International Political Economy

INTERNATIONAL POLITICAL ECONOMY

2014-2015

Topics discussed during the lessons

Introductory lesson: what IPE is and the need for a paradigm change; from international to supranational political economy

Part I–Traditional ideologies and IPE

-Adam Smith and economic liberalism – Causes and effects of the division of labour; the division of labour and the extent of the market; labour commanded and the real price; labour commanded and accumulation of capital; productive and unproductive labour; natural price and market price; the wages of labour; critique ofphysiocracy and mercantilism; free trade and the invisible hand; the expenses of the sovereign (defence, justice and public works); the revenues of the sovereign; four maxims for taxation (equality, certainty, convenience and economy in collection).

-Friedrich List and the national system of political economy – Life of F. List; the theory of value and the theory of productive forces; the theory of the stages of development; industrial development and the theory of infant industry; political unity and industrialization; power politics and free exchange.

-Karl Marx and socialism – K. Marx: the prophet, the sociologist and the economist (Schumpeter); List and Mark: from the stages of production to the mode of production; the materialist interpretation of history; the labour theory of value in classical economist and Marx (Smith, Ricardo and Marx on the labour theory of value); the theory of exploitation; constant and variable capital; the theory of the falling rate of profit; the contradiction between the labour theory of value and the capitalist system; Marx and the theory of the state; Lenin and the theory of imperialism.

-The transition from the international to the supranational paradigm of political economy: J. M. Keynes and L. Robbins – the 1929 crisis, two contrasting point of views; Keynes and his critique to traditional liberalism; Keynes and protectionism; the General Theory, effective demand, prices and wages and the national recovery policy; L. Robbins and his position on the great depression; Economic planning and international order; plan and no-plan; three kinds of plan (nationalism, communism, liberalism); the error of classical economists.

Part II–Public goods, private goods, game theory and institutions.

-What public goods and a private goods are. Non-rival and non-excludable goods. The free rider problem. Pure and impure goods (commons and club goods). Mixed goods: the case of education and NGOs.

-Competition and conflict in IPE: the game theory and its analytical tools. The prisoners’ dilemma. The dominant strategy. Stag hunt. Battle of the sexes. Chicken game. From the prisoners’ dilemma to cooperation: a) the tit-for-tat solution and the spontaneous order; b) the harmony solution by means of punishment: the coercive order.

-Cooperation and conflict in social sciences. F. Hayek theory of spontaneous order (natural, artificial and the Ferguson order). Spontaneous order and organizations. The state as a night watchman. Commutative and distributive justice. J. Searle theory of institutions. Language as the fundamental institution. The logical structure of institutional facts: a) collective intentionality (ex. an orchestra); b) the assignment functions (ex. tools); c) the status function (ex. a paper of 20 euro is legal tender in the EMU). Status functions and deontic powers. Why institutions are the glue that holds society together.

-Coexistence of spontaneous order and organizations. What is an organization. The state is a special kind of organization. Extension of the Max Weber’s definition of state (a legitimate power providing public goods for a certain territorial community). Globalization, international and supranational organizations: spontaneous (self-organizing) order, stag hunt and prisoners’ dilemma as analytical toolsfor supranational political economy.

Part III – Aspects from the history of European integration.

-The USA federal model and European integration. A. Hamilton economic and political thought.

-The two World Wars and the birth of the European Coal and Steel Community (ECSC).The project of the European Defence Community (EDC) and its failure. The Rome Treaties: the European Economic Community (EEC) and the Euratom. De Gaulle against the federal evolution of the Community. Theories of European integration. Supranational integration and supranational democracy.

-Two public European goods.The Single market, the CAP and the role of the European Court of Justice (ECJ). The Monetary Union: from the Werner Plan, through the EMS to the Maastricht Treaty. The EMU, the GSP, the European budget and the theory of fiscal federalism.

-Useful analytical tools: the Neo-Ricardian theory of economic integration; The macroeconomic accounts of a closed and open economy. The balance of payments. The relationship between the rate of interest and the rate of exchange. The incompatible triad. The theory of the optimum currency areas. The algebra of public finance sustainability.

Part IV–The crisis the EMU and the EU (2008-?)

-Constitutional principles of fiscal federalism. The distinction between perfectly transferable assets, imperfectly transferable assets and foreign assets. Lessons from the history of the USA: the evolution of public finance (the years of taxless finance and the debt crisis of the 1840s) and of the monetary union (from Hamilton to Roosevelt).

-The European sovereign debt crisis of 2010-12 and the banking crisis. The Fiscal Compact. The European Stability Mechanism (ESM).The Banking Union.The problem of the Eurobonds (Blue and Red bonds, the Debt Redemption Fund, Eurobills and Federal bonds).

-The Fiscal Union (Own resources and fiscal capacity). The European Unemployment Scheme. Europe 2020 and the European investment plan.

Part V– The Global Financial Crisis: causes and reform of the old international order

-The financial crisis and the decay of the old international order. The financial crisis in the USA: its causes. The financial crisis and its aftermath in Europe and the world economic and political order. The nation-state, international integration and the need of a supranational macroeconomic theory.

-Global imbalances and the dollar standard: the global saving glut and the Bretton Woods II hypothesis.

-Globalization and income inequalities. The T. Piketty’s analysis of global inequality.

-The global ecological problem. Sustainable development: a global carbon tax and emission trading scheme as means for fighting pollution.

-Money as a supranational public good. The evolution of the gold standard. The evolution of the gold-exchange standard and the dollar standard. Global public finance. The World eco-monetary union.

-Useful analytical tools: Intertemporal balance of payments constraint; the Gini coefficient; the Pigouvian environmental tax; the emission trading mechanism.