Teaching
Home CV Teaching

 

[Home]

 

PDF Format

Economic Transition and Development

Public Policy 271

Spring 2004

University of Chicago

 

Brief Description: This course applies basic economic tools to discuss basic problems in making a market economy. It exposes students to current thinking on economic transition and development and stresses the institutional structure of the economic system, including various economic, political, social, and legal institutions and the organizational structure of production. The course is organized around three basic questions, What constitutes a market economy? What makes an economy to grow? And what can transition economies, their failure and success, tell us about how to make and develop a market economy? Course materials cover post-socialist countries’ (e.g., China, Russia) recent and ongoing experiences in moving toward a market economy and, for the purpose of comparison, how existing market economies actually work.

Meeting: MW 3:00-4:20, SS 107

Instructor: Ning Wang, Post-Doc at the UC Law School. My office is Room 612 of the Law School building, which is located at 1111 E. 60th Street. My phone # is 702-7342. Email: ningwang@uchicago.edu. Office hours are Thursday 3-5pm, and by appointment.

Assignments: Students are required to read assigned readings before class. You are also encouraged to read newspapers (NY Times, Wall Street J, etc) to follow what is going on in transition (broadly defined) economies and bring to class discussion what you find interesting and relevant. Class participation, contributing 20% to the final grade, is highly recommended. There will be a mid-term in-class close-book exam (time to be announced), which accounts for 50% of your final grade, and a writing assignment: a short paper of 5-8 pages, double-spaced, accounting for the rest 30%. In the writing assignment, You can 1) critically review assigned readings – you could discuss particular issues raised in the readings but a summary does not count, 2) choose an empirical transition/development question that interests you, review how it is tackled (success and failure), evaluate the performance, and present your own analysis of the problem; 3) or pick certain conventional wisdom on economic transition or development, expose its theoretical weakness and/or disappointing performance in practice, and propose your amendment – be sure it is backed up by theories your learn in this class or elsewhere, 4) or write on any topic of your choosing with my prior permission. The paper is due May 26th (9th week). Late submission is not acceptable. Depending on the size and pace of the class, we may have time for students to present their term papers or lead class discussions.

Readings: All reading materials are on reserve at Reg. Four books (Knight, Coase, Smith, and Weber) are available for purchase at Seminary Coop. Bauer will be available in early April. All journal articles are available electronically either through JSOTR or the library system (“online”) or as specified elsewhere.

 

 Tentative Course Outline

 

Part I: What makes a market economy?

Fundamental Ideas (Classes 1-3)

Knight, Frank. 1933. The Economic Organization. UC Press. This classic text gives a literary and rigorous presentation of the standard price theory. It is a masterpiece and worth careful study even if you have learned microeconomics through diagrams and calculus. It particularly helps to expose those to economic thinking who have shunned away from economics for fear of or contempt for mathematics. Warning: it is verbal but demanding. In a culture of mathematics, we are misled to believe that everything non-mathematical is either easy, or soft, or shallow.

Hayek, Frederick. 1945. “The Use of Knowledge in Society.” AER, 35: 519-30 (Jstor). You are welcome to read a companion piece, “Economics and Knowledge” (1937) Economica, 4: 33-54, as well as his Nobel lecture, “The pretense of knowledge,” AER 1989, 79(6): 3-7, both available through Jstor.

Hayek, Frederick. 1961. “Competition as a Discovery Procedure.”   In New Studies in Philosophy, Politics, Economics and the History of Ideas, pp. 179-90, UC Press. A different and longer translated version appeared in Quarterly Journal of Austrian Economics 2002, 5(3): 9-23 available at  http://www.mises.org/journals/qjae/pdf/qjae5_3_3.pdf  Another piece on competition is highly recommended, “The meaning of competition,” appeared in Individualism and Economic Order, UC Press.

Structure of Production (Classes 4-6)

Smith, Adam. 1976/1776. The Wealth of Nations. UC Press. Book 1, Chapters 1-3 (I assume this is not your first time reading Adam Smith. Re-reading is highly recommended and I hope, rewarding).

Alchian, Armen. 1977. “Some Economics of Property Rights.” In Economic Forces at Work, pp. 127-49, Liberty Press. You are also welcome to consult his piece on property rights in The Concise Encyclopedia of Economics, available at http://www.econlib.org/library/Enc/PropertyRights.html.  His another piece on property rights appeared in the New Palgrave Dictionary of Economics (1987) is also useful.

Coase, Ronald. 1988. The Firm, the Market, and the Law. UC Press. Chapters 1-3 and 5.

