International Economics - V31.0238-004 - Preliminary
Prof. Marc Lieberman
Office: 19 W. 4th St., 8th Floor, #816
email: marc.lieberman@nyu.edu
New York University
Spring 2011
Drop-in Office Hours (No appointment needed)
(subject to change)
Mon: 2:30 – 3:45
Tues: 3:45 – 5:00
Wed: 2:30 – 3:45
In International Economics, we study the origins and implications of economic interdependence among nations. The
field of International Economics is traditionally divided into two parts. First, “International Trade,” the microeconomic
part, attempts to answer questions arising from trade in goods and services. For example: how does trade arise
among nations? Which nations will trade with each other, and which goods and services will they trade? How does
trade impact different groups within a country, and how does government policy alter these impacts? Second,
“International Finance,” the macroeconomic part, attempts to answer questions arising from global financial markets
and their impact on macroeconomic activity. For example, how are currency exchange rates determined? How do
changes in exchange rates affect economic aggregates, such as a country’s trade deficit? Although this course
focuses primarily on International Trade, we’ll address some issues in International Finance in the last few weeks.
Course Reading: There are three types of readings for this course:
1. The Choice: A Fable of Free Trade and Protectionism (3rd edition, 2007) by Russell Roberts.
2. A reader (custom-made for this course), available at Unique Copy Center (252 Greene St.). It consists
mostly of pages from Salvatore’s, Introduction to International Economics (2nd ed), as well as a few
pages from Mankiw’s Principles of Economics (4th ed.)
3. A variety of readings available without charge either online or on blackboard (see the course outline).
Items listed as "main reading" are highly recommended and correspond to some extent with lectures. Keeping up
with these readings will help you follow the lectures, but I do not test separately on the readings (with one exception –
see below under “Exams”). Choose among the “additional readings” based on your interests.
Blackboard Website: The online home page for this course is on the “Backboard” system. Problem sets and
answers will be posted on Blackboard, as well as special announcements. To use Blackboard, you must first activate
your NYU Home account. Once you’ve done so, log into your Home account, select “Academics” at the top of the
page, find this course under “Classes,” and then select it. Once you get to the course page, navigation is clear.
Problem sets: About 6 or 7 problem sets will be assigned during the semester. The problem sets will be posted on
Blackboard for you to download and print, with due dates (usually Mondays) announced in class and on Blackboard.
Problem sets must be turned in at lecture. Do not email problem sets, or put them in my box, or slip them under my
door, or hand them to me in a bar where you may happen to run into me. If a problem set is not turned in at lecture,
it will not be accepted. If you have to miss class, have another (trustworthy!) student turn it in for you at lecture.
Before turning in your problem sets, make a photocopy of your answers. You will not be getting your answers
back. You’ll need the photocopy to check your own answers against those posted on Blackboard so you can see if
you made errors.
Problem Set Grades: Any problem set turned in on time at the lecture, with a serious attempt to answer all
questions, will automatically receive an official score of 100%, regardless of any errors. However, a few selected
parts of each problem set will be graded, and assigned an “unofficial score” which will appear on blackboard. The
unofficial score is a number between 0 and 5 (5 being best). This unofficial score is just feedback for you. It will not
affect your grade unless you end up right on the border between two course grades at the end of the semester. In
that case, I might look at these unofficial scores to decide if the higher grade is justified. This will affect very few
students.
NO LATE PROBLEM SETS ARE ACCEPTED. HOWEVER... You can miss one—and only one—problem set
without penalty. This “freebie” should be reserved for illness or an emergency, or for the very unlikely event that you
claim to have turned in a problem set that neither I nor the T.A. can locate. To be safe, you should turn in all the
problem sets. Don’t use up the freebie unless you need to, because no exceptions will be made if the records show
that you are missing another problem set, even if you have an excellent excuse or claim that you’ve turned it in.
Recitation: Recitations will be held on selected Thursdays (after exams and when a problem set is due the following
Monday). In these sessions, the T.A. for the course (Florian Semani – he is very good!) will solve some problems
similar to those in the problem set. Attendance at recitation is not mandatory, but very highly recommended. Be sure
to attempt the problem set before the associated recitation date. If you have problems, attend the recitation. Students
who skip recitation and then attempt the problem set often have difficulty, but then it’s too late.
You must register in one of the two recitation sections to take this course, but you can attend either one, regardless
of the one you registered for.
Exams: There will be two midterm exams and a cumulative final exam. Midterms and final exams will test (1) your
knowledge of the course material (as presented in the lectures and problem sets); and (2) your ability to apply this
material to new problems. In general, I don’t test on reading material unless it also happens to be covered in either
class lectures or problem sets. One exception is The Choice, which you will have to read before the second midterm
exam. Any other exceptions to this rule will be announced in class and/or posted on Blackboard.
Course Grading: Your average score in the course is a weighted-average of the following:
Problem sets
10%
Midterm Exam #1
25%
Midterm Exam #2
25%
Cumulative Final Exam
35%
Weight added to
best exam:
5% (i.e., 5% weight is added to the best of your three exams)
Your final letter grade will be determined by your average score. There are two ways you can achieve each letter
grade. For each student, I use whichever method gives the highest letter grade.
Method #1 (“Minimum Score”)
for attaining this grade
is an average score of…
Method #2 (“Class Rank” )
for attaining this grade
is an average score…
