Principles of Economics
in the Transition from Plan to Market

Patrick Conway
Department of Economics
Gardner 300-F

Place of this course in the Economics curriculum.

The introductory course in Economics, Economics 10, provides an excellent overview of economic concepts and applications from a market-economy perspective.  This course will present the same concepts in the context of foreign, formerly planned, economies.  This difference in perspective will provide a fascinating perspective on market-economy principles for students with interest in international studies.

This course will not automatically substitute for Economics 10 as prerequisite for various curricula.  It will be up to the student to petition his or her curriculum to satisfy the Economics-10 requirement with this course.

Why examples from Transition Economies?

The "Transition Economies" are those countries that were formerly members of the Soviet Union.  During the days of that political entity, the member countries organized economic activity for the most part through government plans.  With the disintegration of the Soviet Union in 1991, these countries began a transition from planning to use of market-oriented economic principles in organizing economic activity.

Use of case examples from Transition Economies fulfills two useful pedagogical purposes. First, the specifics of these economies will provide the students with a concrete example of the concepts considered. Second, the recent experience in transition away from plan and toward market-led activity provides a chance to compare the effects of each. Introductory economics courses tend to differ from later courses in economics and from courses in other disciplines in that there are no competing hypotheses - the paradigm of efficient markets is the dominant one, with only limited usefulness recognized to government intervention. The Transition Economies employed two competing paradigms in quick succession. The students will have the opportunity to judge for themselves the effectiveness of planning and of markets in organizing activity efficiently.

Organization of the course.

In this course we will cover the principles of economics through the consideration of a succession of case studies.  These case studies will be drawn from recent experience in the transition economies and will illustrate the economic principles under consideration.

          Background materials on the Transition Economies.

Each case will remain under discussion for two weeks.  For each case study there will be a reading that the students will be required to absorb; there will also be references to various texts and World Wide Web sites for further reading.  The required materials in addition to the textbook will be found on the World Wide Web through links to this page, or will be distributed by the instructor in class.

Grades will be assigned on the basis of a midterm, a final, seven case assignments and a group exercise.  The midterm examination will be held during class period, and will count for 15 percent of the grade.  There will be seven case assignments, each worth 5 percent.  The final examination will be cumulative, will occur on May 8 at noon, and will be worth 30 percent of the course grade.  The balance (20 percent) of the grade will be awarded for achievement on the group exercise.  Deadlines for
assignments and group exercise will be announced in class, and late submissions will be penalized.  Examinations will require the students to apply the tools practiced in the case studies on new examples.

Student interaction is an important component of this course, with one another, with me, and with outside specialists on the transition economies.  I will encourage this interaction through use of the World Wide Web (WWW) as a continuing resource.  Many of the course materials will be available from WWW sites, and I will establish a WWW discussion forum.  You can view these at the address “".  I will post questions and answers to that forum on a regular basis.  You can also use this for your own questions and communications.  To participate in these features of the course, you will need to obtain a (free!) electronic mail account from the university; contact the help desk in the basement of Wilson Library for further information.

Enrollment will be limited to 30 to ensure proper hands-on learning.

Resources on the World Wide Web.

Business Information Services for the Newly Indepedent States

Description of ways in which Georgia differs from Russia

Thanks to the "Globalizing the Curriculum" fund and the University Center for International Studies for developmental funding for this course.


"The book" refers to the text Economics: Principles and Policies, 7th edition, by William Baumol and Alan Blinder.

Week 1: Introduction to the Transition Economies: history and present.
    The book: chapters 1, 2 and 3

Week 2: Scarcity and shortage: economic planning and the National Income and Product Accounts.
    The book: chapters 17, 22 and 36
Week 3: Black markets, supply and demand, and price liberalization.
    The book: chapters 4, 5, 34 (pp. 797-808)

Week 4: From producing for the plan to producing for the market.
    The book: chapters 7 and 8

Week 5: The changing job climate -- lost security, but greater rewards.
    The book: chapters 15 and 16

Weeks 6 and 7: Economies of scale vs. competition among businesses: two paths to productivity gains.
    The book: chapters 9, 10 and 11

Week 8: Have markets served consumers and producers well?
            What interventions have the governments continued into the present? Should they have done so?
    The book: chapters 13, 21

Week 9: The government as consumer: then and now.
    The book: chapter 26 and 28.

Week 10: Aggregate supply and demand for money: ruble overhangs and ruble shortages.
    The book: chapters 23, 24, 25

Week 11: The role of banks under planning and market.
    The book: chapters 29 and 30

Weeks 12 and 13: Budget deficits, inflation and unemployment: from hyperinflation to stagnation
    The book: chapters 32 and 33

Week 14: Links to the world economy: then and now.
    The book: chapters 34 (pp. 809-819) and 35