Home assignment mark may include occasional test marks.

Course Outline

Part 1. Theory of International Trade and Protection

1. Introduction

• Important issues in international trade.

• History and present state of world trade �ows

• Russian trade balance

• History of the development of trade theory

(KO Ch.1, K Ch.8, I�4, I�5, I�6)

2. Essentials: Ricardo and Comparative Advantage

• The Ricardian model of trade

• Empirical evidence and policy results

(KO Ch.2; W Ch.2, K Ch. 6, HIE Ch.26)


3. Factor Price Equalization and Trade

• Hecksher�Ohlin model of trade

• Stolper�Samuelson e�ects

• Rybczynski e�ects

(KO Ch.4; W Ch.3; BHV Ch.4, K Ch. 3)

4. Who Wins and Who Loses from Trade?

• The "Speci�c Factors" model of trade

• Redistribution aspect of trade policy

• International experience

(KO Ch.3; A Ch.12; BHV Ch.6, K Ch. 4)

5. Standard Trade Models and Country Welfare

• Welfare comparisons across countries

• Welfare comparisons within countries

(KO Ch.5, K Ch. 1)

6. An Empirical Evaluation of Trade Patterns

• Problems with the Hecksher � Ohlin model

• Empirical evidence of trade theory

(KO Ch.2, 4; W Ch.2, 3; BHV Ch.8, HIE Ch.26)

7. Market Imperfections and Trade

• Imperfect Competition and trade

• Externalities and protectionism

• Empirical evaluation of importance

(KO Ch.6; SR Ch.8, 10, K Ch. 7)

276 FOURTH YEAR

8. International Factor Movements

• International Labor Mobility

• International Capital Flows

• Multinational Firms and Direct Foreign Investment

(KO Ch.7; SR Ch.21�22; BHV Ch.11, K Ch. 13)

9. Tari�s and Non�Tari� Barriers to Trade

• Economics of Tari�s

• Economics of Quotas

• Protection and Imperfect Competition

(KO Ch.8; SR Ch.10, V Ch.2,4 )

10. Government Intervention in Trade

• Welfare arguments

• Income Distribution

• Optimum Tari�

(KO Ch.9; SR Ch.10)

11. Strategic Trade Policies

• Technology and Externalities

• Imperfect Competition and Protection

(KO Ch.11; SR Ch.13)

12. Development through Trade Policies

• Import Substitution and Infant Industry argument

• Export�oriented development strategies

• The East Asian Miracle?

(KO Ch.10; SR Ch.19, K Ch. 11, I�2)


13. Political Economy of Trade (optional, time permitting)

• Endogenous trade policy

• Protection for sale

(KO Ch.9; SR Ch.19, K Ch. 10, , HIE Ch.28, V Ch. 8)

14. World Trade Organization, Preferential Trading Arrange-ments, Custom Unions and Economic Integration

• Preferential Trade Areas

• International Institutions

• WTO and GATT: History

• Anti�dumping

• Environmental regulations

• Traditional Customs Union Theory

• Trade Creation and Trade Diversion

• Conditions that maximize the chance that a CU is bene�cial

(KO Ch.9; SR Ch.16, I�5, I�6)

Part 2. International Macroeconomics

15. IntroductionDistinction between International Trade and International Macroeconomics

16. National Income accounting and the Balance of Payments

• The National Income Accounts

• National Income Accounting for Open Economy

(KO Ch.12; SR Ch.23, I�3)

17. Asset Approach to Exchange Rate Determination

• The Demand for Foreign Currency Assets

• Equilibrium in the Foreign Exchange Market

• Interest Rates, Expectations, and Equilibrium


278 FOURTH YEAR

18. Money, Interest Rates, and Exchange Rates

• Aggregate Money Demand

• The Equilibrium Interest Rate

• The Money Supply and the Exchange Rate in the Short Run

• Money, the Price Level, and the Exchange Rate in the Long Run


19. Price Levels and the Exchange Rate in the Long Run

• Empirical Evidence on PPP and the Law of One Price

• Explaining the Problems with PPP

• A General Model of Long�Run Exchange Rates

• Real Exchange Rate and Real Interest Parity

(KO Ch.15; SR Ch.27, HIE Ch.32, I�1)

20. Output and the Exchange Rate in the Short Run

• Output Market Equilibrium in the Sort Run: The DD Schedule

• Asset Market Equilibrium in the Short Run: The AA Schedule

• Short�Run Equilibrium for an Open Economy

• Temporary vs. Permanent Changes in Monetary and Fiscal Policies

• Macroeconomic Policies and the Current Account

• The Mundell�Fleming model


21. Fixed exchange rate regime

• Central Bank Intervention in Foreign Exchange Market

• Stabilization Policies

• Comparing exchange rate regimes

(KO Ch.17; SR Ch.29, HIE Ch.36)


22. The international monetary system

• The Gold Standard and the Bretton Woods agreement. The IMF.

• Policy coordination with �oating exchange rates.

• Optimum currency area theory. The single currency and economic inte-gration. The EMU.

(KO Ch.18�20; SR Ch.30, 31, I�3)

23. International capital markets and emerging markets

• The e�ciency of international capital markets: theory and evidence.

• Problems of international �nance for developing countries

• Recent �nancial crises: Mexico 1994, Asia 1997�98, Russia 1998.

(KO Ch.21, 22, I�3)



1. Introduction 4 1 1 22. Essentials: Ricardo and

Comparative Advantage23 4 4 15

3. Factor Price Equalization andTrade

23 4 4 15

4. Who Wins and Who Loses fromTrade?

10 2 2 6

5. Standard Trade Models andCountry Welfare

10 2 2 6

6. An Empirical Evaluation ofTrade Patterns

10 2 2 6

7. Market Imperfections and Trade 21 3 3 158. International Factor Movements 15 3 3 99. Tari�s and Non�Tari� Barriers

to Trade23 4 4 15

10. Government Intervention inTrade

10 2 2 6

11. Strategic Trade Policies 13 2 2 912. Development through Trade

Policies5 1 1 3

280 FOURTH YEAR


13. Political Economy of Trade 7 1 1 514. World Trade Organization,

Preferential TradingArrangements, Custom Unionsand Economic Integration

30 6 6 18

15. Introduction 4 1 1 216. National Income accounting and

the Balance of Payments20 4 4 12

17. Asset Approach to ExchangeRate Determination

20 4 4 12

18. Money, Interest Rates, andExchange Rates

20 4 4 12

19. Price Levels and the ExchangeRate in the Long Run

23 4 4 15

20. Output and the Exchange Ratein the Short Run

10 2 2 6

21. Fixed exchange rate regime 20 4 4 1222. The international monetary

system10 2 2 6

23. International capital marketsand emerging markets

20 4 4 12

Total: 351 66 66 219

INSTITUTIONAL ECONOMICS 281

Institutional Economics

Lecturer: Marina I. Odintsova

Course description

The course in Institutional Economics is taught to the fourth year undergrad-uate students and is designed to last for one semester. The course will bedelivered in the form of lectures.

A course in Institutional economics accomplishes a series of courses thatconstitute the basic training for economists. Before studying institutional eco-nomics students should master not only the fundamentals of general economictheory but have knowledge of the historical courses and humanities as well.

It is assumed that the students should be familiar with the following courses:Microeconomics�1 and Microeconomics�2, Macroeconomics, game theory, eco-nomic history and history of economic thought.

Course objectives

The main aim of the course is to provide an overview of recent developmentsin the �eld of institutional economics, to introduce the basic concepts andtechniques related to the subject, to show the students how the institutionalstructure of economy determines the incentives of economic agents, and to helpthe students in their understanding of the role of institutional environmentin economic theory and in business practice, including the analysis of modernproblems in Russian development.

Methods

The following teaching methods are used in the course:


• teacher's consultations (2 hours a week);

• written home assignment;

• test (1);

• self study;

• coursework essay.

In total the course includes 32 hours of lectures and 44 hours of self�study. Thecourse will be assessed by a written exam (3 hours), homework assignments,one test and a coursework essay.

282 FOURTH YEAR

Main Reading

1. Eggertson Thr. Institutions and Economic Behavior. Cambridge, Cam-bridge University Press, 1990.

2. Milgrom P., Roberts J. Economics, Organization and Management. -Prentice�Hall Int., 1992.

3. Varian H. Intermediate Microeconomics. A Modern Approach. 4th ed.W.W.Norton & Company. N.Y. 1996.

Other readings are listed after each topic.

Internet Resources

1. Encyclopedia of Law and Economics � http://allserv.rug.ac.be/~gdegeest

2. International Society for New Institutional Economics ISNIE �http://www.isnie.org

3. Libertarium � http://www.libertarium.ru/library

Grade determination

The �nal grade is determined by the obtained rating. The grade �excellent� �80 marks and more, the grade �good� - in the interval of 60 to 79 marks, thegrade �satisfactory�� in the interval of 40 to 59 marks.

Forms of control Maximum amount of marksTest 20

Home assignments 10Coursework essay 10Written exam 60

Total 100

Course Outline

1. Introduction to institutional analysis

• The concept of institution: attempts at de�nition. Institutions and orga-nizations. Functions of social institutions.

• Interaction situations and the types of norms: prisoners' dilemma�typesituation; co�ordination situation; inequality situation. Enforcementcharacteristics.


