2014 Syllabus

Prerequisite: Economics 101

Meeting times: Daily 10:10am-12:10pm and 1:25pm-3:25pm in Early-Fielding 109. While we will not meet for 4 hours every day, extended hours allows us to reserve blocks for when we (i) watch videos in class and (ii) have guest speakers. This class is NOT compatible with PE classes (unless the PE only meets weekends).

Economics 244: is a broad examination of the automotive industry from the perspective of an economist. Narrowly, “the” industry encompasses not just assemblers such as GM and Toyota and their product and price strategies (is the industry an oligopoly?). It also includes suppliers (who employ roughly 3x as many workers as do the assemblers) and distribution (which employs more than all of manufacturing). Thus arise issues of vertical coordination, the wider cost structure of the industry, and the nature of innovation in a very complex industry, where product specifications must be set well in advance of initial sales (e.g., in late 2012 firms are already working on MY2015 projects). But that’s not the worst of it: vehicles remain in production 4 or more years, so some of the projects on which firms are working today will still be on vehicles still being sold in 2020. Finally, the industry is glboal, with substantial economies of scale. So where do you make vehicles, given flux in exchange rates and business cycles, and how much do you adapt them from marekt to market? All in all, it is a complicated web of issues.

Cars — more precisely, motor vehicles, as in poorer countries trucks and tractors and motorcycles may dominate — well, cars are also durable consumer goods. That exerts pressure for product differentiation, as consumer “needs” differ markedly both within and across countries. It also leads to short product cycles, to lessen the competition between new and used vehicles. The cost of transportation also affects the structure of cities, where we live and (increaslingly) where we work. When combined with the ebb and flow of individual companies and the lessening of intertia, this has speeded the “hollowing out” of various cities, most prominently Detroit. Cars also pollute, and allowing largely untrained and often distracted individuals to drive at high speeds is inherently unsafe. We regulate the industry for both reasons. The industry is politically salient, too, not only in the recently concluded US presidential election but in domestic politics and (for franchises and tax considerations) state and local politics.

Finally, as a major consumer item cars “produce” and are in turn molded by culture. They were featured in early films (Charlie Chaplin, the Marx Brothers), in art (the Diego Rivera murals at the Detroit Institute of Art, as but one example) and in music. How we socialize has changed; while street car suburbs antedated the car, modern American suburbia could not exist without it.

Sequence: To approach these topics, we will begin the first week reading Volti’s short history of the (American) industry, and selected readings on dealerships, on suppliers, and on the entry of new competitors across national boundaries. We’ll then switch to Tom Wolfe’s book, taking advantage of his presence on campus to speak to our class. Then, targeting the second week with guest speaker Bill Cosgrove, a retired Ford executive, we will read Vlasic’s account of the traumatic 2005-2010 period in Detroit. The third week will be spent in Detroit, visiting factories, R&D centers and museums, seeing in the process the impact of the industry’s success and more recent decline on the City of Detroit. For the fourth week we return to Lexington, with Prof Heitmann as our final guest speaker, whose book we of course will also read. In the last day we have a poster session in which you present what you have learned to your fellow students (and us faculty).

Texts:

  • Volti, Rudolf (2004). Cars and Culture: The Life Story of a Technology. Westport, CT: Greenwood Press.
  • Wolfe, Tom (1965). The kandy-kolored tangerine-flake streamline baby. New York: Farrar, Straus and Giroux.
  • Vlasic, Bill (2011). Once Upon a Car: The Fall and Resurrection of America’s Big Three Automakers–GM, Ford, and Chrysler. William Morrow.
  • Heitmann, John and Morales, Rebecca H. (2014). Stealing Cars: Technology and Society from the Model T to the Gran Torino. Johns Hopkins University Press.

Formal output: for the course includes:

  1. contributions to the course blog (3 per week plus at least roughly one comment a day). These for those leading discussions, this will include notes for chapters in the books we read,
  2. leading discussion in class,
  3. asking good questions of our guest speakers and the managers and executives and journalists we meet in Detroit and
  4. creation of a poster for the final Spring symposium on the last Friday of the term.

Because of the central importance of interaction with speakers, you are expected to attend all scheduled lunches and dinners.

See the schedule page for more details on the course, and the readings page for readings. I am still arranging guest speakers, but typically aim for 3 to visit on campus. As details firm up, I’ll modify the schedule to reflect who will be coming and the readings I’ll assign to prepare for their visits.

Fees: As per the Registrar’s Spring Term course list, the fee is $700, based on estimated travel costs including lodging, museum admissions and group meals with speakers. You will be responsible for books, meals and incidentals while traveling. Note that if you have a meal plan you may be able to obtain some money back for the time when we are off campus.

Travel: You must be on time for all departures, having prepared for the meeting or event. You do not need a coat and tie – engineers don’t wear such things absent off-site meetings – but you should always be neatly dressed (e.g., we visit Ford World Headquarters). No T-shirts and no flip-flops or open-toed shoes at any time!! – you cannot enter factories without appropriate footwear (though you do not need to buy steel-toed shoes).

While in Detroit you should leave your hotel room in good shape each day. We will be in three cars, so drivers need to make sure they have adequate sleep – those rooming with drivers are expected to keep hours conducive to that. Our behavior reflects upon the university, and asking good questions and otherwise leaving a favorable impression is important.

Special Accomodations, Honor Code, Health Issues: All activities are covered by the Honor Code. We do not have exams, but you should nevertheless speak to me privately if you have require accomodations under the ADA. I will collect contacts, insurance and general health information from all of you. If however you have significant health issues – critical medications, severe allergies or asthma, diabetes – please speak to me in private.

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