Download New Syllabus for 207 in process of being updated

DEPARTMENT OF ECONOMICS - QUEENS COLLEGE OF CUNY
Comparative Economic and Financial Systems
Eco 207 Fall 2014 course # 47057
Tuesday & Thursday 1:40– 2:55 PM in PH 154
Office Powdermaker 306F
Office Hours: Tu. & Th. 5:15-6:15 pm.
Prof. Michael Dohan
[email protected]
College Phone 718-997-5461
Make an appointment if possible.
CLASS WEBSITE WWW.PROFDATQCECON.ORG
www.profdatqcecon.org: The page for Eco 207 on the class website has announcements about
exams, homework and quizzes. It also has homework problems, vocabulary, concept lists and my office hours. We
do not use Blackboard.
PLEASE READ THE ENTIRE SYLLABUS TODAY BEFORE CONTINUING IN CLASS.
You may finding more writing and research in this course than you have in any other economics course.
On the FIRST DAY YOU ATTEND CLASS, to complete your enrollment in Eco 207, do the following:
1. Send an email from the email address you use most frequently to [email protected] containing:
____1. Your name English (transliteration and “Nickname in English”)
____ 2. Student id _______________________, 3. Year & major(s) _______ ____________________
____ 4. Career plans if any ______________________________________________________________.
____ 5. Cell phone number (in case I need to reach you) _____________________________
____ 6. Country of origin & languages you speak ____________________________________________
____ 7. MOST IMPORTANTLY, a recent head and shoulders photo of you (take one with your phone)
ECON 207. Comparative Economics and Financial Systems. 3 hr.; 3 cr. Prerequisites: Econ 101 or 103 and
Econ 102 or 104, Engl 110. Despite the evolution of many world economies toward the market system, there are major
differences--formal, cultural, and informal--in the financial, legal and accounting systems, in the social and economic
institutions, forms of ownership, business practices including corruption, and the soundness of macro and micro
economic policy-making. These differences pose major challenges for international business decision-making and cause
major differences in economic performance, income distribution, growth, and efficiency of these economies in the lowincome stagnant economies, the growing “transitioning” economies and the world's major mature economies. This
course analyzes these components of an economy within a decision-making information-motivation
framework. Examples will be drawn from a number of economies including U.S., E.U., Russia, Mexico, China, and
Pakistan. Of particular interest are macroeconomic institutions, monetary and fiscal policy, relationships to the world
economic organizations as well as the internal political and legal framework that influences privatization, market
structures, competition and comparative internalization of social costs. Also examines the impact of systems and the
political and social relationships in the operation and efficiency of economic institutions.
CUNY policy on academic integrity: Academic dishonesty is prohibited in the City University of New York and is
punishable by penalties, including but not limited to failing grades, suspension and expulsion. You are responsible for
reviewing this policy as provided at: http://web.cuny.edu/academics/info-central/policies/academic-integrity.pdf .
Text-messaging during quizzes or exams will be dealt with very harshly.
Required Materials to get for Course
1. The Global Economy and Its Economic Systems by Gregory and Stuart: South-Western Cengage Learning,
1st Edition: 2014, Price: 162.25 USD. Buy through Cengage-Brain!
2. The Economist (12 week subscription, print and online, $2.50 per week, $30.00 total) Go to www.economist.com,
click on subscription and then choose student subscription. Select the 12 weeks subscription. Subscribing is required.
Most importantly, you get access to their archives for research and reading about your assigned economy.
Required Materials on Reserve for the Course
3. The Making of Economic Society by Robert L. Heilbroner and William Milberg, 12th edition. You are not
required to buy this book. It will be on reserve in the library and you are required to read the first 5 chapters.
4. Macro Economics 2e by Charles I. Jones: W.W. Norton & Company 2nd edition. Will be on reserve or chapters will
be handed out in class.
Other materials will be handed out in class or placed on reserve.
GRADING POLICY: Your final grade is determined by the following (weights):
1. One midterm exam: 20%.
2. Final exam: 30%
3. 5 Short research essays or briefs: 5% each, 25% total.
