Political Economy: Theories and Concepts

NYU Department of Politics

G53.1400.001

Professor Prosper Bernard Spring 2011

Office hours: before/after class Friday 10am-12pm
Pb80@nyu.edu 19 W. 4th Street (Rm. 217)

Course Description: This course is a survey of the core concepts and approaches in
political economy. The course is divided into four parts. The first part explores economic
approaches to political action and institutions. The topics of discussion will include
rational choice, collective action, transaction costs, and non-market failures. Part two
examines the institutional foundations of capitalism from a cross-national perspective. In
particular, we will compare different types of political economic institutional
arrangements and evaluate their performance with regard to inflation, unemployment,
growth, and investment. Part three focuses on the dynamic relationships among
democracy, development, and equality. The areas of study will include political business
cycles, democratization, social welfare, and distribution and redistribution. Part four
provides an overview of selected topics relating to the political economy of international
relations.

Requirements:

1. Each week, students are expected to attend class and to participate in class
discussions. Each student is required to summarize two required readings during the
semester. The summary assignment involves an in-class presentation that must not
exceed 10 minutes and distribution of a one page summary of the selected readings to
the class. Your overview of the readings should begin by stating the key arguments
developed in the selected readings.

2. You are also required to write three review essays (4-6 pages long or around 1,500
words) relating to three weekly topics. The essays must be based on the required
readings associated with the selected weekly topics. Consider the following questions
as you develop your response essays: What are the main arguments developed in the
literature under review? What empirical data are used to support these arguments? In
what ways do the readings under review contribute to our understanding of the area of
study in question? Are there theoretical, conceptual, and methodological differences
and similarities in the scholarship under review?

Each essay is due the week after we cover the weekly topic on which your essay is
based. Please note the following submission schedule for the first two essays: your
first essay must be submitted no later than February 28; and second essay no later
than April 22.

3. Finally, the course requires that you complete a take home exam at the end of the
semester. The exam will be available April 22 and due by May 6.
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Grading
Three review essays: 60%
Take home exam: 20%
Class participation: 15%
In-class summary: 5%

Readings
There are several books and many articles required for this course. Below, you will find a
list of books available for purchase at the bookstore; these books are also on reserve.
Readings in the form of book chapters are available in the library reserve reading room.
Readings in the form of journal articles are available through Bobst Electronic Journals.

Pranab Bardhan, Awakening Giants, Feet of Clay: Assessing the Economic Rise of
China and India (Princeton University Press, 2010).
Carles Boix, Democracy and Redistribution (New York: Cambridge University Press,
2003).
Avinash Dixit, The Making of Economic Policy: A Transaction Cost Politics
Perspective (The MIT Press, 1998).
Jon Elster, Nuts and Bolts for the Social Sciences (Cambridge University Press,
1989).
Charles Wolf, Jr., Markets or Governments: Choosing between Imperfect Alternatives
(The MIT Press, 1993). [Optional]

COURSE OUTLINE

January 28: What is Political Economy?

James Alt, Comparative Political Economy: Credibility, Accountability, and
Institutions, in Ira Katznelson and Helen Milner, Political Science: The State of the
Discipline (New York: W.W. Norton, 2002) [optional].

Torben Iversen, Democracy and Capitalism, in Barry Weingast and Donald Wittman,
eds., The Oxford Handbook of Political Economy (Oxford University Press, 2006)
[optional]

Charles Wolf, Jr., Markets or Governments: Choosing between Imperfect Alternatives

(The MIT Press, 1993) [Chapter 1].

Recommended:
James Alt and Alec Crystal, Political Economics (University of California Press,
1983).
James Caporaso and David Levine, Theories of Political Economy (Cambridge
University Press, 1992)
Torun Dewan and Kenneth Shepsle, Review Article: Recent Economic Perspectives
on Political Economy, Part I & II, British Journal of Political Science 38 (Spring 2008):
363-382 and (Summer 2008): 543-564.
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Adam Przeworski, States and Markets: A Primer in Political Economy (Cambridge

University Press, 2003).

Part I: Economic Approaches to Political Action and

Institutions
February 4: Rationality in Economics and Politics
Jon Elster, Nuts and Bolts for the Social Sciences (Cambridge University Press, 1989)
[Section Two].

Margaret Levi, Reconsiderations of rational choice in comparative and historical

analysis, in Mark Irving Lichbach and Alan Zuckerman, eds., Comparative Politics:
Rationality, Culture, and Structure (Cambridge University Press, 2009).

Recommended:
Donald Green and Ian Shapiro, Pathologies of Rational Choice Theory (Yale
University Press, 1994).
Margaret Levi, The Limits of Rational Choice Theory. (University of Chicago Press,
1990).
Margaret Levi, The Economic Turn in Comparative Politics, Comparative Political
Studies 33 (August/September 2000): 822-44.
Adam Przeworski, Marxism and rational choice, Politics and Society 14 (1985):
379-409.

