ECN410 PUBLIC FINANCE --Paper 1 Professor Grob Email: firstname.lastname@example.org Phone: 438-4292 Office hours: M-W, 2-4 or by appointment Assigned: January 19, 2006 Due: February 28, 2006 Please write a paper of 5-7 pages on one of the following topics. You may choose a different topic if you wish, but the topic must be approved by me. I am available to help you brainstorm topics and to comment on drafts. Please note that while these questions are multi-faceted, I expect you to clearly state your thesis and relate your main points to your thesis statement. Opinions are welcome: make sure that you argue your case using facts and a clear line of reasoning. This assignment is due at the start of class on February 28 and accounts for 12.5% of your grade. 1. What explains the growth in the U.S. government? How is that growth measured? What are the costs and benefits of the growth in the size of the governments? Who benefits, and who loses from a large government? What, if anything, should be done to control the size of the government? Is your view of economic policy influenced by your view of government as mechanistic or organic? 2. Are the theorems of welfare economics a good framework for normative analysis? What are the assumptions necessary for these results to hold or to work in the real world? Can you think of some good examples of violations of the assumptions to these theorems? Explain whether the problem is one of market power, asymmetric information, externality or public good problem. 3. What should be done to improve the educational system (you may wish to select only one part of the system)? Will public schools improve if they are subjected to competition? How would you measure improvement? What role should the government play in education? What kind of policy changes should be made, why, and what evidence do you have that those policy changes would result in the intended outcomes? 4. Former Vice President Al Gore stated that we need to focus on cleaning up the environment. Choose one aspect of environmental remediation (for instance, clean-up of the Puget Sound or rebuilding New Orleans). Explain why this is a classic externalities or public goods problem. What premium should be placed on clean air, clean water, pollution? Would your opinion on this matter change if you were very wealthy or very poor? What is a fair or equitable solution for meeting the needs and desires of all citizens with respect to environmental clean up? 5. Discuss problems with measuring reduction of poverty. Discuss programs designed to alleviate poverty. What are some of the economic and financial problems that can (or typically do) emerge with welfare programs? Why is it important that managers of public programs exercise care about the measurements of success that they use? 6. Cost benefit analysis (CBA) is often advocated as a means to approach a government finance problem scientifically, using positive analysis. Critique an actual CBA (there are many available on the internet). Who was doing the cost-benefit analysis and who were they trying to influence? Was it clear what the objectives and methods were? Did the analyst seem to have the same objective or values as those supporting the policy change? What problems did you notice with the analysis? Based on your critique, do you believe CBA is fact-based or judgment-based?