4 Apr 2012
School
Department
Course
Professor

INTRODUCTION: INTERNATIONAL ECONOMY
Jeff Frieden
• Modern Political Economy: studies how self interested actors
combine within or outside existing institutional settings to
affect social outcomes
Political Economy is the analysis of the interaction of power and the
processes of wealth creation ! the evolving distribution of wealth and
power.
Most realists believe that certain types of power can be exercised
across different issue areas.
Politics and Economy
• The public good
• Externalities
• Public goods and externalities are exceptions to liberals faith
in markets
Coase Theorem
• There is a legal framework to establish liabilities
• There is perfect information
• There are zero negotiating costs
• Keohane used Coase’s Theorem to explain the need for
international regimes
Most liberalism conclusions are based on perfectly competitive
markets. Liberalism prefers to rely on markets to allocate resources,
and believes that politics messes things up.
Robert Gilpin ! the central subject of study in international politic
economy between the state and markets
!