PUBLIC FINANCE
ECONOMICS 341
FALL 2011
Time:
Room:
Professor:
Office:
Phone:
E-mail:
Office hours:
Tuesday and Thursday 4:00-5:15
College of Business 201
Charles Courtemanche
College of Business 184
502-852-4854
cjcour02@louisville.edu
Tuesday and Thursday 2:00-3:30 and by appointment
Course Description:
The use of microeconomic theory to examine the effects of government taxation and
spending. Topics include externalities, public goods, tax and expenditure incidence, costbenefit analysis, and optimal tax policy.
Course Objectives:
By the end of the semester, you should understand:
1) Why externalities provide a justification for government intervention in markets, and
how this applies to environmental and health policy
2) The theory behind the optimal provision of public goods, and how it applies to
education
3) The pros and cons of social insurance
4) Basic features of the social security, public health insurance, and welfare programs in
the U.S, and how they are (or are not) motivated by economic theory
5) Basic features of the taxation system in the U.S., and how they are (or are not)
motivated by economic theory
6) Theoretical tools for evaluating tax incidence
7) The inefficiencies caused by taxation
8) How to conduct cost-benefit analysis
9) The challenges in aggregating voter preferences to produce policy
10) The budget deficit and options for tax reform and entitlement reform
Text:
Gruber, Jonathan. Public Finance and Public Policy, 2011. New York, NY: Worth
Publishers.
Grading:
Homework
Quizzes
Midterm Exam
Final Exam
5%
20%
35%
40%
Letter grades will be assigned on the usual 10 point scale.
Homework:
You will have six short homework assignments spread out throughout the semester.
They will consist of a combination of math problems, graphs, and short answer questions.
I encourage you to work in groups on these assignments, but you must write up your
answers separately. Since I expect you to work in groups, assignments will not be graded
for accuracy; a valid attempt to answer all parts of all questions will receive full credit.
No homework will be accepted after the beginning of class on the due date, but I will
drop your lowest homework score.
Quizzes:
On each homework due date, we will begin class with a 5-10 minute quiz consisting of a
small subset of your homework problems. You may not use your textbook or notes on
the quizzes, and all work must be independent. The quizzes will be graded for accuracy.
No make-up quizzes will be allowed for unexcused absences, but I will drop your lowest
quiz score.
Exams:
You will also have two exams, a midterm and final. The final exam will not be
cumulative. The exams will consist of a matching/multiple choice/fill-in-the blank/truefalse section, a short answer section, and a math section.
Class Attendance and Participation:
I expect regular class attendance. While attendance is not explicitly a part of your grade,
it would be extremely difficult to do well in this course without regular attendance.
Regarding participation, public finance is a unique subject in that virtually every topic we
cover is a relevant current events issue. Therefore, while lectures will occupy most of
our class time, we will frequently have short discussions, and I expect active
participation. Additionally, I will often ask questions during lectures to make sure that
you are understanding the material.
Important Dates:
Homeworks: 9/6, 9/20, 10/4, 10/27, 11/10, 11/29
Midterm Exam: 10/13
Final Exam: TBA
Fall Break: 10/11
Thanksgiving Break: 11/24
Course Outline:
I.
Introduction
a. Overview (Chapter 1)
b. Tools (Chapter 2)
II.
Externalities
a. Theory (Chapter 5)
b. Application: Environment (Chapter 6.1-6.2)
c. Application: Health Behaviors (Chapter 6.3-6.4)
III.
Public Goods
a. Theory (Chapter 7)
b. Application: Education (Chapter 11)
IV.
Social Insurance
a. Theory (Chapter 12)
b. Application: Social Security (Chapter 13)
c. Application: Public Health Insurance (Chapter 16)
d. Application: Welfare (Chapter 17)
V.
Taxation
a. Overview (Chapter 18)
b. Incidence (Chapter 19)
c. Inefficiencies (Chapter 20)
VI.
Translating Theory to Policy
a. Cost-Benefit Analysis (Chapter 8)
b. Political Economy (Chapter 9)
VII. Where to Go from Here
a. Budget Deficit (Chapter 4)
b. Tax Reform (Chapter 25)
c. Entitlement Reform