International Political Economy

Front 1

What are the 4 levels that found the matrix of IPE?

Back 1

Global.

International.

State/social

Individual

Front 2

What are the 4 structures that found the matrix of IPE?

Back 2

Production/trade

Money/finance

Knoweldge/Technology

Security

Front 3

What are the 3 dominant paradigms in IPE?

Back 3

Economic (competitive liberalism/neoliberalism)

Mercantilism

Structuralism

Front 4

Within the 3 dominant paradigms in IPE, what component is the drier, and what is the driven?

(neoliberalism, mercantilism, structuralism)

Back 4

In neoliberalism, markets/econ drives politics.

In mercantilism, politics drives markets.

In structuralism, economics drives politics.

Front 5

How is a collective/social pressure/force defined, and an example of such?

Back 5

a.) If an individual is forced to act in a way he would not normally choose

or

b.) if the general action is in line with choice but traits/features are not in line with interests/preferences.

Examples:

A.) Military service yes or no

B.) military service yes, but fewer/longer months

Front 6

The mechanisms of the market theoretically and to a large extent practically contribute measures that help to (1) eliminate private force over the weak (as propagated by Hobbes) (2) and, more or less. escape the collective pressure by the state. However, if the market fails, what are the 3 options, that an individual can apply to show her/his dislike?

Back 6

1. Exit the collective/in-group

2. Voice (protest/opposition)

3. Exit and voice

Be able to discuss each options transaction costs.

Front 7

Which (3) conditions apply to the application of the polluter-pays-principle?

Back 7

(1) Negative externalities exist

(2) These negative externalities must interfere with the property rights of the harmed third party.

(3) If the owner of an asset is using it according to his property rights and harming a third party, then the harmed third party has to induce a change in the behavior to the owner through compensation

Front 8

Which parties/players are involved in the political decision making process?

Back 8

(1) voter-consumer/taxpayers

(2) politicians

(3) civil servant/bureaucrats

Front 9

Which issues inflict on the economic efficiency of the government thus harm the public interest?

Back 9

1. The power of special interests

2. The shortsightedness effect

3. Rent seeking costs

4. Lack of signals and incentives to promote operational efficiency

Front 10

Explain the issues inflicting on the economic efficiency of the government for The power of special interest

Back 10

an issue that generates substantial personal benefits for a small number of constituents while imposing a small individual cost on a large number of other voters.

Front 11

Explain the issues inflicting on the economic efficiency of the government for The shortsightedness effect

Back 11

Issues that yield clearly defined current benefits at the expense of future costs that are difficult-to-identify

Front 12

Explain the issues inflicting on the economic efficiency of the government for Rent seeking costs

Back 12

Actions by individuals and interest groups designed to restructure public policy in a manner that will either directly or indirectly redistribute more income (rents) to themselves.

Front 13

Explain the issues inflicting on the economic efficiency of the government for Lack of signals and incentives to promote operational efficiency

Back 13

Absence of the profit motive reduces the incentive of producers to keep costs low.

Front 14

What are the differing concerns of neoclassical economics and IPE?

Back 14

 Neoclassical economics is primarily concerned with efficiency and the mutual absolute benefits of economic exchange

 IPE is particularly interested in the distribution of benefits from market activities.

Front 15

Why do state-centric scholars of IPE argue that it is difficult to attain international (economic) cooperation?

Back 15

Because state-centric scholars of IPE give more importance to the relative benefits/gains: this implies that economic actors are attentive not only to absolute gains but also to the size of their own gain relative to benefits/gains of other actors.

Front 16

Why do we say there is a clash between the logic of the market and the logic of the state? (Two reasons).

Back 16

logic of the market is to locate economic activities wherever they will be most efficient and profitable

logic of the state is to capture and control the process of economic growth and capital accumulation in order to increase the power and economic welfare of the nation

Front 17

What is the hypothesized impact of participating in the international economy?

Back 17

That the international economy has a positive impact on international political affairs, because it moderates the self-centered behavior of states.

Front 18

Which 2 preconditions ought to exist to the creation of effective international regimes and solutions to the compliance problem ?

Back 18

(1) A strong international leadership (hegemon)

(2) An effective international governance structure

Front 19

According to Olson (1995), why would we need a hegemon?

Back 19

It is difficult for a country to reduce trade barriers unilaterally in the absence of external pressures exerted by a powerful state. The world works better when there is a hegemon that finds its own self interest in seeing that various international collective goods are provided.

Front 20

Give a simple definition for an institution, remember North.

Back 20

System of generally accepted formal rules and informal rules, which are governing the human behavior and which are structuring incentives in view of a common objective.

Front 21

Which 3 components does Ostrom distinguish with regard to defining an institution?

Back 21

(1) rule component, which is generally known

(2) Information component, which reduces strategic insecurity

(3) enforcement respectively sanction component

Front 22

If having a choice between different institutions dealing with transferring assets, which institution should be the preferred and why?

Back 22

The preferred is the institution that

(1) minimizes transaction costs and

(2) delineates property rights (PRs) in the most specific and predictable way.

This is because the institution with the lowest transaction costs is the most efficient one with regard to welfare maximization and when property rights are well defined then transaction costs with regard to allocating assets are low, which again serves efficiency.

