PLSC 408 /EP&E400/ MGT 660: Capitalism as a Political Order Yale University, Fall 2011 Wednesday 3:30-5:20pm, RKZ 102 Ian SHapiro Douglas Rae Office Hours: Tuesdays, 1:45-3:45pm Office Hours: Wednesday, 9:00-11:45am 34 Hillhouse, Room 110 56 Hillhouse Avenue, Room 209 432-9368; [email protected] 203-887-2338, [email protected] Douglas Rae’s Assistant: Camille Costelli 203.432.8911 [email protected] Course Description In this seminar we will examine the relations between capitalism and the political orders with which it lives in tension—sometimes creative, sometimes destructive. The first third of the course will be concerned with classic treatments of subject from Smith to Schumpeter. The middle third will deal with contemporary writings on capitalism and democratic regulation, with particular attention to the ways in which apparently technical matters conceal political conflicts and choices. The final third will focus particularly on the financial sector, with attention to the lessons to be gleaned from the political and social responses to the global credit crisis of 2008-10. An intensive case study of the relationship between high-powered financial institutions and the political elites and central banks of major western countries will be a major focus of this segment. Requirements: Students will be expected to write either two 10 page papers (one due by midterm, the other at the end of the semester), or a 20 page research paper. Students who choose the second option must discuss a one- to two-page paper prospectus with the instructor and submit it for approval ahead of time. Because this is a research-oriented seminar, it is not appropriate for Credit/D/Fail. Due dates: Paper Prospectus or First Paper: Final paper: Readings: B= available for purchase at Yale Bookstore R= on Reserve at Bass Library E= available at Yale library online in E-book format C= posted on the Classes server 1 Syllabus: August 31: Introduction to the themes of the course Readings: - Karl Marx. Communist Manifesto. (C) - Adam Smith. The Wealth of Nations. Book 1 Chapters 1-3, 8-10 and Book 4 Chapter 2 paragraph 9. (C) September 7: Readings: - Polanyi. The Great Transformation. The Political and Economic Origins of Our Time (Beacon Press, 2001). Forward by Stiglitz, Chapters 1-6. (B, E) September 14: Readings: - Joseph Schumpeter. Capitalism, Socialism and Democracy (Martino Fine Books, 2010). Part II: Can Capitalism Survive? (excluding chaps. 8 and 9) (B, R) - Eric D. Beinhocker. Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics (Harvard Business Press, 2007), pp. 45-65. (C) - Case study: Yale Polaroid Case: 08-037, 2008. (http://cases.som.yale.edu/polaroid/) (C) Recommended: - Thomas K. McCraw. Prophet of Innovation: Joseph Schumpeter and Creative Destruction (Belknap Press of Harvard University Press, 2010), pp. 347-374. (C) - Arnold Kling and Nick Schulz, “The New Commanding Heights.” National Affairs , no.8 (Summer 2011) (C) September 21: Guest speaker: Peter SWenson Readings: - Peter Swenson. Capitalists against Markets: The Making of Labor Markets and Welfare States in the United States and Sweden (Oxford University Press, 2002). Preface (vii-viii), 3- 14, 17-32, 37-87, 121-133, 142-166, 187-213, 219-220, 243-251, 268-281. (B, E) September 28: Guest speaker: JoHn Geanakoplos Readings: - John Geanakoplos, “The leverage cycle,” Yale University Cowles Foundation Discussion Paper #1715 (July 2009) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1441943## [10-31-2010] (C) - Ana Fostel and John Geanakoplos , “Leverage Cycles and the Anxious Economy.” American Economic Review, Vol. 98 No. 4(2008), pp. 1211—1244. (C) - John Geanakoplos, “Solving the present crisis and managing the leverage cycle,” Yale University Cowles Foundation working paper # 1751 (January 2010) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1539488 [10-31-2010]. (C) 2 October 