University of the Pacific
School of International Studies
& Department of Economics
Spring 2006
David Keefe
ECONOMICS 71
GLOBAL ECONOMIC ISSUES
Course description. This is a 4_unit course on international trade, international finance, economic
development, and on other current issues in the global economy. It is a sophomore-junior level course,
intended for lower division SIS students, for early economics majors, and for economics minors. This
course is required for some SIS majors and recommended for others.1 It counts towards the economics
major and the economics minor.2
This spring, we shall start the course by looking at some of the issues concerning globalization.
Then we shall spend most of the course on developing the economist’s tools to illuminate the efficiency
and equity issues in international trade and the macroeconomic issues of international finance. Lastly we
shall introduce the economic development problems of poor countries (LDCs) and see several economic
issues of interest to all peoples of the world. Although the course is organized around some global
economic issues of current importance, it will not provide you with easy answers to the issues. The
answers to the issues ultimately must come from within yourself. What the course will do is help you
get to your own answers by having you practice and use the tools of economic analysis.
Along the way to learning those tools we shall consider the economic causes and effects of
globalization, why nations ever trade with each other, how we decide which goods to trade, whether
society should compensate the individuals who lose when we open free trade, how we pay for foreign
goods, how foreign_made goods affect our unemployment and inflation rates, how the U.S. macroeconomy affects other economies, how foreign exchange rates and the balance of payments accounts are
determined, how the LDCs can make their economies grow and the standard of living rise, how trade and
aid can help in the development process, and whether international economic institutions like the
International Monetary Fund, the World Bank, and the World Trade Organization have worked to
mitigate international economic problems.
We shall increase our familiarity with globalization, absolute advantage, comparative advantage,
tariffs, quotas, protectionism, multinational corporations, the foreign exchange market, the balance of
payments accounts, international capital flows, economic development and cultural change, human
capital, the demographic transition, and briefly the IMF, the World Bank, the WTO, and other institutions
of the international economy.
Course objectives. I. The primary purpose of this course is to introduce you to the global economy.
II. A second purpose of the course is to further your preparation for a professional career or graduate
school through development of your analytical skills and peer discussion skills. This is not an easy
1
The SIS Academic Standards Committee has agreed to allow an SIS student who earned at least an A- average in
Econ 53 and 55 (Intro Micro and Macro) to substitute Econ 123 for this Econ 71 course. I recommend that
substitution only for those who have completed overseas study and do well on the diagnostic quiz.
2 To receive 4 units of credit for the course, it must be taken before the upper division courses in international trade
and international finance (ECON 121 & 123). If you have already taken 121 (Trade), you should be enrolled at this
hour in ECON 123 (Intl Finance, Prof King, TTh 10). If you have already taken 123 (Intl Finance), but want to
study the Trade and the Econ Devel parts of this course, you may do so for 2 units of independent study credit.
Discuss this with the instructor this week to agree on an independent study contract.
course for non-economics oriented people, but it will benefit you by forcing you to improve your
analytical skills and use of real world evidence more than most non-economics courses do.
The more specific learning objectives for you in this course include:
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considering the causes and effects of globalization.
understanding how the great majority of people in every nation gain from trade, even though
certain individuals may lose in the process of moving to free trade.
getting you to think seriously about the difficult issue of compensation for those who lose when
we move to free trade.
seeing how the U.S. macroeconomy is linked to the rest of the world and how other nations’
macroeconomic problems affect the well-being of every U.S. citizen.
forming an analytical framework for understanding the large problems of economic development
in an LDC.
getting you to think automatically in terms of efficiency vs. equity when analyzing public policy
proposals on economic issues.
improving your analytical skills through the rigor and precision of economic reasoning.
becoming a daily news reader, conversant with the myriad of current international economic
issues in the news and able to apply solid analysis to those stories on your own initiative.3
improving your skills in peer discussions of current issues.1
thinking about how to work productively on research in a small team of peers.1
practicing using the library and the internet to gather global economic data so that you have more
facts to help you form your analyses and opinions on global economic issues.
Photocopies of student work may be retained to assess how well the learning objectives of the
course are being met for the students as a whole.
Prerequisites: ECON 53 and 55 (Intro Micro and Macro) or permission of the instructor (Econ 51, or “A”
grade in 53 and taking 55 concurrently).
Class meets: TTh, 10 - 11:50, WPC 119.
Readings:
(1) Required: D. Keefe, Global Economic Issues. (Hereinafter, GEI.) This will be in two packets, to be
purchased at the UOP bookstore. Packet I will be available as soon as enrollment is stabilized; packet II
will be available in late February.
