POL208 all notes 2nd semester everything.docx

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7 Apr 2012

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Pol208 Lecture notes
Political Economy
Interaction economics and politics; combination of the two fields
Opportunity Cost
War Economy
-Times of war, economics plays an important role market needs to adjust
- Restructuring of the economy
Economic Warfare
-Use of economic instruments as a part of war
-Ex. oil embargo imposed by US and other countries on Japan before they entered WWII;
eventually, they attacked Pearl Harbor
Total War
Economic Sanctions
Opportunity Costs
-When you choose an option, you give up the opportunity of another opportunity that could have
made a lot of money
Peace Dividend
-Economic gain from a reduction in spending on defense.
Economic Liberalism
-Increased efficiency will lead to growth, and growth will maximize welfare
-Free markets and limited government intervention
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Economic Nationalism
-Economics are important for national interest and security
Lecture 1
What’s ahead?
IPE international political economy
Islands of cooperation
Summary and looking forward.
Political economy
o The interaction between economics and politics.
o Studying the interaction between polity and market; how this interaction works.
o Game theory
o Use of economics tools to understand politics.
o What is the role of economy in IR?
o It depends on who you ask:
a source of power (we need butter to buy guns)
a source of welfare (we like butter).
o Prosperity means vs prosperity as a goal.
Chinese economy.
Should we see their economic growth as a threat?
Guns vs. butter
Creates a connection between international security and international political
A common metaphor for the national production possibility frontier.
“Guns will make us powerful; butter will only make us fast:
“we can do without butter but despite all out love for peace, not without arms. One
cannot shoot with butter but with guns.”
“Bomb them with butter”
PPF: production possibility frontier
o in theory, there are only two options and limited amount of resources.
o Gives all different distributions of these two options.
War economy
The trade-off between 'guns' and 'butter' is most noticeable in times of war.
Total war- sustainable over time?
o Never happens in reality; we divert all our resources for war.
Effects on morale.
Effects on gender relations
World wars had far reaching implication on society.
Social revolution created by war economy.
o Positive effects of wartime economy
Increased production
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Technological innovation.
Guns can lead to greater production of butter.
Economic warfare
How we can use the economy as an instrument of war.
An intense, coercive disturbance of the economy of an adversary aimed at diminishing
its power.
Economic warfare can be waged separately from military warfare (sanctions) or in
conjunction with an ongoing war (strategic bombing, siege, blockade etc.
o Tight connection between war and economy.
Submarine warfare in WWI and WWII; oil embargo on Japan.
International law: separates between goods that are part of the war effort and those
which are for civilian use. Dual use?
o Distinction is not easy as many goods have dual use.
o How we devise the war resources so they follow the international law.
Mixed record; smart sanctions.
Economic measures can be a carrot as well: MFN, WTO membership, foreign aid, etc.
o We can make countries to follow policies by offering economic aid.
How to calculate the cost of war?
Direct cost: tanks, planes, bombs, personnel, damaged infrastructure.
Indirect costs: higher oil prices, borrowing money, healthcare for veterans, etc.
Opportunity costs
For the USL total economic impact for the war 2002-08 $1.3 trillion (compared with
$804 billion in direct war costs)
A $1 in indirect costs for every $1 in direct costs
Per family of four $20,900 ($57 a week)
How to understand the role of the economy in IR?
Tight connection with security.
Our view of the role of the economy depends on how we answer the following
o What is power? What is the main purpose of power? Is the economy an instrument for
gaining power or is power an instrument for an improved economy? (human nature)
o Who are the main actors in international relations?
o Is cooperation sustainable (relative vs absolute gains)
o What is therefore the desired balance between guns and butter?
Economic liberalism
efficient equilibrium and stability
Absolute gains
Economic nationalism
Mercantilism; realism; protectionism
Wealth is a source of power; economic competition for primacy; imperialism
Guns and butter
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