Time Schedule:
Judith A Thornton
ECON 490
Seattle Campus
Study of resource allocation, growth, and income distribution in capitalist, market socialist, and centrally planned economies. Prerequisite: 2.0 in ECON 301.
Class description
This course investigates 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 process of institutional change, seeking to bring analytical tools to bear in understanding how institutional change impacts incentives and behavior. We consider the decision to create capital and the institutions that make such investment possible, asking: What do we mean by capital? How do different definitions of capital imply different definitions of 'investment'--in social capital, for example, or physical or human capital? Institutions, of course, are themselves a form of capital, yielding returns in the form of reduced transaction costs. In 'growth disasters' like sub-Saharan Africa, it is not just physical capital that is lacking, but all forms of capital (natural, institutional, social) are rapidly run down. As infrastructure degrades, growing poverty, shrinking life expectancies, shrinking rates of return on many forms of investment, and growing rates of time discount lead to an unraveling of society. The state plays an essential role in choosing economic policies and establishing a framework of de facto and de jure institutions. How do citizens express their demand for institutional change? How does the state provide accountable governance for economic activity? In socialist economies, the state played the role of owner of physical capital, land, and natural resources. In that society, central planers pursed the overriding goal of growth through capital formation, yet, in 1989-1991, the countries of Eastern Europe and the former Soviet Union abandoned communism and embarked on an attempt to create “normal” economic systems. Countries in transition from socialism to market systems have adopted varying packages of political and economic reforms. In Central and Eastern Europe, liberalization of markets, establishment of property rights and rule of law and introduction of democratic political institutions proceeded in parallel. In China and Viet Nam, rapid economic growth has been achieved under the direction of an authoritarian political system. What is the relationship between political and economic reform? Is democracy a necessary pre-condition of innovation and growth, or is it possible to create security of investment and incentives for innovation in the absence of political reform? Our methodology makes use of case studies drawn from contemporary societies. We apply formal economic models to analyze the sources of economic performance. In many cases, the evidence of problems—poverty, health crises, economic dislocation, inflation, crime, and corruption—suggest hypotheses about the determinants of good performance and the sources of poor performance.
Student learning goals
General method of instruction
One purpose of the course is a broad understanding of the relationship between social, political, and legal institutions and economic well being. A second purpose is the development of skill in applying economic theory to the understanding of real-world situations. We use the analysis of case studies to enhance your ability to think analytically, apply economic models, assess economic information, and practice the skills needed to undertake and understand empirical research. In this class, you will apply the tools of economics to the analysis of real world cases.
Recommended preparation
Class assignments and grading
Grades are based on two quizzes, an hour test, and a final exam. Each quiz includes a short essay, and brief problems. The weight distribution is: Hour test and essay: 30 percent Final exam and essay: 40 percent Quizzes (problem sets): 30 percent
