Nations and shopkeepers

- International Economics: Theory, Application and Policy. First Edition
- Nations and Firms in the Global Economy

May 25, 2007

In the past, there have been few international economics textbooks written by authors from this side of the Atlantic. This makes the appearance of a text written in English by a Dutch economist especially pleasing. Charles van Marrewijk's International Economics follows on from his successful earlier text, International Trade and the World Economy (2002). In the style of conventional international economics textbooks, his latest work brings together international trade and international money in a single volume, which also includes a partial study guide. Access to the complete study guide is possible via an online resource centre.

The book provides a comprehensive, rigorous treatment of the subject matter of international economics, evenly split between trade and monetary issues and with an appropriate balance between theory and policy.

While each chapter covers the traditional themes of an international economics course, there are some innovations. Especially welcome are chapters on the new economic geography, multinationals, growth issues and applied trade policy modelling in the first half of the book. In the second half, there is a useful chapter on exchange-rate expectations and sticky prices and on financial crises.

The book is attractively laid out, with good and copious use of diagrams, tables and charts and short biographies of some of the key figures in the history of the subject. It presupposes a working knowledge of basic micro and macroeconomics and will be used mainly by second and third-year economics undergraduates and postgraduates. However, students studying related disciplines should be able to make good use of the book.

One of the difficulties that non-economics specialists face when studying international economics is finding a textbook that suits their needs. Part of the problem is the emphasis that economists place on theoretical models, which sometimes creates a barrier for students of other disciplines, who are usually happier with a more thematic approach. A problem specific to students of business or management, who are more used to looking at the big picture first, is the tendency for economists to compartmentalise issues.

In international economics, the study of nations is often separated from the study of firms, just as microeconomics is treated separately from macroeconomics. Just occasionally, a book appears that offers a different approach. Nations and Firms in the Global Economy is such a book. It is intended to provide an introduction to the subject for students who have taken an introductory course in economics and who have some grasp of elementary mathematics sufficient to study simple graphs and equations. At every juncture, basic economic terms and relationships are explained.

The book is built around three broad themes: international firms and trade; international capital, exchange rates and financial crises; and national and international economic policy issues. Each area is placed within the broader setting of the global economy and, in particular, the process of globalisation. Thus, the argument that international economists ignore international business and vice versa is met head on. Nations matter for the study of the globalisation process and for the study of policy matters.

However, it is often forgotten that the main driver behind trade and capital flows is the firm. Moreover, it is not just the firm per se that matters, but the firm operating across national boundaries with value-creating activities in a multitude of regions. Economists are interested in comparative advantage, as this is the basis for trade, but students of international business are more interested in how firms build and sustain their competitive advantage as they interact with the global economic environment.

The great difficulty in writing a book of this kind lies in knowing how much economic analysis to use. The author must steer a delicate balance between an excessive use of abstract theorising and modelling and the tendency merely to explain what is going on without any formal analysis of how or why. On the whole, Nations and Firms in the Global Economy gets this about right, although weak students may struggle with some diagrams.

Wisely, the authors have pushed some of the trickier bits of analysis into the appendix at the end of each chapter, which bright students can read at their leisure. Box diagrams are also used to focus on particular issues and to introduce case studies. The use of case studies will appeal in particular to students of business or management, who are used to learning by this method. However, to their credit, the authors have resisted the attempt to water down the technical content to the level of the lowest common denominator. This means that the book can be used both by students with only a limited knowledge of introductory economics and by students with a more advanced understanding.

If I were to make any criticism of this book, it is the absence of specific chapters on international trade policy. Part four is devoted to policy and contains some useful chapters on trade policy as a tool of national economic policy. There is also a useful chapter on globalisation and economic growth with a comparison of the experience of different countries.

These chapters will appeal to readers with an economic background. However, my experience has shown that non-economics specialists are most interested in the issues that they read about in the newspapers, such as the multilateral trade negotiations taking place in the Doha Round and the role played by developing countries in the world trading system. For a text written by Europeans, there is surprisingly little discussion of issues relating to Europe and the process of economic and political integration taking place within the region.

Both International Economics and Nations and Firms in the Global Economy are excellent additions to the stock of textbooks from which students and lecturers can draw for study material. Each will probably appeal to different categories of student, who may be studying different courses.

However, lecturers will be hard pressed to find better or more up-to-date texts than these for courses that have as their aim the development of an understanding of the subject of global economics.

International Economics: Theory, Application and Policy. First Edition

Author - Charles van Marrewijk in co-operation with Daniël Ottens and Stephan Schueller
Publisher - Oxford University Press
Pages - 691
Price - £36.99
ISBN - 9780199280988

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