Principles of Macroeconomics
Time:
M, W, F: 1:30pm - 2:20pm
Instructor:
Office Phone:
Email:
Daniel J. D'Amico
561-870-5941
danieljdamico@gmail.com
Office Hours:
This semester I am teaching Mondays, Wednesdays and Fridays. My
formal office hours will be from 9am – 11am on those days. But in
general I tend to be in my office, or on campus, throughout the week
with the exception of lunchtime, economics club meetings or
administrative meetings.
If you find me, and need to ask a question, feel free to grab me when
you can, but the best and most reliable means is to come to the office
during those morning hours and or schedule an explicit appointment
via the email above.
I hope that you come by to introduce yourself, ask questions about
class, discuss economics and current events, or just plain say hello.
My door is always open and I honestly enjoy the company and
conversation.
Course Prerequisites: Prerequisite course required ECON-B100
Catalog Description: This course is an introduction to alternative theories of inflation and
unemployment; economic growth; money, banking, and financial
intermediation; interest rates; business cycles; exchange rates, trade
balances, and the balance of payments; deficits and the national debt;
monetary, fiscal, exchange rate, incomes, and regulatory policies;
national income and product; and international payments accounting.
Course Goals and Objectives:
During the semester the student will develop a working knowledge of
macroeconomic models from several schools of thought (Classical,
Keynesian, Monetarist, Real Business Cycle, New Keynesian, etc).
Unlike most courses in economics where students learn a series of
tools and applications under a single heading, this course will cover
several contrasting schools of thought. Different approaches will
attempt to answer the same fundamental questions with different
answers, the key to this course will be for the student to identify
those differences and the schools of thought from which they
originate. I will present the material simultaneously through a school
of thought approach and a history of thought approach. The student
will be able to compare different schools of thought and different
events in history and answer questions concerning the macro1
economy by using the different models.
Books:
Buchanan, J. and Wagner, R. (2000). Democracy in Deficit: The Political Legacy of Lord Keynes.
Indianapolis: Liberty Fund.
Cantillon, R., (1755). An Essay on Economic Theory. Auburn: The Ludwig von Mises Institute
Cowen, T. (2010). The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern
History, Got Sick, and Will (Eventually) Feel Better. New York: Penguin.
Easterly, W. (2001). The Elusive Quest for Growth: Economists' Adventures and Misadventures in the
Tropics. Cambridge: The MIT Press.
Ebeling, R. (ed.) (1996). The Austrian Theory of the Trade Cycle and other Essays. Auburn: The
Ludwig von Mises Institute.
Friedman, M. and Shwartz, A. (1963). A Monetary History of the United States 1867-1960. New
York: Princeton University Press.
Froyen, R. (2005). Macroeconomics: Theories and Policies, Eighth Edition. New Jersey: Prentice
Hall.
Garrison, R. (2001). Time and Money: The Macroeconomics of Capital Structure. New York:
Routledge.
Horwitz, S. (2000). Microfoundations and Macroeconomics: An Austrian Perspective. New York:
Routledge.
Polanyi, M. (1958). Personal Knowledge: Towards a Post-Critical Philosophy. London: Routledge.
Rosenberg, N. and Birdzell, L. (1986). How the West Grew Rich: The Economic Transformation of
the Industrial World. New York: Basic Books.
Rothbard, M. (1995). Economic Thought Before Adam Smith: An Austrian Perspective on the History
of Economic Thought, Vol. I. Auburn: The Ludwig von Mises Institute.
Schelling, T. (1978). Micromotives and Macrobehavior. New York: W. W. Norton and Company
Selgin and White (1988). "The Evolution of a Free Banking System: The Theory of Free
Banking: Money Supply under Competitive Note Issue," Washington, DC: CATO
Institute.
Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nation. Indianapolis:
Liberty Fund.
Snowdon, B and Vane, H. (2005). Modern Macroeconomics: Its Origins, Development and Current
State. Cheltenham: Edward Elgar.
2
Tullock, G., Seldon, A., and Brady, G. (eds.) (2002). Government Failure: A Primer in Public
Choice. Washington, DC: The Cato Institute.
Yaeger, T. (1999). Institutions, Transition Economies, and Economic Development. Oxford: Westview
Press.
Additional Reading Materials:
Akerlof, G.(1970). "The Market for 'Lemons': Quality Uncertainty and the Market
Mechanism," The Quarterly Journal of Economics. 84(3): 488-500.
Buchanan, James (1983). “Monetary Research, Monetary Rules, and Monetary Regimes,”
Cato Journal. 3(1): 143-146.
