GCP 504: Microeconomics and Trade Policy
Revised: May 29, 2025
Meeting time/place: Tuesdays, 7:20 PM, VMH 481
Kenneth A. Reinert
Phone: 703-993-8212
Email: [email protected] (best way to get in touch with me)
Office: Van Metre Hall, Room 627
Office hours: Upon email request in person and via Blackboard Collaborate Ultra
Home page: reinert.gmu.edu
Course Description
This course provides an introduction to microeconomics and international trade. 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 appropriate 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
Reinert, K.A. (2021) Marshall’s Blackberries: A Short Introduction to Microeconomics. Free on Blackboard! Note: This textbook is a work in progress and will be updated periodically on Blackboard during the semester.
Reinert, K.A. (2021) An Introduction to International Economics: New Perspectives on the World Economy, Cambridge University Press. The most accessible and inexpensive textbook in international economics on the planet!
Course Requirements and Grading
Midterm exam- 30 percent
Cumulative final exam- 30 percent
Problem sets- 25 percent Note: Do not use generative AI on problem sets.
Class participation- 15 percent
Use of Generative AI
No generative AI tools have been used in the preparation of this course. Do not use generative AI on your problem sets. Along with the fact that generative AI gets things wrong, using it will limit your ability to absorb the material and will consequently negatively affect your preparation for the exams.
Week 1 (August 25-August 31): Introduction to Class
Read Marshall’s Blackberries, Chapter 1, “Marshall’s Blackberries.”
Read Introduction to International Economics, Chapter 1, updated. “Introduction.” (Power Point here)
Recommended:
K.A. Reinert (2017) “Globalisation(s) and Development,” Edward Elgar blog, March 22.
Week 2 (September 1-September 7): Tools of Analysis
Read Marshall’s Blackberries, Chapter 2, “Tools of Analysis.”
Begin Problem Set 1 on Canvas.
Week 3 (September 8-September 14): The Supply and Demand Model
Read Marshall’s Blackberries, Chapter 3, “The Supply and Demand Model.”
Begin Problem Set 2 on Canvas
Week 4 (September 15-September 21): Elasticities
Read Marshall’s Blackberries, Chapter 4, “Elasticities.” Feel free to skip appendix.
Problem Set 1 due.
Week 5 (September 22-September 28): Allocative Efficiency and Taxes
Read Marshall’s Blackberries, Chapter 5, “Allocative Efficiency and Taxes.”
Problem Set 2 due.
Recommended:
Marshall, A. (1893) “Consumer’s Surplus,” Annals of the American Academy of Political and Social Science, 3, 90-93.
Week 6 (September 29-October 5): The Theory of the Firm
Read Marshall’s Blackberries, Chapter 6, “The Costs of Production.”
Begin Problem Set 3 on Canvas.
Recommended:
Brue, S.L. (1993) “The Law of Diminishing Returns,” Journal of Economic Perspectives, 7:3, 185-192.
Week 7 (October 6-October 12): The Theory of the Firm Continued
Read Marshall’s Blackberries, Chapter 7, “Firm Supply.”
Continue Problem Set 3.
Recommended:
Hughes, P. (2006) “The Economics of Nonprofit Organizations,” Nonprofit Management and Leadership, 16:4, 429-450.
Kogut, B. and U. Zander (1996) “What Do Firms Do? Coordination, Identity, and Learning,” Organization Science, 7:5, 502-518.
Week 8 (October 13-October 19): Midterm Exam
See study guide link at top of page.
Problem Set 3 due.
Week 9 (October 20-October 26): Market Failure (Monopoly, Externalities, Public Goods)
Read Marshall’s Blackberries, Chapter 8, “Market Limitations.”
Begin Problem Set 4 on Canvas.
Recommended:
Bauman, Y. and S.-L. Hsu (2012) “The Most Sensible Tax of All,” New York Times, July 4.
The Economist (2017) “Externalities: Pigouvian Taxes,” August 19.
Mankiw, N.G. (2007) “One Answer to Global Warming: A New Tax,” New York Times, September 16.
Week 10 (October 27-November 2): International Trade: Absolute Advantage and Ricardian Model
Read Introduction to International Economics, Chapter 2, “Absolute Advantage” and Chapter 3, “Ricardian Model of Comparative Advantage.” (Power Points here)
Problem Set 4 is due. Begin Problem Set 5.
Week 11 (November 3-November 9): Election Day, No Class
Week 12 (November 10-November 16): International Trade: Heckscher-Ohlin Model and Intra-Industry Trade
Read Introduction to International Economics, Chapter 4, “Heckscher-Ohlin Model of Comparative Advantage” and Chapter 5, “Intra-Industry Trade.” (Power Points here)
Week 13 (November 17-November 23): Political Economy of Trade and Trade Policy
Read Introduction to International Economics, Chapter 6, “The Political Economy of Trade” and Chapter 7, “Trade Policy Analysis.” (Power Points here)
Problem Set 5 due. Begin Problem Set 6 on Canvas.
Recommended:
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.
The Economist (2017) “Politicians Cannot Bring Back Old-Fashioned Factory Jobs,” January 14.
Week 14 (November 24-November 30): Thanksgiving and Catch-Up Week!
Week 15 (December 1-December 7): The WTO and Preferential Trade Agreements
Read Introduction to International Economics, Chapter 8,”The World Trade Organization” (updated) and Chapter 9, “Preferential Trade Agreements.” (Power Points here)
Problem Set 6 is due.
Recommended:
The Economist (2008) “Regional Trade Agreements: A Second-Best Choice,” September 4.
Reinert, K.A. (2024) “Steel, Security and the WTO Dispute Settlement Mechanism: A Trade Catastrophe in the Making,” The World Economy, 47:6.
Week 16 (December 8-December 14): Reading Day
Week 17 (December 15-December 21): Cumulative Final Exam on December 16
See study guide link at top of page.
Other Useful Books
Baldwin, R. (2016) The Great Convergence: Information Technology and the New Globalization, Harvard Univesity Press. Just what the title says!
Evenett, S. (2017) Cloth for Wine? The Relevance of Ricardo’s Comparative Advantage in the 21st Century, Vox. A contemporary look at Ricardo’s principle of comparative advantage by some leading trade economists.
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.
Findlay, R. and K.H. O’Rourke (2007) Power and Plenty: Trade, War, and the World Economy in the second Millennium, Princeton University Press. An extraordinary history of world trade going back to ancient times.
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.
Useful Podcast
Some Policies
No use of generative AI on problem sets. Do you own work to help you prepare for the exams.
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.