Course overview: This course has two basic objectives: (1) to give the student an overview of how the American political economy works, and (2) to introduce the student to some key theories and analytical tools of the disciplines of economics and political science that can also be used to study other issues or other national political economies. We identify and analyze basic institutions and processes of the American political economy, showing how some of our more important economic and political institutions work and how they influence each other. Specifically, we discuss the role of private property rights and the price system in a free market economy and the radically different ways in which markets and governments decide how to produce and distribute goods and services. We outline the main ways in which various institutions of American government influence people's economic behavior through available instruments of economic policy, and we look at how such policies are fought over, decided on and implemented. We also give attention to how well or how poorly the actual consequences of government economic policies tend to match the policy-makers' original intentions and to how significant unintended consequences of policy often turn out to be. Because economic resources can be used to seek political power and influence, and because political influence is often used to acquire or protect economic advantages, the analysis of political behavior is also highly relevant to investigating whether capitalist economic institutions and liberal democratic political institutions are mutually compatible or fundamentally antagonistic in the long run. In what ways do American economic institutions and practices support and/or undermine political freedom and democracy? In what ways do the institutions and practices of American politics support and/or undermine the efficient functioning of a basically market economy?

Course requirements and grading policies: All students enrolled for credit are expected to attend class regularly and to complete reading and homework assignments in a timely fashion. Attendance will be recorded at most class meetings by passing around a sign-in sheet. Students are required to complete several homework exercises during the summer quarter (about 2-3 hours work) in lieu of the usual computer lab exercises that are unavailable during the summer. There will be two in-class midterm examinations and a final examination (see course schedule below for tentative dates). The final examination is "comprehensive" -- that is, it covers lecture and reading materials for the entire quarter, not just the last unit following the second midterm. Course grades are based on the higher of each student's two weighted averages, computed as follows:

Method #1

  • 10% attendance
  • 15% midterm exam #1
  • 15% midterm exam #2
  • 15% homework exercises
  • 45% final exam.

Method #2

  • 10% attendance
  • 15% homework exercises
  • 75% final examination

Office hours: Dr. Johnson is normally available for brief conversations in the classroom or hallway for a few minutes after each class meeting. He is also usually available for conversation or consultation in the lounge area near "Take-Ten" in the basement of Haley Center from about 8:00 to 9:00 on non-class mornings (MWF). Official drop-in office hours will be Tuesdays and Thursdays from 2:30 to 3:30 p.m. in 7068 Haley Center. Students unable to use these times may arrange an appointment with Dr. Johnson for any mutually convenient time. Please do not drop in on or phone the instructor during the hour just before class meetings.

Textbooks: All three required textbooks should be on sale in the textbook section of Auburn University Bookstore on floor one of Haley Center as well as in other campus area bookstores. They are:

Course Schedule with Reading Assignments

The schedule of lecture topics and the corresponding reading assignments are listed below. Students should be aware that lectures do not repeat all the main points of the readings but rather build upon and add to them. There is important material in the readings that may be only lightly touched on in class or omitted entirely from lectures if time is pressing. There is important material in lectures that is not covered at all in the readings. To do well on exams, it will be important that you both carefully read the assignments and attend the lectures. Best results are likely to be achieved if you read most of each unit's assignment before the first lecture of the unit, so that you will understand the instructor's referring in passing to ideas explained in detail by the readings.

The (J) textbook contains a lengthy and extensively cross-referenced "Glossary of Political Economy Terms" by the instructor in the very back of the book that can be very useful to you for looking up precise definitions and explanations of specialized political economy terms and concepts that you will encounter in the readings or lectures. An even more extensively cross-referenced hypertext edition of this glossary is also available via the Internet from the instructor's web page. Use Netscape, Internet Explorer, Lynx or the web-browsing software of your choice to connect up at this URL: (Other political economy relevant WWW links are also available via the political science department's web page at Form a habit of checking the glossary for definitions and explanations of all key terms in lectures or readings. If an unfamiliar term is not explained there or in the other readings, make a written note of it and give it to Professor Johnson so it can be explained in class (and perhaps added to the next edition of the Glossary). The reading assignments below specify especially important terms to look up, but all material contained in the Glossary is fair game for coverage on the final exam, whether specifically assigned below or not.