• Institutional structure of the society. Formal and informal institutions.Sanctions for disobeying norms (self�enforcing sanctions, guilt, shame, in-formational sanctions, bilateral costly sanctions, multilateral costly sanc-tions). Conditions of norms' e�ectiveness.

• Interaction of formal and informal institutions. The limits on the trans-planting of institutions from best�performing countries. The problems oftheir enforceability.

• The New Institutional Economics and modern institutionalism. Old in-stitutional economics.

Main Reading

1. Eggertson Thr. Institutions and Economic Behavior. Ch.1, pp.1�32.

2. North D. Institutions, Institutional Change and Economic Performance.Cambridge University Press, 1990, Ch.5, 6, 7.

3. Posner R. Social Norms and the Law: an Economic Approach. //Amer-ican Economic Review. 1997. Vol.87 pp. 365�369.


1. Elster J. Social Norms and Economic Theory.//Journal of Economic Per-spectives. 1989 Vol.3. pp. 99�117.

2. Ellickson R. The Aim of Order Without Law. Journal of Institutionaland Theoretical Economics. 1994. Vol. 150 pp. 97�100.

3. Eggertson Thr. Neoinstitutional Economics. In: Newman P. The NewPalgrave Dictionary of Economics and the Law. Vol. 2, pp. 665�670.

4. Furubotn E., Richter R. Institutions and Economic Theory. The Univer-sity Of Michigan Press. 1997. Ch. 1. P.1�38.

5. Posner R., Rasmusen E. Creating and Enforcing Norms, with SpecialReference to Sanctions. //International Review of Law and Economics.1999. Vol. 19, pp. 369�382.

6. Young P. H. The Economics of Convention. //Journal of Economic Per-spectives. 1996. Vol.10. pp. 105 �122.

2. Transaction costs

• The concept of transaction. Market and intra��rm transactions. Trans-action costs as friction in the economy.

284 FOURTH YEAR

• Transaction costs and transformation costs. Interdependency betweentransaction costs and transformation costs.

• Types of market transaction costs and means of transaction costs min-imization (search and information costs; measurement costs; bargainingand decision costs; supervision and enforcement costs). The state of na-ture and private enforcement devices. Self�enforcing agreements (Telser)and hostages (Williamson). Enforcement mechanisms based on bilateraland multilateral reputation. Shortcomings of reputation as a contractenforcement mechanism. Enforcing contracts with the help of the legalsystem. Comparative advantages and shortcomings of the legal enforce-ment mechanism. Contract enforcement in contemporary Russia.

• Transaction costs, the main types of economic exchange and their insti-tutional structure. Coexistence of the main types of economic exchangein the modern society.

• Transaction cost measurement. Transaction costs in the Russian econ-omy.

Main Reading

1. Barzel Y. Measurement Cost and the Organization of Markets. // Journalof Law and Economics, 1982, Vol. 25. pp. 27�48.

2. Coase R. The Nature of the Firm. // Economic. 1937. Vo. 4.Pp. 386�405.

3. Milgrom P., Roberts J. Economics, Organization and Management. -Prentice�Hall Int., 1992. Ch.2, pp. 19�35, Ch.5, pp.147�149, Ch.8, pp.259�269.

4. North D. Institutions, Institutional Change and Economic Performance.Cambridge University Press, 1990, Ch.8.


1. Dahlman C. The Problem of Externality.// Journal of Law and Eco-nomics. 1979. Vol. 22. pp. 141�162.


3. Greif A. Contract Enforceability and Economic Institutions in EarlyTrade: the Maghribi Traders Coalition. The American Economic Re-view. 1993. Vol. 83. pp. 525�548.


4. Greif A., Milgrom P., Weingast B.R. Coordination, Commitment andEnforcement: The Case of the Merchant Guild.// Journal of PoliticalEconomy, 1994. Vol. 102, N. 4 ,pp. 745�776.

5. Greif A. Cultural Beliefs and the Organization of Society: A Histori-cal and Theoretical Re�ection on Collectivist and Individualist Societies.//Journal of Political Economy, 1994. Vol. 102, N. 5, pp. 912� 950.

6. Niehans J. Transaction Costs.//The Palgrave Dictionary of Economics.London, Macmillan. 1987. pp. 676�679.

7. North D. Institutions.// Journal of Economic Perspective. 1991.Vol. 5.pp. 97�112.

8. North D. Integrating Institutional Change and Technical Change in Eco-nomic History. A Transaction Cost Approach. Journal of Institutionaland Theoretical Economics.1994. Vol.150. pp. 609�624.

9. Williamson O. The Economic Institutions of Capitalism. The Free Press,N.Y. 1985, Ch.2, pp. 43�67.

3. Economic Theory of Property Rights

• The de�nition of property rights. Property rights in di�erent legal tradi-tions (common law and civil law traditions).

• The property rights approach: some basic concepts. Speci�cation of prop-erty rights, the bundle of rights, partitioning of property rights, attenua-tion of property rights.

• Assigning of property rights: the internalization of externalities. TheCoase Theorem. Critic of Coase (dynamic e�ects of alternative legal rules,wealth e�ect, distributional e�ects, strategic behavior and the problem ofholding�out, endowment e�ect, unrealistic assumption about zero trans-action costs)

• Alternative property rights regimes. Common property (open access) andthe tragedy of the commons. Exclusive property rights and the conditionsfor their emergence. The �rst economic revolution. Communal property.Optimal group size. Private property. Public property.

• The emergence of property rights. The optimistic theory of the emergenceof property rights (naive model). The interest�group theory of prop-erty rights. The costs of collective action. The theory of rent�seeking.Interest�groups and rent�seeking in the Russian economy.

286 FOURTH YEAR

Main Reading

1. 1. Coase R.H. The Problem of Social Cost. //Journal of Law and Eco-nomics. 1960. Vol.3Pp. 1�44.

2. 2. Eggertson Thr. Institutions and Economic Behavior. Ch.2, pp. 33�78,Ch.4, pp. 83�124, Ch.8, pp. 247�280, Ch.9, pp. 281�316.

3. 3. Milgrom P., Roberts J. Economics, Organization and Management.Ch.9, pp. 288�307.

4. 4. Varian H. Intermediate Microeconomics. A Modern Approach.4th ed.Ch.31.


1. Coase, R.: The Lighthouse in Economics, 17(2) Journal of Law and Eco-nomics, p. 357 (1974).

2. Cooter R. Coase Theorem. In: The New Palgrave: A Dictionary ofEconomics. � L., Macmillan, 1987, pp. 457�459.

3. Demsetz H. Toward the Theory of Property Rights. //American Eco-nomic Review. 1967, Vol. 57, pp.349�359.

4. Demsetz H. When Does the Rule of Liability Matter? //Journal of LegalStudies. 1972, Vol. 1. pp.13�28.


6. Libecap G. Common Property. In: Newman P. The New Palgrave Dic-tionary of Economics and the Law. Vol. 1, pp. 317�324.

7. Olson M. Collective action. In: The New Palgrave: A Dictionary ofEconomics. � L., Macmillan, 1987, pp. 474�477.

8. Tullock G. Rent�seeking. In: The New Palgrave: A Dictionary of Eco-nomics. � L., Macmillan, 1987, pp. 147�149.

4. Contracts

• The de�nition of a contract. Legal and economic approach to contracts.Freedom of contract.

• The notion of a complete contract. Why are the real contracts incom-plete? Bounded rationality of economic agents.


• Asymmetric information (hidden characteristics, hidden information/hidden action, hidden intentions) and opportunistic behavior.

• Adverse selection and the closing of markets. Signaling, screening andself�selection.

• Asset plasticity and moral hazard. Principal�agent problem and agencycosts. A simple principle�agent experiment in the classroom. Controllingand preventing moral hazard (controlling the agent, incentive contracts,bonding, do�it�yourself method). Case study: crisis of the savings andloan associations in America as an example of moral hazard in �nancialmarkets.

• Attributes of transactions and the choice of a contract. Asset speci�city,types of speci�c assets. Synergy e�ects, quasi�rents appropriation andhold�up problem. Classi�cation of contracts (classical, neoclassical andrelational contracting). Discrete alternative governance structures: mar-ket, hybrids and hierarchy.

• Hybrids: speci�c assets and their safeguards.

• Institutional environment and its role in the choice of contract. GM andToyota: di�erent models for solving the problem of safeguards for speci�cinvestments. The role of trust. Economic approach to trust. Kreps: thetrust game. Types of trust ( contractual trust, competence trust andgood will trust).

• Explaining the internal structure of formal organizations: transactioncosts approach.

Main Reading

1. Akerlof G.A. The Markets for "Lemons": Quality Uncertainty and theMarket Mechanism" Quarterly Journal of Economics. 1984 Vol. 84. pp.488�500.

2. Eggertson Thr. Institutions and Economic Behavior. Ch.6, pp. 170�175.

3. Milgrom P., Roberts J. Economics, Organisation and Management. Ch.5,pp. 126�166, Ch.6, pp. 166�205, Ch.8, pp. 269�279, Ch.9, pp. 307�313,Ch.16, pp. 538�584.

4. Joskow P. Contract Duration and Relationship�Speci�c Investments:Empirical Evidence from Coal Markets.//American Economic Review.1987. Vol. 77. pp. 168�173.

288 FOURTH YEAR


1. Alchian A., Woodward S. Re�ections on the Theory of the Firm.// Jour-nal of Institutional and Theoretical Economics, 1987, Vol.143, pp.110�136.

