IR 213: The Global Economy

Spring 2017

Lectures: T&Th 12:30-1:50, WPH B27

Professor: Benjamin Graham Office: VKC 357B

Office Hours: 3-4PM Friday, drop-in

2-3PM Thursdays, by appointment only. Book here.

E-mail: benjamin.a.graham@usc.edu

Web Site: http://dornsife.usc.edu/graham

TAs:

Victoria Chonn-Ching

Victoria’s Office: VKC B42H

Victoria’s Office Hours: Wednesday, 1-2 (walk-in); 2-3 (by appointment)

Victoria’s E-mail: chonnchi@usc.edu

Dat Nguyen

Dat’s Office: TBD

Dat’s Office Hours: TBD

Dat’s E-mail: TBD

Syllabus: Version March 28, 2017

****

This syllabus will be updated throughout the semester. New versions of the syllabus will

always be announced in lecture, and students are responsible for ensuring they have the

latest version. The most up to date version will always be on my website.

****

Course Description

This course provides an introduction to international economics for students of international relations. We address the core puzzle of why poor countries are poor and rich countries are rich, with a focus on international (as opposed to domestic) factors. We cover the economic fundamentals governing the international movement of goods, money, and people, but we also cover the political implications of those flows. We pay attention to the winners and losers created by these flows, and to the policies and institutions that regulate them. The economic nuts and bolts introduced in this course: comparative advantage, terms of trade, balance of payments, exchange rates, and so forth, are challenging, and the course is demanding. But if you want to save the world, or if you want to get rich, this is the right course to be in. Readings and Quizzes

The textbook for this course is International Economics by Robert Carbaugh (14th

Edition). We will also read several articles during the term, all of which will be provided

on the course website. (Note: Other editions of this book will suffice substantively, but

page numbers in the syllabus are given for 14th edition.

The required readings are short – usually 10-20 pages per class or 20 minutes of video or

audio – but all students are expected to complete the readings before the class for which

they are assigned. There will be a short reading quiz at the beginning of every class for

which readings are assigned. The quizzes are short and fairly easy – the intention is

simply to enforce the assigned reading.

All students have the opportunity to submit notes on the reading to the TA based on the

readings for a given class. If you submit notes of reasonable quality on the readings for

advance of class, you will automatically receive full credit for the quiz. Notes must be

received by your TA before class begins.

Papers

The course requires two very short papers, each limited to 750 words (about 3 double-

spaced pages). The papers will cover core political issues in the course: the first is on

trade, the second on foreign investment or migration. Despite their short length, my

quality expectations for these papers are very high, and we will have a paper-writing

workshop before the first paper is due.

Homework

There will be 2-3 homework assignments, which cover the core economic concepts in the

course. To learn them, you must work through them. These homework assignments will

be partially completed in section.

Exams

For both the midterm and the final, I will distribute a detailed study guide. All questions

on the exam will come word-for-word off the study guide. If you know the answers to

everything on the study guide, you will ace the exam. No tricks, no surprises. I

encourage students to form study groups and collaborate to develop good answers for

each question on the study guide.

Grading Grades for this course will be based on 1). Lecture & section participation (10%), 2).

Reading quizzes (10%), 3). Midterm exam (15%), 4). Two Papers (17.5% each), 5).

Homework assignments (10%), and 6). Final Exam (20%).

Clickers:

All students in this course are required to purchase a [TOPHAP CLICKER?] Students will use the clickers for two purposes: 1). To take reading quizzes and 2). to answer multiple-choice questions during lecture.

While they are convenient for the reading quizzes, the primary purpose of the clickers is to give students a chance to actively participate in the lecture and to check understanding as we proceed through the material. Clicker responses will be used to calculate participation grades for lecture. With the exception of the reading quizzes, I will not deduct points for wrong answers, but students must attempt to answer the questions to receive participation credit.

Course Webpage This syllabus and appropriate links are available on the course webpage at

http://dornsife.usc.edu/graham. The slides from lecture will be available on the website.

