Course Outline 2015
ECON 361: PUBLIC ECONOMICS (15 POINTS)
Semester 2 (1155)
____________________________________________________________
Course Prescription
A study of the role of the state in a modern mixed economy; its roles, measurement and
accountability. Topics include: welfare theory, theory of public goods, cost-benefit
analysis, budgetary issues, taxation theory and practice, insurance markets, and social
insurance.
Programme and Course Advice
Prerequisite: ECON 201 Microeconomics
Goals of the Course
This course develops a theoretical framework so that students can analyse both
normative questions (what should the state do?) and positive questions (what is the
impact of state activity?; what are the implications of alternative public choices?). The
philosophical and conceptual issues involved in the role of the state are highlighted in the
context of the evolving economy that has become global in character. The course draws
on the rich source of innovative developments in state expenditure, project evaluation,
taxation, privatisation and accountability that are associated with the public sector. We
also cover the important skills necessary to be a practicing policy economist and require
students to complete a policy report.
Learning Outcomes
By the end of this course it is expected that the student will be able to:
1.
Demonstrate knowledge of the basic welfare economics framework, and use this
framework to argue for or against particular forms of government intervention.
2.
Apply the theory of public goods and welfare economics.
3.
Understand the concepts of social cost and cost benefit analysis.
4.
Demonstrate understanding of the principles of tax and what constitutes a 'good'
tax.
5.
Critique and discuss the choices and trade-offs in tax reform.
6.
Understand the nature of and reasons for social insurance.
7.
Understand the process of converting economic policy into practical change within
the institution, community etc.
8.
Understand ethical standards for economic advice; the process of making a change
at a societal or institutional level; leadership and communication.
Continued
2.
ECON 361 Course Outline 2015
Content Outline
Welfare Economics Framework: Pareto optimality, the Pareto criterion; the first and
second theorems of welfare economics; social welfare functions; distributional equity.
Market Failure and Equity: causes of market failure and welfare consequences;
classification of goods and the implications for their provision or production; public
goods, merit goods, externalities, and missing markets; the efficiency and equity role for
the state and the possibility of state failure.
Economics of Health Care: health insurance, ageing, medical price inflation, measuring
health gain.
Cost Benefit Analysis: framework for calculating the benefits of Government projects;
valuing non-market attributes such as life.
Positive Political Economy: public choice, bureaucracy, median voter theorem,
positive political economy.
Income Redistribution: social insurance, poverty measures, transfers and benefits.
Tax Theory and Practice: tax principles and tax reform; tax incidence, tax unit, tax
bases, comprehensive income tax, indirect taxation, taxation of capital, deadweight costs
of tax; choices and trade-offs in tax design.
Provisional lecture guide
All Chapters refer to Rosen and Gayer, “Public Finance”, (10th edition).
Week
Topics
Readings
Chapter 1
1
Introduction to the
Government in the New
Zealand Economy
Treasury New Zealand Economic and Financial
Overview 2015 “Public Finance and Fiscal Policy”,
page 41-46
Tools of Positive Analysis
Chapter 2
Tools of Normative Analysis
Chapter 3
Public Goods
Chapter 4
3
Externalities
Chapter 5
4
Health Care Economics
Chapter 9
5
Measures of well-being
GUEST LECTURER
6
Political Economy
Chapter 6
Cost benefit analysis
Chapter 8
2
MID-SEMESTER BREAK
7
Cost benefit analysis (cont.) Chapter 8
Income Redistribution
Chapter 12
8
Expenditure Programmes for Chapter 13
the Poor
Welfare Working Group 2011 Report "Reducing
TEST "23 September, Wed." Long-Term Benefit Dependency"
9
Regional/urban issues
GUEST LECTURER
Taxation
Chapter 14
10
Tax Working Group 2010 Report “A Tax System
for New Zealand’s Future”
11
Optimal taxation
Chapter 15
12
Optimal taxation (cont.)
Chapter 16
POLICY REPORT
Readings to be advised
Continued
3.
ECON 361 Course Outline 2015
Learning and Teaching
This course will be taught in the second semester, will have 3 hours of lectures a week
(Thr, Fri).
Teaching Staff
Sahin Avcioglu, Course Coordinator, Room TBA, 6th Floor, Owen G. Glenn Building,
Email: s.avcioglu@auckland.ac.nz
Learning Resources
Prescribed Text
Rosen, Harvey S. and Ted Gayer, (2014), Public Finance, 10th edition, McGraw Hill,
ISBN: 0078021685.
Additional reading:
All readings and tutorials will be uploaded on Cecil.
Assessment
Coursework
40% (One Test and one Policy Report each worth 20%)
Final Examination 60%
The Test will be held in evening on Monday 23th September. Further details will be
advised in lectures and through Cecil.
Learning
Outcome
1
2
3
4
5
6
7
8
Test
Policy
Report
X
X
X
X
X
X
Final
Examination
X
X
X
X
X
X
X
X
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