2. Furubotn E., Richter R. Institutions and Economic Theory. The Univer-sity Of Michigan Press. 1997. Ch. 4,5Pp. 121�264.

3. Klein B. Fisher�General Motors and the Nature of the Firm. Journal ofLaw and Economics. 2000. Vol. 43. pp. 103�141.

4. Klein B., Crawford R., Alchian A. Vertical Integration, AppropriableRents and the Competitive Contracting Process. // Journal of Law andEconomics, 1978, Vol. 21, pp. 297�326.

5. Menard C. Inside The Black Box: The Variety of Hierarchical Forms.In: Transaction Cost Economics and Beyond. ed. Groenewegen J. L.,Kluwer Academic Publishers, pp.149�170.

6. Shelanski H., Klein P. Empirical Research in Transaction Cost Economics:A Review and Assessment. Journal of Law, Economics and Organization,1995, Vol. 11, N 2., pp.335�361.

7. Williamson O. Comparative Economic Organization: The Analyses ofDiscrete Structural Alternatives. In: Mechanisms of Governance, OxfordUniversity Press, 1996.

8. Williamson O. The Economic Institutions of Capitalism. The Free Press,N.Y. 1985, Ch.1�3, pp. 15�85.

9. Williamson O. Calculativeness, Trust and Economic Organization.//Journal of Law and Economics, 1993, Vol. 36, N.1, Part 2.

5. The new institutional theory of the �rm

• Neoclassical theory of the �rm. Explanations of the �rm in the newinstitutional theory (F.Knight, R. Coase, A. Alchian and H.Demsetz,O.Williamson, O.Hart).

• The market and the �rm. Comparative analyses of the alternative coor-dination forms. Internal market and in�uence costs. The boundaries ofthe �rm.


• Ownership structure of the �rm. A theory of the owner�monitor (Alchianand Demsetz, 1972). Competing forms of economic organization, relativeadvantages of alternative structures (proprietorships, partnerships, opencorporation, regulated �rms, public enterprises, nonpro�t organizations,labor�managed �rms).

• Separation of ownership and control in the open corporation. Oppor-tunistic behavior of the managers and corporate control. Outsider andinsider corporate governance. Privatization in Russia and other transitioneconomies: how to control the managers.

Main Reading

1. Coase R. The Nature of the Firm. Economica.1937. Vol.4. pp. 386�405.

2. Alchian A., Demsetz H. Production, Information Costs and EconomicOrganization. The American Economic Review, 1972. Vol. 52. pp.777�795.

3. Eggertson Thr. Institutions and Economic Behavior. Ch.6, pp.157�190.

4. Hart O. An Economist's Perspective on the Theory of the Firm. ColumbiaLaw Review. 1989. Vol. 89 P.1757�.

5. Milgrom P., Roberts J. Economics, Organization and Management. Ch.9,pp. 313�325, Ch.15, pp. 482�527.


1. Chåung S. The Contactual Nature of the Firm. // Journal of Law andEconomics, 1983, Vol. 26, pp.1�21.

2. Fama E., Jensen M. Agency Problems and Residual Claims// Journal ofLaw and Economics.1983. Vol.26. pp. 327�349.

3. Jensen M., Meckling W. Theory of the Firm: Managerial Behavior,Agency Costs and Ownership Structure. //Journal of Financial Eco-nomics, 1976. Vol. 3pp. 305�360.

4. Íart O. Firms, Contracts and Financial Structure. Oxford,ClarendonPress, 1995.

5. Manne H. Mergers and the Market for Corporate Control. // Journal ofPolitical Economy.1965. Vol. 73, p.

6. Schleifer A., Vishny R. A Survey of Corporate Governance. 52// Journalof Finance, 1007. Vo. 52. p. 737.

290 FOURTH YEAR

6. The new institutional theory of the state

• Social mechanisms for constraining open access. Contractual theoriesof the state (Locke, Rousseau), Hobbes predatory theory of the state.North's model of the state.

• The regulatory role of the state in the Russian economy.

Main Reading

1. Eggertson Thr. Institutions and Economic Behavior. Ch.9�10, pp.281�358.


1. Furubotn E., Richter R. Institutions and Economic Theory. The Univer-sity Of Michigan Press. 1997. Ch. 9. Pp. 413�434.

2. McGuire M., J Olson M. The Economics of Autocracy and Majority Rule:The Invisible Hand and the Rule of Force. //Journal of Economic Liter-ature, 1996, Vol. 34 March, pp.72�96.

3. North D. Structure and Change in Economic Theory. N.Y. and London:Norton, 1981. Ch.3.

7. The theory of institutional change

• Stability of institutions and institutional change. The concept of institu-tional equilibrium. The main sources of institutional change. Centralizedand spontaneous institutional change. The role of the state in the processof institutional change. The problem of compensation of the disadvan-taged groups.

• Theories of selection of e�cient institutions in the process of competition(Alchian, Friedman). Institutional change and path dependence. Formsof path�dependence (weak form, semi�strong and strong forms).

• Institutional change in contemporary Russia.

Main Reading

1. North D. Institutions, Institutional Change and Economic Performance.Cambridge University Press, 1990, Ch. 9�14.



1. Bromley D. Institutional Change and Economic E�ciency. // Journal ofEconomic Issues. 1989. Vol. 23, No. 3.

2. David P. Clio and the Economics of QWERTY.75 American EconomicReview. Papers and Proceedings 1985. Vol. 75 pp.332�337.

3. Margolis S., Liebowitz S. Path Dependence. In: Newman P. The NewPalgrave Dictionary of Economics and the Law. Vol. 3, pp.17�22.

4. Roe M. Chaos and Evolution in Law and Economics.// Harvard LawReview, 1996, Vol. 109, pp. 641�658.


No Topic Total Lectures Self-study

1. Introduction to institutionalanalysis

12 4 8

2. Transaction costs 18 6 123. Economic theory of property

rights24 8 16

4. Contracts 24 8 165. The new institutional theory of

the �rm18 6 12

6. The new institutional theory ofthe state

6 2 4

7. The theory of institutionalchange

6 2 4

Total: 108 36 72

292 FOURTH YEAR

Economics of Transition

Course Instructor: Alexis V. Belianin

Course description

The course aims to serve as an introduction to recent economic experienceof Russia and other post-socialist countries in the light of economic theoryand empirical research. As a result, the course combines a study of severalhistorical and stylised facts, tendencies and trends of economic developmentof Russia in pre-transition and post-transition times, together with the o�eredtheoretical explanations of causes and consequences of particular choices ofeconomic policy, as well as with the relevant empirical literature. Many ofthe themes and issues are contemporary, and drive heavily on the students'background not only in economics, but also in sociology, political science, lawand economics, as well as on their personal experience. The course incorporatesall this in an attempt to develop students' analytical skills and their ability ofindependent thinking and reasoning.

This course is bilingual: classes will be conducted in Russian, while homeassignments and most readings are in English. Lecture notes are be producedin English as well.

Course objectives

By the end of this course students should be able to:

• apply the concepts from modern microeconomic and macroeconomic the-ory to interpret various phenomena of transition;

• apply theoretical knowledge to test alternative hypotheses and developown reasoning about economic policy issues in transition;

• understand and interpret the challenges posed to standard economics pre-cepts by the stylised facts of transition;

• interpret alternative reform strategies during transition, as well as di�er-ent forms of market-based systems.

In addition, by the end of the course students should be familiar with:

• relevant empirical evidence on transition in Russia and former socialistcountries;

• relevant economic literature.

ECONOMICS OF TRANSITION 293

Methods

The course is one semester long, and will consist of approximately 12 lectures(24 contact hours), to be held in January�April 2007. There will be 5 homeassignments, which are to be handled during the lectures, and will include boththeoretical (problems) and empirical (estimations) tasks. Note there will be noseparate seminars, although some problems may be discussed in the classroom.The course will also include some public debate(s) on economic policy anddevelopment of contemporary Russia. Most of the course materials will beaccessible through the course webpage at ICEF Internal Information System(http://mief.hse.ru). This includes course document (please download its fullversion), handouts and solutions to the problem sets; required and additionalreading are usually available through Internet via links contained in the coursedocument.

Readings

There will be no single textbook for this course. Students may �nd useful thefollowing books:

1. Blanchard, Olivier-Jean. The economics of post-communist transition.OUP, 1997. Designed for browsing only athttp://www.oup.co.uk/isbn/0-19-829399-2.

2. Roland, Gerard. Transition and economics: Politics, markets and �rms.MIT Press, 2000. Available at ICEF library and/or from the course in-structor.

3. ICEF study guide (prepared by the lecturer, and available at ICEF li-brary) may also be useful for some topics. This guide, however, is notup-to-date (based on an old version of the course syllabus), and knowledgeof all material contained therein is not anymore required for successfulcompletion of the course.

The main collection of readings for the course consists of journal articles.In most cases these are available through the Internet. Access to JSTOR(www.jstor.org) and Sciencedirect (www.sciencedirect.com) databases is free ofcharge from any HSE computer. Access to other collections, such as RePEc(www.repec.org), NBER (www.nber.org) or Working Papers of the WilliamDavidson Institute (WDI WP at the University of Michigan, http://www.wdi.umich.edu/Publications/WorkingPapers/), is free of charge from anywhere inthe Internet.