February 11: Interest Groups and Collective Action

Jon Elster, Nuts and Bolts (Cambridge University Press, 1989) [Chapter 13].

William Mitchell and Michael Munger, Economic Models of Interest Groups: An

Introductory Survey, American Journal of Political Science 35 (May 1991): 512-546.

Mancur Olson, The Rise and Decline of Nations: Economic Growth, Stagflation, and
Social Rigidities (Yale University Press, 1982) [chapters 1-3].

Recommended:
Scott Ainsworth, Analyzing Interest Groups: Group Influence on People and
Policies (W.W. Norton, 2002).
Peter Katzenstein, Small States in World Markets (Cornell University Press, 1985).
Mancur Olson, The Logic of Collective Action: Public Goods and The Theory of
Groups (Harvard University Press, 1971).
George Stigler, The Theory of Economic Regulation, Bell Journal of Economics
and Management Science 2 (Spring 1971): 1-21.
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February 18: Approaches to nonmarket institutions

Avinash Dixit, The Making of Economic Policy: A Transaction Cost Politics Perspective
(The MIT Press, 1998) [Chapters 1 and 2].

Charles Wolf, Jr., Markets or Governments: Choosing between Imperfect Alternatives

(The MIT Press, 1993) [Chapters 3 and 4].

Recommended:
R. H. Coase, The Nature of the Firm, Economica (November 1937): 386-405.
Margaret Levi, Of Rule and Revenue (University of California Press, 1988).
Douglass North, Structure and Change in Economic History (Norton, 1985).
Douglass North, Institutions, Institutional Change, and Economic Performance
(Cambridge University Press, 1990.
Oliver Williamson, The Economic Institutions of Capitalism: Firms, Markets, and
Relational Contracting (Free Press, 1985).

Part II: Institutional Foundations of Capitalism

February 25: Comparative Capitalism
John Campbell and Ove Pedersen, The Varieties of Capitalism and Hybrid Success:
Denmark in the Global Economy, Comparative Political Studies 40 (March 2007): 307-
32.

Colin Crouch, Models of Capitalism New Political Economy 10 (December 2005):

439-56.

Peter Hall and David Soskice, An Introduction to Varieties of Capitalism in Peter Hall
and David Soskice, eds., Varieties of Capitalism (Oxford University Press, 2001): 1-44.
Link: http://www.people.fas.harvard.edu/~phall/VofCIntro.pdf

Cathie Jo Martin and Duane Swank, The Political Origins of Coordinated

Capitalism: Business Organizations, Party Systems, and State Structure in the Age of
Innocence, American Political Science Review 102 (May 2008): 181-198.

Recommended:
Bob Hancke, Debating Varieties of Capitalism: A Reader (Oxford University Press,
2009).
Wolfgang Streeck and Kozo Yamamura, eds., the Origins of Nonliberal Capitalism:
Germany and Japan in Comparison (Cornell University Press, 2002).
Kozo Yamamura and Wolfgang Streeck, eds., The End of Diversity? Prospects for
German and Japanese Capitalism (Cornell University Press, 2001).
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March 4: Corporatism
Lucio Baccaro and Marco Simoni, Policy Concertation in Europe: Understanding
Government Choice, Comparative Political Studies 41 (October 2008): 1323-48.

David Cameron, Social Democracy, Corporatism, Labour Quiescence and the

Representation of Economic Interest in Advanced Capitalist Society, in Order and
Conflict in Contemporary Capitalism: Studies in the Political Economy of Western
European Nations, ed., John Goldthorpe (New York: Oxford University Press, 1984).

Barry Eichengreen and Torben Iversen, Institutions and Economic Performance:

Evidence from the Labour Market, Oxford Review of Economic Policy 15 (1999): 121-
138.

Alan Siaroff, Corporatism in 24 industrial democracies: Meaning and measurement,

European Journal of Political Research 36 (1999): 175-205.

Recommended:
Lars Calmfors and John Driffill, Bargaining structure, corporatism, and
macroeconomic performance, Economic Policy (April 1998): 13-61.
Isabela Mares, Taxation, Wage Bargaining, and Unemployment (New York:
Cambridge University Press, 2006).
Kathleen Thelen, The Political Economy of Business and Labor in the Developed
Democracies, in Ira Katznelson and Helen Milner, Political Science: The State of the
Discipline (New York: W.W. Norton, 2002).

March 11: Monetary Regimes and Macroeconomic Performance

Alberto Alesina and Lawrence Summers, Central Bank Independence and
Macroeconomic Performance: Some Comparative Evidence, Journal of Money, Credit,
and Banking 25 (May 1993): 151-162.

