pug21774_fm_i-xxviii.indd
International
Economics
Sixteenth Edition
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ESSENTIALS OF ECONOMICS
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International Economics
Sixteenth Edition
The McGraw-Hill Series in Economics
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International
Economics
Sixteenth Edition
Thomas A. Pugel
New York University
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INTERNATIONAL ECONOMICS: SIXTEENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY XXXXXXXXXXCopyright © 2016 by McGraw-Hill
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Pugel, Thomas A.
International economics/ Thomas A. Pugel.—Sixteenth edition.
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In memory of my parents, Adele and Edmund, and my
parents-in-law, Vivian and Freeman, with my deepest
appreciation and gratitude for all that they did to benefit
the generations that follow.
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vi
About the Author
Thomas A. Pugel
Thomas A. Pugel is Professor of Economics and Global Business at
the Stern School of Business, New York University, and a Fellow of
the Teaching Excellence Program at the Stern School. His research
and publications focus on international industrial competition and
government policies toward international trade and industry. Professor
Pugel has been Visiting Professor at Aoyama Gakuin University in
Japan and a member of the U.S. faculty at the National Center for
Industrial Science and Technology Management Development in China.
He received the university-wide Distinguished Teaching Award at New
York University in 1991, and twice he was voted Professor of the Year
y the graduate students at the Stern School of Business. He studied economics as
an undergraduate at Michigan State University and earned a PhD in economics from
Harvard University.
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vii
Preface
International economics combines the excitement of world events and the incisiveness
of economic analysis. We are now deeply into the second great wave of globalization,
in which product, capital, and labor markets are becoming more integrated across
countries. This second wave, which began in about 1950 and picked up steam in the
1980s, has now lasted longer than the first, which began in about 1870 and ended with
World War I (or perhaps with the onset of the Great Depression in 1930).
As indicators of the cu
ent process of globalization, we see that international
trade, foreign direct investment, cross-border lending, and international portfolio
investments have been growing faster than world production. Information, data, and
umors now spread around the world instantly through the Internet and other global
electronic media.
As the world becomes more integrated, countries become more interdependent.
Increasingly, events and policy changes in one country affect many other countries.
Also increasingly, companies make decisions about production and product develop-
ment based on global markets.
My goal in writing and revising this book is to provide the best blend of events
and analysis, so that the reader builds the abilities to understand global economic
developments and to evaluate proposals for changes in economic policies. The book
is informed by cu
ent events and by the latest in applied international research.
My job is to synthesize all of this to facilitate learning. The book
Combines rigorous economic analysis with attention to the issues of economic
policy that are alive and important today.
Is written to be concise and readable.
Uses economic terminology when it enhances the analysis but avoids jargon for
jargon’s sake.
I follow these principles when I teach international economics to undergraduates and
master’s degree students. I believe that the book benefits as I
ing into it what I learn
from the classroom.
THE SCHEME OF THE BOOK
The examples presented in Chapter 1 show that international economics is exciting
and sometimes controversial because there are both differences between countries and
interconnections among countries. Still, international economics is like other econom-
ics in that we will be examining the fundamental challenge of scarcity of resources—
how we can best use our scarce resources to create the most value and the most
enefits. We will be able to draw on many standard tools and concepts of economics,
such as supply and demand analysis, and extend their use to the international arena.
We begin our in-depth exploration of international economics with international
trade theory and policy. In Chapters 2–7 we look at why countries trade goods and
services. In Chapters 8–15 we examine what government policies toward trade would
ing benefits and to whom. This first half of the book might be called international
microeconomics.
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viii Preface
Our basic theory of trade, presented in Chapter 2, says that trade usually results
from the interaction of competitive demand and supply. It shows how the gains that
trade
ings to some people and the losses it
ings to others can sum to overall
global and national gains from trade. Chapter 3 launches an exploration of what
lies behind the demand and supply curves and discovers the concept of comparative
advantage. Chapter 4 shows that countries have different comparative advantages for
the fundamental reason that people,