93.0 or higher
in the top 20% of the class
A-
90.0 – 92.9
in the top 29 % of the class
B+
85.0 – 89.9
in the top 45% of the class
B
80.0 – 84.9
in the top 60% of the class
B-
75.0 – 79.9
in the top 69% of the class
C+
70.0 – 74.9
in the top 79% of the class
C
60.0 – 69.9
in the top 89% of the class
C-
55.0 – 59.9
in the top 91% of the class
D
50.0 – 54.9
in the top 95% of the class
F
below 50.0
Grade
A
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To make sure you understand: The scores in each column are sufficient, but not necessary, to get the associated
grade. For example, every student in the top 20% will earn an “A” even if his/her average score is less than 93.0.
And every student with an average score of 93.0 or better will get an “A” even that is more than 20% of the class. I
know that grades are important to students. I do everything I can to treat everyone fairly. But in this course, grades
are based solely on the average score for the assigned work and exams; no extra credit or additional work will be
offered, and grades cannot be negotiated.
NOTE ABOUT EMERGENCIES, MISSED EXAMS, ETC
Midterm exams: There are no makeup midterm exams. However, if you miss one midterm exam for any
reason (including illness), then I will shift that exam’s weight to the remaining exams (those not yet taken).
Your course grade will be determined only by Method #2 above (“Class Rank”). You will be ranked with the
rest of the class based solely on the exams that you took, as if everyone missed the same midterm you
missed and everyone had the weight shifted onto the remaining exams just as you did. This policy
eliminates any advantage from strategic behavior (e.g., choosing not to take an exam because you think it
might be harder than other exams) or any disadvantage for those with genuine emergencies (e.g., they
exam they missed due to illness turned out to be easier than the other exams).
If you miss both midterm exams, the second missed exam will receive a score of zero. (Serious personal
problems which require exceptions to normal class rules will be handled on a case-by-case basis with the
Director of Undergraduate Studies and the Dean’s Office).
Final Exam: If you have a documented serious illness or documented serious emergency that prevents you
from taking the final exam, contact me ASAP, before the final exam. The economics department will decide
if an incomplete is warranted, in which case a makeup final will be given during the following semester.
(Makeup exams will not be given later during finals week.)
Getting help: No appointment is needed for my "drop-in" office hours. You can also email our TA, Florian, if you
attended the recitation and still have questions about the problem set. Finally, one-on-one and group help for this
class is available at no charge at the College Learning Center -- see their website: http://www.nyu.edu/cas/clc
Important Dates:
TBA
Midterm #1 (Coverage: Section I & most of Section II of course outline)
TBA
Midterm #2 (Coverage: Rest of Section II & all of Section III + The Choice)
TBA
FINAL EXAM (Coverage: Entire course)
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Important Course Policies - PLEASE READ
(1) LATENESS: You are expected to arrive at the classroom and have taken a seat by 12:30pm. To ensure this,
plan to arrive early. Being late disturbs and distracts me and other students. I will generally give a one- or twominute grace period before beginning lecture. In the rare event that you DO arrive late (which means after
2:02pm or after I’ve begun to lecture, whichever comes first), enter quietly through the back door and quickly find
a seat near that door. If no such seat is available, sit on the floor by the door. Do not walk through the rows or
look around for a seat. If lateness becomes a problem, we’ll shift to a “closed-door” policy, in which late students
are not allowed in class at all. Let’s try to avoid this.
(2) TALKING: Don’t talk to other students during lecture. If you are confused about something, raise your hand, or
ask me or another student after class. If you start a discussion with the student next to you, you will just miss
more of the lecture and get further confused. The best way to ensure that you’ll pay attention is to avoid sitting
next to your friends.
(3) CELL PHONES: Turn ‘em off!!!!
(4) MAKING PREPARATIONS TO LEAVE: As we approach the end of class, do not make preparations to leave
(e.g. closing your notebook, packing up your book bag, putting on your coat) until I announce that the lecture is
over. This activity is distracting to me and to your fellow students who are trying to listen to the end of the lecture.
(5) RESPONSIBILITY FOR LECTURE: Attendance at lectures is up to you. However, you are responsible for
everything covered in lecture, including any announcements. Moreover, if you miss class for any reason, you
lose the right to ask me or the TA questions about that lecture material. (You’ll have to ask other students who
attended—get their notes and go over the notes with them.) I'm happy to help students who attend lecture and
are confused. But in a large class, I can’t spent time repeating my lecture or repeatedly answering questions
that wouldn’t be asked by students who attended lecture. Be sure to get phone numbers/email addresses for a
few of your fellow students now, so you can contact someone to fill you in if you are unable to attend a lecture.
(6) TAPING LECTURES: Never do this in any class without the instructor’s permission.
(7) MIDTERM EXAM DATES: The midterm exams are TBA and TBA (during regular class time). These dates and
times cannot be changed, and there are no make-ups. If you already know that you cannot take one of these
midterms, it would be best not to take this course. If you do take the course anyway, be sure you understand
how your grade will be determined if you miss an exam (see p. 3 of the syllabus).
(8) FINAL EXAM DATE: The final exam is on TBA (determined by registrar). Do not purchase plane tickets that
conflict with this final exam date. If you cannot take the final exam at this date and time, YOU CANNOT TAKE
THIS CLASS.
And, on a more pleasant note…Feel free to drop by during office hours to ask questions, to make suggestions, or
even just to introduce yourself and say hi. In spite of all these rules, you’ll find that I’m not such a bad guy.
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COURSE OUTLINE AND READING
Expected Dates of Lectures
↓
I.
Preliminaries
Introduction to Course
TBA