Because of time constraints, the course relies on a substantial amount ofself-study. The students are expected to read and understand all materialsmarked by asterisk (*); other references supplied are optional, but students are

294 FOURTH YEAR

encouraged to browse them as well. Required and supplementary readings aregrouped by course topics, and are available in the full version of this document,located at http://mief.hse.ru. Please follow the weblinks provided after eachmaterial to access it. Please report if any of these weblinks is not working.

Course Outline

1. Planned economic system and the SBC

* Ericson, Richard E. The Classical Soviet-Type Economy: Nature of theSystem and Implications for Reform. Journal of Economic Perspectives,Vol. 5, No. 4. (Autumn, 1991), pp. 11-27.

* Ofer, Gur. Soviet economic growth: 1928-1985. Journal of EconomicLiterature, 1987, v.25, no.4, p.1767-1833.

• Dewatripont, Mathias, and Erik Maskin. Credit and E�ciency in Cen-tralized and Decentralized Economies. Review of Economic Studies, Vol.62, No. 4. (Oct., 1995), pp. 541-555.

• Kornai, Janos. Economics of shortage. Amsterdam: North Holland, 1980,ch.2-5, 7-9. [Êîðíàè ß. Äåôèöèò. Ì.: Íàóêà, 1990.]

• Kornai, J., G. Roland and E.Maskin. Understanding the Soft BudgetConstraint. Journal of Economic Literature, 2003, v.41, no.4.

• Scha�er, Mark. The credible commitment problem in the center--enterprise relationship. Journal of Comparative Economics, 1989, v.26,p.80-103.

• Segal, Ilya R.. Monopoly and Soft Budget Constraint. The RAND Jour-nal of Economics, Vol. 29, No. 3. (Autumn, 1998), pp. 596-609.

• Qian, Yingui. A theory of shortage in socialist economies based on theSoft Budget Constraint. American Economic Review, 1994, v.84, p.145-156.

• Berglof, Erik and Gerard Roland. Soft budget constraints and creditcrunches in �nancial transition. European Economic Review, Volume 41,Issues 3-5, April 1997, Pages 807-817

• Qian, Yingui and Chenggang Xu. Innovation and Bureaucracy under Softand Hard Budget Constraints. Review of Economic Studies, Vol. 65, No.1 (Jan., 1998), pp. 151-164

2. Economics of reforms and reform strategies in transition


* Rodrik, Dani. Understanding economic policy reform. Journal of Eco-nomic Literature, 1996, v.34, p.9-41.

* Fernandez, Raquel, and Dani Rodrik. Resistance to reform: Status quobias in the presense of individual-speci�c uncertainty. American Eco-nomic Review, 1991, v.81, p.1145-1155.

* Blanchard, Olivier-Jean, and Michael Kremer. Disorganization. TheQuarterly Journal of Economics, Vol. 112, No. 4. (Nov., 1997), pp.1091-1126.

* Stiglitz, Joseph. Whither reform? Ten years of transition. World bank,1999.

* Dabrovski, Marek, Stanislav Gomulka, Jacek Rostowski. Whence reform?A critique of the Stiglitz perspective. Journal of policy reform, v.4, 2001.

* Intriligator Michael, e.a. A New Economic Policy for Russia. Mimeo,Russian-American Chamber of Commerce, 1997.

• Aghion, Philippe, and Olivier-Jean Blanchard. On the speed of transitionin Central Europe. NBER Macroeconomics Annual, 1994, p.283-319.

• Alesina, Alberto, and Allan Drazen. Why are stabilizations delayed?American Economic Review, 1991, v.81, p.1170-1188.

• Aukutsionek, Sergei. A theory of transition to the market. (ÀóêóöèîíåêÑ.Ï. Òåîðèÿ ïåðåõîäà ê ðûíêó. Ì: ÈÌÝÌÎ ÐÀÍ, 1992 [1995]).

• Rodrik, Dani. The positive economics of policy reform. American Eco-nomic Review Papers and Proceedings, 1983, v.2, p.356-361.

• Dewatripont, Mathias, and Gerard Roland. The Design of Reform Pack-ages under Uncertainty. The American Economic Review, Vol. 85, No.5. (Dec., 1995), pp. 1207-1223.

• Blanchard, Olivier-Jean. The economics of post-communist transition.OUP, 1997.

• Fischer, Stanley, Lawrence Summers and William Nordhaus. Stabiliza-tion and Economic Reform in Russia. Brookings Papers on EconomicActivity, 1992, No. 1, pp. 77-126.

• Lawrence J. Lau, Lawrence J., Yingyi Qian and Gerard Roland. ReformWithout Losers: An Interpretation of China's Dual-Track Approach toTransition. Journal of Political Economy, Vol. 108, No. 1. (Feb., 2000),pp. 120-143.

296 FOURTH YEAR

• Murphy, Kevin M., Andrei Shleifer and Robert W.Vishny. The Transitionto a Market Economy: Pitfalls of Partial Reform. The Quarterly Journalof Economics, Vol. 107, No. 3. (Aug., 1992), pp. 889-906.

• Qian, Yingui. How reform worked in China. WDI WP 473, 2002.

3. Privatization and its consequences

* Blanchard, Olivier-Jean, and Philippe Aghion. On insider privatization.European Economic Review, 2000.

* Brown, David, and Jonh S.Earle. Competition and �rm performance:lessons from Russia. WDI WP 296, 2000.

* Schmidt, Kristian. The political economy of mass privatization and therisk of expropriation. European Economic Review, 2000, v.44, no.2,p.393-421.

• Boycko, Maxim, Andrei Shleifer and Robert W. Vishny. A Theory ofPrivatisation. The Economic Journal, Vol. 106, No. 435. (Mar., 1996),pp. 309-319.

• Bhaumik, Sumon, and Saul Estrin. Why transition paths di�er: Russianand Chinese enterprise performance compared. WDI WP 525, 2002.

• Brown, Annette N, and David Brown. Does market structure matter?New evidence from Russia. WDI WP 188, 1998.

• Estrin, Saul. Privatization in Central and Eastern Europe. The NewPalgrave dictionary of Economics and the Land, also available as WDIWP 87, 1997.

• Kuznetsov, Pavel, and Alexander Muraviev. Ownership Structure andFirm Performance in Russia: The Case of Blue Chips of the Stock Market.EERC WP, 2001.

• Perevalov, Yuri, Vladimir Dobrodey, Ilya Gimadi. The Impact of Privati-sation on the Performance of Medium and Large Industrial Enterprises.EERC Working Paper, 2000.

• Roland, Gerard, and Thierry Verdier. Privatization in Eastern Europe:irreversibility and the critical mass e�ect. Journal of Public Economics,1994, v.54, p.161-183.

• Shleifer, Andrei. State versus Private Ownership (in Symposium: TheFirm and Its Boundaries) Journal of Economic Perspectives, Vol. 12, No.4. (Autumn, 1998), pp. 133-150.


4. Labor market in transition

* Basu, Swati., Saul Estrin and Jan Svejnar. Employment and Wages inEnterprises Under Communism and in Transition: Evidence From CentralEurope and Russia. WDI Working Paper 440, 2000.

* Sabirianova. Klara Z. The great human capital reallocation: an empiricalanalysis of occupational mobility in transitional Russia. Journal of Com-prative Economics, 2002, also available as EERC working paper, 2001,and WDI WP 309, 2000.

• Brown, David, and John S.Earle. The reallocation of workers and jobsin Russian industry: New evidence of measures and determinants. WDIWP 490, 2002.

• Halpern, Laszlo, and G. Korosi. Labor market characteristics and prof-itability: econometric analysis of Hungarian exporting �rms, 1986 - 1995,Economics of Transition, V.6, p.14-62, 1998.

• Ham, John C., Jan Svejnar and Katherine Terrell. Unemployment andthe social safety net during transitions to a market economy: evidencefrom the Czech and Slovak republics. American Economic Review, 1998,v.88: 1117-1142.

• Kapeliushnikov, Rostislav I. The Russian labor market: adaptation with-out restructurization. M: HSE, 2002. [Êàïåëþøíèêîâ Ð.È. Ðîññèéñêèéðûíîê òðóäà: àäàïòàöèÿ áåç ðåñòðóêòóðèçàöèè. Ì.: ÂØÝ, 2002].

• Svejnar, Jan. Labor Markets in the Transitional Central and East Euro-pean Countries", In: Handbook of Labor Economics, O. Ashenfelter andD. Card (eds), Elsevier, 1999.

• Polterovich Viktor M. Employment - wage decisions in the insider-owned�rm. BOFIT working paper, #1/2000.

5. Political economy of transition

* Polterovich, Viktor M. Institutional traps and economic reforms. E&MM,1999, v.35 [Ïîëòåðîâè÷ Â.Ì. (1999). Èíñòèòóöèîíàëüíûå ëîâóøêè èýêîíîìè÷åñêèå ðåôîðìû, Ýêîíîìèêà è ìàòåìàòè÷åñêèå ìåòîäû, 35,âûï. 2.]

* Ho�, Karla and Joseph Stiglitz. After the Big Bang? Obstacles to theEmergence of the Rule of Law in Post-Communist Societies. AmericanEconomic Review 94 (3), June 2004, 753-763.

298 FOURTH YEAR

* Ho�, Karla and Joseph Stiglitz. The Transition from Communism: ADiagrammatic Exposition of Obstacles to the Demand for the Rule ofLaw. Mimeo, Columbia University.