4. Final country essay: 15%.
5. Class participation and quizzes: 10%.
There is no predetermined grade distribution. Last semester, 5 students were in the A range, 14 in the B
range, 3 in the C range, 1 in the D range and 2 INC out of 26 students. I am willing to give all A’s if you all earn it.
Prof. Dohan
Eco 207, Fall 2014
2
This 207 course differs dramatically from the first two ECO 207 I taught last year, by reducing the time required for
doing the assignments and reading and by making the assignments clearer and shorter. the normal amount of
work for course will be quite adequate to earn an A, provided you have a good grasp of English and knowing
Excel. If your English is weak or you don’t know Excel at all you will have to put in a bit more time. The course
is structured in more logical order to be sure that you are taught the skills before you are required to do the
assignment.
Mid-terms and Final (50%): There will be one midterm exam (tentatively scheduled on the syllabus) and a
cumulative final exam. The mid-term and final are multiple-choice, concept-identification (vocabulary),
analytical and short answer questions. The mid-term is based on lectures, textbook material, and homeworks.
The final has one major essay about your country, 2 shorter essays and multiple choice and concept
identification. Old exams with answers will be posted at www.profdatqcecon.org before the exam. No make-up
exams will be given except in the case of illness confirmed in writing by a physician.
Research reports (25%): There are 5 written research reports or briefs that require you to gather data and to
analyze this data critically. At the beginning of the semester you will be assigned a country. You will be asked to
collect data generally using the World Bank and other institutions, and read relevant articles from Wikipedia,
The Economist, New York Times and Wall Street Journal. You will present this data in a professional format
following the “Sample Report” format. Each report focuses on a series of questions which will require you to
collect and critically analyze the data you have gathered.
Country report (15%): In your country report you will describe the economic and financial system, institutions,
organizations, etc. for your country. We will discuss more about the country report later in the semester. This
will be due on the last day of finals week.
Class participation, attendance and quizzes (10%): You can get or lose points when I ask you a question in
class. Written attendance is taken every day, but attendance is not required. From experience, to pass the class
you need to attend the lectures to get material only available from the lecture. Absence is no excuse for missing
short quizzes from The Economist, vocabulary, or key concepts.
Reading Assignments: Reading assignments are from the textbook, should be completed before or on the day they
are covered in lecture. Even though I don’t cover part of the assigned text in class, you are still responsible for
the assigned material in the text.
In the lectures: Take good lecture notes. The lectures are a very important part of the course and often cover
and explain materials and topics not in the text. You may record my lectures.
Eco 207: Syllabus Comparative Economic & Financial Systems
Fall 2014
I Basic Concepts for the study of comparative economic and financial systems
NIB = lecture material not in
book.
Prof. Dohan
Eco 207, Fall 2014
Thurs 1.Why study economic and financial systems? (decentralized (market) versus centralized
Aug 28 (Planned)
Stuart from
A. To describe different types of economic systems (a static picture)in terms of
institutions,
various types of resources
decision-making systems (Market versus centrally planned),
information systems (decentralized versus centralized),
distribution systems (markets and prices versus rationing),
financial systems,
infrastructure
B. To understand how different economic systems actually work
1. operates (dynamic picture)the economy and its components
1. How is it decided by what means or manners we are going to make these decisions
about who is going to make these decisions. This one of the most important questions in a society
yet for the most part it is rarely discussed in economic or corporate finance. Economic theory
today, both macro and micro, are based on the assumption the we are producing private tye goods
and services.
2. who
3
Order Gregory &
make the decisions on how to decide,
1. In Intro Macro was stated that three questions had to be decided. 1. what to produce,
2. how and 3. for whom to produce the products and service.
3. But rarely did we discuss the
The questions as to who is empowered to decide how and
who is to
have this power to decide on what to produce or what not to produce and how to
produce it
and for whom it is to be produced.
4. what system makes the decisions make between consumption today and tomorrow
5 what system makes the decisions make between about income distribution. (Lorenz curve)
6. decision to produce now verses some future time periods ,that is , (savings) accumulate
and allocate resources over time and what methods to use
7. Who or what system makes the decisions to produce-private type goods and public type
goods and services (as well as public resources) today and tomorrow
8. What systems should we use to deal with market system failure, externalities, common
Cengage.com
Prof. Dohan
Eco 207, Fall 2014
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property, asymmetric information, principal agency problem, irrational decision making etc.