David, P. (1985). "Clio and the Economics of QWERTY," American Economic Review. 332-7.
Gwartney, J., Lawson, R., and Hall, J. (2011). Economic Freedom of the World, 2011 Annual
Report. Vancouver: The Fraser Institute.
McCloskey, D. (1972) "The Enclosure of Open Fields: Preface to a Study of Its Impact on
the Efficiency of English Agriculture in the Eighteenth Century," Journal of Economic
History 32 (1): 15-35.
McCloskey, D. (1975). "The Persistence of English Common Fields," in E. L. Jones and
William Parker (eds.), European Peasants and Their Markets: Essays in Agrarian Economic
History (Princeton University Press: pp. 73-119.
Rajan, R. (2004). "The View From the IMF: Assume Anarchy?" The Globalist. November 24.
Stiglitz, J. (1999). "Towards a General Theory of Wage and Price Rigidities and Economic
Fluctuations," American Economic Review. 89(2): 75-80.
Williamson, C. (2009). "Informal Institutions Rule: Institutional Arrangements and
Economic Performance," Public Choice. 139(3): 371-87.
Students should not feel compelled to purchase all of the above books as almost all of them
will be made available for free download via PDF on blackboard.
Froyen is perhaps the most crucial for physical purchase as it is the only one that is not
available in PDF. The 8th edition is preferred, but later or earlier editions should suffice.
Simply ignore the page numbers and instead focus upon those section headings that
correspond to the titles listed on the reading schedule. A physical copy of the 8th edition will
be placed on reserve at the library.
The associated reading schedule outlines which portions of the above texts and other
supplemental reading assignments should be completed for each day's lecture. Students
should come to class with readings completed so as to be prepared to discuss the contents
therein and ask clarifying questions.
All material from readings and lectures are free game for examination material.
Writing Assignment:
3
There are 14 weeks where we will be covering original material during this semester. Each
student will be assigned to a group responsible for the following:
1) Helping to motivate class discussion during their assigned week.
2) Meeting with other members of their group, outside of class, to discuss the theories and
implications of the readings and material covered.
3) Writing a 5-page analysis of some current economic policy issue in contemporary society
drawing upon the material from the readings and lectures that week.
An easy way to think of this writing assignment is as follows: Each week focuses upon some
distinct economic school of thought through history. Each school subscribes to its own
model of how the economy works. Subsequently each perspective diagnoses the causes of
certain economic phenomena differently and in turn prescribes different public policy tools
for improving economic performance. How would iconic members of your group's
respective school of thought assess current economic events and policies? Or how would a
modern manifestation of those iconic thinkers respond? What theoretical challenges would
applying those conceptual frameworks from past historical periods face if applied today?
Would their recommendations work, why or why not?
Writing assignments are due the following Monday from the groups' assigned week. So if
you are in the group for week 1, your written assignment should be printed and turned in at
the beginning of class Monday January 16. So on and so forth.
Students should provide a reference sheet for their writing assignment, but are welcome to
use any citation style that they are most comfortable with. In other words, do what needs to
be done to assure that you are not plagiarizing. I am far more concerned with the content of
your analysis than the format of your presentation, though this is not to be abused. Papers
should be at least 5 pages, 12 pt. font, double-spaced, not including headers, footers, graphs,
tables, or bibliography.
In addition to drawing from the reading materials assigned from their respective week, to
find a contemporary policy issue or phenomena, students should reference some
contemporary source of economic commentary. Such sources can include but are not
necessarily limited to nationally syndicated periodicals such as The Economist, The Wall Street
Journal, The New York Times etc. Blogs are acceptable but should ideally be written by some
legitimate entity or intellectual authority. Marginal Revolution, Brad DeLong Dailey, etc. are
acceptable, some random guy, without a degree or formal institutional affiliation of any kind,
who happens to write a blog about the bailouts is not a good place to start.
Students are encouraged to make use of the WAC lab for grammar and style assistance. I am
willing to offer feedback to students so motivated as to turn their assignments in before the
Monday deadline. To receive such feedback and assure a high mark, students must turn in
their draft by the Wednesday of their respective week.
No two students in the same week should turn in an assessment of the same contemporary
issue. Hence requirement two listed above, states that the group is expected to meet and
4
discuss the issues that they are selecting. Face to face meetings are obviously not required as
sufficient coordination can be accomplished through email, but group meetings and personal
discussions are encouraged.
Examinations:
There will be one midterm examination and one cumulative final examination (scheduled by
the university). The midterm and final will each be worth 1/4 of your final grade (50% total).
