| PUBLIC
ECONOMICS
3d
Module, 2002/2003
Professor:
Valery
Makarov
TA:
Yuri Andreenko, yandrienko@cefir.ru
Aims:
To familiarise students with basic notions, models and results
of Public Economics. The course helps audience to give thought
to the role of the state in economy, to the economic sectors,
which needed in a state intervention and on the contrary, to which
this intervention can do more harm than good.
Grade
system: Total grade is consisting of weighted average
from midterm exam (0.3), final exam (0.6) and one home assignment
(0.1). Duration of the midterm exam is 1.5 hours and final exam
is 3 hours. Home assignment includes conspectus of a lecture.
Program.
- Introduction:
the role of a state in public life, market failures, the role
of public goods in economy. Classification of goods. Efficient
level of public good providing. Samuelson ratio.
- General
equilibrium model with public sector, Arrow-Debreu economy.
Lindahl market equilibrium. Core of economy. Equilibrium and
core. Kaneko example.
- Contemporary
theory of institutions. Jurisdictions and clubs, difference
between them. Club goods. Example of equilibrium allocation
of agents by clubs. Tiebout hypothesis, “voting by feet”. Example
of nonexistent equilibrium. Examples of institution origination.
- Double-layer
economy. Tobin effect. Arrou-Debreu economy with rationing mechanism.
Example of equilibrium determination.
- Monopolies
control. Niskanen model of bureaucracy. Rozentah-Romer model
of bureaucracy.
- State
intervention. Price and output regulation of essential commodities.
Boiteux model.
- Pareto
efficient and optimal taxation. Principles of equivalence and
ability to pay. Stiglitz model. Example of a taxation scheme.
Example of Pareto efficient taxation scheme.
Literature:
Basic
reading:
Atkinson
A. B. and J. A. Stiglitz, Lectures on public economics, McGraw-Hill
International Editions Economics Series, 1980
Yakobson
L. I., Public economics: economic theory and policy, Higher
School of Economics, Moscow, 2000 (in russian).
Cullis
John and Jones Philip, Public Finance and Public Choice, Second
Edition, Oxford University Press , 1998.
Musgrave,
R. A. and Musgrave, P. B., Public Finance in Theory and Practice.
Fifth Edition. New York, McGraw-Hill, 1989.
Rosen
S. Harvey. Public Finance, Fourth edition, IRWIN, 1995.
Additional reading:
Bewley,
T. F., A Critique of Tiebout's Theory of Local Public Expenditures,
Econometrica, Vol. 49, No. 3, May 1981.
Buchanan,
J. M., An Economic Theory of Clubs. Economica, 32, 125, pp.1
- 14, 1965.
Handbook
of Public Economics, Edited by Auerbach A. J. and Feldstein
M. v.1, v.2. Elsevier, North Holland, 1985.
Samuelson,
P. A., The Pure Theory of Public Expenditure. Review of Economics
and Statistics, 37, 4, 1954.
Tiebout,
A. Theory of Local Public Expenditures,1956.
Tobin,
J., "On limiting the domain of inequality" Journal
of Law and Economics, 263-277, 1970.
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