ITRN 504 Micro Trade

ITRN 504: Microeconomics and Trade Policy

Revised: May 3, 2020

Kenneth A. Reinert

Phone: 703-993-8212
Email: kreinert@gmu.edu
Office: Founders Hall, Room 627
Office hours: Tuesdays and Wednesdays 6-7 PM and by appointment
Home page: reinert.gmu.edu

Study Guide

Course Description

This course provides an introduction to microeconomics and international trade for the ICP student. In the first part of the course, our main objective is to understand the basic principles of the market system underlying local, national, and international economies. Here we will assess both the desirable properties and the limitations of the market system, as well as the potential roles of government. In the second part of the course, our main objective is to understand the forces behind international trade. Here we will assess the main causes of international trade, their effects, the analysis of trade policies, and the institutions of international trade.

Learning Outcomes

Knowledge and Understanding

Students will understand the basic concepts and terms of microeconomics as they apply to policy analysis.
Students will understand the causes of international trade and the political economy of trade.

Analytical Skills and Abilities

Students will be able to use the supply and demand model for policy analysis, including trade policy analysis, and to calculate elasticities.

Professional Development

Students will be conversant with the basic terms of economic trade policy analysis as used in the profession.

Required Books

Krugman, P. and R. Wells (2015) Microeconomics, 4th edition. Note that we are not using the new, 5th edition to save you some money. Available in GMU Arlington bookstore and also available in various e-book formats.

Reinert, K.A. (2012) An Introduction to International Economics: New Perspectives on the World Economy, Cambridge University Press. Available in GMU Arlington bookstore and also available in various e-book formats.

Course Requirements and Grading

Midterm exam- 30 percent
Cumulative final exam- 30 percent
Problem sets- 25 percent
Class participation- 15 percent

Course Outline and Readings

Week 1 (January 22): Introduction to Class

PowerPoint Presentation

Reinert, Chapter 1, “Windows on the World Economy.”

Recommended:

Update to Reinert, Chapter 1, “Introduction.”

The Economist, “The Oceans: A Sea of Troubles,” 3 January 2009.

The Economist, “The Real Wealth of Nations,” 23 June, 2012.

Week 2 (January 28): Tools of Analysis

Krugman and Wells, Chapter 1, “First Principles.”

Krugman and Wells, Chapter 2, “Economic Models: Tradeoffs and Trade,” including Appendix.

After this class, begin Problem Set 1 on Blackboard.

Recommended:

The Economist, “Business and Water: Running Dry,” 21 August, 2008.

Week 3 (February 4): The Supply and Demand Model

Krugman and Wells, Chapter 3, “Supply and Demand.”

Krugman and Wells, Chapter 5, “Price Controls and Quotas.”

The Economist, “Excellence in a Cup,” 27 January 2007.

Supply and Demand Handout

After this class, begin Problem Set 2 on Blackboard.

Recommended:

Lindblom, Chapter 3, “Market-System Coordination.”

The Economist (2016) “Following the Mugabe Model: Spot the Difference,” April 2.

Week 4 (February 11): Elasticities

Problem Set 1 due in class.

Krugman and Wells, Chapter 6, “Elasticity.”

Elasticities Handout

Week 5 (February 18): Allocative Efficiency and Taxes

Problem Set 2 due in class.

Krugman and Wells, Chapter 4, “Consumer and Producer Surplus.”

Krugman and Wells, Chapter 7, “Taxes.”

Recommended:

The Economist (2010) “Petrol Tax,” September 23.

Karplus, V.J. (2013) “The Case for A Higher Gasoline Tax,” New York Times, February 21.

Bauman, Y. and S.-L. Hsu (2012) “The Most Sensible Tax of All,” New York Times, July 4.

Lindblom, Chapter 12, “Too Little, Too Late.”

Week 6 (February 25): The Theory of the Firm 

Krugman and Wells, Chapter 9, “Making Decisions.”

Krugman and Wells, Chapter 11, “Behind the Supply Curve.”

After this class, begin Problem Set 3 on Blackboard.

