Chapter 2 Flashcards
How do economists define institutions?
Institutions are the rules that govern and constrain behavior.
What are the two types of institutions?
Formal and informal institutions.
What are examples of formal institutions?
Laws, codes, and constitutions.
What are examples of informal institutions?
Customs and traditions such as manners and etiquette.
What are the categories of international institutions?
- Commodity- or industry-specific organizations (e.g., OPEC, ITU).
- Commissions and agencies for managing shared resources (e.g., IBWC).
- Development funds and banks (e.g., Asian Development Bank).
- International trade agreements involving a few nations (e.g., NAFTA).
- Global organizations for trade, development, and macroeconomic stability (e.g., IMF, World Bank, WTO).
What are the three major international organizations in international economic relations?
- International Monetary Fund (IMF)
- World Bank
- World Trade Organization (WTO)
What was the goal of the Bretton Woods Conference?
To create a more stable and prosperous world economy.
When was the IMF created?
At the Bretton Woods Conference in 1944.
What is the primary purpose of the IMF?
To assist in the creation of a stable, crisis-free system of international payments between countries.
What is the World Bank’s main function today?
To provide capital and technical assistance for economic development.
What does GATT stand for?
General Agreement on Tariffs and Trade.
What was the primary purpose of GATT?
To provide a forum for discussing trade rules and mechanisms for gradually opening markets to more international trade.
What are the guiding principles of GATT?
National treatment and non-discrimination.
What is a regional trade agreement (RTA)?
An agreement between countries in a specific region to facilitate trade.
What are the five levels of regional trade agreements?
- Partial agreement
- Free trade area
- Customs union
- Common market
- Economic union
What are the principles of regional trade agreements?
They help world trade by reducing barriers and allow countries to try new agreements that can potentially be used later in WTO negotiations.
What are public goods?
Goods that are non-excludable and non-rival, meaning everyone benefits from them even if they do not pay.
Why have international institutions?
International institutions provide public goods. Public goods are non-excludable and non-rival, meaning everyone benefits even if they do not pay, and they are not diminished by consumption.
What are the two important characteristics of public goods provided by international institutions?
- Increased international economic order.
- Increased certainty about the behavior of other nations.
What are four public goods provided by international institutions?
- Open markets in recessions (GATT/WTO).
- Capital flows to less-developed countries (World Bank).
- International money for paying international debts (IMF).
- Last resort lending (IMF).
What is a criticism related to sovereignty and transparency in international institutions?
Countries receiving assistance, particularly from the IMF, are sometimes required to give up the ability to set their own policies.
What is a transparency issue in decision-making within international institutions?
Decision-making in the institutions is not transparent; because the U.S. and Europe have the largest voting bloc, decisions are sometimes viewed as being directed by rich countries.
What is a criticism related to ideology in international institutions?
Critics argue that the advice, technical assistance, and negotiating positions reflect the biases and ideologies of high-income countries and do not adequately consider alternative policies.
What is a criticism related to implementation and adjustment costs in international institutions?
There are asymmetries in the fiscal burdens associated with implementing agreements and adjusting to the changes they create; richer countries do better at this than poorer ones.
