Course pages 2013–14
Economics, Law and Ethics
Lecturers: Professor R.J. Anderson and Dr R.N. Clayton
No. of lectures: 8
Suggested hours of supervisions: 2
This course is a prerequisite for the Part II courses Security II, Business Studies and E-Commerce.
Aims
This course aims to give students an introduction to some basic concepts in economics, law and ethics.
Lectures
- Game theory. The choice between cooperation and conflict.
Prisoners’ Dilemma; Nash equilibrium; hawk-dove; iterated games;
evolution of strategies; application to biology and computer science.
- Classical economics. Definitions: preference, utility,
choice and budget. Pareto efficiency; the discriminating monopolist;
supply and demand; elasticity; utility; the marginalist revolution;
competitive equilibrium and the welfare theorems. Trade; monopoly
rents; public goods; oligopoly.
- Market failure. Asymmetric information: the market for
lemons; adverse selection; moral hazard; signalling; and brands.
Transaction costs and the theory of the firm. Real and virtual networks,
supply-side versus demand-side scale economies, Metcalfe’s law,
the dominant firm model, price discrimination. Behavioural economics:
bounded rationality, heuristics and biases.
- Auctions. English auctions; Dutch auctions; all-pay
auctions; Vickrey auctions. The winner’s curse. The revenue
equivalence theorem. Mechanism design and the combinatorial
auction. Problems with real auctions. Applicability of auction
mechanisms in computer science.
- Principles of law. Contract and tort; copyright and patent;
binding actions; liabilities and remedies; competition law; choice of
law and jurisdiction.
- Law and the Internet. EU directives including distance
selling, electronic commerce, data protection, electronic signatures
and copyright; their UK implementation. UK laws that specifically
affect the Internet, including RIP.
- Ethics. Philosophies of ethics: authority, intuitionist,
egoist and deontological theories. Utilitarian and Rawlsian models.
Insights from evolutionary psychology and neorology. The Internet and
social policy; current debates on privacy, surveillance, censorship
and export control.
Objectives
At the end of the course students should have a basic appreciation of economic and legal terminology and arguments. They should understand some of the applications of economic models to systems engineering and their interest to theoretical computer science. They should also understand the main constraints that markets, legislation and ethics place on firms dealing in information goods and services.
Recommended reading
* Shapiro, C. & Varian, H. (1998). Information rules. Harvard Business School Press.
Varian, H. (1999). Intermediate microeconomics - a modern approach. Norton.
Further reading:
Smith, A. (1776). An inquiry into the nature and causes of the wealth of
nations, available at http://www.econlib.org/LIBRARY/Smith/smWN.html
Poundstone, W. (1992). Prisoner’s dilemma. Anchor Books.
Levitt, S.D. & Dubner, S.J. (2005). Freakonomics. Morrow.
Seabright, P. (2005). The company of strangers. Princeton.
Anderson, R. (2008). Security engineering (Chapter 7). Wiley.
Galbraith, J.K. (1991). A history of economics. Penguin.
Lessig L. (2005). Code and other laws of cyberspace v2, available at
http://www.lessig.org/