  1. Unit 1 (Jun 17,19,24): Introduction; The Analysis of Economic Institutions; Specialization Comparative Advantage, and the Division of Labor; Tradition, Plan and Market as Bases of Economic Organization; Forms of Property Ownership; Exchange, Money.

    1. (J) Miller, "Scarcity and the World of Trade-offs" and "Appendix A: Reading and Working with Graphs," from Economics Today, pp 1-31.
    2. (J) Adam Smith, "Of the Division of Labor..." (1776), pp 33-40.
    3. (J) Glossary: political economy, economics, microeconomics, macroeconomics, political science, scarcity, trade-off, efficiency, division of labor, specialization, comparative advantage, absolute advantage, incentives, property rights, private property rights, corporation, contract, barter, market, state, market economy, entrepreneurship, socialism, money, cost, transaction cost, optimum, efficiency.

  2. Unit 2 (Jun 26,Jul 1,3): Markets and the Price System: The Laws of Supply & Demand; The Interconnectedness of Markets (derived demand, substitution, complementarity); The Market, Marginal Productivity and Income Distribution.

    1. (C) Cohen, pp 1-25.
    2. (J) Gwartney & Stroup, "Supply, Demand and the Market Process," pp 41-64.
    3. (M) Chapter 14.
    4. (J) Glossary: demand, demand curve, demand schedule, law of demand, supply, supply curve, supply schedule, law of supply, ceteris paribus, factors of production, labor, land, capital, human capital, marginal analysis, marginal productivity, complementary goods, substitute goods, derived demand, elasticity, price controls, productivity, diminishing returns, interest rate.

  3. Unit 3 (Jul 8,10,15): Government and the Marketplace; Market Failure; Goals of Economic Policy; The Basic Modes of Government Intervention; Intro to macroeconomic policy tools.

    1. (C) Cohen, pp 26-53.
    2. (M) Chapters 3,5,8,11,18,24,25,26,27.
    3. (J) Friedman, Milton, Chapter 1 of Capitalism and Freedom, pp 97-105.
    4. (J) Glossary: state, nation-state, externality, public goods, free rider, tort, transaction costs, merit & demerit goods, subsidy, competition, monopoly, natural monopoly, cartel, price controls, rent-seeking behavior, monetary policy, fiscal policy, aggregate demand, aggregate supply, unemployment, business cycle.

  4. Midterm Exam #1 on Thursday, Jul 17 [covers readings & lectures to date].

  5. Unit 4 (Jul 22,24): American Political Institutions: The Ideological Underpinnings; Early Origins of the American Political-economic system; The economic role of government & the American ideological spectrum.

    1. (J) The Declaration of Independence [1776], pp 67-70.
    2. (J) The Constitution of the United States [1787], pp 71-85.
    3. (J) Madison, James, "The Federalist No. 10" [1787], pp 87-91.
    4. (J) Madison, James, "The Federalist No. 51" [1788], pp 93-96.
    5. (C) Cohen, pp 54-85.
    6. (J) Maddox, William S. and Lilie, Stuart A., "The Roots of Contemporary Ideologies," pp 107-119.
    7. (J) Glossary: monarchy, aristocracy, oligarchy, democracy, dictatorship, theocracy, autocracy, popular sovereignty, republic, civil rights, separation of powers, checks and balances, ideology, legitimacy, anarchism, liberalism, conservatism, libertarianism, egalitarianism, populism, fascism, socialism, communism, totalitarianism, welfare state, anarchism, left-wing, right-wing.

  6. Unit 5 (Jul 29,31): Popular control over policy making?: Elections, Parties, Interest Groups, and the problem of political information.

