Aim and course description
The module is rooted in the conceptual framework of Public Economics, building up on the distinction between the economics of private interests – the interests that are rival between individuals - and the economics of public interests - the interests that are shared among the people of a political community in their political capacity. In the commercial economy of private interests the market - demand, supply, price and exchange - allocates resources to their satisfaction, albeit imperfectly. In the noncommercial economy of public interests, there is no equivalent mechanism. They remain entrusted to the public economic action of governments and to voluntary cooperation.
The aim of this course is to provide a better understanding on the main motivations behind public intervention, together with the main instruments for such intervention, in a context where regulatory problems cross national boundaries, making cooperation a necessary condition to achieve welfare and redistribution objectives.
The course will be divided into two main parts.
In the first one, the basics of the economics of public intervention will be presented; more specifically, the principles of Welfare Economics and Social and Public Choice, will be introduced. This part will also focus on the main reasons behind public intervention, namely the presence of public, club and merit private goods, and on how these issues can be addressed by public intervention. The first part of the course will end with a treatment of common goods, and how (and to what extent) cooperative behaviors can act as a substitute (or complement) to state intervention.
In the second part, the concepts developed in the first will be “tested” through the lenses of real life experiences. Students will focus on specific, and currently debated, issues, linked to the design and implementation of public policy, including the possibility of illegal behaviors, the complex phenomena of poverty and inequality and the shape of public action when dealing with global commons.
At the end of the course, students are expected to be able to:
- discuss the main reasons behind public intervention, together with the main available tools
- identify and address the most relevant “market failures”
- disentangle problems into those requiring public intervention from those that can be solved by voluntary (e.g. local) actions
- Explain the features of current world problems requiring supranational level interventions, and propose possible solutions
Week 1 – Introducing the economic role of the State: markets, market failures, equity.
Week 2 – An introduction to inequality: theory and evidence from all over the world
Week 3 – The structure of policy design and implementation: public choice, rent seeking, bureaucracies
Week 4 – Evaluating public intervention in a “law and economics” perspective: enforcement, illegal behaviors, corruption.
Week 5 – Poverty, poverty reduction and sustainable development
Week 6 – Economic analysis and global public goods: a game theoretic approach
The final assessment will be based on:
- 60%: final written exam
- 20% participation and performance in group works (one group for each identified topic)
- 15% middle term essay
- 5% attendance
For the part on public intervention motivations and design:
Rosen, H.S., Public Finance, 10th edition, McGraw-Hill 2014
Given the wide array of issues that will be covered in the second part, specific references will be provided during the course.