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Бакалаврская программа «Совместная программа по экономике НИУ ВШЭ и РЭШ»

Public Economics

2019/2020
Учебный год
ENG
Обучение ведется на английском языке
6
Кредиты
Статус:
Курс по выбору
Когда читается:
2-й курс, 3, 4 модуль

Course Syllabus

Abstract

This course deals with economic role of the government. Variations of government performance across the globe explain why nations prosper or fail, and economics provides valuable insights into such matters. Historically, the government was viewed by economists as an institution in charge of preventing market failures by means of regulation and public expenditures. More recently the focus has expanded to consider the government as a supplier, guardian and enforcer of institutions – “rules of the game” in economy and society. Institutions are outcomes of public choice, and reflect politics, culture, and history – hence modern public economics touches upon and overlaps with political economy, law and economics, social economics and anthropology, etc. This course combines elements of the traditional and modern views of public economics. In accordance with the tradition, it reviews main types and causes of market failures, and includes primers on public goods and taxation. Next, the course proceeds to the agency relations between government and society/private sector under different political regimes, most notably democracy and autocracy, and explores the impact of such regimes for public policy and institutions. How the state should be organized to better serve its economic roles? To answer this question, the course introduces main ideas and tools of constitutional design, which compares different systems of government (mechanisms of accountability, scale and scope, fiscal and regulatory tools etc.) from the point of view of achievable economic outcomes. A part of such analysis is another standard chapter of public economics, i.e. economics of federalism. The government triad includes, in addition to legislative and executive branches, the judicial branch, and hence there is a section in the course covering selected topics from the law and economics. The course also looks inside the government “black box” by studying the incentives of public servants, and explores government pathologies such as rent-seeking, corruption, and patronage. Since the quality of governance is closely related to norms and values in the society, the course deals with the economic role of civic culture, i.e. the collective ability of the society to hold politicians and bureaucrats accountable, and with the social traits required to discipline and/or substitute for the government.
Learning Objectives

Learning Objectives

  • To introduce students to theoretical models for studying the role of the state in the economy
Expected Learning Outcomes

Expected Learning Outcomes

  • Understand the tasks of the state in the economy
  • Able to use the general provisions of microeconomic theory to study the problems of economic activity of the state
  • Can analyze the main problems of the public economics
Course Contents

Course Contents

  • Market failures
    Individual rationality and public interest. Sub-optimality of market equilibria. Economics of externalities. Public goods and commons. The problem of collective action. Voluntary contributions to public goods provision. Private solutions of the coordination problem: the Coase Theorem and Lindahl Equilibrium
  • Tax theory primer
    Choice of taxes and public expenditures. Taxation and social welfare. How to choose tax bases and schedules? Informational restrictions. Deadweight loss of taxation. Commodity taxes and the Ramsey rule. Income tax theory. Mirrlees economy and optimal income tax. Credibility of tax regimes: the capital levy problem
  • Agency problem between government and society
    Principal-agent problem in the public sector. Common agency. Conflict of interest between government and society. Fiscal policies and incentives to supply public goods in democracies and autocracies. Political risks of modernization and development. Preference aggregation: direct and representative democracy
  • Government design
    Economic analysis of constitution. Economics of checks and balances. Constitutional design under the “veil of ignorance”: choosing a majority rule. Why are reforms delayed: endorsement ex ante and ex post. Proper scope of government and public-private partnership
  • Economics of federalism
    Local public goods. Inter-jurisdictional spillovers. Preference polarization and Oates Decentralization Theorem. Fiscal competition and “the race to the bottom”. Market-preserving federalism. Tiebout model. Economic and political decentralization
  • Economic analysis of law
    Economic role of courts and the rule of law. Externalities and dispute resolution. Contract law: efficient breach, damages and enforcement. Economic significance of property rights. Economics of litigation. Legal origins and the rise of regulatory state
  • Government performance and pathologies Incentives in public sector
    Monitoring and career concerns. Societal expectations and bureaucratic performance. Economics of corruption. Centralized and decentralized corruption. Economic costs of corruption. Political and economic transactions between public and private sectors
  • Public economics of civil society
    Political collective action problem. Political foundations of democracy and the rule of law. “Civicness” and government performance. Social capital and welfare state. Collective voice vs. collective exit. Institutions and culture: an interplay
Assessment Elements

Assessment Elements

  • non-blocking Problem sets
  • non-blocking Final test
Interim Assessment

Interim Assessment

  • Interim assessment (4 module)
    0.6 * Final test + 0.4 * Problem sets
Bibliography

Bibliography

Recommended Core Bibliography

  • Anthony B. Atkinson, & Joseph E. Stiglitz. (2015). Lectures on Public Economics Updated edition. Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.pup.pbooks.10493
  • Hillman, A. L. (2009). Public Finance and Public Policy : Responsibilities and Limitations of Government (Vol. 2nd ed). Cambridge: Cambridge eText. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=304391

Recommended Additional Bibliography

  • Acemoglu, D., & Robinson, J. A. (2012). Why Nations Fail : The Origins of Power, Prosperity and Poverty (Vol. [International version]). New York: Profile Books. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1478395
  • Besley, T., & Persson, T. (2011). Pillars of Prosperity : The Political Economics of Development Clusters. Princeton: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=380271
  • Dewatripont, M., Jewitt, I., & Tirole, J. (1999). The Economics of Career Concerns, Part I: Comparing Information Structures. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.EE049710
  • Hindriks, J., & Myles, G. D. (2013). Intermediate Public Economics. The MIT Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.mtp.titles.0262018691
  • James A. Robinson. (2006). Economic Backwardness in Political Perspective. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.11207773