Reviewing the slides is not a substitute for attending lecture, and the slides will not

include all the information covered in lecture, or all the material that will be on the

exams.

Statement for Students with Disabilities

Any student requesting academic accommodations based on a disability is required to

register with Disability Services and Programs (DSP) each semester. A letter of

verification for approved accommodations can be obtained from DSP. Please be sure the

letter is delivered to me as early in the semester as possible. DSP is located in STU 301

and is open 8:30 a.m.–5:00 p.m., Tuesday through Friday. The phone number for DSP

is (213) 740-0776.

Statement on Academic Integrity

USC seeks to maintain an optimal learning environment. General principles of academic

honesty include the concept of respect for the intellectual property of others, the

expectation that individual work will be submitted unless otherwise allowed by an

instructor, and the obligations both to protect one’s own academic work from misuse by

others as well as to avoid using another’s work as one’s own. All students are expected to

understand and abide by these principles. Scampus, the Student Guidebook, contains the

Student Conduct Code in Section 11.00, while the recommended sanctions are located in

Appendix A: http://www.usc.edu/dept/publications/SCAMPUS/gov/. Students will be

referred to the Office of Student Judicial Affairs and Community Standards for further

review, should there be any suspicion of academic dishonesty. The Review process can

be found at: http://www.usc.edu/student-affairs/SJACS/.

Course Schedule NUTS AND BOLTS Tuesday, January 10

Lecture 1: Introductory Lecture Optional Viewing: “How Ideas Trump Crises” http://www.ted.com/talks/alex_tabarrok_foresees_economic_growth?language=en#t-478723

Optional Reading:

1. “Is the Era of Great Famines Over?” www.nytimes.com/2016/05/09/opinion/is-the-era-of-great-famines-over.html

2. “In 1990, more than 60% of people in East Asia were in extreme poverty. Now only 3.5% are.” https://www.evernote.com/l/AUsEDMBb-FFF2oZKmP2ZmBcg_2_9V4FsJaU

Thursday, January 12

Lecture 2: Fundamentals: Supply, Demand, Complements, Substitutes Required Reading (actually viewing), watch videos from the Principles of Economics: Microeconomics series by Marginal Revolution University:

1. “The Demand Curve” 2. “The Supply Curve”, 3. “The Equilibrium Price” 4. “A Deeper Look at the Demand Curve” 5. “The Demand Curve Shifts” (super important, this is hard for many

folks) 6. “A Deeper Look at the Supply Curve” 7. “The Supply Curve Shifts” (first 4:35 mandatory, the rest

recommended) The videos are on youtube. https://www.youtube.com/playlist?list=PL-uRhZ_p-BM4XnKSe3BJa23-XKJs_k4KY If you prefer a written source, see the links below or any standard economics textbook: http://www.investopedia.com/university/economics/economics3.asp http://www.policonomics.com/supply-and-demand/

TRADE Part I: How Trade Makes Wealth Tuesday, January 17 Lecture 3: Comparative vs. Absolute Advantage

Required Reading: Carbaugh, Chapter 2, pp. 29-40, 52-55.

Required Viewing: “Comparative Advantage and the Tragedy of Tasmania” http://mruniversity.com/courses/everyday-economics/comparative-advantage-and-tragedy-tasmania Optional Viewing: https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial/gains-from-trade-tutorial

Thursday, January 19 Lecture 4: The Terms of Trade: Winners and Losers Between Countries

Required Reading: 1. Carbaugh, pp. 40-44 2. Irwin, Douglas (2009 (3rd Edition)) Ch6 Developing Countries and Open Market in Free Trade under Fire. Only pp. 178-193 required. 3. Required Viewing & Reading (Chapters 1-4, View and Watch): Planet Money Makes a T-Shirt http://apps.npr.org/tshirt/#/title

Optional Reading: 1. “Learning the Lessons of Stagnation” (This is a 2015 Economist article on Latin America) http://www.economist.com/news/americas/21656201-memories-galloping-growth-fade-it-time-tough-thinking-about-future-learning 2. Wise & Tuynman (2015) NAFTA 20: A Bittersweet Celebration http://www.americasquarterly.org/content/nafta20-bittersweet-celebration

