INTERNATIONAL
POLITICAL ECONOMY
(Course number GOVT 261, Spring 2015)
Class day & time: Tuesday & Thursday, 11am-12:15pm
Instructor: James Raymond Vreeland, Professor 2.0
WE ARE GLOBAL GEORGETOWN!
1
Who is this guy?
WEGG
2
Research
• Informs what I teach
• Keeps me on the cutting edge
• Signals to the world Georgetown faculty
strength
– Signal attracts great students (peers)
– Signals employers the university’s caliber
3
Striving for a global impact
• Places I have taught:
• Places I have had a research position:
• Places I have presented my research:
4
Cultural exchanges
• Co-authors
5
You
35
30
25
20
15
10
5
0
Freshmen Sophomores
Juniors
Seniors
Other
6
You
35
30
25
20
15
10
5
0
SFS
College
MSB
7
You
16
14
12
10
8
6
4
2
0
8
So much more to know…
• International students?
• International experiences?
• Personal stories
• Greatness in this room!
9
What are YOUR
responsibilities in this class?
Go to the syllabus!
www.profvreeland.com
http://www9.georgetown.edu/faculty/jrv24/GOVT_298.html
10
Pedagogy
• Substance
• Analytical tools
• Teaching to fish
11
Substance & Analytical Tools
• Graphs
• Indifference curves
• Statistical tables
12
Technology in the classroom
• Professor 2.0 – bring your laptops to class
• Syllabus: http://www9.georgetown.edu/faculty/jrv24/GOVT_298.html
• Google:
http://www.google.com/search?q=james+vreeland&rls=com.microsoft:en-us&ie=UTF-8&oe=UTF-8&startIndex=&startPage=1
• Google scholar:
–
http://scholar.google.com/scholar?q=james%20vreeland&rls=com.microsoft:en-us&oe=UTF-8&startIndex=&startPage=1&um=1&ie=UTF-8&sa=N&hl=en&tab=ws
• Wikipedia?
13
What is this class about?
14
I P E
nternational
olitical
conomy
15
I.P.E.
• International Political Economy
– Economics: distribution of scarce resources
– Politics: the role of the state in such distribution
– International: flows of such resources across borders
16
International Flows
• Goods & Services (trade)
• Finance
• People
• Pollutants
• Others?...
– Violence/terrorism?
17
What to expect
• WE ARE GEORGETOWN!
• You are Georgetown! I am Georgetown!
• What does it mean to you?
• Culture of Excellence
• Respect
– For other cultures, for each other
• High standards
– On time, attendance, do the reading, no cheating
• RANDOM SELECTOR – COLD CALLING
18
Requirements
• Exams
• What’s the point?
– Analytical tool time!
19
The generic problem of timeinconsistent preferences:
Individual’s preferences over time:
• Time 1: U(A)>U(B)
• Time 2: U(B)>U(A)
• Anticipating the change in preferences,
can the individual commit @ Time 1 to
choosing State A @ Time 2?
20
Classic Example:
Ulysses & the Sirens
21
Education:
• Principal=student.
• Delegates to agent=professor.
• Time 1: Beginning of the semester.
• Time 2: Any Thursday night.
• State A: State of knowledge.
• State B: State of…
– Tombs?
22
Exams
• Designed to help you to do your work
• Emphasizes a key point of the class:
The Importance of Incentives
• Exams will be straightforward
• E.g.,
– What is the purpose of the exam?
– Answer?
– To solve your “commitment problem”
– Or to solve your “time-inconsistent preference problem”
23
Grading
• Mid-term & (non-cumulative) Final – you decide the weight
(25% – 75%)
• Department website:
“Grades in the Department of Government reflect high
standards and university norms… the expectation is that no
more than 50 percent of grades will be A-minus or higher.”
• Standards of excellence
24
Substance…
25
So what, exactly, do we
want the state to do?
• The state versus the market…
• A stylized history of the debate…
• With a pugilist analogy
26
ROUND 1:
•
The market comes out strong with a powerful blow
to the body of the state:
•
Adam Smith’s work leading (eventually) to…
•
The fundamental theorems of welfare economics:
1. Competitive allocations are efficient
2. Any efficient allocation (distribution) can be reached
from an appropriate distribution of initial endowments
There is No role for the state to play in the
economy (except perhaps to redistribute initial
endowments)
27
ROUND 2:
•
But the state returns a powerful punch to
the market:
•
Some traditional market failures:
–
Monopolies (failure of perfect competition)
–
Public Goods (efficient price is 0, since these
goods are non-rivalrous)
–
Externalities (consumption by one individual
affects the utility of another individual)
As the bell rings to end this round, the state has
a big role to play in the economy
But wait… the market has a major blow in store for
the state…
28
ROUND 3:
•
The market returns with – what looks to be – a
knock-out blow to the jaw of the state. Stigler:
–
Why assume that the state will perform any better than
the market?
–
Private individuals are privately motivated
–
Why assume governments are public spirited??
–
Opens the possibility of “rent-seeking” behavior by
governments
–
Corruption
–
The “principal-agent” problem which we will address
soon!
•
For better or worse, we’re stuck with the market.
•
Keep the state out of the economy.
29
ROUND 4:
•
The state is cut & it’s bleeding, but it’s on its feet
and it’s on the move. Delivers a monumental blow
to the belly of the market.
•
Stiglitz questions the assumptions of the model
which undergirds “the market.”
–
–
MISSING MARKETS
•
Practical: Futures market. No risk-market for some
things (moral hazard)
•
Logic: trade-off between thinness and completeness
•
Normative: we don’t want some markets to exist
IMPERFECT INFORMATION
•
Utility functions are not “well-behaved”
30
The contest is a DRAW…
31
Bottom line
• There is no assumption that the market or the
state will be efficient
• No monolithic theory of “state” over “market”
or vice versa
• No religion, no ideology
• Study precise situations
– Analyze the trade-offs between
– Centralized mechanisms of allocation &
– Decentralized mechanisms of allocation
32
Questions, then conclusion
33
Take-aways
1.
I. P. E.
2.
Time inconsistent preference problem
– A.K.A. Commitment problem
3.
States vs. Markets
– Fundamental theorems of welfare economics
– Traditional market failures
– Rent-seeking governments
–
No ideology: No assumption that the market or the state will be efficient
4.
Centralized vs. Decentralized Mechanisms of Allocation
5.
WE ARE GEORGETOWN!
34
Take-aways
1.
I. P. E.
2.
Time inconsistent preference problem
– A.K.A. Commitment problem
3.
States vs. Markets
– Fundamental theorems of welfare economics
– Traditional market failures
– Rent-seeking governments
–
No ideology: No assumption that the market or the state will be efficient
4.
Centralized vs. Decentralized Mechanisms of Allocation
5.
WE ARE GEORGETOWN!
35
WE ARE GLOBAL GEORGETOWN!
Thank you
36