This lecture provides an overview of the physical aspects of earth's biomes. Temperature, water, latitude, and altitude all come into play. Regions with similar levels of these climatic features tend to have similar life-forms living there. These same climatic features can also affect weather patterns, which in turn affect life by altering habitats and ecosystems. On a large enough scale, such as El Niño, these weather patterns can affect life all over the earth.

While there are many differences between modern science and philosophy, there are still a number of lessons in modes of thought that scientists can take from philosophy. Scientists' ideas about the nature of science have evolved over time, leading to new ideas about falsifiability, creativity, revolutions, and the boundaries and limits of what can be accomplished by different types of science.

There is a distinct possibility that humans are currently part way through an evolutionary transition between individuals and groups. The conflict between these two units of selection and levels of organization, between biology and culture, may explain some of the tensions in modern human life. Examples of selfishness and altruism exemplify how these types of selection act on humans.

Midterm Exam 1 covers the first half of the course.

Professor Gendler explains the interdisciplinary nature of the course: work from philosophy, psychology, behavioral economics, and literature will be brought to bear on the topic of human nature. The three main topics of the course are introduced--happiness and flourishing, morality, and political philosophy--and examples of some of the course’s future topics are discussed.

In order to understand the precise predictions of the Leverage Cycle theory, in this last class we explicitly solve two mathematical examples of leverage cycles. We show how supply and demand determine leverage as well as the interest rate, and how impatience and volatility play crucial roles in setting the interest rate and the leverage. Mathematically, the model helps us identify the three key elements of a crisis. First, scary bad news increases uncertainty. Second, leverage collapses.

Standard financial theory left us woefully unprepared for the financial crisis of 2007-09. Something is missing in the theory. In the majority of loans the borrower must agree on an interest rate and also on how much collateral he will put up to guarantee repayment. The standard theory presented in all the textbooks ignores collateral. The next two lectures introduce a theory of the Leverage Cycle, in which default and collateral are endogenously determined.

This lecture addresses some final points about the CAPM. How would one test the theory? Given the theory, what's the right way to think about evaluating fund managers' performance? Should the manager of a hedge fund and the manager of a university endowment be judged by the same performance criteria? More generally, how should we think about the return differential between stocks and bonds? Lastly, looking back to the lectures on Social Security earlier in the semester, how should the CAPM inform our thinking about the role of stocks and bonds in Social Security?

This lecture continues the analysis of the Capital Asset Pricing Model, building up to two key results. One, the Mutual Fund Theorem proved by Tobin, describes the optimal portfolios for agents in the economy. It turns out that every investor should try to maximize the Sharpe ratio of his portfolio, and this is achieved by a combination of money in the bank and money invested in the "market" basket of all existing assets. The market basket can be thought of as one giant index fund or mutual fund. This theorem precisely defines optimal diversification.

Evolution plays an important though underutilized role in medicine. Evolution guides how our bodies respond to various treatments, how pathogens will respond to treatments, and how pathogens' responses will change over time. Pathogens oftentimes will evolve to an intermediate level of virulence where they become strong enough to infect a host and reproduce, but not so strong as to kill the host before it can spread the pathogen.