Tuesday, January 24th

***Homework 1 Due*** Careers lecture & exercise

Thursday, January 26th Class cancelled Tuesday, January 31

Lecture 5: Sources of Comparative Advantage: Winners and Losers Within Countries Required Reading: Carbaugh, pp. 65-82

Required Skimming: Carbaugh, pp, 82-103 An Application of Comparative Advantage (Recommended Skimming): “The Allocation of Talent and U.S. Economic Growth.” http://faculty.chicagobooth.edu/erik.hurst/research/HHJK.pdf?utm_content=buffer6ae7c&utm_source=buffer&utm_medium=twitter&utm_campaign=Buffer

Thursday, Feb 2 Lecture 6: The Law of One Price and Barriers to Trade

1. Required Listening: Freakonomics podcast: “Did China Eat America’s Jobs?” http://freakonomics.com/podcast/china-eat-americas-jobs/

2. Required Reading: “Why Voters Don’t Buy it When Economists Say Free Trade is Good.” http://www.nytimes.com/2016/07/31/upshot/why-voters-dont-buy-it-when-economists-say-global-trade-is-good.html?_r=0

3. Optional Viewing: Explore this data visualization: http://globe.cid.harvard.edu/?mode=gridSphere&id=null

4. Optional Reading: Carbaugh Chapters 4 & 5 NOTE: THESE CHAPTERS REALLY HELP WITH THE HOMEWORK AND THE MIDTERM

Part II: The Politics of Trade Tuesday, Feb 7

Lecture 7: Domestic Politics of Trade: Concentrated vs. Diffuse interests, lobbying, etc

Required reading: 1. Carbaugh, pp. 209-215 2. Planet Money: The Lollipop War http://www.npr.org/sections/money/2013/04/26/179295426/episode-454-the-lollipop-war 3. “France moves to placate farmers with more aid” http://www.wsj.com/articles/france-moves-to-placate-farmers-with-aid-1437578010 Optional reading: 1. “Why are Unions so Focused on Fighting Trade Deals”

http://blogs.wsj.com/washwire/2015/03/20/why-are-unions-so-focused-on-fighting-trade-deals/

2. Irwin, Douglas (2009 (3rd Edition)) Ch6 Developing Countries and Open Market in Free Trade under Fire. pp. 200-204

Thursday, February 9

Lecture 8: International Politics of Trade: A Little History Required Reading: Carbaugh, 179-193

Recommended Viewing: This is a UC Riverside lecture that covers material I don’t, and in a pretty engaging way. A Brief History of International Trade, by Ryan Petersen http://www.youtube.com/watch?v=mwEB85eX4R4&playnext=1&list=PL81`931CF32FB0D9AE&feature=results_video

Tuesday, February 14 *****Homework 2 Due*****

Lecture 9: International Politics of Trade: Current Debates Required Reading: “This Was the Trans-Pacific Partnership” http://www.nytimes.com/interactive/2016/business/tpp-explained-what-is-trans-pacific-partnership.html?_r=0 Required Listening: Planet Money: “Retraining Day” http://www.npr.org/sections/money/2017/01/27/512060753/episode-750-retraining-day

Optional Reading: 1. Carbaugh, pp. 193-209 1. Labor Standards & Trade Agreements Irwin, Chapter 6, pp. 204-218. (First half of the chapter assigned previously).

