POLSCI 645S / ECON 548S / PUBPOL 630S

The Political Economy of Growth, Stabilization, and Distribution

Short title: POL ECON GROWTH, STAB, & DIST

This course addresses the study of three kinds of national economic performance: the growth of gross domestic product, the stabilization of prices and of financial markets, and the distribution of income and wealth. As is elaborated in the schedule of meetings, topics and assignments, the course examines the following questions: Why are some nations rich and others poor? Are financial crises avoidable or inevitable? Does economic growth reduce poverty, increase inequality, or both? What do political and economic institutions have to do with the answers to the above questions? What do geography and culture have to do with them? To what extent are the answers to these questions under human control? What kinds of difference can and do governments make?

This class meets 26 times. A list of dates, topics, detailed assignments and supplementary readings is below.

Course Requirements: You are expected to do all of the reading assignments, to attend class ready to discuss the assignments, and to write a substantial research paper. Three fifths of your grade will be based on the paper, and two fifths on participation.

Participation: You can’t participate unless you are in class. You will be given two unexcused absences, and otherwise absence will cut into your participation grade.

You are asked to formulate one question or comment on the readings for each class, whether you attend or not, and these questions will be graded as follows: Satisfactory, Marginal, and Unsatisfactory. Not submitting a question will result in an Unsatisfactory grade for that class. You are permitted two grades of U for the semester. After that, one point will be subtracted from your total final grade for each U. I will not be able to respond individually to each question, but if you don’t hear from me, you may assume a “Satisfactory.” Please aim at about 100 words for your questions.

A good question or comment will not be obvious, but will have some subtlety. It may relate the reading at issue to other readings or to general knowledge or conventional wisdom. These questions shall be available to me and to all of the class by 7:00 am on the day of the reading in question. Your participation grade will also be based on the quality and regularity of your oral participation in class.

Research paper: You are asked to write a substantial research paper of 5,000 to 7,000 words. (Four double spaced pages of 12 point type comprise about 1,000 words.) You must negotiate your topic with me, and you are asked to pick a general topic by September 12 (meeting 6). We should begin discussing this as soon as possible.

A prospectus will be due September 26 (meeting 10). This means a title, a problem or issue statement in a paragraph, and an outline in sentences of how you will address the topic.

A first draft will be due October 22 (meeting 17). This first draft will have a title, an abstract, and will flesh out an outline with prose paragraphs. You will make a short presentation to the class on

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October 29 or 31, or November 5 or 7 (meetings 19 - 22). The final paper will be due at the beginning of class on November 21, the last day of class. Late papers will lose one letter grade per day, starting then.

Of the 60% of your grade based on the paper, 10% of your total grade will be based on the first draft, and 50% of your total grade will be based on the final paper. You are expected to be in regular communication with me about your paper from the identification of the topic through the time you submit the prospectus, the first draft and up to the final product.

Eligible undergraduate political science majors should consider using the paper assignment for this course as a means to achieve Honors in Political Science. Information on eligibility for and requirements of the honors program is available at: http://polisci.duke.edu/undergraduate/honors .

Reading assignments: One book is on sale at the Duke Bookstore, and all other readings are available online or through Sakai resources. Journal articles are accessible from on campus with a Duke account, or elsewhere with a VPN. Other online readings will be .pdf files in Resources on Sakai, or have their URL below on the Schedule of meetings, topics, and assignments.

At the Duke bookstore: Carmen Reinhart and Kenneth Rogoff, 2009. This Time is Different: Eight Centuries of Financial Folly (Amazon price: $14.46).

Grading: Grading is a matter of judgment that I seek to make as fair and transparent as possible. Here is a rough guide to what I think standards should be.

A: Truly outstanding work. B: Very good work. A solid achievement. C: Mediocre work. (This is not considered passing for a graduate course like this one.) F: Unacceptable.

