 Hi, this is Professor Gerald Friedman at the University of Massachusetts. Welcome to Microeconomics. Microeconomics is the study of individual behavior and how individual behavior leads to social outcomes, the setting of prices, the allocation of resources to produce different things, how much pizza do we make, and how much of it has sausages. There are two big approaches to microeconomics. There's what we can call the orthodox or the neoclassical approach. And when we say neoclassical, we're not just talking about Grecian columns outside libraries at Ivy League universities, but we are talking about an approach that developed at the same time as most of America's institutions for higher education in the 1870s and 1880s. Neoclassical economists look at the economy as the result of the thinking of individuals, and they treat each individual in isolation from others as if they're all living on a desert island after their plane crashed on the way back from Australia or like Robinson Crusoe, stranded without anybody around. And they think of this individual as allocating his or her resources among producing different things according to what we call the person's individual utility function. In his or her head, this Robinson Crusoe or Jane Fonda or whatever is thinking how much do I like pizza with broccoli and how much do I like pizza with sausage. And then when we decide how much society we will be producing pizza with sausage or broccoli, it's all the result of all these little people in isolation, each one driven by their utility functions in their heads using some technology that people over at MIT or someplace figured out and using the resources that they gather on their little desert island or that they pulled out of their plane, their crashed plane before they burned it. Individuals with their utility functions, the technology and the resources. That is neoclassical or orthodox microeconomics. Then there's another approach, an approach that looks at individuals acting through institutions and guided by institutions. In this approach, your oceanic airlines send along a particular guidebook for how to live on a desert island and you're living with other people on the desert island, living together because you don't want to die alone. The group sets standards, allocates resources through some process where people influence each other, all as a result of the history, that traditional culture, wherever that comes from and people are born into an institution, they come into a group and they act according to that group and through the group. Those are the two big approaches that we will be talking about throughout this whole semester. Welcome aboard.