GCP 504: Microeconomics and Trade Policy
Revised: January 14, 2025
Meeting time/place: For the Spring 2025 semester, GCP 504 will be in online asynchronous mode.
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
Class participation- 15 percent
Week 0 (January 13-January 19): Course Preparation
Before the course begins, please introduce yourselves on the discussion board, saying a few words about your educational interests, professional activities, or anything else you think might be relevant. Also view the textbook folder.
Week 1 (January 20-January 26): Introduction to Class
Read Marshall’s Blackberries, Chapter 1, “Marshall’s Blackberries.”
Read Introduction to International Economics, Chapter 1, updated. “Introduction.” (Power Point here)
View the introduction to the course presentation.
Recommended:
K.A. Reinert (2017) “Globalisation(s) and Development,” Edward Elgar blog, March 22.
Week 2 (January 27-February 2): Tools of Analysis
Read Marshall’s Blackberries, Chapter 2, “Tools of Analysis.”
View the whiteboard recordings on: models and functions, linear and nonlinear graphs, resource constraints, totals, averages and marginals, and production possibilities frontiers.
Begin Problem Set 1 on Blackboard.
Week 3 (February 3-February 9): The Supply and Demand Model
Read Marshall’s Blackberries, Chapter 3, “The Supply and Demand Model.”
View the whiteboard recordings on: circular flow diagram, demand curve, supply curve, market equilibrium, and shifts of demand and supply curves.
Begin Problem Set 2 on Blackboard.
Week 4 (February 10-February 16): Elasticities
Read Marshall’s Blackberries, Chapter 4, “Elasticities.” Feel free to skip appendix.
View the whiteboard recordings on: why elasticities, price elasticity of demand and linear demand curves, income elasticity of demand, cross price elasticity of demand and stacked fractions in elasticity formulas.
Problem Set 1 due.
Week 5 (February 17-February 23): Allocative Efficiency and Taxes
Read Marshall’s Blackberries, Chapter 5, “Allocative Efficiency and Taxes.”
View the whiteboard recordings on: consumer and producer surplus, changes in consumer and producer surplus, allocative efficiency, per unit tax and elasticities 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 (February 24-March 2): The Theory of the Firm
Read Marshall’s Blackberries, Chapter 6, “The Costs of Production.”
View the whiteboard recordings on: marginal revenue, total product of labor, average and marginal products of labor, total costs, and AVC, ATC and MC curves.
Begin Problem Set 3 on Blackboard.
Recommended:
Brue, S.L. (1993) “The Law of Diminishing Returns,” Journal of Economic Perspectives, 7:3, 185-192.
Week 7 (March 3-March 9): The Theory of the Firm Continued
Read Marshall’s Blackberries, Chapter 7, “Firm Supply.”
View the whiteboard recordings on: profit maximization, profit maximization with AVC, ATC and MC curves, profits on operation, long run equilibrium, and monopolistic competition.
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 (March 10-March 16): Spring Break
Week 9 (March 17-March 23): Midterm Exam
See study guide link at top of page.
Problem Set 3 due.
Week 10 (March 24-March 30): Market Failure (Monopoly, Externalities, Public Goods)
Read Marshall’s Blackberries, Chapter 8, “Market Limitations.”
View the whiteboard recordings on: monopoly, natural monopoly, externalities, tradable pollution permits, and public goods.
Begin Problem Set 4.
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 11 (March 31-April 6): 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)
View the whiteboard recordings on: introduction to trade theory, absolute advantage model, and Ricardian comparative advantage model.
Problem Set 4 is due. Begin Problem Set 5.
Week 12 (April 7-April 13): 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)
View the whiteboard recordings on: Heckscher-Ohlin model, types of trade, and monopolistic competition model of intra-industry trade.
Week 13 (April 14-April 20): 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)
View the whiteboard recordings on: Stolper-Samuelson theorem, tariff diagram, and quota diagram.
Problem Set 5 due. Begin Problem Set 6.
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 (April 21-April 27): Catch-Up Week!
Week 15 (April 27-May 4): 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.
Laïdi, Z. (2013) “Trade Deals Show Power Politics Is Back,” Financial Times, March 31.
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 (May 5-May 11): Cumulative Final Exam
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 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.