• Johnson, Simon, Daniel Kaufmann; Andrei Shleifer; Marshall I. Goldman;Martin L. Weitzman. The Uno�cial Economy in Transition, pp. 159-239.

• Rapaczynski, Andrei. The Roles of the State and the Market in Estab-lishing Property Rights. Journal of Economic Perspectives, Vol. 10, No.2. (Spring, 1996), pp. 87-103.

• Shleifer, Andrei, Edward Glaeser and Samuel Johnson. Coase versus theCoasians. Quarterly Journal of Economics, 2001.

• Shleifer, Andrei, and Robert W. Vishny. Politicians and Firms. QuarterlyJournal of Economics, Vol. 109, No. 4. (Nov., 1994), pp. 995-1025.

• Shleifer, Andrei, and Robert W. Vishny. Corruption. Quarterly Journalof Economics, Vol. 108, No. 3. (Aug., 1993), pp. 599-617.

• Sonin, Konstantin. Why the rich may prefer poor protection of propertyrights. (aka �Inequality, property rights protection and economic growthin transition economies�). WDI WP 544, 2002,

6. Transition strategies and economic growth

* Svejnar, Jan. Transition economies: performances and challenges. Jour-nal of Economic perspectives, 2001, also available as WDI WP 415, 2001.

* Campos, Nauro, and Fabrizio Coricelli. Growth in transition: what weknow, what we don't, and what we should. Journal of Economic Litera-ture, 2002, also available as WDI WP 470, 2002.

* Stiglitz, Joseph. The Post Washington consensus consensus. Initiativefor Policy Dialogue, Columbia University, 2005.

• Ahrend, Rudiger. Speed of reform, privatization initial conditions orwhat? Explaining the di�erences in Russia's regional economic growth.RECEP Working paper, 1998.

• Berg, Andrew, Eduarto Borensztein, Ratna Sahay, Jeromin Zettelmeyer.Output in transition economies: explaining the di�erences. IMF Workingpaper, 1999.

• Fisher, Stanley, and Bill Easterly. The Soviet Economic Growth. TheWorld Bank Economic Review, 1995, v.9, no.3, p.349-371.


• Fisher, Stanley, Ratna Sahay, Carlos A.Vegh. From transition to market:evidence and growth perspectives. IMF Working paper, 1998.

• Havrylyshyn, Oleg, and Ron van Rooden. Institutions matter in transi-tion, but so do policies. IMF Working Paper, 2000.

• Lizal, Lubomir, and Jan Svejnar. Investment, credit rationing and thesoft budget constraint: evidence from Czech panel data. Review of Eco-nomics and Statistics 2001, also available as WDI WP363, 2001.

• Roland, Gerard, and Thierry Verdier. Transition and the output fall..Economics of Transition, 1999, v.7, p.1-28, also available as WDI WP 37,1997.

• Tornell; Aaron , and Andres Velasco. The Tragedy of the Commons andEconomic Growth: Why Does Capital Flow from Poor to Rich Countries?Journal of Political Economy, Vol. 100, No. 6, Dec., 1992, pp. 1208-1231.


No Topic Total Lectures Self-study

1. Planned economic system and theSBC

16 6 10

2. Economics of reforms and reformstrategies in transition

24 6 18

3. Privatization and its consequences 16 4 124. Labor market in transition 14 4 105. Political economy of transition 22 6 166. Transition strategies and economic

growth16 4 12

Total: 108 30 78

300 FOURTH YEAR

Time Series Analysis

Lecturer: Grigoriy G. KantorovichClassteachers: Marina Y. Turunzeva, Eugeny R. Nadorshin

Course description

Time Series Analysis (intermediate level) is a one�semester course designed forthe fourth year ICEF students. This is an intermediate course of Time SeriesTheory for the students specializing in the �eld of Economics. Its prerequisitesare Statistics, Econometrics, the knowledge of economic theory and computer�based information systems is necessary as well. The course is taught in Russianand English.

The stress in the course is made on the sense of facts and methods oftime series analysis. Conclusions and proofs are given for some basic formulasand models; this enables the students to understand the principles of economictheory. The main stress is made on the economic interpretation and applicationsof considered economic models.

Course objectives

The students should get acquainted with the main concepts of Time Series the-ory and methods of analysis. They should know how to use them in examiningeconomic processes and understand methods, ideas, results and conclusions thatcan be met in the majority of books and articles on economics. In this coursestudents should master traditional methods of Time Series analysis, intendedmainly for working with time series data. Students should understand the dif-ferences between cross�sections and time series, and those speci�c economicproblems which occur while working with data of these types. Students shouldbecome skillful in analysis and modelling of stochastic processes of ARMA (p,d, q) models, get acquainted with co�integration and error correction models,autoregressive models with distributed lags, understand their application ineconomics. Considered methods and models should be mastered by practiceusing real economic data and modern economic software.

Methods



• practices and in computer class (2 hours per week, the main problems ofhome assignments are discussed);

TIME SERIES ANALYSIS 301

• self�study in computer class (doing home assignments using Excel andEconometric views, work with economic data, appliances in Internet);

• self�study with literature.

In total the course includes 36 hours of the lectures and 36 hours of practicesand classes.

It is assumed that lectures and seminars are attended and home assignmentsare done by students. The main form of control is the examination at the end ofseventh semester. Before the exam students have to demonstrate econometricresearch based on data gathered under the supervision of the teacher.

To get a good mark in the exam students have to show absolute knowledgeof the bases of the course, hand in all home assignments and well writtenexamination research.

Main Reading

1. Enders W. Applied Econometric Time Series. John Wiley & Sons, Inc.,1995

2. Mills, T.C. The Econometric Modelling of Financial Time Series. Cam-bridge University Press, 1999

3. Andrew C. Harvey. Time Series Models. Harvester Wheatsheaf, 1993.

4. Andrew Ñ. Harvey. The Econometric Analysis of Time Series. PhilipAllan, 1990.

5. Êàíòîðîâè÷ Ã.Ã. Ëåêöèè ïî êóðñó �Àíàëèç âðåìåííûõ ðÿäîâ�.Ýêîíîìè÷åñêèé æóðíàë ÂØÝ, 2002, � 1, 2, 3, 4, 2003, � 1.

6. Ã. Ã. Êàíòîðîâè÷, Ì. Þ. Òóðóíöåâà. Ðóêîâîäñòâî äëÿ ñòóäåíòîâïî êóðñó �Àíàëèç âðåìåííûõ ðÿäîâ�, Ãîñóäàðñòâåííûé óíèâåðñèòåò� Âûñøàÿ øêîëà ýêîíîìèêè. Ìåæäóíàðîäíûé èíñòèòóò ýêîíîìèêèè ôèíàíñîâ, 2004.


1. Econometric Views 4.0 User's Guide. Quantitative Micro Software, LLC.

2. Banerjee, A., J.J. Dolado, and D.V. Hendry. Co�Integration, Error Cor-rection, and Econometric Analysis of Non�Stationary Data. Oxford Uni-versity Press, 1993

3. Maddala, G.S. And Kim In�Moo. Unit Roots, Cointegration, and Struc-tural Change. Cambridge University Press, 1998

302 FOURTH YEAR

4. P. J. Brockwell, R. A. Davis, Introduction to Time Series and Forecasting.Springer, 1996

5. J. Johnston, J. DiNardo. Econometric Methods. McGraw�Hill, 1997.

6. W. Charemza, D. Deadman. New Directions in Econometric Practice.Edward Elgar Publishing Limited, 1997.

7. R. I. D. Harris. Using Cointegration Analysis in Econometric Modeling.Prentice Hall, 1995

Internet Resources

1. http://www.gks.ru/

2. http://www.cbr.ru/

Software and Data Bases

The main software used in the course is Econometric Views.

Grade determination

This course includes 2 control works and one essay. The main form of controlis the written exam. Necessary conditions for a good exam grade are well�donecontrol works (20% of the �nal grade), all home assignments done (5% of the�nal grade), and the essay (20% of the �nal grade). The exam work gives 55%of the �nal grade.

Course Outline

1. Stochastic process and its main characteristicsStochastic process. Time series as a discrete stochastic process. Stationar-

ity. Main characteristics of stochastic processes (means, autocovariation andautocorrelation functions). Stationary stochastic processes. Stationarity as themain characteristic of stochastic component of time series. Wold decomposi-tion. Lag operator.

5 no. 1, 2002, p. 85 � 93

2. Autoregressive�moving average models ARMA (p,q)Moving average models ÌÀ(q). Condition of invertability. Autore-

gressive models ÀR(ð). Yull�Worker equations. Stationarity conditions.Autoregressive�moving average models ARMA (p,q).

5 no. 1, 2002, p. 93 � 109

TIME SERIES ANALYSIS 303

3. Coe�cient estimation in ARMA (p,q) processes. Box�Jenkins'method

Coe�cients estimation in autoregressive models. Coe�cient estimation inARMA (p) processes. Quality of adjustment of time series models. AIC in-formation criterion. BIC information criterion. �Portmonto�-statistics. Box�Jenkins methodology to identi�cation of stationary time series models.

5 no. 1, 2002, p. 109 � 116; 5 no. 2, 2002, p. 231 � 263

4. Forecasting in Box�Jenkins modelForecasting, trend and seasonality in Box�Jenkins model.5 no. 2, 2002, p. 263 � 266

5. Non�stationary time seriesNon�stationary time series. Time series with non�stationary variance. Non�

stationary mean. ARIMA (p,d,q) models. The use of Box�Jenkins methodologyto determination of order of integration.