2. 'Reshoring' Trend Has Little Impact On U.S. Economy, Study Finds http://www.npr.org/2014/12/16/371059896/reshoring-trend-has-little-impact-on-u-s-economy-study-finds

Thursday, February 16

Lecture 10: Trade and Development Required Reading: 1. Carbaugh, pp. 223-240 2. Re-skim the first half of Chapter 6 from Irwin. Optional Reading (Fair Trade Movement): 1. Economist (2014) Good thing, or bad? http://www.economist.com/news/business-books-quarterly/21606248-easing-consciences-good-thing-or-bad 2. NPR (2013) Coffee For A Cause: What Do Those Feel-Good Labels Deliver? http://www.npr.org/sections/thesalt/2013/04/24/177757797/coffee-for-a-cause-what-do-those-feel-good-labels-deliver 3. Freakonomics (2010) Fair Trade and the Food Movement http://freakonomics.com/2010/06/30/fair-trade-and-the-food-movement/

Tuesday, February 21 *****Midterm Exam****** Thursday, February 23

Lecture 12: Foreign Investment (I) Required Reading: 1. Friedman, Excerpt from The Lexus and the Olive Tree,

http://sdarcy.edublogs.org/files/2011/03/goldenstraightjacket-pu084c.pdf

2. Why Foreign Direct Investment Still Polarizes India

http://www.washingtonpost.com/blogs/monkey-cage/wp/2014/09/30/why-foreign-investment-still-polarizes-india/

Tuesday, February 28

Lecture 13: Foreign Investment II Required Reading: Pandya, Sonal. 2016. “Political Economy of Foreign Direct Investment: Globalized Production in the Twenty-First Century.” Annual Review of Political Science. http://www.annualreviews.org/doi/pdf/10.1146/annurev-polisci-051214-101237 Optional Reading:

1. The Economist, “Istanbuls and Bears” http://www.economist.com/node/21552216 2. Quantitative Easing and Capital Flows to Emerging Markets http://econbrowser.com/archives/2014/01/guest_contribut_41

3. Moran, Theodore. “Toward Best Outcomes From Foreign Direct

Investment in Poorly Performing States” http://www.cgdev.org/doc/shortofthegoal/chap11.pdf

For Later Reference: Chapter 9, Carbaugh

Thursday, March 2 Lecture 15: Paper Writing Workshop Due in Class: A one-sentence thesis statement for your paper, and a

bibliography with at least three sources. Tuesday, March 7

Lecture 14: What is money? Also, interest rates and exchange rates Required Reading (many articles, but all very short):

1. Carbaugh, p. 386 “How to Play the Falling (Rising) Dollar” 2. “What a Stronger Dollar Means for the Economy”: http://www.nytimes.com/2015/01/06/upshot/what-a-stronger-dollar-means-for-the-economy.html?abt=0002&abg=1 3. NYTimes: Clashes and Protest in Iran As Currency Plunges http://www.nytimes.com/2012/10/04/world/middleeast/clashes-reported-in-tehran-as-riot-police-target-money-changers.html?_r=1&hp 4. The Wikipedia page on Gresham's law: http://en.wikipedia.org/wiki/Gresham%27s_law You don't need to read the whole entry -- just figure out what the law is, so you can understand the blog post in #5. 5. "Gresham's Law Takes Iran": http://ftalphaville.ft.com/2012/10/03/1190441/greshams-law-takes-iran/

Thursday, March 9 ******Paper 1 Due****** Tuesday, March 21 Lecture 16: Balance of Payments Required Reading:

1. Carbaugh Chapter 10 2. NYTimes: As the U.S. Borrows, Who Lends? http://www.nytimes.com/2012/09/22/business/economy/as-the-us-borrows-who-lends.html?src=recg

Optional Readings: 1. Economist (2014) Tourism and the trade balance: A number of great import http://www.economist.com/news/china/21596568-china-has-worlds-biggest-trade-deficitin-services-number-great-import

Thursday, March 23 Lecture 17: The IMF

Required Reading: 1. Read the introduction and section 5.1 of the Wikipedia article on the IMF. Skim the rest of the article. 2. Kenneth Rogoff, “The IMF Strikes Back”, http://www.imf.org/external/np/vc/2003/021003.htm Required Viewing Watch the three videos at the link (one each on surveillance, technical assistance, and lending) http://www.imf.org/external/about/ourwork.htm

Optional Reading (short): Frankel, “Critiques of the IMF” http://www.hks.harvard.edu/fs/jfrankel/Critiques_of_the_IMF.pdf

Optional Reading (short): Jerven: “What does Nigeria’s new GDP number actually mean?” http://africanarguments.org/2014/04/08/what-does-nigerias-new-gdp-number-actually-mean-by-morten-jerven/

Tuesday, March 28

Lecture 18: Financial Crises: The Asian Financial Crisis, The Global Financial Crisis, and the Future of the Eurozone Required Reading:

“A Good Look at the Thai Financial Crisis in 1997-1998” http://www.columbia.edu/cu/thai/html/financial97_98.html

Required Listening: This American Life, episode #455, “Continental Breakup.”