Reference. For a general reference and an outstanding background resource, see Angus Maddison. 2006. The World Economy. It is available in the reference room of Perkins Library at HC21 .M285 2006, and online at http://www.oecd-ilibrary.org/development/the-world- economy_9789264022621-en

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Meeting 1: 8/27/2014 Overview of course

1. The Place of Economic Performance in Human Well-Being

Meetings 2 and 3: 8/29 and 9/3 (Please note: Class will not meet on 8/29 because of APSA)

Read: Angus Deaton. 2013. The Great Escape: Health, Wealth and the Origins of Inequality. Introduction and Chapter 1 (pp. 1-56). The eBook above is immediately accessible for unlimited users at the following URL: http://proxy.lib.duke.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=

nlebk&db=nlabk&AN=603306 Amartya Sen. 2001. Economic progress and health. Chapter 17 (pp. 333-45) in David Leon and Gill Walt. 2001. Poverty, Inequality and Health: An International Perspective (in Sakai Resources)

For further reading:

UN Human Development Index: http://hdr.undp.org/en/statistics/hdi

Richard Easterlin: http://www.nytimes.com/2012/09/28/opinion/in-china-growth-outpaces- happiness.html?scp=1&sq=&st=nyt

Charles Kenny. 2011. Getting Better: Why Global Development Is Succeeding and How We Can Improve Tte World Even More.

J. Y. Kim, et al. eds. 2000. Dying for Growth: Global Inequality and the Health of the Poor.

Bjorn Lomborg. 2001. The Skeptical Environmentalist. Part II. Measuring Human Welfare, (Sakai resources)

Hans Rosling: http://www.youtube.com/watch?v=jbkSRLYSojo

Amartya Sen. 1999. Development as Freedom.

Benjamin Friedman. 2005. The Moral Consequences of Economic Growth. chapter 1 “What Growth Is, What Growth Does” (Sakai resources)

Diane Coyle. 2014. GDP: A Brief but Affectionate History

Joseph Stiglitz, Amartya Sen, John-Paul Fitoussi. 2009. Report by the Commission on the Measurement of Economic Performance and Social Progress. www.stiglitz-sen-fitoussi.fr (Executive Summary is on pp. 7-18)

OECD Better Life Index www.oecdbetterlifeindex.org

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2. The Miracle of Economic Growth

Meeting 4: 9/5 Basics

Read: Angus Maddison. 2006. The World Economy, vol. 1: A Millennial Perspective. Introduction and summary. pp. 19-27.

http://www.oecd-ilibrary.org/development/the-world-economy_9789264022621-en

Read: William J. Bernstein. 2004. The Birth of Plenty: How the Prosperity of the Modern World Was Created (Sakai resources) Introduction (pp. 1-8) 1 A Hypothesis of Wealth (pp. 9-50)

For further reading:

Joel Mokyr. 1990. The Lever of Riches: Technological Creativity and Economic Progress

Kenneth Pomeranz. 2000. The Great Divergence: China, Europe and the Making of the Modern World Economy.

David Landes. 1998. The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor.

Diego Comin, et al. 2010. Was the Wealth of Nations Determined in 100 BC? American Economic Journal: Macroeconomics 2: 65-97.

Meeting 5: 9/10 Growth theories

Read: Philippe Aghion and Peter Howitt. 2009. The Economics of Growth. Introduction: pp 1-18 (in Sakai resources)

Read: David Warsh. 2006. Knowledge and the Wealth of Nations: A Story of Economic Discovery Introduction and chapters 3-4, (especially chapter 4) (Sakai resources)

For further reading:

Daron Acemoglu. 2009. Introduction to Modern Economic Growth

Stephen L. Parente and Edward C. Prescott. 2000. Barriers to Riches

Paul Romer. 1990. Endogenous Technological Change. Journal of Political Economy 88:S71-S102 (October, part 2)

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Meeting 6: 9/12 Growth regressions

Read: Robert J. Barro.1991. Economic Growth in a Cross Section of Countries. Quarterly Journal of Economics 106 (2):407-443.

Ross Levine and David Renelt. 1992. A Sensitivity Analysis of Cross Country Growth Regressions. American Economic Review. 82: 942-963.

Dani Rodrik. 2005. Why We Learn Nothing from Regressing Economic Growth on Policies. (Sakai Resources)

For further reading:

Xavier Sala-i-Martin. 1997. I just ran Two Million Regressions. American Economic Review Papers and Proceedings 87(2): 178-183.

Jonathan Krieckhaus. 2004. The Regime Debate Reconsidered: A Sensitivity Analysis of Democracy’s Effects. British Journal of Political Science. October.

