The
Department
of Economics
Economics
472 Professor
Barry W. Ickes
Economics
of Transition Spring
2007
Office: 618 Kern Graduate Bldg.
Office Hours: Tuesday 10-11, Wednesday 10-11
Introduction
With the demise of communism in
Central and
The (optional) textbook for this
course is Daniel Gros and Alfred Steinherr, Economic
Transition in Central and Eastern Europe (GS).[a] Most
of the readings will be on the website, and I will put some of my lecture notes
there as well.
Important articles are listed below
and are available on the web at the site for this course:
http://econ.la.psu.edu/~bickes/econ372home.htm. Materials will be added to the
web list periodically, so you should check it for new items. The website for
the course is crucial not only for readings but for class announcements, and
updates to the syllabus. These will happen periodically. You should bookmark
the website and get used to surfing it.
Course Issues and
Philosophy
It is useful to make clear at the
start some issues of teaching philosophy. As you will learn, I find this
material very interesting. My goal is to make you find it interesting. I enjoy
the material and am very enthusiastic about it. I will try hard to convey why
this is interesting and important. There are costs to this approach, however.
This is not material that has been taught so many times that it practically
runs by itself. There is no autopilot in this course. This means that that you
will have to work. You won’t do well if you are not prepared to work hard and
think. I am not, however, a monitor. I will not enforce you to supply effort. I
expect that you will put in the effort to learn. But it is up to you.
This
course is clearly not just theory, and the connection with real world events
will be evident. This means that the material is dynamic. Events will upset the
order of the topics. And, as new developments occur I will restructure the
plan. The syllabus is only a rough guide to what we will do each week. If you
desire lots of structure you are in the wrong
course. I cannot emphasize this enough. I must also point out that the exams
are not multiple choice. Past exams
are available on the website. Examine them now. If you don’t like such exams I
suggest that you take appropriate action now.
Attendance in this course accounts for 5%. This is a somewhat small (though not insignificant) direct contribution to your grade. The indirect contribution, however, is much larger. One reason is that the lectures do not repeat what is in the book. They are complements, not substitutes (what point would there be to the lectures, otherwise). Past experience suggests that students who do not attend class typically fail exams and drop out. [b] Perhaps you can be the exception. In any event, there will be a seating chart, and I will record attendance.
Even though attendance will be recorded, it is still a choice left up to you, tardiness, however, is not. Showing up late to class not only demonstrates a lack of respect to the instructor, it is also shows a lack of respect to other students. It is disruptive to lectures. It is a negative externality that is dumped on your fellow students. It is not fair to other students to show up late. Better not to show up at all than to show up late (unless you have a good excuse). Of course, it is best to show up on time. You are all too civilized to dump your garbage on your neighbor’s lawn or car. Extend this courtesy to fellow students.
Course Requirements
There will be two midterms and a
final exam. The weight for each midterm
will be about 30%. The final will be worth approximately 40%. The dates of the midterms will be announced.
They will be held in class. The exams will not be multiple choice, and
bluebooks will be required for the midterms and final. Review questions will be
posted on the website (past sets are already there).
Administrative matters will be
announced on the website for the course. Additional reading materials and
review questions will also be placed there.
Prerequisites: Econ 2 or Econ 4 or
Econ 14.
Course Outline
The list of topics will resemble the
following outline. This is a plan not a blueprint. We may take detours from
time to time. Updates will appear on the course website. If you need a
week-by-week detailed plan of readings this is not the course for you.
1. Introduction: The Meaning of Transition
Lecture Note, Introduction to Transition
GS, chapter 1
2. The Legacy of Central
Planning
a. The Mechanism and Logic of Central Planning
b. The Economic Structure of Soviet-type Economies
c. The Collapse of Central Planning
GS, Chapter 2
Lecture Note on Legacies of Central
Planning
Lecture Note on Collapse of Central Planning
Grossman, Gregory, “Notes for a
Theory of the Command Economy,” Soviet Studies, XV, 2, October
1963:101-123.
Ericson, Richard, "The
Classical Soviet-Type Economy: Nature of the System and Implications for Reform,"
Journal of Economic Perspectives,
Fall, 1991. (need to be logged on from PSU)
Ickes, Barry W., “Dimensions of Transition in
Russia” in The Russian Economy in the
1990's, B. Granville and P. Oppenheimer, eds.,
Ofer, Gur, "Soviet
Economic Growth: 1928-1985," Journal
of Economic Literature, December
1987. (need to be logged on from PSU)
3. How to Organize Transition
a. Gradual versus Comprehensive Reform, “Shock Therapy” versus
Gradualism
GS, chapter 3, 6.
Fischer, S. and A. Gelb,
“The Process of Socialist Economic Transformation,” Journal of Economic Perspectives, Fall, 1991. (web)
Sachs, Jeffrey D., and
David Lipton, “Creating
a Market Economy in Eastern Europe: The Case of Poland,” Brookings Papers on Economic Activity,
1990:1.
Murphy, Kevin, Andrei
Shleifer, and Robert Vishny, “The Transition to
a Market Economy: Pitfalls of Partial Reform,” The Quarterly Journal of
Economics, Vol. 107, No. 3. (Aug., 1992), pp. 889-906.
b. Liberalization:
Internal and External
Lecture Note on Liberalization and
Price
Liberalization
c. Transition and Structural Change,
Investment is Transition
[first midterm about here]
4. Macroeconomic Stabilization in Transition Economies
a. The Legacy of macroeconomic imbalances
GS, chapter 3.
b. The Record of Stabilization in Transition Economies
c. Why Has Output Fallen in Transition
Lecture Note on the Output Fall
GS, chapter 7
Sachs, Jeffrey D., “Russia’s
Struggle with Stabilization,” Annual
World Bank Conference on Development Economics, World Bank, 1994.