There is also a transcript you can download if you prefer.

http://www.thisamericanlife.org/radio-archives/episode/455/continental-breakup

Optional Reading:

1. Economist (2015) Greece signs up to a painful, humiliating agreement with

Europe

http://www.economist.com/news/europe/21657627-agreeing-long-resisted-

reforms-just-start-greece-greece-signs-painful-humiliating

2. A Set of Economist summaries on the Greek Crisis.

http://www.economist.com/greekcrisis

4. Gordon and Wright (2015) No Exit Why Greece and Europe Will Still Stay Attached https://www.foreignaffairs.com/articles/greece/2015-06-30/no-exit

5. The Giant Pool of Money – A good, if dated, This American Life episode explaining the U.S. housing bubble that burst in 2008. https://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money

Thursday, March 30

Lecture 19: Development Strategies Required Reading: Carbaugh, pp. 255-258 (247-250) Also: Start reading for Thursday (Thursday readings are longer than usual, but important)

Tuesday, April 4

Lecture 20: Foreign Aid Required Readings: 1. Sachs, “The Development Challenge” in Foreign Affairs http://heinonline.org/HOL/Page?handle=hein.journals/fora84&div=33&g_sent=1&collection=journals 2. Easterly, “How to Assess the Need for Aid? The Answer: Don’t Ask” http://www.ffem.fr/jahia/webdav/site/afd/shared/PUBLICATIONS/RECHERCHE/Archives/Notes-et-documents/29-notes-documents-VA.pdf#page=37 3. Dambisa Moyo, “Why Foreign Aid is Hurting Africa” http://online.wsj.com/article/SB123758895999200083.html#articleTabs%3Darticle Optional Reading: Biggs, Ryan. “Does Foreign Aid Target the Poorest?” International Organization. 2016. https://doi.org/10.1017/S0020818316000345

Thursday, April 6

Lecture 21: Foreign Aid II Required Reading: 1. Charles Kenny, “Get an MBA, Save the World,” http://foreignpolicy.com/2012/04/23/get-an-mba-save-the-world/ 2. Sean Parker “Philanthropy for Hackers”

http://www.wsj.com/articles/sean-parker-philanthropy-for-hackers-1435345787

5. “Jimmy Carter May Soon Get His 90th Birthday Wish: No More Guinea Worm” http://www.npr.org/2016/06/06/480973123/jimmy-carter-may-soon-get-his-90th-birthday-wish-no-more-guinea-worm

6. A short blog post on biometric smart cards in India. “http://marginalrevolution.com/marginalrevolution/2016/10/indias-biometric-smartcards-good-sentence.html”

Optional Reading: 1. The Problem with International Development and How to Fix It

http://www.newrepublic.com/article/120178/problem-international-development-and-plan-fix-it

Tuesday, April 11

Lecture 22: The World Bank Required Reading: 1. “The World Bank Group,” Council on Foreign Relations Backgrounder (all sections). http://www.cfr.org/world-bank/world-bank-group/p27990 2. U.S. Opposing China’s Answer to World Bank

http://www.nytimes.com/2014/10/10/world/asia/chinas-plan-for-regional-development-bank-runs-into-us-opposition.html

3. “Uruguay: The little country that changed tobacco laws.” http://www.csmonitor.com/World/Global-News/2016/0709/Uruguay-The-little-country-that-changed-tobacco-laws