Meeting 7: 9/17 The absence of growth recipes

Read: Dani Rodrik. 2007. One Economics, Many Recipes: Globalization, Institutions and Economic Growth. Introduction, chapters 1, 5, 6. (Sakai resources)

For further reading:

John Williamson, “What Washington Means by Policy Reform” http://www.iie.com/publications/papers/paper.cfm?researchid=486

John Williamson. 2012. Is the “Beijing Consensus” Now Dominant? Asia Policy 13: 1-16.

Dani Rodrik. 2014. When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations. Journal of Economic Perspectives 28(1): 189-208.

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3. Stabilization of Prices and Financial Markets

Meeting 8: 9/19 Stabilization I: Prices and Inflation

Read: Peter Bernholz. 2003. Monetary Regimes and Inflation: History, Economic and Political Relationships chapters 1, 2 (Sakai resources)

John B. Taylor. 2010. Better Living through Monetary Economics, pp. 319-341 in Siegfried, ed. Better Living through Economics. (Sakai resources)

For further reading:

N. Gregory Mankiw and Matthew Weinzierl. 2011. An Exploration of Optimal Stabilization Policy. Brookings Papers on Economic Activity Spring: 209-249.

Marvin Goodfriend 2007. How the World Achieved Consensus on Monetary Policy. Journal of Economic Perspectives Fall, 47-68.

Robert J. Samuelson. 2008. The Great Inflation and its Aftermath: The Past and Future of American Affluence.

Meeting 9: 9/24 Stabilization II: Hyperinflation

Read: Stanley Fischer, et al. 2002. Modern Hyper- and High Inflations. Journal of Economic Literature 40:837-880.

For further reading:

Koech, Janet. 2011. Hyperinflation in Zambia. Dallas Federal Reserve Bank. Globalization and Monetary Policy. Annual Report. 2-11 Pt http://www.dallasfed.org/assets/documents/institute/annual/2011/annual11b.pdf

See also: Steve Hanke and Alex Kwok. 2009. On the measurement of Zimbabwe’s Hyperinflation. Cato Journal 29: 353-364.

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Meeting 10: 9/26 Stabilization III: The Recent U.S. Financial Crisis

Read: William Keech. 2013. Economic Politics in the United States: The Costs and Risks of Democracy. Chapter 5. (Sakai resources)

Carmen Reinhart and Kenneth Rogoff. 2009. This Time is Different: Eight Centuries of Financial Folly (Preface, Preamble, Part V: Chapters 13, 14, 16. Skim or skip chapter 15)

Prospectus due September 26

Meeting 11: 10/1 Stabilization IV: The Financial Economy

Read: Reinhart and Rogoff, (Chapters 1, 2, 4, 7, 8, 10. 17)

For further reading:

Alan S. Blinder. 2014. After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead

Atif Mian and Amir Sufi. 2014. House of Debt: How They (and You) Caused the Great Recession and How We Can Prevent it from Happening Again

Matthieu Bussiere, et al. 2013. The financial crisis: Lessons for international economics. American Economic Journal: Macroeconomics 5: 75-84.

Juan Cruces and Christoph Trebesch. 2013. Sovereign defaults: The price of haircuts. American Economic Journal: Macroeconomics 5: 85-117.

Charles Calomiris and Stephen Haber. 2014. Fragile by Design: The Political Origins of Banking Crises and Scarce Credit.

4. The Distribution of Income and Wealth

Meeting 12: 10/3 Distribution I: Introduction

Read: Weining Koh, 2014. The Impact of Income Inequality on Growth: Updates and Extensions (Sakai resources)

Thomas Piketty. 2014. Capital in the Twenty-First Century. Introduction (Sakai resources)

For further reading:

Branko Milanovic. 2014. The Return of “Patrimonial Capitalism”: A Review of Thomas Piketty’s Capital in the Twenty-First Century. Journal of Economic Literature 52(2): 519-534

Randall Holcombe. 2014. Review of Piketty. Public Choice 160(3, 4):551-557.

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Meeting 13: 10/8

Read:

Piketty, chapter 1 Income and Output (Sakai resources)

Meeting 14: 10/10

Read:

Piketty, chapter 3 The Metamorphoses of Capital (Sakai resources)

Meeting 15: 10/15

Read:

Piketty, chapter 7 Inequality and Concentration: Preliminary Bearings

For further reading:

Jonathan Krieckhaus et al. 2014. Economic Inequality and Democratic Support. Journal of Politics 76: 139-51.

