International Political Economy Midterm PDF

A.​ What is the International Political Economy? General Definitions (according to Dr. Trinidad’s discussions) General Terms: 1.​ Multidisciplinary: Multiple distinct disciplines in approaching a topic 2.​ Interdisciplinary: Mixing multiple disciplines in approaching a topic 3.​ Subsidy: A...

A.​ What is the International Political Economy? General Definitions (according to Dr. Trinidad’s discussions) General Terms: 1.​ Multidisciplinary: Multiple distinct disciplines in approaching a topic 2.​ Interdisciplinary: Mixing multiple disciplines in approaching a topic 3.​ Subsidy: Aid from the government to reduce the cost of production The earliest political economists were mercantilists. An interdisciplinary field combining politics and economics. Acknowledging the inseparable relationship between politics and economics. Logic of the market: Based on functional integration, seeks efficiency Logic of the state: Based on territory and loyalty, seeks intervention in the market Definitions by Thomas Oatley Battle between winners and losers of global economic exchange. Four Issue Areas 1.​ International trade system 2.​ International monetary system 3.​ Multinational corporations 4.​ Economic development Consequences of Resource Allocation 1.​ Welfare: Determination of societal well-being 2.​ Distributional: How income is distributed between countries and groups Research Traditions 1.​ Explanatory: Explains the foreign policies, ‘why?’ 2.​ Evaluative: Assessing the outcomes TRADITIONAL SCHOOLS IN IPE: Mercantilism, Liberalism, Marxism 1.​ Rise of Mercantilism (17th to 18th Century) -​ Acquiring trade from abroad. -​ Connection of national power and wealth: State power is the ultimate goal, economics is the tool. -​ Manners of Trade a.​ Manufacturing > Agriculture -​ Hamilton’s Report  1.​ National self-reliance 2.​ Protection of the Infant Industries b.​ Exports > Imports c.​ Accumulation of gold and reserves. d.​ Trade as being either in surplus or deficit (zero-sum) 2.​ Liberalism: Challenging Mercantilist Dominance -​ Free and unrestricted trade not interfered by the government (laissez-faire) -​ Classical thinkers: Adam Smith and David Ricardo -​ Three Central Arguments 1.​ To enrich individuals and not enhance the state’s power (Wealth of individuals). 2.​ Enriching from trade regardless if positive or negative. 3.​ Primary commodities over manufactured goods. -​ Favor of a market-based system that is mutually beneficial (Free-market). -​ Adam Smith’s Wealth of Nations 1.​ Competition as a regulator for exchange. 3.​ Marxism: Criticizing Capitalism -​ Working class vs. the Capitalist class -​ Explains the brutal division and specialization of labor. a.​ Workers are paid at a subsistence wage. -​ Three Dynamics 1.​ Competition forces efficiency increase and stock, capital is at the hands of an elite. 2.​ Falling profit rate. Lower profits result in wage decrease. 3.​ Imbalance between purchase and production abilities. a.​ Large capital means ability to produce. b.​ Low profit means the inability of consumers to purchase the goods produced. -​ The value of manufactured goods is determined by the amount of labor used to make them. -​ State is an agent of capitals, reinforcing them with policies. -​ Exploitation of the developing world by capitalist nations. Definitions by Robert Gilpin Smith’s Wealth of Nations: Political Economy is a branch of science by statesmen and legislators. John Mill: A science on how a nation should be rich. Alfred Marshall: Political economy heavily focused on the study of economy. Lionel Robbins: Studies human behavior as a relationship between ends and scarce means. Methodological Individualism: Applies to all types of human behavior which many economists and social scientists use to explain social institutions, public policy, and other social activities that are usually seen as non-economic in nature. Important Contributions 1.​ Chicago Schools -​ Methodological individualism or the rational actor model of human behavior (applicable to choosing a sexual partner or voters choosing the next President). Efforts to maximize and optimize self-interest. -​ Natures and Behaviors: 1.​ Endogenous: Factors inside economics 2.​ Exogenous: Factors outside economics. -​ Three Key Areas Public-Choice Neo-Institutionalism New Political Economy 1.​ Behavior of 1.​ Role of 1.