Front 23

Three important aspects of property rights theory are

(1) transferability

(2) exclusiveness

(3) universality.

How can you define universality?

Back 23

Universality implies that each and every asset/resource ought to be the property of at least one (natural or legal) body.

Front 24

From the important aspect of property right theory known as universality, how can we learn from the prisoner game dilemma?

Back 24

Front 25

Give examples of insecure property rights on assets/resources. (5)

Back 25

• Fewer investments in productivity maintaining activities

• Fewer inputs in productivity increasing activities • Thereby a reduced value of the asset/resource

• Missing access to credit markets because insecure asset/resource can not be used as collateral

• Reduced capacity to carry risks

Front 26

What are the main points of the Coase Theorem? (6)

Back 26

1. Property rights are necessary

2. the first distribution of property rights is not relevant for efficient allocation.

3. property rights are sufficiently specified and complete information is given

4. the affected parties can freely transfer their rights.

5. market participants can solve external effects that are arising from the property rights distribution.

6. The state does not have to intervene.

Front 27

What was Hardin’s (1968) recommendation to overcome the issue that he coined as the “tragedy of the commons”?

Back 27

1. Nationalization of property rights - state installs rules on how to use assets/resources

2. Privatization of property rights, including universality, transferability and exclusiveness

Front 28

Mention the most important principles of early-modern mercantilism (3)

Back 28

• Economic policies of the state in the national economy, with an interventionist notion, especially in foreign trade

• Duty of the state is to enhance and maintain both national wealth and national power

• Applies protectionist policies to protect, promote domestic manufacturing industries, particularly with regard to exporting these goods

Front 29

Give a ‘neutral’ brief definition of capitalism.

Back 29

Capitalism describes an economic system in which the means of production are privately owned and operated for profit.

Front 30

If we add the term ‘laissez faire’ to capitalism, what does it imply? (3)

Back 30

• Gov. should interfere minimally with the free and efficient workings of the market

• Gov. has a responsibility to create the proper environment for free economic exchange

• Protect private property rights & enforce contracts

Front 31

Which factors contributed to the success of the UK under the reign of Queen Victoria (19th century) as economic ‘workshop of the world’?. (4)

Back 31

Several parallel factors contributed to the success story:

1. The Victorian period is also called ‘age of individualism’, indicating that particularly the better-off shifted away from the tutelage of the church (and thus the Queen) and concentrated on bettering their own economic situation.

2. A primary approach to improve the economic situation was to replace labor with machines (take-off industrialization) to shift the profit border outwards.

3. The economic philosophy of ‘laissez-faire’ also falls into this period.

4. In order not to bring up the population against the Church (= Queen), the Queen let the entrepreneurs engage in the structural change starting the industrialization era.

Front 32

Is an efficient allocation of resources necessarily an equitable (fair) allocation of resources?

Back 32

Only achieved if income is distributed in an equitable manner – which case in markets thriving for efficiency.

As a side note, distributive justice is associated

with structuralism – with all its flaws.

Front 33

What are the main modern (recent) structuralist theories and what are their main ideas?

Back 33

Dependency Theory

Modern world system (MWS) theory

Neo-imperialism

Front 34

Describe the main points (4) of dependency theory

Back 34

1. there are core and peripheral countries.

2. Domestic elites in the peripheral countries ally with international capitalists.

3. As a result, instead of protecting their country and seeking independence, periphery leaders allow the economic exploitation by international capitalists in core countries to continue.

4. This (3) is often referred to as economic neocolonialism

Front 35

Describe the main points of (MWS) modern world system theory (3)

Back 35

1. Structurally 3 functional areas: capitalist core states, agricultural periphery, and semi-periphery with labor intensive economic structures.

2. International division of labor makes nation-states mutually dependent on economic exchange.

3. The core states dominate the other states through unequal exchange for the purpose of extracting cheap raw materials and not just for dumping surplus production.

Front 36

What makes FDI (foreign direct investments) attractive? (2)

Back 36

1. Locational advantages - specific country charecterisitics that provide opportunity to provide such as natural resources

2. Market imperfections - Horizontal or vertical integration

Front 37

Name 3 positive impacts of FDI to host countries.

Back 37

1. FDI can transfer savings from one country to another.

2. MNCs can bring technology and managerial expertise

3. MNCs can enable host-country producers to gain access to marketing

Front 38

Name 3 negative impacts of FDI to host countries.

Back 38

1. MNC make decisions about how resources will be used in the host country

2. MNC may reduce, rather than increase, the amount of funds available for investment

3. MNC might also drive established host-country firms out of business

Front 39

Name 3 MNC/FDI regulations by host countries

Back 39

1. Blocking FDIs in some sectors of the economy

2. Requiring that the majority of the domestic affiliate is owned by local shareholders

3. Requiring that domestic affiliate to purchase a certain percentage of its inputs from domestic suppliers

Front 40

Explain in your own words the principal-agent framework from institutional economics, which Humphreys et al. 2007

Back 40

....?

Front 41

What are common aspects characterizing governance of a state? (4)

Back 41

Governance …

1. refers to the exercise of political power (procedures & policies) to manage a nation’s affairs

2. also includes procedures that regulate the actions of non-governmental and private-sector players

3. also includes political processes at supranational level and relevant regional organizations

4. can only be understood in the light of the specific historical, cultural, social and economic context