B.E. International Program

Faculty of Economics, Thammasat University

 

EE 448 Selected Topics in Public Economics
Course Syllabus

Semester:                   Fall 2009 (August 10 – December 02, 2009)

Instructor:                  Ajarn Brian Kennedy

Office:                         Main Office, B.E. Program, 3rd floor, Faculty of Economics Building, or Main Office, BAS Program, 2nd Floor, Lib Building

Office hours:              Wednesday and Friday, 11:00 a.m. – 12:30 p.m. or by appointment (I will be on campus Tuesday – Friday from 8:30 a.m. to 3:30 p.m, at either the Econ or Lib Building;  often I stay until 6:30 or so.)

Contact Information:  bkennedy@gmu.edu, bpk@econ.tu.ac.th, (I check email frequently), or Phone 01-442-7426 (after 7:30 a.m., before midnight)

Class Schedule:          Wednesday and Friday, 12.30 p.m.- 2.00 p.m.

Room:                         Week 1 & 2, room Room 205, Week 3 - 16, Room 304

Course Content:

This class uses economic models and methods to analyze how individuals make collective choices. Using these models, we can model how a) voters behave under different voting systems, and how they make their decisions on who (or whether) to vote, b) how politicians and governments make decisions to raise revenue and allocate goods, and c) to model how bureaucracies make decisions. Throughout the course, every attempt will be made to model people engaged in politics using the same tools and assumptions that economists use to model how people behave under market conditions.

The first third of the course will be primarily concerned with voting models. Using the medium voter model as a base model, it will demonstrate the concepts of rational ignorance and rational irrationality, vote cycling, etc. The primary focus will be on how different incentives cause Homo Economicus to make decisions in the public sphere that are very different from the ones he makes in the private sphere.

The second third of the course shifts the focus to governments, to demonstrate why government decisions often vary widely from what either voters state they desire, or from what economists would view as socially beneficial. eindividuals make decisions. It also explores the empirical data on how governments actually make decisions, and explores proposals to reform government.

The final third of the course analyzes bureaucracies and bureaucrats. It examines how individuals and decision makers in bureaucracies maximize their own interests. This section will also offer anlysis of the rent-seeking society, the political buisness cycle, and other selected topics of public choice interest.

Prerequisites:

EE 311 and EE 340 or (b) EE 441 or (c) EE 442 or (d) permission of the instructor. All students should have a solid grasp of algebra, micro-economics and public finance. Knowledge of Industrial Organization and Game Theory would be helpful, but is not required.

Primary Text:

The primary text for the class will be

Dennis Mueller, Public Choice II

A quick note on the text. A later version of this text, Public Choice III, is available. However, it is almost twice the length of Public Choice II, with the additional length being primarily devoted to more complex mathematical models of the main topics, addittional topics of marginal value, or more recent empirical studies. The more complex math models are not appropriate for an undergraduate level course, and the more recent empirical studies are of little value, since almost all empirical work in Public Choice Economics are of the U.S., and mean little to foriegn students without extensive background. Therefore, I am electing to use the older version of the text.

Secondary Texts:

Rober Cooter, The Strategic Constitution, Available at
http://www.law.berkeley.edu/faculty/cooterr/PDFpapers/stratcon.PDF

Mancur Olson, The Logic of Collective Action

Joe Stevens, The Economics of Collective Choice, Boulder, Colorodo; Westview Press, 1993

Secondary Text:

Other Texts referenced will include

Donald Wittman, The Myth of Democratic Failure

Mancur Olson, The Rise and Decline of Nations, New Haven, Yale University Press, 1982

Joe Stevens, The Economics of Collective Choice, Boulder, Colorodo; Westview Press, 1993

Dennis Mueller, Perspectives on Public Choice

Dennis Mueller, Public Choice III

Jac Heckelman, Readings in Public Choice Economics

Randal G. Holcombe, From Liberty to Democracy: The Transformation of American Government

Joseph Stiglitz, Economics of the Public Sector

Joseph Stiglitz and A. Atkinson, Lectures in Public Economics

Evaluation:

The class evaluations will be based on three exams, given throughout the semester.  Each exam will be 1½ hours in length, students will have a choice of what questions to answer.  A sample exam will be passed out before the first exam.

Each exam is worth a percentage of your grade as given below.  The Midterm exam, and the Final exam, will both be comprehensive.  The exam schedule is given below:

Midterm Exam: September 30, 12:30-4:00          40%

Final Exam: December 17, 9:00-12:00                60%

Cheating: 

Don’t.  If you do, and I catch you, you will be reported to the program director for appropriate punishment.  At a minimum, you will receive a zero on the exam you are caught cheating on, other punishments include automatically failing the course, and being suspended for one (or more) semesters.

Topics: Below is a tentative course outline.

Section I:  Voters
Week 1:  Introduction to Public Choice          

Week 1:  Introduction to Public Choice
Private and social benefits and costs
Positive and negative externalities
Coase and Property Rights
Application: Regulation vs. trade-able permits

Week 2:  The Logic of Collective Action
Public vs. private costs
Public goods, the Tragedy of the Commons, Free Riders

Week 3:  The median voter model
Model Assumptions, model methods
Cycling, peaks, Condorcet voting

Week 4:  The Median voter Model II
Extended numeric analysis of the model
The U.S. – First past the post
Thailand – Party list voting
The Thai Constitution of 1997, 2007, 2009

Week 5:  Bargaining and Agenda Setting
The one and two dimension agenda setter
Indifference curve analyses

Week 6:  The rational and irrational voter
Expressive voters
Rational Ignorance
Rational Irrationality
Other models of voter behavior

Week 7:  Normative Implications
Other Voting systems
The case for limited government
Federalism and Tiebout Voting

Midterm Exam

Section II:  Politicians and Politics

Week 8:  Rent Seeking I
The traditional economic model of monopolies
Wealth transfers and deadweight losses
The utility maximizing politician
New York Taxi Medallions

Week 9:  Rent Seeking II
Gordon Tullok and the chinese beggars
The policy entrepenuer
Dissapating rents
Harbinger triangles and the Rent-Seeking Society
Mancur Olsen "The decline and fall of empires"

Week 10:  Empirical Model:  The Political Business Cycle
The Phillips Curve
Macro-economic policy and the Phillips Curve
The "Misery Index" -- Political science and elections
The long run and short run Philips Curve
The political buisness cycle

Week 11:  Empirical Model: 

Midterm Exam 2

Section III:  Bureaucrats, Governments, and Normative Questions

Week 12:  Principal-Agent models

Week 13:  The Niskannen Revenue maximization model
What do Buerocrats and Government Workers maximize
Government Agencies as Monopolistic Providers of Goods
Marginal vs. Total Revenue
The Revenue Maximizing Minister
Efficiency vs. Equity, social evaluations of value vs. expert evaluations of value

Week 14:  the Coase Theorem




Week 15:  TBA

Week 16:  TBA

Final Exam

 

 

 

 

 

 

 

 

Last Modified August 13, 2009->