​ Competition for politicians and Institutions private government advantage. officials. Consequence of rational individuals that Example: Role of government maximize economic Trade protection (Tariffs intervention interests. and other blocks) can be best understood as rent-seeking behavior. 2.​ Government 2.​ Institutions have 2.​ Reflects the Failure: constraining and values and Economic enabling effects interests of the distortions on the behavior dominant society. caused by the of actors. They have  government are distributive the threat to effects. economic well-being. The government is an apparatus for their private interests. 3.​ Rent-seeking 3.​ These may be behavior: formal and Gain wealth informal without institutions. reciprocation. From Political Economy to Neoclassical Economy… The Science of Rational Choice Study of choice under scarce conditions. It guides individuals to make an efficient resource allocation. Explains human behavior based on market principles. The Universal Social Science The tools define the subject and the domain is determined by the applicability and range. Its methods and assumptions can be applied anywhere. Krugman’s arguments: 1.​ Extensive and explicit rational means 2.​ Guides efforts to maintain preferences. 3.​ Markets develop naturally in order to coordinate. Equilibrium Demand is equal to a market’s supply and all resources are fully utilized. Markets move towards equilibrium when no individual or firm can achieve greater welfare by altering resource allocations without decreasing welfare. The market is self-regulating and correcting: Invisible Hand. -​ Coordination with individuals is spontaneous and is guided by self-interest. Neoclassical Economics vs. Political Economy based on Robert Gilpin’s Distinctions Areas of Study Neoclassical Political Unit of Analysis Markets as an equilibrium. Non–market, exogenous factors. Supply matches demand; balance among the opposing forces. Nature of Actors Rational, promotes economic Values competition over welfare (profits and gains). economic policy and promotion of self-interest. Changes in price and quantities signal change in Everyone is assumed to seek responses in decisions. the same range of economic objectives. Individuals make decisions based on prices and their objective is to increase profits. View of the Economy Nature of a Market EMBEDDED in a socio-political system. A collection of markets that rise spontaneously to meet Government, powerful needs. They create markets, dominant interests, and money, and economic history determine the goals. institutions. -​ Determines how markets should play in ‘Smoothly functioning the system. machine’ governed by objective laws. Markets are interdependent. Dynamic and functions in its own logic without central direction. Dynamics of the World Focuses on endogenous Only concerned in the Economy factors as the predominant political origins of crises; cause of crises. exogenous factors. Susan Strange’s Assumptions on Theory and Definition of IPE Negative Assumptions on Theory 1.​ Merely description and uses new terms to describe known phenomena and putting them without causal connection. 2.​ Rearranges known facts in new categories and does not constitute its own explanation. 3.​ Simplifying concepts borrowed from other social sciences. 4.​ The choice of what is counted as coincidental and subjective is too subjective to provide a basis for explanation. Positive Assumptions 1.​ Explain the international system that is not easily explained by common sense. 2.​ Does not need to predict or prescribe. 3.​ Theory should be scientific only in the sense that the theorist respects the scientific virtues of rationality and aspires to the systemic formulation. IPE concerns the social, political, and economic arrangements affecting the global systems of production, exchange and distribution, and the mix of values reflected therein. It cannot avoid a close concern with causes. IPE must be concerned with the future possibilities. It may not be predicted but it cannot be ignored. Power is structural, not relational. -​ They do not necessarily interact with each other. Dominant IPE Approach 1.​ Identifying sources of economic interests, analysis of competing interests. 2.​ How these are translated into policies, analysis of national processes and institutions. 3.​ Consequences of these policies and choices on the global economy, analysis of foreign economic policies.