That leaves 1/4 for the writing assignment and 1/4 for class participation and work effort.
Grading:
Grades will be awarded according to the following grading scale:
90 – 100 A
85 – 89 B+
80 – 84 B
75 – 79 C+
70 – 74 C
65 – 69 D+
60 – 64 D
0 – 59 F
Academic Integrity Statement:
The following passage is reprinted as it appears in the University Bulletin 2008 – 2009: All
academic work will be done by the student to whom it is assigned without unauthorized data
or help of any kind. A student who supplies another with such data or help is considered
deserving of the same sanctions as the recipient. Specifically, cheating, plagiarism, and
misrepresentation are prohibited. Plagiarism is defined by Alexander Lindley as “the false
assumption of authorship: the wrongful act of taking the product of another person’s mind,
and presenting it as one’s own” (Plagiarism and Originality). “Plagiarism may take the form
of repeating another’s sentences as your own, adopting a particularly apt phrase as your own,
paraphrasing someone else’s argument as your own, or even presenting someone else’s line
of thinking in the development of a thesis as though it were your own.” (MLA Handbook,
1985). A student who is found to have cheated on any examination may be given a failing
grade in the course. In case of a second violation, the student may be excluded for one or
two terms or dismissed from the university. A student who engages in cheating, plagiarism,
or misrepresentation on term papers, seminar papers, quizzes, laboratory reports, and such
may receive a sanction of a failing grade in the course. A second offense may be cause for
exclusion or dismissal from the university. Faculty members are required to report
immediately to the dean of the student’s college any case of cheating, plagiarism, or
misrepresentation which he or she has encountered and, later, the manner in which it was
resolved. The dean of the student’s college should apprise the student of the serious
consequences of cheating, plagiarism, and misrepresentation as well as of the appeals
procedure open to the student in such cases.
Disability Statement:
A student with a disability that qualifies for accommodations should contact Sarah Mead
Smith, Directory of Disability Services at 865-2990 (Academic Resources Center, Room 405,
Monroe Hall). A student wishing to receive test accommodations (e.g. extended test time)
5
should provide the instructor with an official Accommodation Form from Disability
Services in advance of the scheduled test date.
Course Schedule:
*Froyen page numbers refer to 8th edition
Week 1:
INTRODUCTION
Monday
Course Introduction and review of syllabus
Readings:
(1) Course Syllabus
(2) Schelling, T. (1978). Micromotives and
Macrobehavior. New York: W. W. Norton and Company.
Chapter 4: Sorting and Mixing Race and Sex: pp. 134-67
(3) Horwitz, S. (2000). Microfoundations and
Macroeconomics: An Austrian Perspective. New York:
Routledge.
Chapter 1: Is There an Austrian Macroeconomics? pp. 114.
Wednesday
Micro v. Macroeconomics
Readings:
(1) Froyen, R. (2005). Macroeconomics: Theories and
Policies, Eighth Edition. New Jersey: Prentice Hall.
Chapter 1: Introduction pp. 2-13.
(2) Froyen, Chapter 2: Measurement of Macroeconomic
Variables pp. 14-34.
Friday
The Stylized Facts of Macroeconomics
Readings:
(1) Rosenberg, N. and Birdzell, L. (1986). How the West
Grew Rich: The Economic Transformation of the
Industrial World. New York: Basic Books.
Week 2:
EARLIEST HISTORY OF ECONOMIC THOUGHT
Monday
History of thought meets economic history: A
competing schools of thought approach to studying
macroeconomics.
Readings:
(1) Snowdon, B and Vane, H. (2005). Modern
Macroeconomics: Its Origins, Development and Current
State. Cheltenham: Edward Elgar.
6
Chapter 1: Understanding modern macroeconomics. pp.
1-35.
Wednesday
Ancient Economics for an Ancient Economy
Readings:
(1) Rothbard, M. (1995). Economic Thought Before Adam
Smith: An Austrian Perspective on the History of
Economic Thought, Vol. I. Auburn: The Ludwig von
Mises Institute.
Chapter 1: The first philosopher-economists: the
Greeks. pp. 3-30.
Friday
The Feudal Economy
Readings:
(1) McCloskey, D. (1972) "The Enclosure of Open Fields:
Preface to a Study of Its Impact on the Efficiency of
English Agriculture in the Eighteenth Century," Journal
of Economic History 32 (1): 15-35.
(2) McCloskey, D. (1975). "The Persistence of English
Common Fields," in E. L. Jones and William Parker
(eds.), European Peasants and Their Markets: Essays in
Agrarian Economic History (Princeton University Press:
pp. 73-119.