Modern macro course focus largely on the production of private-type and public-type goods and
distribution of private type goods and services almost entirely privately owned producers evenly if
financed by the government or semi-public agency, That self-regulation is adequate if not optimal.
It implicit assumed that some form of the mixed market system will shape the decisions
B. Much of this course will focus on evolution of the modern economies from the traditional nonmarket economies to several types of economies of the 20 th and 21st centuries and discussing the
various characteristics of economies around the world
C. We will learn to measure and analyze the large differences in per capita income, growth rate of
GDP, living conditions and socio-economic indicators among countries
D. Explain the large differences of the productivity of resources in different economic systems and
how this resulted from the interaction between economic institutions and non-economic institutions.
Tues 2.Working with economic time series:
Jones Chap. 2
Sep 2
Look at sample
A. Measuring output over time
“Report” on
B. Comparing output between countries
website.
C. Understanding the underlying data (meta-data)
D. Do the numbers in the time series make logical sense? Can you explain trends?
Gregory & Stuart
Thurs 3.Definition of socio-economic concepts: infrastructure, institutions, belief systems, etc.
chap. 2
Sep 4
Tues 4.Describing economic systems - what type of goods and services are produced: resources,
Sep 9
types of goods and services produced, ownership structures, use of market forces, etc.
Heilbroner chap.
1
Thurs 5.Sources of economic growth: capital accumulation, growth of human capital, labor,
Jones chaps.
Sep 11
3, 4, 5 and 6
technological progress, economies of scale.
II. Types of Economic Systems
Tues
Sep 16
6.Various Models of growth. Cobb-Douglas production function, Solow-Romer model, total
factor productivity model, and Malthusian population theory.
Thurs 7.Understanding the concept of efficiency: Pareto Efficiency for Private Goods
Sep 18
Jones handout
The marginal analysis approach to static efficiency, eg. MPP lax
product, MPPlax/ MPPlay = Px /P y and MCx /MC y = MUx /MU y
dynamic efficiency over time.
=
Read Prof. Dohan’s
MPPlbx to produce one
essay on “Efficiency &
etc.
Solitary of the Peasant”
Prof. Dohan
Eco 207, Fall 2014
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Sep 23- No classes
25
Tues 8.Strength and Weaknesses of the Market System: Markets work best for private type goods and
Sep 30 services and provide information on the quantity and prices that people are willing to pay for each
G&S
pp. 35-41;
commodity or service. The economy needs non-market guidance (king, parliament, legislature, etc.) 54-65 & chap. 6
on how to allocate resources between private type goods & services & public types goods & services
Thurs 9.Ancient and traditional economies: primarily rural economies not producing for the market but Heilbroner chap.
Oct 2
rather according to tradition or command, worked by slaves or peasants tied to the land & was not
2, pp. 15-23
monetized. Urban centers were markets for international & domestic trade and used money. Belief
systems discouraged working for profit making, trading and lending money. By end of 4th C. the
western Roman Empire had nearly collapsed, was replaced by many small states creating a
system called Feudalism & widespread manorial organization of society & towns, guilds, &
concepts of medieval economics, disrepute of economic gain & profit as a method of distributing
income.
th
th
Tues 10.Manorial economies from 5 C. to the 17 C. centered around self-sustaining fortified self-
Oct 7
sufficient manors with few monetary transactions even in cities and where economic activity was Heilbroner chap.
guided by tradition. Urban centers had markets often regulated by guilds (goldsmiths, weavers,
2, pp. 24-35
etc.) not for profit but stability. Dominated by the Catholic Church which was opposed to making
money, charging interest.
Thurs 11.Changes in Economic Institutions throughout Europe and England:
Oct 9
Heilbroner chap.
Changes leading up to the industrial revolution: the itinerant merchant, urbanization, the crusades,
3
the growth of national power uniting manors, exploration to the far east and new world, a change
G&S
in religious climate, breakdown of the manorial system, and the rise of the cash economy.
