15.014 | Spring 2016 | Graduate

Applied Macro- and International Economics II

Pages

Case Write-up Questions

The following 6 selected cases have questions to be addressed and written up. Students should work in teams of three to four. The questions address aspects of the case that need further analysis.

Every question should be answered at most in one page, except for the Argentina case which will need 3 pages, one for each of the events you have chosen.

Case Question 1

Case: “U.S. Current Account Deficit,” HBS 9706002.

Is the US sustainable? Find in trading economics the CA and Wage Changes in any of the last three years and do a BBNN diagnostic!

Case Question 2

Case: “Menem and the Populist Tradition in Argentina,” HBS 9700061.

Explain 3 events from the case (such as devaluations, policy choices, growth, change in export prices, etc.). Do the diagnostic, and explain the impact using the BBNN.

Case Question 3

Case: “New Theories of International Trade,” HBS 9390001.

Should UK remain in the European Union? (yes, no) What are the advantages of Protection?

Case Question 4

Case: “Reforming Social Security Around the World,” Kellogg KEL493.

Answer for one country only: How would you change the social security system in (US, France, or Japan)?

Case Question 5

Case: “A Framework to Think About Pollution,” Darden UV5687.

Comment the following Statement: Carbon Tax Markets have the chance to solve the property rights problem that exists in CO2 emissions.

Case Question 6

In one page! What is the solution to the problem of income inequality in a developed nation?

Selected lecture notes for the course are available in the table below.

SES # TOPICS LECTURE NOTES
BBNN Framework
1 PROMISE (Part I) Lecture 1: PROMISE (PDF)
2 BBNN: Internal and External Adjustment Notes not available
3 Short Run Adjustment: ASAD Notes not available
4 Automatic Adjustment and External Account Measurement Notes not available
5 Shocks to BB and NN Notes not available
6 Social Peace Line and Political Cycles Lecture 6: BBNN Argentina (PDF - 1.1MB)
7 Environmental Restriction Line Notes not available
8 Offshoring Exercise Lecture 8: BBNN Offshoring (PDF)
Economic Policy
9 Fish Banks and Pareto Efficiency Notes not available
10 Market Faillure: Natural Monopolies: Natural Resources Notes not available
11 Market Faillure: Crime, Corruption, and Institutions Notes not available
12 Market Faillure: Public Goods: Social Security Lecture 12: Social Security (PDF)
13 Market Faillure: Public Choice: Democracy Lecture 13: Choice (PDF)
14 Market Faillure: Externalities: Lobsters and Taxes Notes not available
15 Market Faillure: Unaceptable Outcomes: Poverty and Inequality Lecture 15: Income Inequality (PDF - 2.4MB)
New Technologies
16 New Technologies: Cryptocurrencies Lecture 16: BitCoin (PDF - 2.8MB)
17 New Technologies: Payment Systems Notes not available
18 New Technologies: Economic Measurement Notes not available
19 PROMISE (Part II) Notes not available
20 Life through Others Notes not available

The readings in this course are from the following three sources:

[MIM] = Rigobon, Roberto. Managerial International Macroeconomics (PDF - 4.1MB). (Preliminary and incomplete, March, 2016).

[FT] = Feenstra, and Taylor. International Economics. Worth Publishers, 2014. ISBN: 9781429278423.

[JG] = Gruber, Jonathan. Public Finance and Public Policy. Worth Publishers, 2015. ISBN: 9781464143335.

SES # TOPICS Cases, Readings, and Videos
BBNN Framework
1 PROMISE (Part I)  
2 BBNN: Internal and External Adjustment [MIM] Chapter 8: BBNN: Basic (PDF).
3 Short Run Adjustment: ASAD Rotemberg, Julio J. “Japan: Betting on Inflation?” Harvard Business School Case. Harvard Business School Publishing. Case: 9–714–040, January, 2014.
4 Automatic Adjustment and External Account Measurement

Alfaro, Laura, Rafael Di Tella, et al. “The U.S. Current Account Deficit.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–706–002, July, 2005.

[FT] Chapter 16: National and International Accounts.

5 Shocks to BB and NN [MIM] Chapter 9: BBNN: Shocks (PDF).
6 Social Peace Line and Political Cycles

Di Tella, Rafael M., and Eliseo Neuman. “Menem and the Populist Tradition in Argentina.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–700–061, March, 2000.

[MIM] Chapter 11: BBNN: Social Peace (PDF).

7 Environmental Restriction Line [MIM] Chapter 12: BBNN: Sustainability (PDF).
8 Offshoring Exercise

Yoffie, David B., and Heather A. Hazard. “New Theories of International Trade.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–390–001, July, 1989.

[MIM] Chapter 14: Trade: Comparative Advantages (PDF - 1.2MB).

[FT] Chapter 2: Trade and Technology: The Ricardian Model.

Economic Policy
9 Fish Banks and Pareto Efficiency Donald N. Stengel “Managerial Economics- Concepts and Principles 8-Market Regulation.”  Harvard Business Review. Harvard Business School Publishing. Case: BEP076, June 15, 2011.
10 Market Faillure: Natural Monopolies: Natural Resources

[MIM] Chapter 18: Preliminaries on Public Finance.

11 Market Faillure: Crime, Corruption, and Institutions  
12 Market Faillure: Public Goods: Social Security

Besanko, David, and Saahil Malik. “Reforming Social Security Around the World.” Harvard Business Review. Harvard Business School Publishing. Case: KEL493, March 25, 2010.

