The American College of History and Legal Studies
History of the American Economy and Government Regulation
Syllabus
Term:
Professor:
Email:
Summer 2014
David W. Fagerstrom
david.fagerstrom@achls.org
Cell Phone: 603 560-3058
Home Phone: 603 893-0825
Class Schedule: (all classes meet 6:00-to-10:20 p.m., including two 10 minute breaks)
Week 1
Pilgrims to
Revolution
Monday, June 30
Tuesday, July 1
Wednesday, July 2 – View & Discuss “Too Big
To Fail” – HBO Adaptation of the book.
Thursday, July 3 - No classes before 4th of July.
Week 2
Revolution
to 1920
Monday, July 7
Wednesday, July 9
Thursday, July 10
Week 3
WWI to
WWII
Week 4
Cold War
to Today
Week 5
Final Exam
Monday, July 14 – MID-TERM EXAM
Wednesday, July 16
Thursday, July 17
Monday, July 21
Wednesday, July 23
Thursday, July 24
Monday, July 28 - Study Day – No Class
Wednesday, July 30 - Study Day – No Class
Thursday, July 31 - FINAL EXAM
This seminar course concerns the history of the American economy and government regulation.
We study history chronologically and reflectively; this view helps us to determine whether
current crises indicate that the United States has failed to study our economic past. Students also
explore the history of governmental regulation of economic matters, focusing on fiscal policies,
monetary policies, regulatory agencies and Supreme Court rulings. To ensure students share a
common foundation of economic principles, the course includes some basic micro and macro
economic theories and the ideas of the leading thinkers whose views influenced economic
matters.
Like your prior courses at ACHLS, this seminar is rigorous and demands adherence to a heavy
reading schedule. You will complete each week’s readings prior to the first class of the week.
The readings consist of a traditional History of the American Economy text book, an Economics
text book (Version 1.07 is a custom one volume edition. Version 1.0 is in two volumes, one for
Micro Economics, the other for Macro Economics), and a scholarly and potentially contrarian
work on the role of capitalism in the American Economy. The PDF manuscript, A Financial and
Economic History of the American Automobile Industry provides an in-depth look at how
government regulation influenced the rise and fall of the American automobile industry from its
founding to today. Each week’s readings also include selected websites (including YouTube
videos) and instructor provided handouts.
This is a discussion class. ACHLS expects each student to respond to instructor questions
several times during each class. However, students may voluntarily join the discussion provided
we maintain civility, courtesy and decorum at all times. As we’ll discover, many issues in
economics are subject to debate with each side’s position dependent upon their point of view and
desired outcome. Part of my job is to initiate such discussions and moderate the student-tostudent debate.
Attendance is required for participation in the discussion and debate. Under ordinary
circumstances, more than two absences will result in a reduction in your participation and final
grade.
In general the objectives for this course are:
• Mastery of the course content by thorough preparation for each class and thoughtful
discussion of the issues explored.
• Demonstrating knowledge of both sides of economic debates by articulating either side of
an issue, regardless of your personal ideology.
• Develop critical thinking skills, especially as applied to economic matters, and
• Enhance your speaking and writing skills.
Reading List:
Text 1:
Gary M. Walton and Hugh Rockoff, History of the America Economy, 11th
Edition. ISBN 0-324-78661-3
Text 2:
Russell Cooper and Andrew John, Economics: Theory Through Applications, 1st
edition. Version 1.0: ISBN 978-1-4533-2224-6. See Reading List for Version
1.07 and ordering options.
Book 1:
Thomas Di Lorenzo, How Capitalism Saved America, © 2004,
ISBN 1-4000-8331-1
Web inputs:
The week-by-week syllabus directs students to text and/or video websites for
additional materials used in each week’s discussions.
Additional:
Instructor-provided PDF files of selected texts.
See the Reading List on the ACHLS website for further details surrounding editions, new versus
used, sources, etc.
Note: Weekly Assignments/Readings Subject to Change as Needed.
Assessment:
• Participation (12 class meetings)
• Mid-Term Exam
• Final Exam
30%
30%
40%
up to 2.5% per class
July 14, 2014
July 31, 2014
Week One
Readings:
• Text 1, Chapter 1, “Growth, Welfare and the American Economy” pp. 1-17
• Text 1, Part 1, “The Colonial Era: 1607 – 1776” pp. 22 – 107
•
•
•
•
•
•
•
•
•
•
•
Thomas J. DiLorenzo, How Capitalism Saved America, Introduction, Chapters 1, 2, 3,
and 4, Capitalism through the American Revolution, pp. 1-78.