5 no. 2, 2002, p. 267 � 273

6. The unit root problemThe unit root problem. Spurious trends and regressions. Unit root tests

(Dickey�Fuller). ADF test and the choice of the number of lags. Other unitroot tests.

5 no. 3, 2002, p. 379 � 393

7. Unit root and structure changesNon�stationary time series, TSP or DSP: methodology of research. Seg-

mented trends and structure changes.5 no. 3, 2002, p. 393 � 401

8. Regressive dynamic modelsRegressive dynamic models. Autoregressive models with distributed lags

(ADL).5 no. 4, 2002, p. 501 � 505

9. Vector autoregression model and co�integrationTime series co�integration. Co�integration regression. Testing of co�

integration. Vector autoregression and co�integration. Co�integration anderror correction model.

5 no. 4, 2002, p. 513 - 523; 5 no. 1, 2003, p. 79 � 97

10. Causality in time seriesGranger causality. Hypothesis testing on rational expectations. Hypothesis

testing on market e�ciency.5 no. 4, 2002, p. 505 � 512

304 FOURTH YEAR



1. Stochastic process and its maincharacteristics

18 2 4 11

2. Autoregressive�moving averagemodels ARMA (p,q)

24 6 6 12

3. Estimation of coe�cients ofARMA (p,q) processes.Box�Jenkins' approach

18 4 2 12

4. Forecasting in Box�Jenkinsmodel

15 2 2 11

Midterm exam5. Non�stationary time series 20 4 4 126. Unit root problems 18 4 2 127. Unit root and structure changes 18 4 2 128. Regressive dynamic models 18 2 4 129. Vector autoregressive model and

co�integration24 6 6 12

10. Causality in time series 16 2 4 10

Total: 114 22 22 70

BANKING OPERATIONS AND RISK ANALYSIS 305

Banking Operations and Risk Analysis

Lecturer and classteacher: Dmitry A. Kachalov

Course description

The Banking Operations and Risk Analysis is a two�semester course for the4�th year ICEF students. This is an intermediate banking course for the BAcFinance and Economics programme students. Introductory Banking course,Intermediate Microeconomics, and Quantitative Methods are pre�requisites.The course is taught in English.

The course aims to provide insights into �nancial economics, economics ofbanking, its role in the economy, and practical risk management issues. Thiscourse introduces the main models and surveys the basic literature on �nancialeconomics and �nancial intermediation. Utilising the tools of general microe-conomic theory for problems of �nancial theory demonstrates the convergenceof the two disciplines. The course underlines the distinctions between mod-els based on symmetric information and competitive market and models thatuse the assumption of asymmetric information and contractual relationships.Under symmetric information assumption there is no need for �nancial interme-diation and banks are unable to earn non�zero pro�t. Prices are determined bythe competitive market and each agent decide on assets allocation to maximizeexpected utility. In this framework the models of asset pricing are considered.

If information is asymmetric the market allocation is no longer optimal.Financial intermediaries that enable loan and deposit contracts can providebetter opportunities in that case. The role of banks in the economy is de-scribed and emphasised with the services provided by banks to investors and�rms, namely liquidity insurance and delegated monitoring. The unit struc-ture includes themes about most important issues on bank management, bankregulation, and development of �nancial markets.

The course combine topics of three di�erent subjects: Financial Economics,Theory of Financial Intermediation, and Bank Management.

Course objectives

Banking disciplines taught on MSc programs, as well as research papers, useadvanced microeconomic analysis. The main objective of studying the courseis to introduce basic applications of general microeconomic theory to special �-nancial problems. Eliminating barriers between economic and �nancial courseswill help graduate students to apply theoretical background for further anal-ysis and research of �nancial institutions and markets. The course also helpsdevelop practical skills in common areas of risk measurement and managementin banking.

306 FOURTH YEAR

Methods

The program is timed for 4 academic hours per week. The methods explicitlyoutline the thinking process used in the discipline and emphasizes the need forlearning by the students themselves rather than on teaching them. Through-out the one�year program, students are motivated to de�ne and analyse theproblems or issues, evaluate options. The following methods are used:


• seminars (2 hours per week), which include discussion of the basic prob-lems covered at lectures, questions and problems for each theme are re-viewed;

• home assignments for each topic;

• consultations with the teacher;

• self�study.

In total the course includes: 66 hours of lectures, 66 hours of classes, 192hours of self study.

Main Reading

There is no one book that covers the whole course. Most of the bank man-agement themes can be found in the fourth edition of �Financial InstitutionManagement: A Modern Perspective� by Saunders and Cornett �Risk Manage-ment in Banking�. Bessis is recommended for speci�c topics like credit ratingsand capital management. The book by Koch and MacDonald is another (sup-plementary) reading that provides a lot of factual information about bankingbusiness and real world examples.

1. Saunders, A., �Financial Institution Management: A Modern Perspec-tive�, McGraw�hill, 2000. (S1)

2. Bessis, J., �Risk Management in Banking�. Wiley, 1998. (B)

3. Koch, T.W., MacDonald S.S., �Bank Management�, Harcourt Brace &Co., 2000. (KM)


Books

1. Brealey, R., Myers, S., �Principles of Corporate Finance�, McGraw Hill,2000. (BM)


2. Copeland, T. E., �Financial Theory and Corporate Policy�, 3�rd ed, 1992.(C)

3. Freixas, X., Rochet J., �Microeconomics of banking�, MIT Press, 1999.(FR)

4. Saunders, A., �Credit Risk Measurement�, Wiley, 1999. (S2)

Articles

1. Allen, F., Santomero, A.M., �The theory of Financial Intermediation�,Journal of Banking and Finance, 1998, 21. (AS)

2. Bhattacharya, S., Thakor, A.V., �Contemporary Banking Theory�, Jour-nal of Financial Intermediation, 3, 2�50, 1993. (BT)

3. Black, F., and M. Scholes, �The Pricing of Options and Corporate Lia-bilities�, Journal of Political Economy, May�June 1973, 637�659. (BS)

4. Cox, J., S. Ross, and M. Rubinstein, �Option Pricing: A simpli�edApproach,� Journal of Financial Economics, September 1979, 229�263.(CRR)

5. Diamond, D. , W., (1996), �Financial Intermediation as Delegated Mon-itoring: A Simple Example�, Federal Reserve Bank of Richmond, Eco-nomic Quarterly, 82/3. (D)

6. Diamond, Douglas W., and Philip Dybvig, 1983, �Bank runs, depositinsurance, and liquidity�, Journal of Political Economy 91, 401�419. (DD)

7. Scholtens, B., Wensveen, D., �A critique on the theory of �nancial inter-mediation�, Journal of Banking and Finance, 24, (2000) 1243�1251 (SW)

Grade determination

1�st semester:

• test in November � 25%

• home assignments and seminar activity � 20%

• �rst semester written exam in December � 55%

2�nd semester:

• home assignments and seminar activity � 20%

308 FOURTH YEAR

• second semester written exam in April � 80%

The �nal course grade:

• 1�st semester grade � 50%

• 2�nd semester grade � 50%

The exams and test include problems and free response parts.

Students also take the University of London exam in June, which resultsare not included in the ICEF course grade.

Course Outline

1. Fundamentals of Risk Analysis

1. Risk Aversion

2. Arrow�Debreu economy and general equilibrium

3. Mean�Variance analysis

(BM) Chapters 7, (C) Chapters 4, 5, 6.

2. Asset Pricing

1. Capital asset Pricing Model

2. Option Pricing

3. Forward Contract Pricing

(BM) Chapters 7, 20, 27, (C) Chapters 7, 8, 9, (BS), (CRR).

3. Banking and Financial Intermediation

1. Introduction

2. Liquidity Provision

3. Asymmetric Information and delegated monitoring

4. New approaches to the theory of intermediation

(AS), (BT), (D), (FR )pp. 8�11, 20�23, 29�32, (S1) Chapters 1,6, (SW), (DD).


4. Risks in Banking

1. Classi�cation of banking risks

2. Introduction to risk management and measurement techniques

(S1) Chapter 7.

5. Lending and Credit Risk

1. Default risk and credit rationing

2. Estimating default probability

3. Loss Given Default and Expected Loss

4. Credit portfolio management

5. Credit derivatives

6. Bank And Agency Rating systems

(FR) Chapters 5.1�5.2, (S1) Chapters 11, 12, 27, (S2)Chapters1, 2, 3.

6. Asset�Liability Management, Liquidity Risk and Interest RateRisk

1. The term Structure of Interest rates

2. Duration and convexity

3. Sources of interest rate risk, interest rate gap analyses

4. Liquidity risk

(B) Chapters 10�14, (S1) Chapters 8, 9, 17, 18, (KM) Chapters6�9.

7. Using Derivatives for Risk Management

1. Risk Measurement and Value�at�risk models

2. Currency Hedging

3. Interest Rate Hedging

4. Delta Hedging and Options

(S1) Chapters 10, 24, 26, (KM) Chapters 10, 11.

310 FOURTH YEAR

8. Analysis of Bank Performance

1. Introduction to bank data

2. Accounting versus market value measures

3. Risk�adjusted performance and RAROC model

4. Economic Value Added (EVA)

(S1) pp. 289�291, (B) Chapter 1, (KM) Chapter 4.