(2) Required: New York Times, available free on-line (www.nytimes.com) or through M-F student
subscription at bookstore information desk, costing approximately $30. You must follow all the
international economic news. The Wall St. Journal or The Economist magazine is an excellent substitute,
though it will require more explaining of the articles in Tuesday discussion than is needed for NY Times
articles which your peers will have read.
3
A few years ago, I listened to a dozen business and government leaders at UOP’s “National Panel for the
Development of SIS and Business.” When asked what they wanted from a new graduate of SIS or ESB, they said:
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competence in the area of study.
writing skills and speaking skills, at the level of being able to explain a problem and solution to someone
not familiar with the issue.
leadership skills on issues, by showing initiative in offering insights and suggestions on a new problem.
•leadership skills with other people (ie, interpersonal skills), well directed toward problem solving.
ECON 71, Keefe, S’06
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(3) Required: Annual Editions: Economics 05/06. (Hereinafter, AnnEd.)
(4) Recommended (on reserve): For a standard text on international economics, see Caves, Frankel, and
Jones, World Trade and Payments: An Introduction [on reserve]. (Hereinafter, Caves.)
Office hours: Monday, 2:30-3:30; Tuesday 1:45-3:45; Thursday 1:45-2:45.
WPC 240, 946_2257, dkeefe@uop.edu. Students are encouraged to drop by during office
hours to talk about anything. For a time other than office hours, please feel free to call or e-mail me.
Grades: The basis for your course grade will be:
Participation
Midterm I
Midterm II
Final Exam
25%
20
25
30
100%
This course is not graded on a curve. We shall abide by the UOP Catalog (p. 22) which says that an A is
for “outstanding work, highly meritorious in the course as a whole”; a B is for “very good work, but not
outstanding”; a C is for “satisfactory work”; a D is “barely passing, but counts toward graduation”;
and an F is failure. Past experience suggests that we probably shall end up with a grade distribution
within, or near to, these ranges: A: 15 - 30%; B: 20 - 50%; C: 20 - 35%; D/F: 0 - 12%.
For an average student to earn a B in this class, you should expect to spend 12 hours per week on this
course. That is the standard time expected by the Western Association of Schools and Colleges, the
accrediting body for all reputable universities in the western part of our country. That 12 hours normally
will consist of 4 hours of class time and 8 hours outside class -- completing text readings, daily news
reading, recommended exercises, conferring with peers, coming to office hours, etc. As an experiment,
try recording your actual hours spent on each of your courses for a few weeks. See which courses are
pushing you to work an appropriate number of hours.
Exercises in the main text. Each chapter of the main text has several exercises sprinkled throughout. If
you want to learn efficiently about global economic analysis, you are well advised to sketch out an answer
to every exercise. Some are trivial; some require library/internet research; some invite you to work
carefully through the analysis we are learning in the chapter; a few are advanced brain teasers for your
intellectual enjoyment (ie, not material for an exam). Most weeks you will be required to prepare notes
on at least one exercise to be discussed on Thursday. Your notes on the exercises will not be handed in
unless we find in lecture and discussion that people are not doing the exercises. Brief answers to selected
exercises will be posted on our Blackboard website.
Attendance and participation: The first 20 to 30 minutes of class on Tuesdays normally will be review of
material from your intro econ classes which will be helpful for understanding that week’s economic issue.
Attendance is probably not necessary if you earned an “A” in your intro courses. At 10:30 on Tuesday
we normally will start our lecture on material above the intro level, and attendance is expected of all
serious students. On Thursday the first hour of class normally will continue that lecture material above
the intro level.
The second hour of Tuesday and Thursday classes normally will be discussions of NY Times articles and
Annual Editions articles and GEI exercises and end-of-chapter questions. Attendance and active
participation in this second hour is required. Most of your participation grade in the course will be based
on these two discussion hours. Three unexcused cuts of this second hour will be allowed. After three
ECON 71, Keefe, S’06
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unexcused cuts, your participation grade will suffer significantly from further cuts of the discussion hour.
You do not need an excused absence to miss an occasional first hour on Tuesday or Thursday class, but
you will be giving up the chance to add a bit to your weekly participation grade. If you do miss a class,
you are responsible for obtaining from a fellow student that day’s materials and any assignments.
Please help others to learn even as you are learning from them. Your participation grade for the course
will be based on how much I think your participation helps the rest of the students throughout the course.