Mankiw-Taylor, Europe, Middle East and Africa Economics, 2e, Chapter 1. Instructor
provided as a PDF file, pp. 2-18
http://www.youtube.com/watch?v=jbkSRLYSojo
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCAQF
jAA&url=http%3A%2F%2Fwww2.econ.iastate.edu%2Fclasses%2Fecon312%2Fvandew
etering%2Fdocuments%2Fmarshall.ppt&ei=A3PU9rxHoe_sQS404Bw&usg=AFQjCNEuiAVJZrt9mu7X_WDgZEKrweE2lA&bvm=bv.
68235269,d.cWc (especially slide 3 of the PowerPoint).
http://www.gatesfoundation.org/Pages/home.aspx
http://en.wikipedia.org/wiki/Product_Red
http://en.wikipedia.org/wiki/Muhammad_Yunus
https://www.youtube.com/watch?v=bx_LWm6_6tA
http://www.pbs.org/wgbh/pages/frontline/warning/view/
In Class Video Viewing: (HBO Documentary, Too Big to Fail)
Total Reading: about 350 pages plus web articles.
Topics:
− Incentives and self-interest, a.k.a.: greed.
! Who’s ox is getting gored?
− Adam Smith and the “Invisible Hand.”
− Supply and Demand
− Shifts in Supply and Demand?
− The role government plays in the economy, ca. 1492-to-1776
− The incentives for Europe to colonize the Americas
− Economic activities in and between the colonies
− Colonial import and export trade
− How economic issues drove the colonies into armed revolution
− Lord Alfred Marshall and the conflict of cool heads and warm hearts
− Contemporary U.S. economic regulation and results concerns
− Basics of micro and macro economics
How did economic incentives to colonize differ from colony-to-colony? Were all
colonization efforts economically driven? How did Adam Smith’s “Invisible Hand” play
out in the colonies in the 150 years before he wrote his seminal work, The Wealth of
Nations? Looking backwards from today, what do U.S. regulators wrestle with when
trying to resolve conflicts between “cool heads” and “warm hearts”? Which of those
conflicts have the greatest impact on you, personally? Which of those conflicts have the
greatest potential to “change life as we know it”?
The July 2nd class will focus on the Financial Crisis of 2007-2009. Students should
review the “…v=bx_LWm6_6tA” YouTube video and the Frontline video before class.
The class will also feature a showing of the instructor’s copy of the HBO film, “Too Big
to Fail” which highlights the beginning of the collapse of the American (and Global)
Financial system, and the Bush 43-era Toxic Asset Relief Program (TARP) laws, the
intent of the legislation, and the actual results. In class discussion will center around
issues such as why didn’t we see this coming, compare/contrast Obama Stimulus and
Bush TARP, and what might have happened had the TARP bill not been passed.
Week Two
Readings:
• Text 1, Part 2, “The Revolutionary, Early National, and Antebellum Eras: 1776-1860”
pp. 110 – 237
• Text 1, Part 3, “The Reunification Era: 1860-1920” pp. 242 – 377
•
•
•
•
•
Thomas DiLorenzo, How Capitalism Saved America, Chapters 7 and 8, the Robber
Barons and Antitrust, pp. 110-155.
Arthur M. Kenison, Economic History of the American Automobile Industry, Chapter 1,
pages 5-40
http://www.u-s-history.com/pages/h3002.html (The War of 1812)
http://www.youtube.com/watch?v=dmzZ8lCLhlk (Milton Friedman on “The Robber
Baron Myth.”)
Total Reading: 400 and web articles.
Topics:
•
•
•
•
•
•
•
•
•
•
•
Price Theory: How prices get established.
Elasticity: sometimes raising prices produces more revenue, sometimes it doesn’t.
GDP Growth, Business Cycles, Prices (Inflation) and Unemployment
The role government plays in the economy, ca. 1776-to-1920
The incentives for “The Second Revolution: The War of 1812”
A new nation expands
Transportation, import and export trade
Local beginnings of the industrial age.
Changes in the labor force.
Industrial captains of industry – villains or heroes? The rise of Antitrust Law.
Early attempts (and failures of National Banks)
•
•
The emergence of the Federal Reserve System.
Abolitionists versus plantation owners. An early case of warm hearts versus cool heads?