William Bernhard, J. Lawrence Broz, William R. Clark, The Political Economy of

Monetary Institutions, International Organizations 56 (Autumn 2002): 693-723.

J. Lawrence Broz and Michael Plouffe, The Effectiveness of Monetary Policy Anchors:
Firm-Level Evidence, International Organizations 64 (Fall 2010): 695-717.

Robert Franzese and Peter Hall, Institutional Dimensions of Coordination Wage

Bargaining and Monetary Policy, in Torben Iversen and Jonas Pontusson, eds., Unions,
Employers, and Central Banks (New York: Cambridge University Press, 2000).

Recommended:
J. Lawrence Broz, Political System Transparency and Monetary Commitment
Regimes, International Organization 56 (Autumn 2002).
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Robert Franzese, Macroeconomic Policies of Developed Democracies (New York:

Cambridge University Press, 2002).
Torben Iversen, Contested Economic Institutions (New York: Cambridge University
Press, 1999).
Philip Keefer and David Stasavage, Checks and Balances, Private Information, and
Credibility of Monetary Commitment, International Organization 56 (Autumn 2002).
Finn Kydland and Edward Prescott, Rules rather than discretion: The Inconsistency
of Optimal Plan, Journal of Political Economy 85 (June 1977): 473-90.

Part IV: Democracy, Development & Equality

March 25: Partisan and Electoralist Models

Michael Alvarez, Geoffrey Garrett, and Peter Lange, Government Partisanship, Labor
Organization, and Macroeconomic Performance, American Political Science Review 85
(June 1991): 539-556.

Christopher Anderson, The End of Economic Voting? Contingency Dilemmas and the
Limits of Democratic Accountability, Annual Review of Political Science 10 (2007):
271-296.

Carles Boix, Political Parties and the Supply Side of the Economy: The Provision of
Physical and Human Capital in Advanced Economies, 1960-90, American Journal of
Political Science 41 (July 1997): 814-945.

Robert Franzese, Jr. Electoral and Partisan Cycles in Economic Policies and Outcomes,
Annual Review of Political Science 2002 (5): 369-421.

Recommended:
Alberto Alesina, Politics and Business Cycles in Industrial Democracies, Economic
Policy 8: 57-98.
James Alt, Political Parties, World Demand, and Unemployment: Domestic and
International Sources of Economic Activities, American Political Science Review 79:
1016-40.
Raymond Duch and Randolph Stevenson, The Economic Vote: How Political and
Economic Institutions Condition Election Results (Cambridge University Press, 2008).
Douglass Hibbs, Political Parties and Macroeconomic Policies, American Political
Science Review 71 (December 1977).

April 1: Democracy and Development

Daron Acemoglu and James Robinson, Economic Origins of Dictatorship and
Democracy (Cambridge University Press, 2006) [pp. 1-87].
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Carles Boix, Democracy and Redistribution (Cambridge University Press, 2003) [pages
1-97].

Recommended:
Margaret Levy, Of Rule and Revenue (Berkeley: University of California Press,
1988).
Adam Przeworski et al., Democracy and Development: Political Institutions and
Well-Being in the World, 1950-1990 (New York: Cambridge University Press, 2000).
Dietrich Rueschemeyer, Evelyne Huber Stephens, and John Stephens, Capitalist
Development and Democracy (Chicago: University of Chicago Press, 1992.

April 8: Economic Development

Pranab Bardhan, Awakening Giants, Feet of Clay: Assessing the Economic Rise of China
and India (Princeton University Press, 2010).

Recommended:
Philip Keefer, What Does Political Economy Tell Us About Economic
Developmentand Vice Versa? Annual Review of Political Science (2004) 7: 247-72.
Anthony Payne and Nicola Phillips, Development (Polity Press, 2010).
Adam Przeworski, The Last Instance: Are Institutions the Primary Cause of
Economic Development? Archives of European Sociology (2004).

April 15: Approaches to the Welfare State

Carles Boix, Democracy and Redistribution (Cambridge University Press 2003) [Chapter
5, pp. 171-203].

Gosta Esping-Andersen, The Three Worlds of Welfare Capitalism (Princeton: Princeton

University Press, 1993) [chapter1, pp. 1-34].

Isabela Mares and Matthew Carnes, Social Policy in Developing Countries, Annual
Review of Political Science 2009 (12): 93-113.

Paul Pierson, The New Politics of the Welfare State, World Politics 48 (1996): 143-
179.