    1. (J) Downs, Anthony, "Economic Theory of Political Action in a Democracy," pp 121-136.
    2. (J) "Are There Significant Differences Between the Democratic Party and the Republican Party?," pp 137-144.
    3. (J) Ginsberg, Benjamin "Money and Power: The New Political Economy of American Elections," pp 169-184.
    4. (J) "Do Political Action Committees Undermine Democracy?," pp 185-195.
    5. (C) Cohen, pp 86-132.
    6. (J) Dye & Zeigler, "Interest Group Politics," pp 147-167.
    7. (J) Glossary: incumbent, political party, interest group, faction, right-to-work laws, elite theory, pluralist theory

  7. Unit 6 (Aug 5,7): Elected Policy Makers: Congress, the President, and the politics of fiscal policy.

    1. (C) Cohen, pp 133-212.
    2. (J) Payne, James L., "The Congressman's World," pp 227-239.
    3. (J) Minarik, Joseph J., "Taxation: A Preface," pp 241-246.
    4. (M) Chapters 28,29.
    5. (J) Glossary: agency problem, pork-barrel legislation, logrolling, seniority, iron triangles, rational-comprehensive decision-making, incrementalism, fiscal policy, budget, budget surplus, budget deficit, unemployment, unemployment rate, inflation, recession, depression, political business cycle, Phillips curve, Gross National Product, Gross Domestic Product, saving, investment, tax, tariff, protectionism, national debt, appropriation bill, authorization bill, transfer payment, entitlement program, veto, line item veto, sequestration, impoundment, productivity.

  8. Unit 7 (Aug 12,14): Unelected Policy Makers: The Federal Reserve and monetary policies; The politics of economic regulation.

    1. (C) Cohen, pp 213-283.
    2. (J) Economist "Schools Brief #1: A Cruise Around the Phillips Curve," pp 247-251.
    3. (J) Economist "Schools Brief #2: A Bad Case of Arthritis," pp 253-258.
    4. (J) Wilson, James Q., "The Politics of Regulation," pp 257-281.
    5. (J) Kemp, Kathleen, "Industrial Structure, Party Competition, and the Sources of Regulation," pp 283-289.
    6. (J) Moore, Thomas G., "Trucking Deregulation," pp 291-294.
    7. (M) Chapters 1, 2, 4, 12, 19, 30.
    8. (J) Glossary: monetary policy, money stock, interest rate, Federal Reserve, reserve requirement, discount rate, open market operations, inflation, deflation, hyperinflation, Phillips Curve, captured agency, bureaucracy, bureaucratic politics, cartel, judicial review, judicial activism, judicial restraint.

  9. Midterm Exam #2 on Aug 19 [covers all readings & lectures since Exam #1].

  10. Unit 8 (Aug 21): Overview of Distributional Outcomes: How much redistribution of income do American governments engage in? What are the main criteria for redistribution? Are the Poor Getting Poorer as the Rich Get Richer?

    1. (C) Cohen, pp 284-304.
    2. (J) Levy, Frank, "Distribution of Income," pp 303-307.
    3. (J) Galloway & Vedder, "The Distributional Impact of the Eighties: Myth vs. Reality," pp 309-319.
    4. (M) Chapters 15, 16, 22.
    5. (J) Lindblom, Charles E., "The Market as Prison," pp 295-302.
    6. (J) Glossary: productivity, progressive tax, regressive tax, transfer payment, supply-side economics.

Final exam period for the 9-10:30 class will be Saturday, August 23rd, from 1:30 to 4:00 p.m. The exam for the 11:00-12:30 class will be Tuesday, August 26th from 1:30-4:00 p.m.

The odd 1 1/2 hour scheduling of this course can create time conflicts over final exam scheduling with other courses students may be taking. Carefully check and compare the announced final exam times for this course and all your other courses.

Students who foresee a time conflict between the final exam for this class and the exam for some other class should notify the instructor of the potential conflict in writing no later than the date of the first midterm exam so that plans can be made for any necessary make-up final exam period. Please do not ask to take the final exam before the final exam period. This would be contrary to general university policy and the personal policy of the instructor -- non-cancellable airline reservations and impending wedding ceremonies, not withstanding. Students who cannot take the final exam at the regular exam time or at any scheduled exam period make-up time that may be announced and who also present documentation of an acceptable excuse for this (such as personal illness, death or serious illness in the immediate family) may receive a temporary course grade of "X" or "XF," which university regulations require must be cleared by the student taking a make-up examination before the end of the first week of the student's next quarter of registration at AU.