What were the economics of winning the revolution? Did independence bring about instant
peace and prosperity? How did incentives play a role in expansion of the new country – and
who’s ox was being gored? How did early industrialization change life in America? Did
both sides (labor and management) gain from the new relationships? Are there benefits from
economic growth, especially when measured by per capita GDP? Given a choice (a choice
regulators have to some degree), which do you prefer, rising inflation and low
unemployment, or low inflation with somewhat high unemployment? Why? What is in the
news looking backward from today where we might find guidance from the successes (or
failures) of the past?
Materials covered in weeks one and two will be the subject of a mid-term exam on Monday,
July 14, the first day of week 3.
Week Three
Readings:
• Text 1, Part 4, “War, Depression, and War Again: 1914-1946” pp. 380 – 482
•
•
•
•
•
•
•
•
•
Thomas DiLorenzo, How Capitalism Saved America, Chapters 5 and 6, Public Goods
versus Private Goods and Free Market wages, pp. 79-109.
Thomas DiLorenzo, How Capitalism Saved America, Chapters 9 and 10, Capitalists’
view on The Great Depression, pp. 156-205.
Arthur M. Kenison, Economic History of the American Automobile Industry, Chapters 2
and 3, pages 41-81
http://ingrimayne.com/econ/EconomicCatastrophe/GreatDepression.html
http://en.wikipedia.org/wiki/History_of_economic_thought
http://www.encyclopedia.chicagohistory.org/pages/804.html
http://www.flatworldknowledge.com/node/26164
Feenstra-Taylor, International Macro Economics, 2e, Chapter 11, part 4. Instructor
provided as a PDF file, The Global Financial Crisis of 2007-2009, pp. 1-23
Total Reading: 391 plus web articles.
Topics:
• Organization of the firm:
o Pure competition, monopoly, monopolistic competition, and oligopoly.
• Antitrust and government regulation:
o Who are the regulators or the money behind regulation?
• Post-war divergences of Northern and Southern economies.
• Agriculture: advancing westward but in need of Federal assistance
• The role of railroads in economic change and the need for government regulation
• The Industrial Revolution, incentives for concentration and the need for antitrust laws.
•
•
•
•
•
•
•
•
•
•
•
•
Labor, unions, strikes and disruptions.
One nation, one currency, but to what standards?
Bank panics and the rise of the Federal Reserve System
The U.S. in an imperialist world: foreign trade, protectionism and income tax
Keynesian versus Classical Economic thought:
o Policy choices: government intervention or Laissez Faire.
Tools in the government’s economic tool chest:
o Fiscal policy, monetary policy, international trade
Economic incentives for enemies to drag the U.S. into WWI
Economic incentives for enemies to drag the U.S. into WWII
From the jubilation of the 1920s to and through the Great Depression
The FDR New Deal
The role of World War II in extracting the U.S. from the Great Depression
Shifts in labor and agriculture during WW II.
What were the economic and monetary challenges in the postbellum era? Did western
agriculture and eastern industrialization unify or divide the country? What forces were at
work to economically hold the union together? How did incentives play a role in
industrialization and automation of agricultural processes – and who’s ox was being gored?
How did industrialization change life in America? Did both sides (labor and management)
gain from the new relationships? What led to the rise of unions? Given a choice (a choice
regulators have to some degree), which do you prefer, industry regulated by industry insiders,
industry regulated by political appointees with no knowledge of industry operation, or
minimal regulation if any? Why? What is in the news looking backward from today where
we might find guidance from the successes (or failures) of the past?
Week Four
Readings:
• Text 1, Part 5, “The Postwar Era: 1946 to the Present” pp. 486 – 572
•
•
•
Thomas DiLorenzo, How Capitalism Saved America, Chapters 11 and Conclusion,
Capitalists and the Energy Crisis & Choosing Sides, pp. 206-256.
Income & Wealth Distribution, Poverty and the Poverty Line PowerPoint
− To be Distributed by Professor Fagerstrom
Arthur M. Kenison, Economic History of the American Automobile Industry, Chapters 6,
pages 116-145 and Chapter 3, pages 165-180
• http://www.youtube.com/watch?v=e5VQsDStSVY&feature=relmfu
• http://www.youtube.com/watch?v=fIqyCpCPrvU&playnext=1&list=PL8967410B91E6A
3BE
• http://www.youtube.com/watch?v=VoxDyC7y7PM&feature=relmfu
Total Reading: 420.