Branko Milanovic, 2005. Worlds Apart: Measuring International and Global Inequality Introduction, chapters 1-3 (Sakai resources)

Branko Milanovic, 2011. The Haves and the Have-Nots Vignettes 1.9, 2.2, 2.3 (Sakai resources)

Michael Norton and Dan Ariely. 2011. Building a Better America – One Wealth Quintile at a Time. Perspectives on Psychological Science 6:9-12. http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20press.pdf

Lant Pritchett. 1997. Divergence, Big Time. Journal of Economic Perspectives 2: (Issue 3 Summer), 3- 17.

Xavier Sala-i-Martin. 2005. The World Distribution of Income: Falling Poverty and… Convergence, Period. http://www.columbia.edu/~xs23/papers/pdfs/World_Income_Distribution_QJE.pdf

David Dollar. 2007. Poverty, inequality and social disparities during China’s economic reform. http://china.usc.edu/App_Images/Dollar.pdf

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5. Case Studies

Meeting 16: 10/17 Chile

Read: Vittorio Corbo, Leonardo Hernandez and Fernando Parro 2005. “Institutions, Economic Policies and Growth: Lessons from the Chilean Experience.” Working Paper No. 317. Central Bank of Chile http://www.bcentral.cl/eng/studies/working-papers/317.htm

Sebastian Edwards. 2010. Left Behind: Latin America and the False Promises of Populism. Ch. 5. Chile, Latin America’s Brightest Star. (Sakai resources)

For further reading:

Andres Solimano. 2012. Chile and the Neoliberal Trap: The Post Pinochet Era Ch. 4 Economic growth and macroeconomic performance under Concertación (Sakai resources)

Meeting 17: 10/22 China

Read: Barry Naughton. 2010. China’s Distinctive System: Can It Be a Model for Others? Journal of Contemporary China 19: 437-460. (Sakai resources)

Edmund Malesky and Jonathan London. 2014. The Political Economy of Development in China and Vietnam. Annual Review of Political Science 17: 395-419. http://www.annualreviews.org/doi/pdf/10.1146/annurev-polisci-041811-150032

Meetings 18: 10/24 China, cont.

Read: Chenggang Xu. 2011. The Fundamental Institutions of China’s Reforms and Development. Journal of Economic Literature 49: 1076-1151. (parts 1-3, 4-7)

Meeting 19: 10/29 China, cont.

Read: Loren Brandt, et al. 2014. From Divergence to Convergence: Reevaluating the History Behind China’s Economic Boom. Journal of Economic Literature 52(1): 45-123.

For further reading on China:

Ronald Coase and Ning Wang. 2012. How China Became Capitalist.

Yasheng Huang. 2012. Capitalism with Chinese Characteristics.

Justin Yifu Lin. 2012. Demystifying the Chinese Economy.

Kellee Tsai. 2007. Capitalism without Democracy: The Private Sector in Contemporary China.

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6. Hypotheses and Explanations

Meeting 20: 10/31

Read: Daron Acemoglu and James A. Robinson. 2012. Why Nations Fail. Preface, Chapters 1-3, especially Chapter 2. (Sakai Resources)

Peter B. Henry and Conrad Miller. 2009. Institutions versus Policies: A Tale of Two Islands. American Economic Review 99(2): 261-267.

Meeting 21 11/5 presentations Meeting 22 11/7 presentations Meeting 23 11/12 presentations

Meeting 24: 11/14

Read: Mancur Olson, Jr. 1993. Dictatorship, Democracy, and Development. American Political Science Review 87: 567-76.

Dani Rodrik. 2014. When ideas trump interests: Preferences, Worldviews, and Policy Innovations. Journal of Economic Perspectives. 28: (Winter) 189-208.

Meeting 25: 11/19

Read: Halvor Mehlum, et al. 2006. Institutions and the Resource Curse. Economic Journal 116: 1-20.

Jonathan Hanson. 2014. Forging and Taming Leviathan: State Capacity, Constraints on Rulers, and Development. International Studies Quarterly. June 2014. 380-392

Meeting 26: 11/21

TBA

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