Recommended:

The Economist (2013) “Singapore’s Economy: Bashing the Metal Bashers,”  May 4.

Week 7 (March 3): The Theory of the Firm Continued

Krugman and Wells, Chapter 12, “Perfect Competition and the Supply Curve.”

Recommended:

The Economist (2012) “Small Is Not Beautiful,” March 3.

The Economist (2012) “The Rise of State Capitalism,” January 21.

Week 8 (March 10): Spring Break, No Class

Week 9 (March 17): Spring Break Extended, No Class

Week 10 (March 24): Online Midterm Exam: To be posted on Blackboard at 12:00 noon, with your exam due at 10:00 PM via email, with scanned images. Under the circumstances, this will be an open-book, open-notes exam.

Problem Set 3 due via email as a scan (I can accept phone images).

See study guide link at top of page.

Week 11 (March 31): Market Failure (Monopoly, Externalities, Public Goods)

Lecture notes posted on Blackboard as “Limits of the Market System.”

Whiteboard recording posted on Blackboard on the monopoly model diagram.

A Problem Set #4 has been posted on Blackboard. It is due vie email on April 7.

Your assignment: Read carefully through the lecture notes on the limits of the market system. Watch the whiteboard recording on the monopoly model diagram. Post any questions on the discussion board for this week’s topic. Complete Problem Set #4 by April 7th and email it to me. I can accept phone images.

Krugman and Wells, Chapter 13, “Monopoly.”

Krugman and Wells, Chapter 17, “Externalities.”

Krugman and Wells, Chapter 18, “Public Goods and Common Resources.”

Recommended:

Das, P. and R. Horton (2017) “Pollution, Health and the Planet: Time for Decisive Action,” Lancet.

The Economist (2017) “Externalities: Pigouvian Taxes,” August 19.

Lindblom, Chapter 5, “Enterprise and Corporation.”

Week 12 (April 7): International Trade

Problem Set #4 is due via email. I can accept phone images.

PowerPoint Slides for Chapters 2, 3, and 4 have been posted on Blackboard.

Whiteboard recordings posted on Blackboard on the absolute advantage model diagram and the comparative advantage model diagram.

Problem Set #5 related to these chapters has been posted on Blackboard.

Your assignment: Read carefully through the chapters in the Reinert textbook and/or the PowerPoint slides. Watch the whiteboard recordings on the absolute advantage model diagram and comparative advantage model diagram. Post any questions to the discussion board on this week’s topic. Complete Problem Set #5 by April 14th and email it to me. I can accept phone images.

Reinert, Chapter 2, “Absolute Advantage.”

Reinert, Chapter 3, “Comparative Advantage.”

Reinert, Chapter 4, “Intra-Industry Trade.”

Recommended:

Update to Reinert, Chapter 4, “Intra-Industry Trade.”

Week 13 (April 14): Political Economy of Trade and Trade Policy

Problem Set #5 is due via email. I can accept phone images.

PowerPoint Slides for Chapters 5 and 6 have  been posted on Blackboard.

Problem Set #6 has been posted on Blackboard.

Your assignment: Read carefully through the chapters in the Reinert textbook and/or the PowerPoint slides. Watch the tariff diagram and quota diagram whiteboard recordings. Post any questions to the discussion board on this week’s topic. Complete Problem Set #6 by April 28th and email it to me. I can accept phone images.

Reinert, Chapter 5, “The Political Economy of Trade.”

Reinert, Chapter 6, “Trade Policy Analysis.”

González, A. (2020) “A Memo to Trade Ministers on How Trade Policy Can Help Fight COVID-19,” Trade Policy Watch, Peterson Institute for International Economics.

Recommended:

Update to Reinert, Chapter 6, “Trade Policy Analysis.”

The Economist (2017)  “Politicians Cannot Bring Back Old-Fashioned Factory Jobs,” January 14.

Francois, F. and L.M. Baughman (2018) “Policy Brief: Does Import Protection Save Jobs?” Trade Partnership.

