Spring 1998

David Latzko
COB 318
Office hours: Mon. 1-2 & 5:30-6:30, Wed. 1:30-4:30, and by appointment


We live in a global economy in which international trade is now more important to the U.S. economy than it used to be. The problem is that most of what a student is likely to read or hear about international economics is simply wrong. The most important thing to get out of this course is how to detect that nonsense. The purpose of the course is to provide students with the tools of analysis to provide a basis for understanding the everyday events which they read about in the newspapers.

The course begins by developing the theory of comparative advantage to explain why nations trade. The question of who gains and who loses from international trade is addressed. The effects of tariffs, quotas, and other forms of protectionism are examined. The issues of trade blocs such as NAFTA and the European community and competitiveness are discussed next. Since trade between countries is conducted with different national currencies, we spend some time looking at the determinants of exchange rates. Opening up an economy to international trade creates several macroeconomic issues which we will examine. The emphasis throughout the course will be on the policy dimensions of the problem.



Peter H. Lindert and Thomas A. Pugel, International Economics (10th edition). Irwin. 1996.

the additional readings will be distributed in class



	Grading Ranges:

	4.0 = 90.0-100%          2.0 = 70.0-74.9%
	3.5 = 85.0-89.9%         1.5 = 65.0-69.9%
	3.0 = 80.0-84.9%         1.0 = 60.0-64.9%
	2.5 = 75.0-79.9%         0.0 = below 60.0%


There may be changes in the assignments and the dates. Students are responsible for learning of any changes in the syllabus that are announced in class.


Students are expected to take full responsibility for their academic work and academic progress. Students are expected to attend class regularly, for consistent attendance offers the most effective opportunity open to all students to gain developing command of the concepts and materials of the course. A study (Romer, JEP, Summer 1993) found that the difference in performance for a student who attends regularly and one who attends sporadically is about a full letter grade. However, attendance in class, in and of itself, is not a criterion for evaluation of the student's degree of success or failure. Furthermore, absences do not alter what is expected of the student qualitatively and quantitatively. Absences will not be used in the computation of grades.

Late assignments will not be accepted. Make-up exams will be given only when the absence of the student results from one of the following causes: illness (where the student is too ill to attend class), religious observance (where the nature of the observance prevents the student from being present during the class period), participation in university activities at the request of university authorities, and compelling circumstances beyond the student's control. Students requesting a make-up exam must furnish documentary support for their assertion that absence resulted from one of these causes.

Course incompletes are not normally offered. The course material is designed to be completed within the semester time frame.

Academic dishonesty will result in a grade of "0" for the course. Students may withdraw from the class through the eighth week of the semester. It is the student's responsibility to ensure that the withdrawal form is returned to the registrar's office. Thereafter, a student may withdraw only for medical reasons, supported by a written excuse from a physician. The expectation of a poor grade is not grounds for withdrawal after the eighth week.

Class participation is highly encouraged. Students are expected to contribute significantly to discussion voluntarily or when called upon.


Two hourly examinations and a final examination will be administered during the semester. The final exam is cumulative while the hourly exams include only the material covered since the previous exam. In addition, problem sets will be assigned each week (except for the weeks of the two hourly exams). These problem sets will cover the material from the previous week's class as well as the assigned articles for the current week.

Each class will end with a "minute paper". A minute paper consists of short responses to two questions: (1) "What was the most important thing you learned today?" and (2) "What didn't you understand?" Minute papers will be evaluated on the basis of quality and quantity.

Students will work in groups of 3 on a project assigned by the instructor. The project will consist of a 12 page paper and a 15 minute presentation to the class.

Finally, please feel free to come see me to ask questions or discuss difficult material. If my office hours are not convenient, you may set up an appointment for an alternative time.


January 12 Why Do Nations Trade?

Lindert & Pugel, Ch. 1, 2, 3

January 19 Winners and Losers from International Trade

Lindert & Pugel, Ch. 4, 5

January 26 Modern Trade Theories

Lindert & Pugel, Ch. 6

February 2 Tariffs and other forms of Protectionism

Lindert & Pugel, Ch. 7, 8, 9

February 9 Fair Trade; Trade Blocs

Lindert, Ch. 10, 11

Sheldon Friedman, "NAFTA as Social Dumping", Challenge, Sept./Oct. 1992, pp. 27-32.

Gary Clyde Hufbauer and Jeffrey J. Schott, "Prescription for Growth", Foreign Policy, Winter 1993-94, pp. 104-114.

February 16 First Hourly Examination

February 23 International Bargaining

John McMillan, Games, Strategies, and Managers, Oxford University Press, 1992, pp. 45-88.

March 9 Trade and the Environment; Political Economy of Trade Policy

Lindert & Pugel, Ch. 12, 14 (pp. 276-281 only)

Jagdish Bhagwati, "The Case for Free Trade", Scientific American, November 1993, pp. 42-49.

Robert Z. Lawrence, "Japan's Different Trade Regime: An Analysis with Particular Reference to Keiretsu", Journal of Economic Perspectives 7(3), Summer 1993, pp. 3-19.

Paul Krugman, "Protectionism: Try It, You'll Like It", International Economy, June/July 1990, pp. 35-39.

March 16 Foreign Exchange

Lindert & Pugel, Ch. 15, 16, 17

Jack L. Hervey, "The U.S. Trade Deficit: Is the Sky Really Falling?", Chicago Fed Letter, June 1995.

March 23 What Determines Exchange Rates?

Lindert & Pugel, Ch. 18, 19, 20

Michael R. Pakko and Patricia S. Pollard, "For Here or to Go? Purchasing Power Parity and the Big Mac", Federal Reserve Bank of St. Louis Review, Jan/Feb 1996, pp. 3-21.

March 30 Second Hourly Examination

April 6 Open Economy Macroeconomics

Lindert & Pugel, Ch. 21, 22

Thomas Klitgaard and Karen Schiele, "The Growing U.S. Trade Imbalance with China", Federal Reserve Bank of New York Current Issues, May 1997.

April 20 More Open Economy Macroeconomics

Lindert & Pugel, Ch. 23, 24

April 27 Group Project Presentations