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Economics

Author/Instructor: Volkhart Vincentz

Credits: 8

• To familiarize students with the basic concepts and terminology of economics by means of studying the specific economic problems encountered by transition economies during the last decade.
• To provide students with a working knowledge of macroeconomic policy making, the functioning of national and international institutions, and the basic controversies surrounding transition policy.

• Legacy of the planned economy: basic problems of information and coordination
• Stabilization of the economy: basics of stabilization, problems of the early 90s, economic crises
• International institutions and controversies about stabilization (IMF, World Bank, WTO)
• Structural reforms: building of national institutions, privatization, soft budget constraints and corporate governance, measuring structural reforms
• Growth and convergence: basic concepts of economic growth, results in Eastern Europe
• Integration into the world economy: comparative advantages, trade agreements, exchange rates and foreign trade, export-oriented growth
• Accession and Non-Accession to the EU: problems of the enlarged EU, new neighbors in the East (CIS)

Students must complete and pass a specified number of module tasks and participate regular in online discussions.

Example tasks from the Economics Module
Use the model at www.desertislandgame.com for the following tasks: The game used in this task uses preferences (demand) of the traders to determine the utility (scores) of different consumption bundles. It also allows players to trade at different prices. In the game you have to try to get a „balanced diet“ i.e. in consumption the number of fish should be equal to the number of coconuts.

1. Use the data of the “basic game” to fill a table:

In which production (fish or coconut) do you have an absolute advantage? In which production do you have a comparative advantage?

2. Fill tables according to the basic game when you trade 1 coconut for 1 fish. Try to achieve a balanced diet.

3. Propose different trades to Ricardo with changing prices of coconuts. The price of coconuts is expressed in fish (fish per coconut)

a) What is the highest price of coconuts (most fish per coconut) that Ricardo will still accept? Why?
b) What is the lowest price (fewest fish per coconut) you will offer? Why?
c) What are the scores of you and Ricardo in cases a) and b)? What can you conclude about gains from trade for you in relation to the price ratio.

4. “If productivities in East and West converge, the gains from trade get smaller”.

a) Explain the statement. Under which premises is it right or wrong?
b) Which factors might affect the convergence of productivities between the regions?

5. “Eastern Europe can produce some goods more cheaply than the West can. This cost advantage is based only on lower wages. Most goods imported from Eastern Europe can be produced with less hours of work, i.e. higher productivity, in the West. Importing these goods endanger our jobs and our living standard.”

Comment shortly on this statement.

Module abstract
Please find a reading example here: Economics.