Judith A Thornton
Study of resource allocation, growth, and income distribution in capitalist, market socialist, and centrally planned economies. Prerequisite: 2.0 in ECON 301.
The goal of this course is to investigate how institutional arrangements impact the ability of the members of a society to better their lives and to achieve rising economic welfare. We look at the efficiency of economies, the process of growth, and the resulting welfare of their people, seeking to bring the tools of economic analysis to bear in understanding how institutional change impacts economic incentives and economic growth. Students will apply the tools of economics to the analysis of real world cases. Our tour of topics on institutions and growth is organized into three sections. Section 1 looks at the barriers to growth facing the people in the poorest countries of the world, called the “Bottom Billion.” Section 2 provides an in-depth case study of China, a country that has reaped the benefits of a transition from socialism to markets, enjoying unprecedented growth. Section 3 turns to the risks in a high-income economy. It looks at the roles of institutions and policies in the US response to the 2008 financial crisis. We analyze the impacts of economic policies on growth and welfare using micro-economic theory. Students whose use of price theory is weak can review the underlying theory in Jeffrey Perloff’s Microeconomics (any edition.) Applying microeconomics to real world cases, we ask how economic policies influence the economic behavior of individuals and firms, exploring how households and producers respond to changes in the opportunities and constraints that they face and how they interact in markets and in administrative systems. We use microeconomics as a problem-solving tool to ask questions and to set up and solve qualitative and quantitative problems. We apply economic theory in order to state refutable propositions and to predict the likely outcomes of changes in public policies.
Student learning goals
1. Applied Goals: The goal of the course is to survey the historical experience of a sample of developed and developing economies undergoing rapid economic change. We apply microeconomic principles and the theory of production to an understanding of the choices and constraints individuals face. Explore how economic institutions and policies impact economic growth, productivity, and welfare and how economic performance influences formation of institutions. Understand how individuals and firms make choices subject to market and administrative constraints. Understand how government policies affect the allocation of resources, productivity, and growth. Understand how prices in a market system inform the decisions about what to produce, how to produce it, and who gets it. Explore how administrative decision-makers make resource allocation decisions in the absence of market competition.
2. Problem-Solving Goals Apply microeconomics and production theory to an understanding of the role of institutions and policies in economic performance. Understand how economic arrangements influence the behavior of decision-makers, focusing on incentives, constraints, and sources of uncertainty. Understand how institutional constraints and incentives impact the economic environment faced by individuals. Use the theory of risk to understand how individuals respond to uncertain economic outcomes. Understand how market structure and regulatory policies influence the allocation of resources.
General method of instruction
Class time is divided between presentation of material, class discussion, and practice with problem sets.
Pre-requisies ECON 300 and 301
Class assignments and grading
Grades are based on three quizzes and one final essay, each of which receives 25% of the weight. The final essay consists of a paper of approximately 3-4 pages plus a 5-minutes presentation to the class presented during the last week of the quarter. For class presentations and essays, students will get together in groups of approximately 4 students to analyze a particular case of an institutional success or failure, usually based on examples in the readings. Random examples from our readings include micro-credit programs, Guinea-worm eradication, food-subsidies for school attendance, sources of corruption, smuggling, capital flight, Chinese agricultural collectives, the Great Leap Forward, the household responsibility system, town-and-village enterprises, a country’s social-safety-net programs, US mortgage lending, Fanny Mae and Freddy Mac, comparison of human development indicators. We will assume that your essays could be gathered together in a collection titled: “Case Studies in Governance and Misgovernance.”