Main Reading:
o Custom Reader: Salvatore, Chapter 1 [Note: Salvatore’s chapters appear after the
Mankiw pages in your reader]
Some Basic Microeconomic Background
TBA

II.
Main Reading:
o Posted on Blackboard: Hall & Lieberman, Principles and Applications, 5th ed, 2010,
pp. 434 - 449
International Trade Theory
TBA
The Gains from Trade: A First Look (Partial Equilibrium Model)
 Main Reading:
o Custom Reader: Mankiw, Principles of Microeconomics, 4th ed.:, pp. 178 – 184,
TBA
The Ricardian Model
(multiple dates)

Main Reading:
o Custom Reader: Salvatore , Chapter 2.

Background Reading (if necessary):
o Any Micro Text: The sections on income and substitution effects in any micro text,
principles or intermediate. (This is usually found in the chapter on consumer theory.)

Additional Reading
o Online: For a more technical treatment: Steven Suranovic, International Trade,
Chapter 2, Sections 1 through 8. [This is a free online text, available at
http://internationalecon.com/v1.0/index.html . But figuring out how to get to the free part is
tricky. Use the URL above, ignore the payment options, and instead use the Table of Contents
on the left. Select an individual section, and it shows up without payment. Payment is
required only for printing.]
TBA,
The Heckscher-Ohlin Model
(multiple dates)

TBA
(multiple dates)
Main Reading:
o Custom Reader: Savatore, Chapter 3 (including Appendix A3.1) and Chapter 4
(through p. 93 only)
Note: Read these two chapters together – we will be bouncing back and forth
between them.
Alternative Theories of Trade

Main Reading:
o Custom Reader: Salvatore, pp. 93 – 103 in Chapter 4 .
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
Background Reading (if necessary):
o Any micro principles or intermediate text on internal and external economies of scale.

Additional Reading:
o Custom Reader: Salvatore, Remaining pages in Chapter 4.
o
Online: Krugman, “About the Work,” NY Times Blog Post, Oct 15, 2008. Brief
summary by Paul Krugman of his Nobel Prize winning work on New Trade Theory:
http://krugman.blogs.nytimes.com/2008/10/15/about-the-work/
III. International Trade Policy
TBA
(multiple dates)
Tariff and Non-Tariff Barriers to Trade

Main Reading:
o Custom Reader: Salvatore, Chapter 5 and Chapter 6 (through p. 159)

Additional Reading:
o Online: For further reinforcement of this material: Steven Suranovic, International
Trade, Chapter 7, Sections 1 through 15. [This is a free online text, available at
http://internationalecon.com/v1.0/index.html . But figuring out how to get to the free part is
tricky. Use the URL above, ignore the payment options, and instead use the Table of Contents
on the left. Select an individual section, and it shows up without payment. Payment is
required only for printing.]
TBA
The Debate over Protectionism
(multiple dates)

Main Reading:
o Russell Roberts, The Choice (3rd edition), Entire book. (Read this before the second
midterm exam)