It is not the quantity of your questions and comments that matters, but rather it is the quality. How much
does your participation help the rest of the students?
Tuesday discussion hour, 11:00-11:50. Most Tuesdays we will devote 11:00-11:15 to discussion in small
groups of NY Times stories (or other reputable news source) on any international economic news from the
past week. You will prepare brief notes for yourself to help in your describing the story to your group,
what any issues are, how economic analysis can help us understand the issue, and finally what your
personal opinion is on the issue. These notes will be handed in only if the group does not appear to be
preparing well for the NY Times discussion. Appropriate would be any current story or column from the
NY Times (or other reputable news source) on globalization, the scientific method vs. other ways of
learning about the world, international trade, international finance, economic development, non-U.S.
population issues, international environmental issues, the problems of the transition to a market economy
in former planned economies, etc.
For 11:15-11:30, you will switch to discussion of required articles related to the issue of the week (from
the Annual Editions: Economics 05/06 -- on average two articles each Tuesday). Bring your rough
preparation notes on the NYT story and your critical reading notes on those AnnEd articles. The notes will
be handed in only if it becomes apparent that people are not doing good preparation. At 11:30-11:50, we
shall reconvene to discuss the AnnEd articles or the NY Times stories.
Thursday discussion hour, 11:00-11:50. Each Thursday we normally shall organize the class into two 50minute sessions. The first hour usually will be lecture on the week’s new analytical material. Attendance
will not be taken the first hour. The second hour is required. 11:00-11:25, in small groups you will go
over exercises for which you have prepared notes. The notes will be handed in only if it becomes
apparent that people are not doing good preparation. In your preparation, you are encouraged to work
together on the exercises, but your preparation notes must be yours alone. Copying someone else’s prep
notes would be considered a violation of the honor code. 11:25-11:50, we shall reconvene and all go over
one or two exercises or end-of-chapter review questions, and we shall consider questions on the week’s
material.
Quizzes. Other than the first Thursday, I hope we will not have to have any quizzes. If people need
quizzes because they are not doing good preparation, we shall have them at the start of the second hour.
Such quizzes will be unannounced and will count a little bit in your participation grade.
Exams. We shall have two midterms and a final exam. The final will be comprehensive. The exams
may have short answer questions, problems to be solved, and/or longer essays which allow the expressing
of some personal opinion after good analysis on an issue has been shown.
To reschedule an examination or to be excused from a Tuesday or Thursday discussion hour, you must
show written evidence from the campus medical clinic (or from a university office if you are on official
UOP business, off-campus that day).
ECON 71, Keefe, S’06
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Blackboard learning system for the course. You have been automatically enrolled in the new Blackboard
Enterprise edition of the on-line site for this course. Go to: http://blackboard.pacific.edu today to see if
it is working, and revisit the site regularly.
Learning or physical disabilities: If you need accommodations because of a certified learning or physical
disability, as soon as possible you must contact the Learning Disabilities Support Office or the Disabled
Student Services Office in Bannister Hall to obtain an Accommodations Request Form. Then please
schedule a meeting with me during office hours or some other mutually convenient time to arrange the
accommodation.
Other medical information. If you have emergency medical information about a chronic condition which
your professor should know about ahead of time, please make an appointment to see me ASAP or come
in during office hours this week.
Honor Code
You expect me to be intellectually honest and academically fair. I expect the same of you. Your
integrity and mine are more important than any grade. You can keep your integrity and self esteem only
by having the strength not to cheat __ here or anywhere else.
By attending UOP you have committed yourself to the University Honor Code, which is detailed on
pages 39-40 of Tiger Lore. Here is a summary:
To be academically honest, students are expected to:
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act honestly in all matters;
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actively encourage academic integrity;
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discourage any form of cheating or dishonesty by others;
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inform the instructor of a reasonable belief (with evidence) that cheating, plagiarism, or other
academically dishonest conduct has occurred.
Cheating and plagiarism are of course academically dishonest. Other forms of academic dishonesty are
explained in Tiger Lore. If you have any doubts about what is intellectually and academically honest
conduct, check out Tiger Lore, speak to me privately, and then bring up the question in discussion class
for everyone to think about. It will help us all.
If a student violates the Honor Code in the judgment of the instructor, a grade of zero may be given to the
assignment and the matter may be referred to the Director of Judicial Affairs in the Office of Student Life.
If found guilty by a hearing officer or the Judicial Review Board, the student may be penalized by failure
of the assignment or failure of the course and may also be reprimanded or suspended from the University.
See pp. 71-78 of Tiger Lore for details of judicial proceedings.