[JG] Chapter 7: Public Goods: Problems and Solutions.

[JG] Chapter 13: Social Security.

13 Market Faillure: Public Choice: Democracy [JG] Chapter 9: Implementing Public Goods: Political Economy and Public Choice.
14 Market Faillure: Externalities: Lobsters and Taxes

Debaere, Peter. “A Framework to Think About Pollution: Externalities, Pollution Taxes, and Cap and Trade.” Harvard Business Review. Harvard Business School Publishing. Case: UV5687. April 26, 2011.

[JG] Chapter 5: Externalities: Problems and Solutions.

[JG] Chapter 6: Externalities in Action: Environmental and Health Externalities.

15 Market Faillure: Unaceptable Outcomes: Poverty and Inequality

Krugman on Piketty:
Krugman, Paul. “The Piketty Panic,” The New York Times, April 24, 2014.

Solow on Piketty:
Solow, Robert M. “[Thomas Piketty Is Right](http://www.newrepublic.com/article/117429/capital-twenty- first-century-thomas-piketty-reviewed).” New Republic, April 2014.

Summers on Piketty:
Summers, Lawrence H. “The Inequality Puzzle.” Democracy, no. 33 (2014): 696.

[JG] Chapters 12 and 17.

New Technologies
16 New Technologies: Cryptocurrencies

Video

Khan Academy. “Bitcoin: What is it?” May 3, 2013.

17 New Technologies: Payment Systems  
18 New Technologies: Economic Measurement  
19 PROMISE (Part II)  
20 Life through Others

Video

TEDx Talks. “How Will You Measure Your Life?” July 17, 2012.

Course Meeting Times

Lectures: 3 sessions / week, 90 minutes / session

Prerequisites

The prerequisite for this course is 15.012 Applied Macro- and International Economics for MBAs or 15.015 Macro and International Economics for Sloan Fellows.

Course Overview

This course is the continuation of 15.012 (and 15.015 if you are a Sloan Fellow). The course is divided in three distinct sections. The first one addresses questions of sustainability from a macroeconomic point of view.

In discuss a framework called PROMISE that I am designing. The underlying problem is how can standards of living be improved in a sustainable manner. In this context, sustainability has more than one dimension: (i) obviously sustainability from the environmental and resource use; but also from (ii) social and political; (iii) institutions; (iv) economy and markets; (v) organizations; (vi) relations; (vii) and personal. Growth in standards of living and social wellbeing needs all dimensions to be internally consistent. For example, it makes no sense to grow the economy if that is inconsistent with the environment, nor if it is inconsistent with personal aspirations. We develop a framework where we can study the interactions between all these dimensions and study each dimension in particular. We will use my class notes to develop this framework.

The second part of the course deals with economic policy. Having understood what economies need to do, then the next step is to consider how those actions can be implemented. Questions such as: How to deal with problems and conflicts that arises from international trade? How to deal with corruption and its economic impact? What are the problems of poverty and income distribution? In fact, what are the implications of the actual programs dealing with poverty in different countries and their impact on the environment? How can we design social security systems that are viable? What about health care systems? How to solve the problems of public choice, public goods, externalities, etc.? We will devote a fair amount of time to understand the international and macroeconomic implications of these issues. And how the solutions differ across the globe (and why they differ). In most of the problems highlighted there are welfare gains that can be generated, although they will be rarely fairly distributed among the population. To understand these problems we will rely heavily on simulations, games, and cases.

The last part of the course talks about how technology is changing the macro economy. I will pay attention to three main issues: How technology is changing currencies (cryptocurrencies), how technology is changing the banking and payment system, and how technology is affecting the way statistical offices work (related to my research with Alberto Cavallo on the Billion Prices Project).

Evaluation

The course is a combination of lectures, simulation exercises and cases. The grade is entirely driven by case write-ups. For each case I’ll have some questions that I want to be addressed before class. If the case has no question assigned then no case write-up is required. You have to have a write up for every case that has a question. You should work in teams of three to four. The grade in this course is evenly divided among the 6 total case deliverables.

Calendar

SES # TOPICS KEY DATES
BBNN Framework
1 PROMISE (Part I)  
2 BBNN: Internal and External Adjustment  
3 Short Run Adjustment: ASAD  
4 Automatic Adjustment and External Account Measurement Case Question 1 due
5 Shocks to BB and NN  
6 Social Peace Line and Political Cycles Case Question 2 due
7 Environmental Restriction Line  
8 Offshoring Exercise Case Question 3 due
Economic Policy
9 Fish Banks and Pareto Efficiency  
10 Market Faillure: Natural Monopolies: Natural Resources  
11 Market Faillure: Crime, Corruption, and Institutions  
12 Market Faillure: Public Goods: Social Security Case Question 4 due
13 Market Faillure: Public Choice: Democracy  
14 Market Faillure: Externalities: Lobsters and Taxes Case Question 5 due
15 Market Faillure: Unaceptable Outcomes: Poverty and Inequality Case Question 6 due
New Technologies
16 New Technologies: Cryptocurrencies  
17 New Technologies: Payment Systems  
18 New Technologies: Economic Measurement  
19 PROMISE (Part II)  
20 Life through Others  

Course Info

As Taught In
Spring 2016
Level
Learning Resource Types
Lecture Notes
Written Assignments
Online Textbook