Gradual appearance of economic activity in the 16th & 17th C. with the spread of monetization, the
development of markets for labor, land and capital, the “enclosures” (for sheep raising) forcing
labor off of their traditional manorial land which led to the emergence of a landless proletariat
working for wages. Calvinism, the profit motif, the protestant ethic, invention of economics,
emergence of market systems.
chap. 10
Prof. Dohan
Eco 207, Fall 2014
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Tues 12.Industrial Revolution in England: 1750-1870 New industrial technologies: steam engine,
Oct 14
improved iron and steel, power loom, spinning Jenny, building of canals, emergence of
railroads, etc. Falling costs from economies of scale leading to large profits and savings by the
Heilbroner chap.
4
entrepreneur most of which was reinvested. Great interest in technology by all strata of society,
introduction of the patent system, large domestic market, emergence of the factory in cities.
(VIP: See Prof. Dohan’s essay outlining the principal components of the Industrial Revolution
in England.)
Thurs First Midterm: covers chapters 1-8 from Gregory & Stuart & 1-4 from Heilbroner & 2 from
Oct 16
Jones.
III. Development of Modern Economies
Tues 13. Development of American Capitalism
Heilbroner
Chap 5
Oct 21
Thurs 14.Development of modern capitalism: using US as an example. 1830-1920: vast amount of
Oct 23
agricultural land raised the productivity of labor & raised wages for industry as well.
Constitution guaranteed a large market without borders. Stable government, rich resources of oil,
Heilbroner
chap. 5
iron ore, wood supported the development of industry. The development of a financial system as
well as government land grants to railroads helped finance economic growth. The invention of
the internal combustion engine formed the basis of the rapid growth of the auto industry which
changed the face of America. Economies of large scale production changed the market structure
of many industries. Giving rise to anti-trust regulations. Captains of industry.
Tues 15.US mixed market economy. The basics: private ownership of the means of production with
Oct 28
public regulation of the behavior of enterprises. Private financing of the economy (some
exceptions). The importance of not-for-profit organizations: colleges, charities, churches. The
wide spread presence of non-private enterprises managed by board of trustees providing
G&S Ch. 11
pp. 239-279
see vocab.
sheet on Ch. 11.
government services (MTA, post office, Queens College, etc.). The importance of regulation in
the US economy. Corporate governance and US financial markets.
Thurs 16.The European model. The European union is now a market larger than the US. Euro financial
G&S Chap. 12
system with a unified currency for members. Different systems of corporate governance.
Oct 30
Independent fiscal polities. Some economies have strong social safety nets.
G&S Chap. 12
Tues 17.Problems facing the European Union: High taxes cause high labor costs reducing
continued
competitiveness in world markets. Problems paying for the welfare state with a declining work
Nov 4
force and an aging population. Uneven fiscal policy and deficits among its members (Greece,
Italy, Spain, Portugal) are causing major stresses. Whatever happened to Keynes?
Prof. Dohan
Eco 207, Fall 2014
7
Thurs 18.The Asian Model: Japan and the 4 Tigers. Plus India
G&S Chap. 13
Nov 6 a. Gershchenkron’s theory of relative backwardness inspired countries to take steps to accelerate Read Wikipedia
economic growth.
on economy of
b. Rapid economic growth based on high rates of investment and national saving, closing the
India
technology gap through import and imitation, shifting excess agricultural labor from agriculture
to industry, and a focus on expanding exports. Technological borrowing does not substitute for
technological innovation.
c. Export lead growth strategy was the basis for rapid economic growth of the four Tigers listed
plus Japan: Hong Kong, Korea, Singapore, & Taiwan.
d. Income security will become a major problem for Asian economies most of which have a
young labor force. They currently rely on the young supporting the old. Or relying on a high
rate of savings during population’s working years.
e. India: A success story threatened by corruption.