Additional Reading
On Outsourcing (Goes with lectures on the Total Employment Argument)::
o Online: Daniel W. Drezner, "The Outsourcing Bogeyman," Foreign Affairs, May/June
2004. [Available online at http://foreignaffairs.org. Find the search box, enter "Drezner,"
locate the article, then click "read" at the bottom of the article description. You may have to
register to read it, but it’s free.]
o
Online: Alan S. Blinder, “Offshoring: The Next Industrial Revolution?” Foreign Affairs,
March/April 2006. [Go to www.foreignaffairs.com, but “Blinder” and “offshoring” in the
search box. You may have to register to read it, but it’s free.]
o
Online: J. Bradford Jensen and Lori Kletzer, "Fear" and Offshoring: The Scope and
Potential Impact of Imports and Exports of Services,” Peterson Institute for
International Economics, Jan, 2008. [Go to www.iee.com, put “Jensen” and “Kletzer” into
the search box.]
On The Income Distribution Argument
o Online: Edward Gresser, "Taxing the Poor,” July 30, 2008. [Available at
www.ppionline.org ; and put “Taxing the poor” in the search box.]
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o
Online: Paul Krugman, "In Praise of Cheap Labor," March 21, 1997, Slate [Start at
www.slate.com. Find the search box, then enter the following: Krugman "cheap labor"]
On Protectionism in General ::
o Posted on Blackboard: Frederic Bastiat, "The Petition of the Candlemakers."
o
Online: William Poole, "Free Trade: Why Are Economists and Non-Economists So
Far Apart.," Speech, June 15, 2004. [Start at www.stlouisfed.org, then select “Research
and Data” and put the words “Poole” and “non-economists” in the search box.]
o
Online: Cletus Coughlin, "The Controversy over Free Trade: The Gap between
Economists and the General Public." This is a longer version of the arguments
covered in Poole's speech (above), and also provides an excellent review and
perspective on many of the models covered in this course.) [Start at
:www.stlouisfed.org, then select “Research and Data” and put the words “Coughlin” “the Gap”
in the search box. Be sure to choose the pdf with that title – it may be second or third item on
the list.]
o
Online: Gresser and Dunkelman, “Free Trade can Fight Terror,” August 15, 2008.
[www.ppionline.org ; put “”Free Trade can Fight Terror” in the search box.
IV. International Finance
TBA
Floating Exchange Rates
(multiple dates)

Main Reading:
o Posted on Blackboard: Hall & Lieberman, Economics: Principles and Applications 5th
ed., pp. 887-901 (Posted on Blackboard)

Additional Reading:
o Online: Anthony Landry, “The Big Mac: A Global to Local Look at Pricing,” Federal
Reserve Bank of Dallas, September 2008. [Relates to purchasing power parity. Start at
www.dallasfed.org , then put “Big Mac” in the search box.]
TBA
The Trade Deficit and the Net International Investment Position
(multiple dates)

Main Reading:
o Posted on Blackboard: Hall & Lieberman, Economics: Principles and Applications, 5th
ed, 2010, pp. 908-917.

Additional Reading:
o Online: Ben Bernanke, "The Global Saving Glut and the U.S. Current Account deficit,"
Speech, March 10, 2005. [Start at www.federalreserve.gov, then put “Bernanke” and “Glut”
into the search box.]
o
On Blackboard: J. Bradford DeLong, "Divergent Views on the Coming Dollar Crisis,"
The Economist's Voice, Vol 2., 2005 (All of it remains relevant today)
o
Online: Congressional Budget Office, “Will the U.S. Current Account Have a Hard or
Soft Landing?,” June, 2007 [Start at www.cbo.gov. Select “Publications,” then "By subject
area", then “Trade,” then find the paper.]
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o
Online: Fred Bergsten, “The Dollar and the Deficits: How Washington can Prevent the
Next Crisis,” November 2009. [Start at www.iie.com , and put the title in the search box.]
o
Online: Congressional Budget Office, “How Changes in the Value of the Chinese
Currency Affect U.S. Imports,” July 2008. [Start at at www.cbo.gov. Select “Publications,”
then "By subject area", then “Trade,” then find the paper. Or see the short summary of the
paper at http://cboblog.cbo.gov/?p=146 ]
o
TBA
Online: Two competing views about policy toward China’s exchange rate at the
Peterson Institute for International Economics. [Start at www.iie.com , and put the first
few words of each title below in the search box.
 Nicholas Lardy, “China’s Exchange Rate Policy and Trade
Imbalances,” April 22, 2010
 Fred Bergsten, “Correcting the Chinese Exchange Rate: An Action
Plan,” March 24, 2010
Back to protectionist debate (to tie up loose ends)
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