9. Capital Regulation

1. Capital Regulation

2. Capital requirements and securitisation

(S1) Chapters 19, 20, 28, (FR) Chapters 7.1, 7.2, 7.4, 9.



1. Fundamentals Of Risk Analysis 32 6 6 202. Asset Pricing 44 10 10 243. Banking And Financial

Intermediation48 12 12 24

4. Risks In Banking 28 4 4 205. Lending And Credit Risk 30 6 6 186. Asset�Liability Management,

Liquidity Risk And Interest RateRisk

30 6 6 18

7. Using Derivatives for RiskManagement

40 8 8 24

8. Analysis Of Bank Performance 32 6 6 209. Banking Regulation 40 8 8 24

Total: 324 66 66 192

ORGANISATION THEORY 311

Organisation Theory

Lecturer and classteacher: Sergey Barcov

Course description

The Organisation Theory is a two�semester course for the 4�rd year ICEF stu-dents. This is an intermediate course for the students specialized in Economicsand Management. Introduction in Management and Business course is a pre�requisite, as well as Economics and Sociology courses. The course is taught inEnglish.

The course comprises a number of basic approaches to organisation theoryin the historical as well as in the methodological aspects. The development ofthe organisation theory during XX century is presented in its relation to thesocial and economical processes of that period. At the end of the course aphenomenon of globalization is studied. It intensi�es the interaction betweencultures which has a great in�uence on the functioning of national as well asmultinational companies.

Course objectives

The organisation theory is a fundamental subject within modern managerialeducation. The purpose of the course is to present the fundamental concepts ofthe organisation theory. Introduction to various approaches to an organisationmust teach the students to complete macro� and micro�analysis of organisationsin the context of their development and interaction with the environment. Themain purpose of the course is to create modern outlook that could be a basisfor practical work in any management position.

Methods


1. classes (2 hours per week)

2. seminars (2 hours per week)

3. self study

Main Reading

English book by G.Morgan �Organisations in Society�, MacMillan 1990 andtextbook in Russian Ãèáñîí Äæ.Ë., Èâàíöåâè÷ Äæ., Äîíåëëè Äæ X., ìë.Îðãàíèçàöèè: ïîâåäåíèå, ñòðóêòóðû, ïðîöåññû. � Ì.: ÈÍÔÐÀ�Ì, 2000 are

312 FOURTH YEAR

considered as main textbook. There is also a study guide by G.Morgan for theUniversity of London programme.

1. Áàðêîâ Ñ.À. Òåîðèÿ îðãàíèçàöèé/ Ðóêîâîäñòâî äëÿ ñòóäåíòîâ. - Ì,ÌÈÝÔ, 2004

2. Áàðêîâ Ñ.À. Ñîöèîëîãèÿ îðãàíèçàöèé. - Ì.: ÌÃÓ, 2005

3. Ãèáñîí Äæ.Ë., Èâàíöåâè÷ Äæ., Äîíåëëè Äæ X., ìë. Îðãàíèçàöèè:ïîâåäåíèå, ñòðóêòóðû, ïðîöåññû. � Ì.: ÈÍÔÐÀ�Ì, 2000.

4. Êðàâ÷åíêî À.È. Èñòîðèÿ ìåíåäæìåíòà. � Ì., 2000

5. Øåëäðåéê Ð.Õ. Òåîðèÿ ìåíåäæìåíòà: îò òåéëîðèçìà äî ÿïîíèçàöèè.� ÑÏá.: Ïèòåð, 2001.

6. Ùåðáèíà Â.Â. Ñîöèàëüíûå òåîðèè îðãàíèçàöèè (ñëîâàðü). � Ì.:ÈÍÔÐÀ�Ì, 2000.

7. Huczynski A., Buchman D. Organizational Behaviour. -Prentice Hall,2001

8. Morgan G. Organisations in Society. - Polgrave, 2001

9. Pugh D.S. Organization Theory. � Penguin, 1997


In the supplementary reading there are a lot of books which have become clas-sical readings in organization Theory and Management. During the last decadea lot of translations were made in Russian and the books are really available.

1. Âèññåìà Õ. Ìåíåäæìåíò â ïîäðàçäåëåíèÿõ ôèðìû.� Ì., 1996

2. Âèõàíñêèé Î.Ñ., Íàóìîâ À.È. Ìåíåäæìåíò: ÷åëîâåê, ñòðàòåãèÿ, îðãà-íèçàöèÿ, ïðîöåññ.� Ì., 1995.

3. Äðóêåð Ï.Ô. Çàäà÷è ìåíåäæìåíòà â XXI âåêå.� Ì.�ÑÏá.�Êèåâ, 2000

4. Äóíêàí Ó.Äæ. Îñíîâîïîëàãàþùèå èäåè â ìåíåäæìåíòå.� Ì., 1996.

5. Êàñòåëëüñ Ì. Èíôîðìàöèîííàÿ ýïîõà.� Ì., 2000

6. Ìåñêîí Ì.Õ., Àëüáåðò Ì., Õåäîóðè Ô. Îñíîâû ìåíåäæìåíòà. - Ì.,1992

7. Ïèíê Ä. Íàöèÿ ñâîáîäíûõ àãåíòîâ. - Ì., 2005


8. Òåéëîð Ô.Ó. Ìåíåäæìåíò. � Ì, 1992.

9. Òåéëîð Ô.Ó. Ïðèíöèïû íàó÷íîãî ìåíåäæìåíòà. � Ì, 1992.

10. Óèëüÿìñîí Î.È. Ýêîíîìè÷åñêèå èíñòèòóòû êàïèòàëèçìà.� Ì.,1996

11. Ôàéîëü À. Îáùåå è ïðîìûøëåííîå óïðàâëåíèå. � Ì., 1992.

12. Ôîðä Ã. Ìîÿ æèçíü. Ìîè äîñòèæåíèÿ. � Ì., 1989.

13. Ôîðä Ã. Ñåãîäíÿ è çàâòðà. � Ì., 1992.

14. Øàéí Ý. Îðãàíèçàöèîííàÿ êóëüòóðà è ëèäåðñòâî.� ÑÏá, 2001

15. Ýìåðñîí Ã. Äâåíàäöàòü ïðèíöèïîâ ïðîèçâîäèòåëüíîñòè. - Ì., 1997

16. Burrell G., Morgan G. Sociological Paradigms and Organisational Anal-ysis. - Heinemann, 1979

17. Clark P. Organizations in action : competition between contexts. - L.,1999

18. Guillen M.F. Models of Management: Work, Authority and Organisationin Comparative Perspective. - Chicago: University of Chicago Press,1994.

19. Burrell G., Morgan G. Sociological Paradigms and Organisational Anal-ysis. - Ashage, 2003

20. Clegg S. Modern Organizations, 1999

21. Clegg S. Modern Organizations. Organization Studies in the PostmodernWorld, 2000

22. Douma S. Economic Approaches to Organizations. � Prentice Hall, 1992

23. Jones G.R. Organizational Theory, 2001

24. Morgan G. Images of Organization. - Sage, 1996

25. Needle D. Business in Context, 2002

26. Pugh D.S. Great Writers on Organizations. - Ashage, 1999

27. Stonehouse G. Global and transnational business: Strategies and man-agement. - John Wiley & Sons, 2004

28. Whitley R. Business Systems in East Asia, 1999

29. Anthropology of organizations / ed. by Wright, S. - N.Y., 1994

314 FOURTH YEAR

Internet Resources

1. http://carbon.cudenver.edu/~mryder/itc_data//postmodern.html#horkheimer

2. http://tech.groups.yahoo.com/group/OrgComplexity/

3. http://groups.yahoo.com/group/peopleinorganizations/

4. http://groups.yahoo.com/group/organizationtheory/

5. http://groups.yahoo.com/group/OrganizationCourse/

6. http://www.economyprofessor.com/economictheories/organization� the-ory.php

7. http://business.nmsu.edu/~dboje/postmoderntheory.html

8. http://www.pracademicspress.com/ijotb.html

9. http://media.karelia.ru/~resource/econ/Teor_org/

10. http://www.socioego.ru/teoriya/istoch/zanc/zan_teor_org_sod.html

11. http://en.wikipedia.org/wiki/Organizational_studies

12. http://ecsocman.edu.ru/db/sectx/124/

Grade determination

A grade is calculated as weighted average with the following weights: 1stsemester:

• 30% � classworks + written home assignments;

• 30% � tests;

• 40% � winter examination.

Final grade:

• 40% � �rst semester;

• 10% � spring classworks + written home assignments;

• 10% � spring tests;

• 40% � �nal examination.


Course Outline

1. Introduction to Organisation TheoryAn object of study. Methodology of organisation theory. Key concepts of

organisation theory. Relations of organisation theory with other managerialdisciplines.

Ùåðáèíà (ñ.191�192), Morgan (Ch. 1), Êðàâ÷åíêî (ãë. 3),Pugh D.S., Jones G.R.

2. Organisation Theory and Scienti�c ManagementBasic Taylor's assumptions. A worker as a resource. A problem of co�

operation and paternalism. Rationalisation of work. Organisational principlesof simple production work (specialisation, external control). Specialisation inadministration work. Line structure and its critics. Taylor's disciples (H.Gantt,The Gilberths,t).

Âåáåð, Òåéëîð, Ôîðä, Ýìåðñîí, Øåëäðåéê (ãë. 2�4), Guillen(Ch. 2).

