Political Science 356/556:
The Political Economy of Reform in Central and Eastern Europe
Spring, 1999

Thurs., 2-4:40.
Randall Stone
Assistant Professor of Political Science
Office Hours: Weds., 1-3:00
Harkness Hall 311
University of Rochester

Purpose: Contemporary theory in political science and economics increasingly emphasizes the role of institutions. In Central and Eastern Europe, meanwhile, institutions have seen an unprecedented degree of experimentation, reform and variation since 1989. This course will integrate recent theoretical developments with contemporary case studies drawn primarily from the region. Emphasis will be placed upon the political and economic consequences of the choice of institutions, and upon the politics of institutional design. The course will focus on five topics: central planning, simultaneous political and economic transitions, macroeconomic stabilization, privatization and property rights, and the politics of regulation.

Requirements: Grading: 50% Final Paper; 50% Class Participation.

Prerequisites: This is a graduate course, but undergraduates with exceptional preparation in economics may be admitted. Other undergraduates should consider taking PSC 271 instead.

OMRI: In addition to assigned readings, students are encouraged to regularly read RFE/RL reports on the former Soviet Union and Eastern Europe, and JRL reports on Russia, which are distributed five days per week by e-mail. These are some of the best sources available in English, and there is no charge for either service.

The course will cover the following topics:

The Political Economy of Reform in Central and Eastern Europe

I. Theoretical Toolbox
II. The Setting
A. Central planning
B. Simultaneous political and economic transitions
III. The Politics of Property Rights
A. Contracts, courts and property rights
B. Privatization
IV. Macroeconomic Stabilization
A. Credibility and central banks
B. Elections and political business cycles
C. Democracy, reform and the status quo
V. Distributive politics
A. Regulation and capture
B. Redistribution
Books Recommended for Purchase:

These books are assigned in whole or substantial part, so it will be convenient to own a copy.

Week 1, Jan. 14: Introduction and course overview
Paul Milgrom and John Roberts, Economics, Organization and Management, (Englewood Cliffs: Prentice Hall, 1992), Chpts. 1-2.

Week 2, Jan. 21: Theoretical Toolbox: Principal-Agent Models, Reputation in Repeated Games, and Social Choice Theory
Required: Recommended:
Week 3, Jan. 28: The baseline: Central planning
Required: Recommended:
Week 3, Feb. 4 Simultaneous political and economic transitions
Required: Recommended:
Week 4, Feb. 11The politics of the rule of law: Contracts, courts and property rights
Required: Recommended:
Week 5, Feb. 18NO CLASS

Week 6, Feb. 25 Privatization
Required: Recommended:
Week 7, Mar. 4 Macroeconomic stabilization I:
Reputation, institutions, and credible commitments
Required: Recommended:
Week 8, Mar. 11 Macroeconomic stabilization II:
Elections and political cycles
Required: Recommended:
Week 9, Mar. 18 Macroeconomic stabilization III: Democracy and reform

Week 10, Mar. 25 Regulation and capture
Week 11, Apr. 1 Redistribution

Week 12, April 8 No class -- preparation for presentations

Week 13, April 15PRESENTATIONS

Week 14, April 22PRESENTATIONS