In 1976 there was a graduate-student-faculty discussion concerning a reform of procedures for the general examinations at MIT’s department of economics. I have only been able to locate the field syllabus for international economics of the three fields mentioned in my classmate’s report:
“As a compromise intended to make everyone feel better without rocking the boat, a syllabus will be made up in each of three fields. The syllabus is intended to give some guidance as to what topics might show up on a general. The three fields chosen for the experiment are econometrics, industrial organization, and international trade.”
Source: Massachusetts Institute of Technology. Institute Archives. MIT Department of Economics Records (AC 394). Box 2; Folder “Gen Exams”. Dick Startz, “Final Report on Generals’ Reform”, November 21, 1976.
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January 1977
Bhagwati & Dornbusch
INTERNATIONAL ECONOMICS
Syllabus
This syllabus is designed to provide some guidance in regard to the field requirements in international economics. It is not exhaustive but does indicate the broad areas in which the students will be required to be knowledgeable.
The syllabus is divided into the traditional areas of international monetary theory and policy, on the one hand, and the pure theory of trade, on the other. However, most public policy issues, with which the students will be expected to be familiar, require a skillful adaptation of both strands of analysis (as should be obvious from the writings of the best trade economists on policy matters such as the effect of the oil price increases). Thus, the students will be expected to integrate the two sets of insights as appropriate, in addressing themselves to policy questions. In this regard, the students will also be expected to have reasonable familiarity with the central issues of current concern, e.g. SDRs, GATT rules, the New International Economic Order problems, etc. Acquaintance with earlier historical writings, chiefly in the 1930s, should also prove to be rewarding since it emphasizes the integration of policy and theory. Here, the writings of economists such as Haberler, Ohlin, Iversen and Hawtrey are particularly recommended.
A. INTERNATIONAL MONETARY THEORY AND POLICY
International Macroeconomic Issues:
- National Income Accounting in the Open Economy. Balance of Payments Accounting. Reform of Balance of Payments Accounting in the US.
- Keynesian Macroeconomics in the Open Economy and the Current Account: The foreign trade multiplier, multipliers with repercussions. The transfer problem and income adjustment.
- Keynesian macroeconomics under capital mobility: Monetary and fiscal policy. The policy mix. Financing versus adjustment.
- Price and output adjustment in a Keynesian framework.
- Exchange rates and the current account: Elasticity, absorption and monetary approaches.
- Internal and external balance: The role of home goods.
- Flexible exchange rates: The income adjustment process. The terms of trade and saving.
- Flexible rates and capital mobility: Asset market theories of exchange rate determination. The role of expectations. The transmission of disturbances.
- Purchasing power parity.
- Portfolio balance theories of macroeconomics in the open economy: Capital flows and the structure of the balance of payments.
- The social cost of foreign exchange.
- Stabilization policy, the budget and trade policy.
International Financial Issues
- International monetary standards and international reserves.
- The Euro-dollar market.
- Interest arbitrage and forward markets.
- Intermediation, the pattern of world payments and lending, and the balance of payments.
- International Investment.
B. THE PURE THEORY OF TRADE
- General equilibrium analysis of the traditional value-theoretical model of trade theory, involving two primary, non-traded factors producing two traded commodities; theories of comparative advantage: Ricardo and Heckscher-Ohlin; empirical verification; new directions in explaining comparative advantage.
- Tariff analysis: effects of tariffs on internal and external terms of trade; equivalence of tariffs and quotas; transfer problem; growth and trade.
- Trade and welfare; trade vs. autarky; optimality of free trade; restricted trade vs. autarky; distortions and ranking of policy interventions; measurement of gains and losses from alternative policies; theory of non-economic objectives; preferential tariff reductions and customs union theory.
- Extension of the positive and welfare analysis of alternative models: (1) models involving use of imported factors of production; (2) models with non-traded goods; (3) models with putty-clay characteristics.
- Comparative advantage and uncertainty; analysis of illicit trade in general equilibrium; project analysis and trade theory.
Source: Massachusetts Institute of Technology. Institute Archives. MIT Department of Economics Records (AC 394). Box 2; Folder “Gen Exams”.
Image Source: Jagdish Bhagwati (left), Rudiger Dornbusch (right). MIT Museum legacy website.