Tues 19.Origins of Soviet command economy: Marx left no outline for economic growth. Near
economic collapse in Russia in 1920 led Lenin to initiate the New Economic Policy=NEP, a
Nov 11
G&S Chap. 14
mixed market economy relying heavily on the sale of grain for export. Stalin, after eliminating
to p. 391
his rivals initiated the first 5 year plan to accelerate industrialization through the development
of heavy industry. The imbalance between industry and agriculture led to a drastic drop in
grain collections needed for export and industrialization and led Stalin to his disastrous policy
of collectivization forcing all peasants into collectivized farms where they had no ownership
of the means of production.
Thurs 20.Institutions of the Soviet economy: given the priorities of the political leaders, Gosplan and
the State Ministries worked out the targets for all sectors of the economy down to the individual
Nov 13
G&S
enterprises and farms relying on information of capacity, resources, etc. provided by directors
Chap. 14
and managers of the enterprises and farms. It used a system called “material balances” to try to
equate the supply and demand for individual inputs and outputs while meeting the targets of the pp. 392- 413
political leadership. The market system and shortages were not used for these production
decisions. Managers were rewarded based on planned fulfillment, not on profit. Markets,
however, were used to allocate labor & consumer goods. Gosplan used the value added tax to
try to keep the macro-economy in balance & reduce consumer demand.
21.Why
the Soviet planning process didn’t work.
Tues
G&S
a.
Growing
inefficiency because of the inability to equal marginal products in production
Nov 18
Chap. 14
b. Asymmetrical information provided by managers to get less demanding plan targets and high
pp. 414productive capacity led to underutilized resources. The material balance system (input output
424
table) 1) didn’t adapt for technological change, 2) rarely balanced leading to shortages & was late.
and
c. The principal agent problem favored the manager in finding the easiest way to fulfill his plan
Chap.
16
rather than producing what was really needed in the economy.
And
d. A poor system of incentives did not reward managers for production of spare parts or the
Chap 18
introduction of new products and technology.
pp. 531e. Failure to use interest rates along with a price system based on labor costs led to growing
539
inefficiency in the productivity of added capital.
Thurs 22.Growing failure of the Soviet system: initial rapid growth from 1928 through 1970 based on
high rates of investment and shift of labor from agriculture into industry. Declining static
G&S
Nov 20
efficiency and poor performance for reasons discussed above, little economic change in the
Chap. 15
economy took place between 1970 and 2000 after which the system collapsed. Extensive
pp. 425-442
second economy between firms trading scare inputs and black markets for consumers.
Transitioning to a modern mixed market economy: Soviet experience with privatization,
privatizing the land in agriculture, shifts in income distribution, corruption, unreliable court
system and political agendas of Putin.
Tues 23.The surprising success of Chinese economy since 1970s: abandonment of Soviet type
G&S
policies, introduction of market type incentives in agriculture and in small businesses, retain
Nov 25
Chap. 15
state ownership of the “commanding heights,” in SEOs (State owned enterprises) development pp. 443 - 465
of foreign trade, and decentralization of authoritarian regime.
Thurs No class, Thanksgiving day
Nov 27
Read articles on
China in Archive
of The Economist
Jan 2000 – Jan
2014
Thurs 25.Islamic economic theory: Three religious tenets: no interest rate to allocate
G&S Chap. 22
pp. 607-609, plus
Dec 4 investment, zakat (10% of profit goes to the poor) and “the practice of “fair and
written assignment
honest business”. Yet corruption and politics are a major factor in Islamic economic
performance. Many are single resource economies (oil). What will happen if the market for using World Bank
info.
oil collapses? Others are very poor & overpopulated: Pakistan, Bangladesh. Why?
Tues 24.Problems emerging in the Chinese economy from the years 2000-2013: ineffective
corporate governance of large state owned enterprises, lack of an internal market and
Dec 2
excessive reliance on exports, growing shortage of labor, deteriorating environment,
pervasive corruption and poor macro policy leading to inflation.
Prof. Dohan
Eco 207, Fall 2014
8
Articles on the 6 African
Tues 26.Political, institutional and social problems as a major cause of Africa’s poor
countries in Archive of
economic
performance
in
many
economies,
even
those
with
rich
natural
resources.
Dec 9
The Economist
Note: the six African countries you are to read about will be given in “The African
Jan
2000 –2014
Assignment”
Thurs
Dec 11
Thurs Final
Dec 18