Week 3:
MERCANTILISM
Monday
The structure of society in the Mercantilist era
Readings:
(1) Yaeger, T. (1999). Institutions, Transition
Economies, and Economic Development. Oxford:
Westview Press.
Chapter 2 Section 1: Dependency Theory. pp: 13-17.
Wednesday
The dawn of international trade
Readings:
(1) Rothbard, Chapter 7: Mercantilism: Serving the
absolute state. pp. 213-34.
(2) Rothbard, Chapter 8: French mercantilist thoughts
in the seventeenth century. pp. 235-54.
Friday
Mercantilist Public Policy
Readings:
(1) Rothbard, Chapter 9: The liberal reaction against
mercantilism in seventeenth century France. pp. 25576.
7
(2) Rothbard, Chapter 10: Mercantilism and freedom in
England from the Tudors to the Civil War. pp. 277-308.
(3) Rothbard, Chapter 11: Mercantilism and freedom in
England from the Civil War to 1750. pp. 309-44.
Week 4:
THE CLASSICAL SCHOOL
Monday
The Industrial Revolution
Readings:
(1) Smith, A. (1776). An Inquiry into the Nature and
Causes of the Wealth of Nation. Indianapolis: Liberty
Fund.
Book I: Of the Causes of Improvement. pp. 13- 267.
Wednesday
Market clearing prices and three equilibrated
markets
Readings:
(1) Froyen, Chapter 3: Equilibrium Output and
Employment. pp. 37-58.
(2) Froyen, Chapter 4: Money, Prices and Interest. pp.
59-77.
Friday
Laissez faire political economy and economic
growth
Readings:
(1) Froyen, Chapter 5: Long Run Economic Growth:
Origins of the Wealth of Nations. pp. 78-92.
(2) Snowdon and Vane, Chapter 2.1 -2.5: pp. 36-50.
Week 5:
THE KEYNESIAN REVOLUTION
Monday
The Circular Flow
Readings:
(1) Froyen, Chapter 6: The Keynesian System: The Role
of Aggregate Demand. pp. 93-121.
Wednesday
The IS-LM Model
Readings:
(1) Snowdon and Vane, Chapter 2.6-2.17: pp. 54-90.
Friday
Fiscal and Monetary Policy
Readings:
(1) Froyen, Chapter 7: Money, Interest, and Income. pp.
122-62.
8
(2) Froyen, Chapter 8: Policy Effects in the IS-LM Model.
pp. 163-86.
Week 6:
THE DECLINE OF KEYNESIANISM
Monday
Effective v. Ineffective Stimulus
Readings:
(1) Froyen, Chapter 9: The Keynesian System (IV):
Aggregate Supply and Demand. pp. 187-220 .
Wednesday
Stagflation and the 1970s
Readings:
(1) Snowden and Vane, Chapter 3: The Orthodox
Keynesian School. pp. 101-47.
(2) Froyen, Chapter 11: Output, Inflation, and
Unemployment: Alternative Views. pp. 242-60.
Friday
Reading Day, No Class
Week 7:
REIEW WEEK AND MIDTERM EXAMINATION
Monday
Review Day
Wednesday
Review Day
Friday
Midterm examination
Week 8:
THE MONETARY SCHOOL
Monday -
Friedman and empirical macroeconomics
Readings:
(1) Snowden and Vane, Interview with Milton
Friedman: pp. 198-218.
(2) Friedman, M. and Shwartz, A. (1963). A Monetary
History of the United States 1867-1960. New York:
Princeton University Press.
Wednesday
Monetary policy criticisms of Keynesianism
Readings:
(1) Snowdon and Vane, Chapter 4: The orthodox
monetarist school. pp. 163-97.
Friday
Stable Monetary Policy
Readings:
(1) Froyen, Chapter 10: The Monetarist
Counterrevolution. pp. 222-41.
9
(2) Froyen, Chapter 18: Monetary Policy. pp. 382-402.
Week 9:
THE NEW CLASSICAL SCHOOL
Monday
Historical context
Readings:
(1) Froyen, Chapter 12: New Classical Economics. pp.
261-80.
Wednesday
Rational Expectations
Readings:
(1) Snowdon and Vane, Chapter 5: The New Classical
School. pp. 219-71.
Friday
Washington Consensus and New Growth
Readings:
(1) Yeager, Chapter 2.2: Neoclassical Growth Theory:
pp. 17-22.