Fischer, Stanley and
Ratna Sahay, “The
Transition Economies After Ten Years.”
Elisabetta Falcetti,
Martin Raiser and Peter Sanfey, “Defying the Odds: Initial Conditions, Reforms
and Growth in the First Decade of Transition.” (Web)
5. Privatization
a. The Firm in Transition
b. Alternative Plans of Privatization
i. Spontaneous Privatization
ii. Mass Privatization
(1) Voucher Privatization in the
(2) Privatization via Liquidation in
Lecture Note on Privatization
Brada, J.C.,
“Privatization Is Transition -- Or is it?” Journal
of Economic Perspectives, 10, 2, Spring 1996: 67-86. (web)
Megginson, W., and J.
Netter, “From State to Market: A Survey of Empirical Studies on Privatization,”
Journal of Economic Literature, Vol.
39, No. 2, June 2001. (web)
Djankov, S. and P.
Murrell, “Enterprise
Restructuring in Transition: A Quantitative Survey.”
6. Restructuring, Ownership Change, and Improvements in
Performance
a. Creating Markets for Corporate Control in Planned Economies
Berglof, E., and P. Bolton, “The Great Divide
and Beyond: Financial Architecture in Transition,” Journal of Economic Perspectives, 16, 1, Winter 2002: 77-100.
b. Restructuring
Gaddy, Clifford and
Barry W. Ickes, “To Restructure or Not to Restructure: Informal Activities and
Transition.” (web)
Commander, Dutz, and
Stern, “Restructuring in Transition Economies: Ownership, Competition and
Regulation.” (web)
c.
Gaddy, Clifford and
Barry W. Ickes, “
GS, chapter 8.
[second midterm about here]
7. Institutional Development and Transition
Timothy Frye and Andrei
Shleifer, “The
Invisible Hand and the Grabbing Hand,” The
American Economic Review, Vol. 87, No. 2, (May, 1997), pp. 354-358. (web)
Joseph Stiglitz, "Whither
Reform: Ten Years of Transition." (web)
Roland, G., “The
Political Economy of Transition,” Journal
of Economic Perspectives, Winter 2002, 29-51.
8. The Record on Transition
a. A Comparative Analysis of the Transition Record
b. Poverty, living standards, inequality
GS, chapter 4-5,
Svejnar, Jan, “Transition Economies:
Performances and Challenges,”
Guriev and Ickes, Microeconomic Aspects of
Economic Growth in Eastern Europe and the Former Soviet Union (web)
c.
Lecture Note on China
Qian, Yingyi, “How
Reform Worked in China,” in Dani Rodrik, editor, In Search of
Prosperity: Analytic Narratives on Economic Growth, Princeton University
Press, 2003, pp. 297-333.
Sachs, Jeffrey D., and
Wing Thye Woo, “Structural
Factors in the Economic Reforms of China, Eastern Europe, and the Former Soviet
Union,” Economic Policy,
Vol. 18, April 1994.
9. Conclusions
Lecture Note
Valid Excuses
During the course many
possible events may occur that would result in your inability to attend class,
attend exams, or perform at a minimally acceptable level during an
examination. Illness or injury, family
emergencies, certain University-approved curricular and extra-curricular
activities, and religious holidays can be legitimate reasons to miss class or
to be excused from a scheduled examination.
In the case of your own
illness or injury, a note from a physician, physician’s assistant, or a
nurse-practitioner that says, among other things, “...unable to attend” is
required. The words “unable to attend”
must be precisely stated in the note. If the note leaves any ambiguity on this
point you will not be excused. Be
advised that University Health Services cannot provide such verification unless
treatment is rendered by them and in their judgment the verification is
medically justified (their verification policy can be accessed at http://www.sa.psu.edu/ja/PoliciesRules.pdf, page 38). Further,
the note must be provided to the instructor within one week of the missed
course event (in cases of extended illness or incapacity, the note must be
provided within a week of the end of your illness or incapacity, and it should
specify the period of your inability to attend the course).
With regard
to family emergencies, you must provide verifiable documentation of the
emergency. Given the vast array of
family emergencies the instructor will provide precise guidance as to what
constitutes adequate documentation.
Unless the emergency is critical you should notify the instructor in
advance of your absence from the scheduled course event. In cases of critical emergencies, you must
notify the instructor within one week of your absence.
For
University-approved curricular and extra-curricular activities, verifiable
documentation is also required. The
student should obtain from the unit or department sponsoring the activity a
letter (or class absence form) indicating the anticipated absence(s). The letter must be presented to the
instructor at least one week prior to the first absence.
In the case
of religious holidays, the student should notify the instructor by the third
week of the course of any potential conflicts.
[a] Students sometimes ask me “what does it mean for a book to be optional?” Basically, everything is optional. Studying is optional. I cannot require you to do anything. Your decision is based on your knowledge of the material, yourself-confidence in learning, and your interest in the subject. The more interested you are the more you want to learn, and that means more reading.
[b] This does not really explain why I give points for attendance. After all, aren’t the costs of absenteeism internalized (i.e., via a low grade)? The problem is not that students who fail to attend lectures do poorly on exams. It is that students who fail to attend lectures and then do poorly on exams then pose an extra burden (on me) later in the course (pleading for extra credit, trying to learn in 3 weeks what they should have learned over 12 weeks, etc.). This makes paternalism a potentially optimal social policy