3. Organisation Theory and Scienti�c ManagementBasic Taylor's assumptions. A worker as a resource. A problem of co�

operation and paternalism. Rationalisation of work. Organisational principlesof simple production work (specialisation, external control). Specialisation inadministration work. Line structure and its critics. Taylor's disciples (H.Gantt,The Gilberths,t).

Âåáåð, Òåéëîð, Ôîðä, Ýìåðñîí, Øåëäðåéê (ãë. 2�4), Guillen(Ch. 2).

4. Scienti�c Management in Russia and other CountriesThe inapplicability of scienti�c management to non�American systems. The

social and economic environment in the USA in the beginning of XX century.The situation in Europe in this period.

Taylor successors in Soviet Russia (Gastev, Vitke, Dunoevsky and others).Experimental sociology and psychology in Soviet universities and institutes in1920�s.

Scienti�c management and in its in�uence in the post�war time. Job designand work measurement in south�eastern Asia. Nowadays mass production.

Êðàâ÷åíêî (ãë. 14�17), Guillen (Ch. 3�6), Whitley R.

5. Sloan and Organisational StructureTraditional structures of American �rms: holdings (conglomerates) and

functional structures. The basic challenge for Sloan in GM. Emergence of M��rm. Balance of centralisation and decentralisation. Reducing of external andinternal risks. Dependence on stock market and the predominance of �nancialstrategy in M�structures. The future of M�structures.

316 FOURTH YEAR

Øåëäðåéê (ãë. 13), Guillen (Ch. 2), Pugh D.S. , Jones G.R.,Huczynski A., Buchman D. (ch. 13�15).

6. Modern tendencies in the Development of OrganisationalStructures

Models and structures. Relationship between a model and a structure.Weber's �ideal� bureaucracy as an organisational model.

Goal setting and organisational structure. Functional organisational struc-ture. M�form. Technology and its in�uence on the organisational structure.Matrix structure: its advantages and shortcomings. Concept of network or-ganisation. Complex organisational structures (trust, conglomerate, holding).Organisational structure and social context.

Ãèáñîí è äð. (ãë. 14), Guillen (Ch. 2), Pugh D.S., Jones G.R.,Âèññåìà., Huczynski A., Buchman D. (ch/ 13�15).

7. Fordism and Organisation TheoryHenry Ford as outstanding business reformer. Assembly line and its social

and economic consequences. Mass production and work alienation. $5�wageand the emergence of middle class. Fordism as a social and philosophical sys-tem. Fordism and world competition.

Ôîðä, Øåëäðåéê (ãë. 9), Guillen (Ch. 2), Clegg S. (2002).

8. Human Relation Approach in Organisation TheoryBackground and circumstances of the Human relation approach emergence.

Hawthorne studies and their interpretation. �Human being as a Social Animal�.Informal organisation. Human relations theories and Scienti�c management.Content theories of motivation. A problems of job enrichment. McGregor'stheories X and Y.

Øåëäðåéê (ãë. 11), Ùåðáèíà (ñ.219�221), Guillen (Ch. 2),Morgan.

9. Groups and Leadership in OrganisationsThe role of leadership crucial to motivation. The Taylorist view on manage-

ment as responsible for the implementation of the work system Human relationstheories and change in the management role interpretation. Di�erent types ofleadership (autocratic and democratic, participative and directive). The dis-tinction between managers and leaders. The role of groups. Group dynamic.Typology of groups in organisation.

Êðàâ÷åíêî (ãë.18�21), Øåëäðåéê (ãë. 8, 11, 14�16), Guillen(Ch. 2), Pugh D.S., Huczynski A., Buchman D.(ch. 9, 10, 11, 21).

10. Contingency Theories and Situation ApproachA concept of social system. Open and closed systems. A synthesis of the

ideas of classical organisation theory and Human relation approach. Studies of


J. Woodward. A concept of technology. Relationship between technology andsocial organisation. Technology as a contingency parameter.

The Aston studies. Elements of organisational structure: specialisation ofroles, standardisation of rules and procedures, standardisation of employmentpractices, formalisation of instructions and procedures, centralisation of deci-sions, spans of control, length of the management chain of command, numbersof specialized support sta�. Four main types of structure: personnel bureau-cracies, work�ow bureaucracies, full bureaucracies, non�bureaucracies

Ùåðáèíà (ñ. 135�136), Guillen (Ch. 2), Morgan, Pugh D.S..

11. Organisational Culture.The notion of organisational culture modern Organisation Theory. The rise

of the public interest to Organisational Culture in the end of 1970�s. The normsand values of the members of organisation. The involvement and participationin the work process ias a cultural value. Positive and negative aspects of co�operation, teamwork, �exibility, integration, competition, individualism, jobdemarcations and hierarchy. Peters and Waterman's key characteristics of thebest American companies.

Hofsteade's study of organisational cultures in di�erent countries. The prob-lem of typology of organisational cultures. The key points of organisationalculture of Russian companies.

Âèõàíñêèé&Íàóìîâ, Øàéí, Øåëäðåéê (ãë. 19,20), Guillen(Ch. 2), Huczynski A., Buchman D. (ch. 19).

12. Critique of American System. New Paradigms of the Organ-isation Theory

A concept of paradigm. Problems of organisational paradigm. The function-alist paradigm. The interpretive paradigm. The radical humanist paradigm.The radical structuralist paradigm. Organisation metaphors (Morgan's imagesof organisation). Post�modernism in organisation theory.

Morgan (Introduction), Burrell G.& Morgan G, Morgan G.(1996).

13. Marxism, Feminism and Organisation TheoryMarxist in�uence on Organisation. Organisations as structures of domi-

nation.Labour process theory. Braverman's theory and his interpretation ofTaylor and Ford's work. The routinisation and fragmentation of work as mech-anisms to de�skill the worker and make the worker dependent on the capitalist.The development of labour process theory. The clash between skilled workersand managers attempting to de�skill. Contradictions between di�erent partsof the workforce.

Critical theory. The designation �critical theory�. Habermas's work. Tech-nical rationality in organisations. Development a non�objective view of man-agement techniques and organisational processes.

318 FOURTH YEAR

Gender in Organisations. Organisation Theory as re�ected male dominancewithin society and organisations. The gendered nature of organisational life.Job design, labour markets and equal opportunities. The barriers to equalopportunities.

Áàðêîâ (ñ. 44�50),Âàëëåðñòàéí, Øåëäðåéê (ãë. 18), Morgan(ch. 3), Clegg S.(1999, 200).

14. Population Ecology Approach to OrganisationsCritique of innovation and strategic conceptions of organisation develop-

ment. Rational�natural and con�ict�balance development models. Externalenvironment as cultural ambience, a set of ecological niches, competition andenvironment. The principle of Isomorphism. Ecosystem. Conservative natureof organisations. A concept of natural selection of socio�cultural samples.

Ùåðáèíà (ñ. 122�124), Morgan (Ch. 5).

15. Institutionalism, Neoinstitutionalism and the Nature of Or-ganisations

Elements of the theory of the �rm. Inter��rm networks. Transaction cost.A concept of institutionalism. Evolutionary economics and a transformation ofthe �rm. The neo�institutionalist economics of D. Norton. Main governancefactors in sectors and �elds. Whitley's �ve business systems.

Ìåíàð, Óèëüÿìñîí, Morgan (ch. 5), Ùåðáèíà (ñ. 112�116),Duoma S.(ch 7, 9), Whitley R.

16. Organisations in Post�industrial Society. Post�FordismNew types and dimensions of competition. The key characteristics of Post�

Fordism: a �exible production process based on �exible machines; process in-novations rising incomes for polyvalent skilled workers and increased demandfor new di�erentiated goods. Nations, competition and Post�Fordism.

Èíîçåìöåâ, Guillen (Ch. 7), Áàðêîâ Ñ.À. (2002), Clegg S. (2000- ch. 6,7).

17. Globalization of Organisation ActivityPhenomenon of globalization. Multinational corporations and national cul-

tures. Main stages of a global company development: local, national, interna-tional, global. Characteristics of a global company.

Áàðêîâ (ãë.6), Âàëëåðñòàéí, Ãèáñîí è äð. (ãë. 3),Äýíèåëñ&Ðàäåáà, Whitley R.




1. Introduction to OrganisationTheory

6 2 2 2

2. Organisation Theory andScienti�c Management

8 2 2 4

3. Scienti�c Management in Russiaand other Countries

6 2 2 2

4. Sloan and OrganisationalStructure

6 2 2 2

5. Modern tendencies in theDevelopment of OrganisationalStructures

6 2 2 2

6. Fordism and OrganisationTheory

6 2 2 2

7. Human Relations Approach inOrganisation Theory

6 2 2 2

8. Groups and Leadership inOrganisations

6 2 2 2

9. Contingency Theories andSituation Approach

6 2 2 2

10. Organisational Culture 8 2 2 411. Critique of American System.

New Paradigms of theOrganisation Theory

6 2 2 2

12. Marxism, Feminism andOrganisation Theory

8 2 2 4

13. The Population EcologyApproach to Organisations

6 2 2 2

14. Institutionalism,Neoinstitutionalism and theNature of Organisations

10 4 2 4

15. Organisations in PostindustrialSociety. Postfordism

6 2 2 2

16. Globalization of organisationactivity

8 2 2 4

Total: 108 34 32 42