Week 14 (April 21): The WTO and Preferential Trade Agreements

PowerPoint Slides for Chapters 7 and 8 have been posted on Blackboard.

New, revised Chapters 7 and 8 have also been posted on Blackboard. These contain more recent information than what is in the current textbook. Note the numbers of the new chapters are different from the current version of the textbook.

Your assignment: Read carefully through the chapters in the Reinert textbook and/or the PowerPoint slides. Continue working on Problem Set #6, due next week.

Reinert, Chapter 7, “The World Trade Organization.”

Reinert, Chapter 8, “Preferential Trade Agreements.”

Recommended:

The Economist (2008) “Regional Trade Agreements: A Second-Best Choice,” September 4.

Laïdi, Z. (2013) “Trade Deals Show Power Politics Is Back,” Financial Times, March 31.

Week 15 (April 28): International Production / Review of Semester

Problem Set #6 is due via email. I can accept phone images.

Please begin sending me questions you have for the whole semester for review. As best as I can, I will post answers on Blackboard in the form of whiteboard recordings. This will take place both this week and next.

Reinert, Chapter 9, “Foreign Market Entry and International Production.”

Reinert, Chapter 10, “Foreign Direct Investment and Intra-Firm Trade.”

Reinert, Chapter 11, “Managing International Production.”

Week 16 (May 5): Recovery Week and Continued Review

Please begin sending me questions you have from the whole semester for review. As best as I can, I will post answers on Blackboard in the form of whiteboard recordings.

Week 17 (May 12): Cumulative Final Exam, Online

Same general format as the midterm. To be posted on Blackboard at 12:00 noon, with your exam due at 10:00 PM via email, with scanned images. Under the circumstances, this will be an open-book, open-notes exam.

See study guide link at top of page. Note: The Mason pandemic closure has separated me from the Word version of the study guide. You will see that the material at the end of the study guide on “Foreign Direct Investment” has been highlighted in the pdf file. This will not be on the final exam.

Other Useful Books

Baldwin, R. (2016) The Great Convergence: Information Technology and the New Globalization, Harvard Univesity Press. Just what the title says!

Goldin, I. and K.A. Reinert (2012) Globalization for Development: Meeting New Challenges, Oxford University Press. A review of multiple dimensions of globalization and their relationships to development.

Hoekman, B.M. and M.M. Kostecki (2009) The Political Economy of the World Trading System, Oxford University Press, Oxford. A must-have introduction to the WTO for trade policy analysts.

Levinson, M. (2006) The Box, Princeton University Press. A business history of container shipping and its impacts on the world trading system.

Lindblom, C.E. (2001) The Market System, Yale University Press. A review of market systems from a noted political scientist.

Reinert, K.A. (ed.) (2017) Handbook of Globalisation and Development, Edward Elgar. A comprehensive collection of chapters on all aspects of globalization and their relationship to development.

Reinert, K.A. and R.S. Rajan (eds.) (2009) The Princeton Encyclopedia of the World Economy, Princeton University Press. A useful reference on all aspects of international economics. Available in the Arlington library and in electronic form through the library catalog.

Tirole, J. (2017) Economics for the Common Good, Princeton University Press. An insightful book on all aspects of microeconomics from a Nobel Laureate.

Walter, A. and G. Sen (2009) Analyzing the Global Political Economy, Princeton University Press. A very good introduction to the theory of global political economy.

Some Policies

No texting in class unless in an emergency.

Exams are not “open book” or “open notes.”

There is no “extra work” that can be done for “extra credit.”

Students are responsible for obtaining notes from other class members if they miss a class.

The GMU honor code will be enforced. To be more specific: If I can show that a student cheated on an exam, that student will fail the course.

It is my personal policy not to discriminate among students based on race, ethnicity, religious faith, national origin, gender, sexual orientation, physical ability, or citizenship status.

Academic Accommodation for a Disability

If you are a student with a disability and you need academic accommodations, please see me and contact the Disability Resource Center (DRC) at 703-993-2474.  All academic accommodations must be arranged through the DRC.