IP_336 Theory and Practice of Economic Transformation
Course Description: The course consists of analyzing the processes of economic transition in general, as well as in particular historical instances. The emphasis is laid-but not exclusively-on the central European experience. As a prerequisite for analyzing the dynamics of transition it deals with the workings of non-market economic systems, especially the centrally planned state-managed economies. Topics also include each system’s ideological foundations, institutional structure and economic decision-making mechanisms. Each of the competing approaches to transitions is dealt with separately. Theoretical conclusions are supplemented by empirical evidence in the form of case studies.
Learning Objectives: The main objective of the course is to provide students with understanding of the working of nonmarket systems and explain the challenges that the economic transition to market capitalism necessarily entails.
Course Format: The course will be conducted in the form of lectures (2 hours per week) and seminars (2 hours per week). However, the division between lectures and seminars will not be strict. The course also includes students’ presentations and discussions.
Class Participation: Active participation is expected. Mid-term and final tests are based on lectures, assigned literature and on the discussion during seminars. Students are graded on their contribution to class discussions, presentations and on the test results.
Group Project: At the second session students will be assigned group projects. These will consist of writing and presenting a scholarly paper (case study) on a given topic (plus its submission by email no later than May 18th, 2012). The paper should not be longer than 18.000 characters (with spaces). The presentation should not exceed 20 minutes and will be followed by a discussion moderated by the presenting team. The overall score from the group project will be a weighted average of
- presentation 15%
- content (focus, meaningful arguments, new ideas) 50%
- use of relevant sources 20%
- scholarly style 15%
Attendance: Attendance of students is expected. It is a part of students’ evaluation. Each session is valued 1 point. The maximum you can get is 18 points (there are 22 sessions; lectures and seminars). It means that 4 absences are costless.
Student Evaluation: Course grade will be determined on the basis of the following: attendance (20 %), group project (30 %), mid-term test (20 %), final test (30 %).
Project topics:
- Post war social transformation – the case of Iraq/Afghanistan:
What did the economy look like before the last war? How was it organized (central planning/markets)? Was it efficient? Was it economically free? Was bureaucracy corrupt?
What did it look like after the war? What were the plans for reconstruction? Did the plans work? What is the situation now? What are the main institutional and economic problems now?
What is the lesson to be learnt for the process of transformation?
- Privatization in the West (select an industry/country/company)
What was the economic rationale for privatization? What were the major interests behind?
What was the scope/method/outcome of privatization?
What was the cost?
What are the limits of privatization? What are its necessary prerequisites?
- Crisis of western welfare state (select a country/system)
What are the problems of welfare systems in Europe? Are they necessary or just accidental?
What can be done to eliminate them? What are the alternatives to current state-run systems? Could they be privatized?
Are there any success stories of reforms?
- Cost and benefit of development aid (select a country/method)
What is the economic logic behind foreign aid? How successful has it been so far? Where did it work and where did it not?
What are the alternatives? What can be done to boost economic development?
- The two Koreas – Why only the South became a tiger?
What are the causes of huge economic disparity between the south and the north? Is it a matter of institutions, policy, or culture? What the strengths and weaknesses of the respective systems?
- Does central planning work? The case of China
Is there socialism in China? Is China economically free? Is Chinese culture special? Does the absence of democracy hamper economic growth?
- Will India dominate the next century?
The economic development of India since its independence till early 1990′s reforms – what went wrong? Economic transformation: the Indian Style – sources of inspiration, overall evaluation. Prospects of India – strengths and weaknesses (comparison with China or CEEC possible, but not required)
Outline of the course
- Economic development, growth
- Causes of Wealth
- Role of economic system
Basic Readings:
Week 2: Theory and classification of economic systems [presentation pdf, outline docx - includes Part 2: Intellectual Sources of Socialism]
- nature of economic explanation
- order and conflict
- types of economic systems
- problem of organization
Basic Readings:
Supplementary Readings:
Intellectual sources of Socialism
- Religious utopian thinking
- Secular „utopian“ socialism
- Karl Marx and Friedrich Engels – socialism as a scientific doctrine
Basic Readings:
Supplementary Readings:
Week 3: The true reality of socialist countries – why economic transformation was required [presentation pdf, outline docx - includes Part 2: Did socialism have to fail?]
- Central planning in practice
- soft budget constraint
- shortage economy
- socialism as mercantilism
- The Council for Mutual Economic Assistance
- democide
Basic Readings:
Supplementary Readings:
Did socialism have to fail?
- problem of economic calculation
- incentives vs. knowledge
Basic Readings:
Advanced Readings:
- Salerno, Joseph, „Why a Socialist Economy is ‘Impossible’“,
- Eugen von Bohm-Bawerk: „Unresolved Contradiction in the Marxian Economic System“
- Reisman, George: Capitalism, c. 8
- Hans-Hermann Hoppe: „Marxist and Austrian Class Analysis„
- Reisman, George: „Classical Economics vs. The Exploitation Theory„
- MacKenzie, D. W.: „Oskar Lange and the Impossibility of Economic Calculation“
- Caplan, Bryan: „Economic Calculation, Quantitative Laws, and the „Impossibility“ of Socialism“
- Boettke, Peter – Leeson, Peter: „Socialism: Still Impossible After All These Years“
- Failures of capitalism
- Washington consensus
- Shock therapy vs. gradualism
Basic Readings:
Advanced Readings:
- Economic freedom – conceptual analysis
- Measurement of economic freedom
Basic Readings:
Advanced Readings:
Week 6: Why institutions matter and how to change them [presentation pdf, outline docx] + MID-TERM TEST (AT 9:15)
- Nature of institutions
- Private property
- Shock therapy vs. gradualism
- Democracy
Basic Readings:
Advanced Readings:
- Caplan, Bryan; Stringham, Edward: „Mises, Bastiat, Public Opinion, and Public Choice“
- Boettke, Pete; Leeson, Pete: „Is the Transition to the Market too Important to be Left to the Market?“
- Mises, Ludwig von: Interventionism
- Joseph Stiglitz: „Whither Reform? Ten Years of the Transition“
- Olivier Blanshard; Andrei Shleifer: „FEDERALISM WITH AND WITHOUT POLITICAL CENTRALIZATION: CHINA VERSUS RUSSIA„
- Friedman, David: „Do We Need a Government“, parts I and II
- Hardin, Garrett: „The Tragedy of the Commons“
- Overview of Czech transition
- Price deregulation
- Trade liberalization
Basic Readings:
Advanced Readings:
- Methods of Privatization
- Voucher Privatization
Basic Readings:
Advanced Readings:
Week 9: Labor market and education [presentation pdf, outline docx; includes Part 2: Social policy and health care]
Basic Readings:
Advanced Readings:
Social policy and healthcare
- Social Policy
- Health Care
Basic Readings:
Advanced Readings:
Basic Readings:
Advanced Readings:
Week 11 + 12: National holidays (May 1st and 8th)
Week 13: FINAL TEST (9.15 AM) + remaining presentations
