POLITICAL SCIENCE/ECONOMICS 335 Course Syllabus Undergrad Seminar in Political Economy: Capitalism, Dictatorship & Democracy
Professor Contact Information
Professor Victor Menaldo Dept. of Political Science Gowen Hall, Room 31
Email: vmenaldo@u.washington.edu
Office Hours: by appointment
Class Information
Fall Quarter, 2026
In this class, we examine several questions. What is capitalism? How has capitalism evolved over time? What is the role of the state in creating and sustaining capitalism? What is dictatorship? How do non-democratic regimes use and abuse markets to consolidate their grip on power? What is democracy? What is the relationship between democracy and capitalism? What is welfare state capitalism and its consequences?
When appropriate, we will evaluate these questions through the lens of recent crises:
- How can we think of capitalism, dictatorship, and democracy in light of the AI Revolution?
- How will capitalism, dictatorship, and democracy be changed by the Russian-Ukraine War or conflict in the Middle East?
- And what about the recent slowdown in Chinese economic growth and other economic problems roiling the world economy?
To address these questions generally, we familiarize ourselves with the “new institutional economics” framework. To begin with, describe and explain the four essential components of capitalism. First is specialization along comparative advantage and trade. Second is competition between firms and the allocation of inputs to the production process and its output based on prices. Third are incentives and opportunities to innovate. Fourth is the role of financial markets in allocating scarce capital to its highest value use and fostering innovation and economic development.
The new institutional economics approach also makes sense of the infrastructure provided by the state that sustains capitalism: property rights, contracts, rules that reduce transaction costs, and policies that solve market failures. And it gives us a lens by which to examine different regime types. We care most about their incentive structures regarding the economy. We also care about the role that markets play or do not play in advancing incumbents’ political strategies.
Issues include several. First, the use of crony capitalism by authoritarian regimes to consolidate their rule by creating and distributing rents to their supporters and finance the state. Second, why democracies are more likely to foster market exchange that more closely approximates “free market” capitalism: secure and impersonal property rights and contract enforcement, the encouragement of freer entry and exit and market competition, the promotion of larger and more sophisticated financial systems, and institutions and regulations that foster innovation. Third, why democracies are also more likely to provide public goods and policies that reduce the risks associated with market exchange. That is where “welfare state capitalism” comes in.
TEACHING GOALS
- How to think about capitalism using basic micro-economics and neo-institutional economics.
- To understand the elements of modern economic development: the state’s role in creating a framework that promotes impersonal exchange at a large scale, the public and private sectors’ systematic approach to continuous innovation, using markets to allocate and transform scarce resources, and the role of the financial system in promoting savings, investment and innovation.
- Familiarize students with the political economy of regime types and how their differing incentive structures lead to different types of “capitalism”.
Course Requirements
Students are expected to complete the required readings each week and to contribute to discussion. Grades are awarded on the basis of three things only: participation, a take home open book exam (essays) during the midpoint of the course, and a take home open book exam at the end of the course (essays).
Course Evaluation:
Participation –20%
Exam 1 – 40%
Exam 2 – 40%
Class Participation Guidelines:
There are two elements of participation in this class. The first is participation during lectures. You should always attend these. I will grade you on the relevance, cogency, and persuasiveness of your oral contributions. During class discussion, you should draw from the week’s readings—which means that you should complete them before each class.
Tips on Reading Reflections: make sure that you have done the reading and done it carefully. Make sure that these emails are well crafted and thoughtful. Credit for participation is not about quantity, in other words. It is about quality.
Washington state law requires that UW develop a policy for accommodation of student absences or significant hardship due to reasons of faith or conscience, or for organized religious activities. The UW’s policy, including more information about how to request an accommodation, is available at Religious Accommodations Policy (https://registrar.washington.edu/staffandfaculty/religious-accommodations-policy/). Accommodations must be requested within the first two weeks of this course using the Religious Accommodations Request form (https://registrar.washington.edu/students/religious-accommodations-request/).
WEEK 1, DAY 1: Introduction to Class and what is capitalism?
Menaldo, “The Prosperity Puzzle”
WEEK 2, DAY 1: Historical Origins of Capitalism
Acemoglu and Robinson, “Why Nations Fail”: 199-261 (these refer to the pdf pages).
WEEK 2, DAY 2: The Special Role of Innovation in Modern Capitalism & Development
Romer, “Object vs. Idea Gaps”
WEEK 3, DAY 1: New-institutional economics: property rights, transaction costs, institutions, markets & market failures.
Alston et al. 2018. “Institutional and Organizational Analysis”: 31-108
WEEK 3, DAY 2: The Role of Government in Promoting Innovation/Intellectual Property
- Nelson, “The Simple Economics of Basic Scientific Research”
- Kenan Patrick Jarboe and Robert D. Atkinson, “The Case for Technology in the Knowledge Economy R&D, Economic Growth, and the Role of Government”
- Posner, “IP Law and Economics Approach”
WEEK 4, DAY 1: Intellectual Property Rights 2
Kieff, “On the Theory and Practice of Commercializing Innovation”
WEEK 4, DAY 2: Where Profits Come From
Gochberg & Menaldo, “To Rent or not to Rent”
WEEK 5, DAY 1: Firms and the Make or Buy Decision/Firms Embedded in Networks
Reread Teece, “Profiting from Technological Innovation”
WEEK 5, DAY 2: Financial Systems
Calomiris and Haber. “Fragile by Design,” Chapter 3
WEEK 6, DAY 1: Financial Systems II
Metrick and Yasuda, “Venture Capital and the Finance of Innovation”
WEEK 6, DAY 2
Review and Exam 1 handed out
WEEK 7, DAY 1: Authoritarianism and Crony Capitalism I
Haber, “Authoritarian Government”
WEEK 7, DAY 2: Authoritarianism and Crony Capitalism II
- North, Wallis and Weingast, “Violence and Social Orders”, Chapter 2.
- Albertus and Menaldo, “Crony Capitalism & Protectionism is the Despot’s Way”
- Tracinski, “Why Strongmen Own the Store”
Week 8, Day 1: Democracy, Markets and Firms
North, Wallis and Weingast, “Violence and Social Orders”, Chapter 4.
WEEK 8, Day 2: American Industrialization & Role of Government
- Haber, “Innovation, Not Manna from Heaven”
- Nelson and Wright, “The Rise and Fall of American Technological Leadership”
WEEK 9, Day 1: The Computer Revolution & Role of Government
- O’Mara, “The Code” (Chapters 1-3): Available for electronic download using the UW Library
- Menaldo, Chapter 3 of “History’s Most Revolutionary Innovation: AI and Its Origins and Impact.”
WEEK 9, Day 2: Democracy and Welfare State Capitalism
- Bergh, “What are the Policy Lessons from Sweden? On the Rise, Fall and Revival of a Capitalist Welfare State”
- Menaldo, “Dear Bernie Sanders: Democratic Socialism Depends on Robust Capitalism”
WEEK 10, Day 1:
No Class
WEEK 10, Day 2: THANKSGIVING
No Class
WEEK 11, Day 1: The Fourth Industrial Revolution
Menaldo, Chapter 11 of “History’s Most Revolutionary Innovation: AI and Its Origins and Impact.”
WEEK 11, Day 2: Review
Review for Exam II and Exam II handed out