5: Guest speaker: Frances RosenblutH Readings: - George J. Stigler, “The Theory of Economic Regulation.” Bell Journal of Economics, Vol.2, No.1 (Spring, 1971), pp.3-21. (C) - Sam Peltzman, “Towards a More General Theory of Regulation After a Decade of Deregulation.” Journal of Law and Economics, Vol. 19, No. 2 (Aug., 1976), pp. 211-240. (C) - Gary Becker, “A Theory of Competition Among Pressure Groups for Political Influence.” The Quarterly Journal of Economics, Vol. 98, No. 3 (Aug., 1983), pp. 371-400. (C) Recommended: - Adam Przeworski and Michael Wallerstein, “Structural Dependence of the State on Capital.” The American Political Science Review, Vol. 82, No. 1 (Mar., 1988), pp. 11-29. (C) October 12: Readings: - John Cassidy. How Markets Fail: The Logic of Economic Calamities (Farrar, Straus and Giroux, 2009) Chapters 1-2, 6-7, 9-11, 13-19, 22-23, Conclusion and afterword. (B, R) October 19: Readings: - Michael Lewis. The Big Short: Inside the Doomsday Machine (W. W. Norton & Company, 2011) (B, R) October 26: Readings: - Gretchen Morgenson and Joshua Rosner. Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon (Times Books, 2011). (R) November 2: Guest speaker: Paolo Zannoni “Money and Credit”: The nature of money, the function of money, the nature of credit. Money and the state; credit and the banks. Readings: - J.M. Keynes. A Treatise on Money. vol 1, book 1,” The Nature of Money”, Royal Economic Society, pp.3-43. (C) - Joseph Schumpeter. Capitalism, Socialism and Democracy (Martino Fine Books, 2010). Part II: Can Capitalism Survive?, Chapter 8 (discussion on credit) (B, R) - Geoffrey Ingham. The Nature of Money (Polity Press, 2004), pp. 69-133. 3 November 9: Guest speaker: Paolo Zannoni “Banks and the Nation State”: Money and credit after the consolidation of the nation state; territorial currencies. Banks and banking systems; public banks. Readings: - Richard Grossman. Unsettled Account: The Evolution of Banking in the Industrialized World since 1800 (Princeton University Press, 2010), pp.28-109. (C) - Benn Steil and Manuel Hinds. Money, Markets and Sovereignty (Yale University Press, 2010), pp.66-106. (C) November 16: Guest speaker: Paolo Zannoni “Banking Systems and Governments”: The Institutions of governance of banks; banks and politics in the American republic. Public debt. Governments and the banking system. Readings: - Niall Ferguson. The Cash Nexus. Money and Power in the Modern World, 1700-2000. (Basic Books, 2002), pp.105-191. (C) - Bray Hammond. Banks and Politics in America from the Revolution to the Civil War. (Princeton, 1991) , pp.89-144. (C) - Adam Smith, The Wealth of Nations, Vol.2, Book 5, part 1: paragraphs 90-129 (the end of part 1). November 23: No Class, Fall Break November 30: Guest speaker: Timothy PacHirat Readings: - Timothy Pachirat, Every Twelve Seconds: Industrialized Slaughter and the Politics of Sight (Yale University Press, 2011). December 7: T.B.D 4 Bibliography The following is a list of helpful readings for the course. You are not required to purchase these books. They could be helpful as background reading for the course or you might want to consult them as you are working on your papers. On tHe History of Economic THeory Jerry Z. Muller, The Mind and the Market: Capitalism in Western Thought Mark Blaug, Economic Theory in Retrospect I.M.D. Little, A Critique of Welfare Economics Economics and Society: The Political Element in the Development of Economic Theory: A Collection of Essays on Methodology Joseph Schumpeter, History of Economic Analysis Maurice Dobb, Theories of Value and Distribution since Adam Smith: Ideology and Economic Theory Eric D. Beinhocker. Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. On tHe History of Capitalism Maurice Dobb, Studies in the Development of Capitalism Barry Supple, State and the Industrial Revolution Barry Supple, The Rise of Big Business 5 .