POLSCI 369 Lecture Notes - Lecture 5: Autarky, Externality
9 Oct 2018
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Document Summary
Three components of order in international economic relations. Rank each of the following on stability/predictably and openness: autarky, 1935-39: predictable but not open, peak golden era, 1895-1913: stable and open, current era: very open, highly legalized and mostly stable, depression, 1929-31: extremely unstable and mostly open. Externalities: arise where the decisions of one selfish agent affect other agents locate within the same system. E(cid:454)ter(cid:374)alities are(cid:374)(cid:859)t opti(cid:373)all(cid:455) supplied: positive e(cid:454)ter(cid:374)alities (cid:373)ea(cid:374) that others benefit from my choices, and tend to be undersupplied. Similarly, negative externalities mean that others are harmed by my choices, and so tend to be oversupplied. Cooperation: in either case, the world would be better off if states could get together and cooperate, to supply policies with positive externalities and to agree to mutually refrain from policies with negative externalities. Incentives to cheat: cooperative dilemmas arise with a particular set of payoffs associated with choices. If we both cheat one another, we are worst off.