Thursday, April 13 Lecture 23: Migration and Development: Winners and Losers From Immigration Required Reading: 1. Vox article on open borders. http://www.vox.com/2014/9/13/6135905/open-borders-bryan-caplan-interview-gdp-double 2. Carbaugh, pp. 317-323 3. Required Viewing: Is There a Brain Drain? http://mruniversity.com/courses/development-economics/there-brain-drain 4. “Illegal Immigrants Don't Lower Our Wages Or Take Our Jobs” http://www.forbes.com/sites/artcarden/2015/08/28/how-do-illegal-immigrants-affect-american-workers-the-answer-might-surprise-you/#5818a53a6b10 5. “Yes, Immigration Hurts American Workers” http://www.politico.com/magazine/story/2016/09/trump-clinton-immigration-economy-unemployment-jobs-214216 Optional Reading:

1. “Understanding the Economic Impact of the H-1B Program on the U.S” NBER Working paper.

http://www.nber.org/papers/w23153#fromrss 2. Michael Clemens, “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?” 2. http://www.nytimes.com/2013/05/13/us/san-diego-mayor-building-economic-bridges-to-tijuana.html?hp&_r=0 3. CGD blog post http://blogs.cgdev.org/globaldevelopment/2012/01/two-years-after-haiti%E2%80%99s-catastrophe-it%E2%80%99s-time-to-complement-aid-with-the-most-cost-effective-assistance-migration.php

Tuesday, April 18 Lecture 24: Migration and Development II Required Reading:

1. Accepting Migrants but Not Offering Rights: http://www.newrepublic.com/article/120179/how-reduce-global-income-inequality-open-immigration-policies 2. Buy a House, Get a Visa http://www.citylab.com/housing/2012/11/buy-house-get-visa-coming-soon-everywhere/3959/ 3. “Where Refugees Can Come Home”

http://www.nytimes.com/2016/12/03/opinion/sunday/where-refugees-can-come-home.html

4. “New poll: Voter worries about immigration mostly aren’t about the economy.” http://www.vox.com/2016/7/6/12098622/immigration-worries-economy-security

Thursday, April 20 Lecture 25: Global Supply Chains: Complicating Everything You’ve Learned Readings TBD Tuesday, April 25 Lecture 26: Special Topics: Economic Inequality

Required Reading: 1. Dani Rodrik “Is Global Equality the Enemy of National Equality?”

http://rodrik.typepad.com/Is%20Global%20Equality%20the%20Enemy%20of%20National%20Equality.pdf

2. “And the Richest Countries in the World 2040 Are…”

http://matthewandrews.typepad.com/mattandrews/2014/07/the-richest-30-countries-in-the-world-in-2040-are.html

3. “A Bigger Economic Pie but a Smaller Slice for Half of the US.”

http://www.nytimes.com/2016/12/06/business/economy/a-bigger-economic-pie-but-a-smaller-slice-for-half-of-the-us.html?_r=0

Optional Reading: “How Much Money Could a Land Value Tax Raise?” http://www.slate.com/blogs/moneybox/2013/10/17/land_value_tax_revenue_how_much_can_we_raise_by_taking_unimproved_land.html

Thursday, April 27 ***Paper 2 Due****** Lecture 27: Special Topics: Current Policy Debates in the Global Economy. Possible Readings:

1. “Industrial Revolution Comparisons Aren’t Comforting” https://www.bloomberg.com/view/articles/2017-02-16/industrial-revolution-comparisons-aren-t-comforting

2. “The Shocking Truth about the Border Adjustment Tax” http://econlog.econlib.org/archives/2017/02/the_shocking_tr.html

3. Planet Money: The Last Bank Bailout http://www.npr.org/sections/money/2016/12/27/507125309/episode-744-the-last-bank-bailout

4. The Opposite of Brexit: The African Union Launches an all-Africa Passport 5. “STRONG DEMAND FOR THINGS POOR PEOPLE SELL SOMEHOW BAD FOR

POOR PEOPLE.” https://boringdevelopment.wordpress.com/2014/07/29/strong-demand-for-things-poor-people-sell-somehow-bad-for-poor-people/

FINAL EXAM: Wednesday, May 10, 2PM - 4PM