Coase, Ronald. 1992. “The institutional structure of production.” AER 82: 713-19 (Jstor) 

If you missed the 2003 Centennial Coase Lecture, you are strongly recommended to watch it online at http://www.law.uchicago.edu/events/events-online.html, which I believe will greatly enrich your learning experience at Chicago.

Variety of market economies (Classes 7-8)

Roe, Mark. 1993. “Some Differences in Corporate Structure in Germany, Japan, and the United States.” Yale Law Journal 102: 1927-1989 (Jstor)

Gilson, Ronald. 2001. “Globalizing Corporate Governance: Convergence of Form or Function.” American Journal of Comparative Law 49: 329-57 (available through HeinOneline at http://heinonline.org/HOL/Index?collection=journals).        

 

Part II: How does the economy develop?

What can history tell? (Classes 9-10)

North, Doulgass. 1994. “Economic performance through time.” AER 84(3): 359-68. (Jstor) Students are welcome to read his book, Institutions, Institutional Change, and Economic Performance (1990) and The Rise of the Western World (1973), coauthored with Robert Thomas, both cited in his Nobel lecture.

Weber, Max. 1981. The General Economic History. Translated by Frank Knight. UC Press. Part 4, Chapters 22-27, and 30. This classic text is unfortunately under-appreciated. It presents a much richer and more nuanced picture of the historical rise of capitalism than his better known treatment, The Spirit of Capitalism and the Protestant Ethic.

Smith, Adam. 1976/1776. The Wealth of Nations. UC Press. Book 3.

Growth models (Class 11)

Harberger, Arnold. 1998. “A vision of the growth process.” AER 88(1): 1-32 (Jstor) This may be the most technical paper in the course. But it is not as hard as it seems, and contains a simple message.

Nelson, Richard. 1997. “How new is new growth theory?” Challenge 40(5): 29-58 (online). A recent Region review with Robert Solow is recommended for those who want to know more about growth models and “endogenous growth theories,” which is available at http://minneapolisfed.org/pubs/region/02-09/solow.cfm

Back to basics (Classes 12-13)

Schultz, Theodore W. 1975. “The value of the ability to deal with disequilibria.” Journal of Economic Literature 13(3): 827-46. (Jstor)

Adelman, Irma. 2001. “Fallacies in development theory and their implications for policy.” In Gerald M. Meier and Joseph E. Stiglitz eds., Frontiers of  Development Economics, pp. 103-34. Oxford University Press (also available in word format at http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid=1558).

Bauer, Peter. 2000. From Subsistence to Exchange and Other Essays. Princeton. Chapters 1-2. Other chapters are fun to read. Bauer writes clearly and insightfully.

For students who are interested in reading more about basic principles in economic development, Development as Freedom (1999) by Amartya Sen is a good choice.   

 

Part III: What do we learn from transition economies?

Overview of transition (Class 14)

McMillan, John. 1997. “Markets in transition.” In Advances in Economics and Econometrics: Theory and Applications, edited by David M. Kreps and Kenneth F. Wallis, pp. 210-39, Cambridge University Press.

Kornai, Janos. 2000. “What the change of system from socialism to capitalism does and does not mean.” Journal of Economic Perspective 14(1): 27-42 (Jstor)

Country reports (China and Russia) (Classes 15-16)

Justin Lin, Fang Cai, and Zhou Li. 1996. “The lessons of China’s transition to a market economy.” Cato Journal 16(2): 201-31 (online)

Qian, Yingyi. 2003. “How reform worked in China” in In Search of Prosperity: Analytic Narratives on Economic Growth, edited by Dani Rodrik, Princeton University Press, 2003, pp. 297-333 (also available in word format at http://eres.bus.umich.edu/docs/workpap-dav/wp473.pdf)

Black, Bernard and Anna Tarassova. 2002. “Institutional reforms in Transition: A case study of Russia.” Supreme Court Economic Review 10: 211- 79 (also available in word format through http://papers.ssrn.com)

Making a market in a market economy (Classes 17-18)

Coase, Ronald. 1959. “The Federal Communication Commission.” Journal of Law and Economics 2: 1-40 (Jstor)

Hazlett, Thomas. 1998. “Assigning Property Rights to Radio Spectrum Users: Why Did FCC License Auctions Take 67 Years?” Journal of Law and Economics 41(2): 529-76. (and Coase’s comment, pp. 577-80) (online)

Benkler, Yochai. 2002. “Some economics of wireless communication.” Harvard Journal of Law and Technology 16 (1): 1-59. (also available at http://cyberlaw.stanford.edu/spectrum/OwlEcon_Final.pdf)

Sandel, Michael. 1998. “What Money can’t buy: the moral limits of markets”. Available at http://www.tannerlectures.utah.edu/lectures/sandel00.pdf