Econ 247

Fall 2011

Course Description and objectives

This course will introduce students to the basic ingredients of policy analysis rooted in the microeconomics of externalities (social, economic, and political), public goods, common property, information failure, absence of competition, and distributional concern.

We will analyze different situations where the market system fails to achieve the socially desired outcome, and where policy makers intervene to improve on the market outcome.  The policies we will review range from command and control mechanisms to market based incentives.  The course will analyze how effective public policy has been in addressing several real world economic problems in an attempt to define the limitations on the role played by the government, and how this role should change with the dynamics of the market.

 Textbooks and Reading Material:

The textbook for this course is:

Principles of Economics by Robert Frank and Ben Bernanke.

Grading:

The grade for this class will be calculated as follows:

Exam 1                                                                         20%

Exam 2                                                                         25%

Final Exam                                                                    30%

Assignments                                                                  15%

Participation                                                                  10%

In class participation constitutes 10% of your class grade.  You are required to review the chapters that will be covered before hand and come to class prepared to ask questions.  You are also expected to carefully do the readings and relate them to the concepts we cover in class.  There will be weekly discussion sheets, practice sheets and homework assignments that cover the readings as well as the concepts we cover in class.  Students who actively interact with the class, ask and respond to questions typically do better.  You are expected to participate in class discussions to help keep the class meaningful and enjoyable. 

Policies

1.      Students are expected to be in class on time.

2.     No cell phones, laptops or electronic devices can be used in class.

3.      If you absolutely must miss an exam, you have to contact me immediately.  A make-up exam shall be given only if official documents from the dean's or the nurse's office are provided supporting a valid reason for missing the exam.  The format of the make-up exam will be at my discretion. 

4.     If you accumulate more than two unexcused absences, 1%  will be deducted from your final grade for every class missed.   Excused absences are those absences for which I recieve a note from the dean's or the nurse's office. 

5.   Assignments submitted after the due date will not be accepted regardless of the reason.

6.   It is your responsibility to collect your assignment from the TA.   Assignments that have no names will be discarded a week after they are graded.

7.      There are no "extra credit" assignments.

8.      Dishonest conduct or disruptive behavior will not be tolerated.  Please refer to the student code of conduct for a review of requirements.

Finally, students are encouraged to speak with me directly should any concerns or difficulties arise. I am happy to work with students who need extra help. Please feel free to drop by during office hours, send an email or speak with me following class time.

Course Outline

The following is an outline of the chapters that will be covered.  The outline and dates are intended as a guide and may be changed during the semester.

Week 1: Sept 7^th, 9^th  

Free Markets vs Central Control

Chapter 3

Readings:

• Krueger, Anne O. (1994). "Economists' Changing Perceptions of Government," published in Comparative Economic Systems Models and Cases. 7th edition.

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Week 2: Sept 12^th, 14^th, 16^th

Government Control of Prices and Unintended Consequences

Readings:

• Neal R. Peirce. On Rent Control. Cato Institute publications
• Portney, Paul (2002). "Penny-Wise and Pound-Fuelish? New Car Mileage Standards in the United States," Resources, spring issue 147.

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Week 3: Sept 19^th, 21^st, 23^th

Efficiency of Markets

Chapter 7

Readings:

• Cohen, R. (2008). "Economist Dissect the Yuck Factor," The New York Times.
• Bastiat, Frederric (1845). The Candlemakers' Petition, Sophismes Economiques
• Evensky, J. (1993), “Ethics and the Invisible Hand,” Journal of Economic Perspectives, 7(2): 197 – 205

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Week 10: Nov 7^th, 9^th, 11^th

Trade Policy

Readings:

• Dornbusch, Rudiger (1992). "The Case for Trade Liberalization in Developing Countries," Journal of Economic Perspectives, 6(1): 69-85

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Week 4: Sept 26^th, 28^st, 30^th

Imperfect Competition: Monopoly, Natural Monopoly, Price Discrimination

Chapter 9

Readings:

• Lynn, Barry C. (2006). "Breaking the chain: The antitrust case against Wal-Mart," Harper's Magazine.
•  Lutz, Matthias (2000). "EU Commission versus Volkswagen: New Evidence on Price Differentiation in the European Car," Review of Industrial Organization, 17(3): 313-323.

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Exam 1

Week 5: Oct 3^rd, 5^th, 7^th

Imperfect competition: Oligopoly and strategic behavior

Chapter 10

Readings:

• McAuliffe R. (1988). "The FTC and the Effectiveness of Cigarette Advertising Regulations,"Journal of Public Policy and Marketing, 7:49-64
• Paba, Sergio (1991). "Brand Reputation, Efficiency and the Concentration Process: A case Study," Cambridge Journal of Economics, 15: 21-45
• Kimes, Mina (2011). "Railroads: Cartel or free market success story?" Fortune, September 26.

Week 9: Oct 31^th, Nov 2^nd, 4^th

Common Resources: Endangered Species

 

Readings:

• Begley, Sharon (2007). "Cry of the Wild," Newsweek.

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Exam 2

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Week 11: Nov 14^th, 16^th, 18^th

PRIVATE SOLUTIONS TO MARKET FAILURES

Private solutions, The Role of Institutions, Corporate Social Responsibility

Readings:

• Coase R. (1960). “Problem of Social Cost,” Journal of Law and Economics, 3(1): 1-44
• Heal, G. (2008). Corporate Environmentalism: Doing Well by Being Green.
• Rosenbloom, Stephanie and Michael Barbaro (2009). "Green-Light Specials, Now at Wal-Mart," New York Times Business Feed, Jan 25
• Stavins, Robert N. (1998) “What Can We Learn from the Grand Policy Experiment? Lessons from SO₂ Allowance Trading” Journal of Economic Perspectives, 12(3): 69 – 88
• Demsetz, H. (1967). “Towards a Theory of Property Rights,” American Economic Review, 57(2): 347- 359.
• Soto, H. (2000). The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. Basic Books

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Week 12&13: Nov 21^st , 28^th, 30^th, Dec 2^nd

The Economics of Information and Financial Crises.

Chapter 12

Financial Crises, The Economics of Information

Readings:

• Akerloff, G. (1970). "The Market for Lemons: qualitative uncertainty and the Market Mechanism," Quarterly Journal of Economics 84, 488-500.
•  
  Mishkin, Frederic S. (1999). "Global Financial Instability: Framework, Events, Issues," Journal of Economic Perspectives, 13(4): 3 – 20.
• Rauh, Joshua and Zingales, Luigi (2009) "Bankruptcy is Best to Save GM," The Economists' Voice, 6(4), Article 3
• Bhidé, Amar (2009) "In Praise of More Primitive Finance," The Economists' Voice, 6(3), Article 8

Final Exam*

* If you would like to get back your final exam, you may give me a self-addressed, stamped postcard or envelope and I will mail you the final exam and course grade.