ECON 71, Keefe, S’06
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SCHEDULE OF READINGS, ECON 71, SPRING 2006
(Subject to change)
All exercises and review questions in GEI are recommended for the serious student. This schedule of
readings for the course will list only the difficult but essential exercises. Most weeks you will be required to
prepare notes on at least one exercise to be discussed on Thursday. Your notes on the exercises will not be
handed in unless we find in discussion that people are not doing the exercises. Brief answers to selected
exercises will be posted on our Blackboard website.
Dates:
Topic
Week 1
1/16-20/06
Required Reading before class
Overview of
the course.
For Thursday: This syllabus & Global Economic
for a quiz on both on Thursday.
Recommend all exercises; notes to be prepared for
Exercise 0.2 and for Review and Discussion
Questions at the end of Preface.
Nota bene, Monday, Jan 16, 2006, is Martin Luther King, Jr., holiday. No classes.
Week 2
Jan 23-27.
Globalization;
WTO; Seattle.
For Tues: GEI, Ch. 1, Sections A-D; NY Times prep notes; notes on
Annual Editions #56.
For Thurs: GEI, Ch 1, Sec E-F; prep notes on team Exercise 1.1 or
1.2, as assigned.
Recommended: Caves, Ch. 1.1 (on reserve).
Week 3
Jan 30-Feb 3.
Finish Globalization
Tues: GEI, Ch 1, Sec G and appendices; Prep notes on NY Times
and on AnnEd #46, 38, 44.
Th: For first hour, GEI Ch 1 Rev & Disc Qs. Second hour, prep
notes on Exer 1.3.
Rec: Caves, Ch. 14.6 (on res.).
N.b. Tues 1/31/06 is the ADD Date.
Week 4
Feb 6-10
Economics;
Scientific Method;
Absolute Advantage
Tu: Read GEI Ch 2. Prep notes on NY Times and on AnnEd #2, #17.
Th: Read GEI Ch 3, pp. 1-21. Prep notes on Exer 3.5 & 3.7.
Rec: Caves, Ch. 5.6, 5.1, 5.3, 2.0, 2.1 (on res.).
Week 5
Feb 13-17.
Gains from trade;
Comparative
Advantage.
Tu: Read GEI Ch 3, pp. 22-34. Essential Exer 3.9. Notes on
Exer 3.10, NY Times, and AnnEd #42
Th: GEI, Ch 4, pp 1-17. Ess exer 4.4. Prep notes on 4.5.
Rec: Caves, Ch. 5.2, 5.8, 3.1, 3.2. 3.4, 4.5, 12.1 (res.).
N.b. No classes Mon 2/20/06 for Presidents’ Day. Campus closed.
Week 6
Feb 20-24.
Finish Comp. Adv.;
Compensate losers?
Tu: Finish Ch 4, w/appendix recommended only. Ess Exer 4.7.
Notes on Exer 4.8, NYT, and AnnEd #43, 40.
Th: GEI, Ch 5, A - C. Ess exer 5.1, 5.2, 5.3. Notes on 5.4.
Rec: Caves, Ch. 2.4, Ch 5 app., 6.7 (on res.).
Week 7
Finish compensation issue;
Feb 27-Mar 3. Review for test.
Tues: GEI, Ch 5D-H. Ess Exer 5.7, 5.8. Notes on Review
Question #8 and on AnnEd #45, 48, 50. (No NYT this week.)
MIDTERM I, Thurs 3/2/06.
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ECON 71, Keefe, S’06
Week 8
Mar 6-10
Go over exam;
start Intl Finance
Intro Macro review.
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Tues: GEI, Ch 6, pp. 1-20 and App A if needed. Ess Exer
6.1, 6.4, 6.5. Notes on NYT and AnnEd #55, 24, 25, 26.
Thurs: Ch 6, pp 21-28 & 40. Notes on Exer 6.6, 6.7.
Rec: Caves, Ch. 15.0, 17.0, 17.1, 17.5, 17.6.
N.b. Fri 3/10/06 is the DROP Date.
Mar 13-17, 2006. SPRING BREAK. Enjoy.
Weeks 9-16. Assignments on foreign exchange rates, balance of payments, international macroeconomic
policies, and economic development to be announced.
Probable date of Midterm II: Thursday, April 13.
FINAL EXAM: Econ 71, Tuesday, May 16, 2006, 8:00 - 11:00 a.m. It will be comprehensive.
There will be no early final exam, so do not make any travel plans for before noon on May 16.