Recommended:
Sarah Brooks, Social Protection and the Market in Latin America: The
Transformation of Social Security Institutions (Cambridge University Press, 2009).
Margarita Estevez-Abe, Torben Iversen, and David Soskice, Social Protection and
the Formation of Skills: A Reinterpretation of the Welfare State, in Peter Hall and David
Soskice, eds., Varieties of Capitalism (New York: Oxford University Press, 2001).
Stephen Haggard and Robert Kaufman, Development, Democracy, and Welfare
States: Latin America, East Asia, and Eastern Europe (Princeton University Press, 2008).
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Evelyne Huber and John Stephens, Development and Crisis of the Welfare State:
Parties and Policies in Global Markets (Chicago: The University of Chicago Press,
2001).
Christopher Pierson, Beyond the Welfare State: The New Political Economy of
Welfare, third edition (Penn. State University Press, 2007).

April 22: Inequality in Affluent and Developing Countries

Andrea Brandolini and Timothy Smeeding, Patterns of Economic Inequality in Western
Democracies: Some Facts on Levels and Trends, PS: Political Science and Politics 34
(January 2006): 21-26.

Lane Kenworthy and Jonas Pontusson, Rising Inequality and the Politics of
Redistribution in Affluent Countries, Perspectives on Politics 3 (September 2005): 449-
471.

Symposium: New Approaches to the Politics of Inequality in Developing Countries

PS: Political Science and Politics (October 2009). Read: Editors Introduction (pp. 629-
631); Echeverri-Gent (pp. 633-638); van de Walle (639-643); Boix (pp. 645-649); Huber
(pp. 651-655); and Kaufman (pp. 657-650).

Kenneth Scheve and David Stasavage, Institutions, Partisanship, and Inequality in the
Long Run, World Politics 2 (April 2009): 215-253.

Recommended
Alberto Alesina and Edward Glaeser, Fighting Poverty in the US and Europe: A
World of Difference (New York: Oxford University Press, 2004).
Pablo Beramendi and Christopher J. Anderson, eds., Democracy, Inequality and
Representation (Russell Sage Foundation, 2008).
Jonas Pontusson, Inequality and Prosperity: Social Europe vs. Liberal America
(Ithaca: Cornell University Press, 2005).

Part V: The Political Economy of International Relations

April 29: Contemporary Issues in International Political Economy

C. Fred Bergsten, The Dollar and the Deficits: How Washington Can Prevent the Next
Crisis, Foreign Affairs (November/December 2009): 20-38.

David Lake, International Political Economy: A Maturing Interdiscipline, in Barry

Weingast and Donald Wittman, eds., The Oxford Handbook of Political Economy.
(Oxford University Press, 2008): 757-777.

Helen Milner and Bumba Mukherjee, Democratization and Economic Globalization,

Annual Review of Political Science 12 (2009): 163-181.
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Layna Mosley and David Andrew Singer, The Global Financial Crisis: Lessons and
Opportunities for International Political Economy, International Interactions 2009 (35):
420-429.

Recommended
Robert Gilpin, The Political Economy of International Relations (Princeton:
Princeton University Press, 1987).
Robert Gilpin, Global Political Economy: Understanding the International Economic
Order (Princeton: Princeton University Press, 2001).
Andrew Walter and Gautam Sen, Analyzing the Global Political Economy (Princeton
University Press, 2008).
Barry Weingast and Donald Wittman, eds., The Oxford Handbook of Political
Economy (Oxford University Press, 2006).

May 6: The State in the Global Economy

Ian Bremmer, State Capitalism Comes of Age, Foreign Affairs (May/June 2009): 40-
55.

Nancy Brune and Geoffrey Garrett, The Globalization Rorschach Test: International
Economic Integration, Inequality, and the Role of Government, Annual Review of
Political Science 8 (2005): 399-423.

Marius Busemeyer, From myth to reality: Globalisation and public spending in OECD
countries revisited, European Journal of Political Research 48 (2009): 455-482.

Hyeok Yong Kwon and Jonas Pontusson, Globalization, labour power and partisan
politics revisited, Socio-Economic Review (2010): 1-31.

Recommended:
Pranab Bardhan, Samuel Bowles, and Michael Wallerstein, eds., Globalization and
Egalitarian Redistribution (Princeton: Princeton University Press, 2006)
Mark Brawley, The Politics of Globalization: Gaining Perspective, Assessing
Consequences (Toronto, Canada: Broadview Press, 2003).
Jude Hays, Globalization & the New Politics of Embedded Liberalism (Oxford
University Press, 2009).
Dani Rodrik, Has Globalization Gone Too Far? (Washington D.C.: Institute for
International Economics 1997).
Joseph Stiglitz, Globalization and Its Discontents (New York: W.W. Norton, 2002).
Geoffrey Garrett, Partisan Politics in the Global Economy (Cambridge University
Press, 1998).