Public Economics

Full course description

How can we effectively reduce pollution? Who should provide education and health care? Should we redesign the pension system, and if so, how?

Questions like these are at the core of the field of public economics. Public economics (or public finance) is the study of the role of government in the economy. It is all about the formulation, execution, and effects of government policy. The aim of the tutorials is to learn about how economists think about these challenges and incorporate them into economic models.

The government differs from other organizations because it can use legal instruments to enact policies. Though competitive markets often allocate resources well without any government intervention, there are two major reasons for the government to play a role.

• Market Failures. There are a variety of reasons markets may not be efficient. For example, firms may have market power, or buyers and sellers may not have access to the same information, or there may be costs and benefits to third parties that are not reflected in prices.
• Fairness. At their best, markets guarantee efficiency and voluntary participation, but they may still result in large inequalities.

The topics covered in this course include public goods, externalities, education, health care, pensions, redistribution, collective decision-making, and cost-benefit analysis. After the course, you should be able to critically assess political and economic discussions pertaining to the public sector.