040923 KU Public Economics (MA) (2024S)

*Prerequisites:*

Familiarity with game theory (intermediate undergraduate level) and microeconomics (advanced undergraduate level) is expected. If you have a sufficient level of familiarity, you should feel very comfortable with the following two background recommendations:

1) Minimal game theory background: Gibbons’ A Primer in Game Theory, Chapter 1, Sections 1.1 and 1.2., or equivalent. Alternative: weeks 1 and 2 of the Coursera lecture from the University of British Columbia (Jackson et al, Game Theory).

2) Minimal microeconomics background: Varian’s Intermediate Microeconomics: A Modern Approach (8th edition), Chapters 2 to 6, 14 to 16, and 19 to 22 (i.e., consumer theory, producer theory, and Walrasian equilibrium), or equivalent. Some specialised concepts from consumer theory will be used extensively and presented in class: income expansion path (a.k.a. wealth expansion path), price offer curve, compensated demand function, Slutsky equation, equivalent and compensating variations.

*Course Outline:*

What do we really mean when we say that taxation is “distortionary”? How do we make sure to minimize tax induced distortions? Should the provision of public goods be subsidized by the State? Are taxes, carbon markets, and quotas adequate means to tackle climate change? If so, when, why, and how do they work? What is “economic justice,” should we bring it about, and how can we bring it about?

The standard microeconomics toolbox (game theory, consumption and production theory, equilibrium theory), when properly put to use, gives partial answers to the questions listed above. In this seminar we will learn to derive microeconomists’ answers to these questions and to critically examine them. We will also formalize important economic arguments for and against specific types of state intervention, and connect these to the value judgments they explicitly or implicitly involve.

Throughout the term, important skills will be trained: equilibrium analysis, within-the-model reasoning, out-of-the-model reasoning, and normative thinking. At the end of the term, successful participants will have a sense of the limits and benefits of using models to answer questions of public policy.