•
Topics:
• Tools in the government’s economic tool chest:
o Net exports, exchange rates, international finance and environmental regulation
• Fading of the Keynesian era and the rise of the Monetarist era
• Shift from a manufacturing (goods) dominated economy to a service economy
• Immigration, outsourcing and off-shoring in a service dominated economy
• Reaganomics, trickle-down economics, the Laffer Curve and battles over taxation.
• Social economics of inflation, unemployment, inequality, poverty, discrimination and the
environment:
• Policy choices: cool heads or warm hearts.
• Energy crises
• The ebb and flow of political power in the post-World War II era.
• How the Federal Reserve System, Treasury and Congress determined limits for “Too Big
to Fail.”
• Nationalization of Fannie Mae and Freddie Mac
• Tightening of credit for all applicants, even after capital infusions into Financial Services.
• Financial Success (payback of loans, redemptions of Preferred Stock) of TARP
• Portugal, Ireland, Italy, Greece and Spain: countries too big to save or too big to fail?
• De-regulation of the financial services industry
• Community Reinvestment Act 1977 – outlawing “redlining” by lenders
• Administrative pressures to open “The American Dream” (home ownership) to more
citizens.
• Collapse of the housing bubble
• Global savings glut
• Federal Reserve lowered interest rates, 2001-2005
o Role of the 9/11/2001 attacks on monetary and fiscal policy
• The U.S. was not alone in the “Great Recession.”
• Beyond the reach of regulation: AIG
• Federal Reserve monetary policy restrictions and remaining tools:
o Money Supply and Quantitative Easing
• The “Great Recession” is not the only crisis we face:
• Continuous deficits, rising national debt, national debt ceiling
• Potential consequences of a U.S. “Sovereign Default” (failure to pay maturing bonds and
interest payments when due).
• Saving the U.S. auto industry through TARP
Why did Keynesian philosophies fail and give way to the monetarist era? Did the American
Recovery and Reconstruction Act (the Obama stimulus bill) provide economic stimulus, or
funds to those who supported the majority party? How has the shift to a service economy
changed American labor, income and wealth? Does America need to change distribution of
income? Which is the correct approach, make the wealthy poor or provide greater
opportunity for the poor to rise out of poverty? Are the current debates over immigration
driven by economics, culture, or social mores? What is in the news looking backward from
today where we might find guidance from the successes (or failures) of the past?
Is the “Great Recession” the worst economy we’ve experienced since The Great Depression?
How did the housing bubble burst? How did access to credit change 2007-present? Has
regulation of the credit card industry provided more, or less, credit to Americans? What
drove changes in consumer and business confidence? To what extent was Federal
Government spending (e.g., the “Stimulus Bill”) offset by reductions in state and local
spending as tax revenues fell? What is in the news looking backward from today where we
might find guidance from the successes (or failures) of the past?
How has the shift to a service economy changed American labor, income and wealth? Does
America need to change distribution of income? Which is the correct approach, make the
wealthy poor or provide greater opportunity for the poor to rise out of poverty? Are the
current debates over immigration driven by economics, culture, or social mores? What is
your personal downside to the “Great Recession”? Do party politics tend to push critical
decisions to the eleventh hour? Does the retail sector affect the Financial Sector and vice
versa? How will Congress (and the President) respond to the pending encroachment on the
National Debt Ceiling? How are the principle players likely to compromise on the conflicts
between “warm hearts” and “cool heads”? If exploration tax breaks for big energy disappear,
what are the likely consequences for the consumer in the short run and in the long run? If
reducing the deficit and lowering the National Debt requires raising taxes, which taxes
(levied against whom) and how much should they increase? What is in the news looking
backward from today where we might find guidance from the successes (or failures) of the
past?
Keynesians versus Classical Economists – who’s right? How does the American Recovery
and Reconstruction Act (the Obama stimulus bill) compare and contrast to FDR’s New Deal?
How did isolationism and high tariffs contributed to U.S. entry into the two World Wars?
How is our current “Great Recession” different from the Great Depression? What forces
mitigated the impact of current circumstances compared to the Great Depression? Did both
sides (labor and management) gain from the new relationships brought about by the changes
necessitated by WW II? What is in the news looking backward from today where we might
find guidance from the successes (or failures) of the past?
Week Five
Final Exam Week!
Final Exam Thursday, July 31, 2014