Week 10
NEW KEYNESIANSIANS AND REAL BUSINESS
CYCLE
Monday
New Keynesianism
Readings:
(1) Froyen, Chapter 13.2: New Keynesian Economics pp.
291-7.
(2) Snowdon and Vane, Chapter 7: The new Keynesian
school. pp. 357-432.
Wednesday
Market Failure Theory
Readings:
(1) Stiglitz, J. (1999). "Towards a General Theory of
Wage and Price Rigidities and Economic Fluctuations,"
American Economic Review. 89(2): 75-80.
(2) Akerlof, G.(1970). "The Market for 'Lemons':
Quality Uncertainty and the Market Mechanism," The
Quarterly Journal of Economics. 84(3): 488-500.
Friday
Real Business Cycle Theory
Readings:
(1) Froyen, Chapter 13.1: Real Business Cycle Models.
pp. 281-90.
(2) Snowdon and Vane, Chapter 6: The real business
cycle school. pp. 313-43.
(3) David, P. (1985). "Clio and the Economics of
QWERTY," American Economic Review. 332-7.
10
Week 11:
PUBLIC CHOICE
Monday
Behavioral Symmetry
Readings
(1) Tullock, G., Seldon, A., and Brady, G. (eds.) (2002).
Government Failure: A Primer in Public Choice.
Washington, DC: The Cato Institute.
Part I: The Theory of Public Choice: pp. 1-71.
Wednesday
Democratic Challenges to Keynesian Policy
Readings:
(1) Buchanan, J. and Wagner, R. (2000). Democracy in
Deficit: The Political Legacy of Lord Keynes.
Indianapolis: Liberty Fund.
Friday
Rules and Constraint
Readings:
(1) Buchanan, James (1983). “Monetary Research,
Monetary Rules, and Monetary Regimes,” Cato Journal.
3(1): 143-146.
SPRING BREAK
Week 12:
AUSTRIAN BUSINESS CYCLE
Wednesday
The Model
Readings:
(1) Ebeling, R. (ed.) (1996). The Austrian Theory of the
Trade Cycle and other Essays. Auburn: The Ludwig von
Mises Institute.
(2) Garrison, R. (2001). Time and Money: The
Macroeconomics of Capital Structure. New York:
Routledge.
Friday
Cantillon Effects
(1) Snowdon and Vane, Chapter 9: The Austrian School.
pp. 474-516.
(2) Cantillon, R.. (1755). An Essay on Economic Theory.
Auburn: The Ludwig von Mises Institute.
Week 13:
NEW INSTITUTIONAL ECONOMICS
Monday
Institutions Matter
Readings:
(1) Yeager, Chapter 4: Institutions and Economic
Growth: The Static Case. pp. 35-45.
11
(2) Yeager, Chapter 5: Institutions and Economic
Growth: The Dynamic Case. pp. 47-53.
Wednesday
Economic Freedom
Readings:
(1) Gwartney, J., Lawson, R., and Hall, J. (2011).
Economic Freedom of the World, 2011 Annual Report.
Vancouver: The Fraser Institute.
Friday
Formal v. Informal Institutions
Readings:
(1) Williamson, C. (2009). "Informal Institutions Rule:
Institutional Arrangements and Economic
Performance," Public Choice. 139(3): 371-87.
Week 14:
DEVELOPMENT ECONOMICS
Monday
Curing Poverty in a Global Market
Readings:
(1) Yeager, Chapter 9: Institutions and Economic
Development. pp. 113-26.
Wednesday
Exporting Plans for Development
Readings:
(1) Easterly, W. (2001). The Elusive Quest for Growth:
Economists' Adventures and Misadventures in the
Tropics. Cambridge: The MIT Press. pp. 141-292.
Friday
How to Grow Informal Institutions?
(1) Rajan, R. (2004). "The View From the IMF: Assume
Anarchy?" The Globalist. November 24.
(2) Polanyi, M. (1958). Personal Knowledge: Towards a
Post-Critical Philosophy. London: Routledge.
Part II The Tacit Component. pp. 70-260.
Week 15:
THE CURRENT FINANCIAL CRISES
Monday
Bubbles and Technological Progress
(1) Cowen, T. (2010). The Great Stagnation: How
America Ate All the Low-Hanging Fruit of Modern
History, Got Sick, and Will (Eventually) Feel Better. New
York: Penguin.
Wednesday
Free Banking and Reform
(1) Selgin and White (1988). "The Evolution of a Free
Banking System: The Theory of Free Banking: Money
12
Supply under Competitive Note Issue," Washington, DC:
CATO Institute.
Friday
Final Examination
13