Public Economics, spring 2012

course web page



Slides: introduction to public goods

Midterm exam, fall 2011

Final exam, fall 2011

Public goods decision processes

Optimal government size: pdf writeup, Matlab program with Excel graphing companion, Excel calculation

Files for Tiebout simulation: tiebout.m, evaluate.m, Excel graph of demo

Election systems list

In-class ballot: single-winner analysis: electionprogram3.m, Excel results

exams for this course posted after completion: midterm, final


Homework assignments…

Writing assignment 1 (due Thursday, January 26)

In your view, what role (if any) should governments ideally play? Under what conditions can government action improve on private market outcomes? Why? Under what conditions would you expect government intervention to do more harm than good? Why? Try to identify value assumptions, logical arguments, and evidence or experience that influence opinions about the proper role of government.


Problem set 1 (due Tuesday, February 28)

Click here for the pdf file.


Writing assignment 2 (due Tuesday, March 13)

      Suppose that a ‘pure communist’ economic system is one in which there is little or no private property, and the government has control over all or nearly all economic decisions. Discuss the advantages and disadvantages of such a system. Is there a version of pure communism that you find more acceptable than others?

      Suppose that a ‘pure capitalist’ economic system is one in which all or nearly all things of value are privately owned and controlled, and the only role of the government is to enforce private property rights. Discuss the advantages and disadvantages of such a system.

      If asked, what mixture of these systems would you recommend? Try to argue that your proposal would possess some of the benefits of each, and to be honest about the disadvantages that may remain.

      You should draw on chapters 1 and 2 of the text, as well as the material from the class discussions.


Problem set 2 (due Tuesday, April 24)

Click here for the pdf file.


Problem set 3 (not to be collected)

Click here for the pdf file


Interesting articles

Public goods: Samuelson, Paul (1954) The Pure Theory of Public Expenditure. Review of Economics and Statistics 36:4, 387-389.

Lindahl taxes: Lindahl, Erik (1958) Just Taxation -- A Positive Solution.

Majority rule equilibrium: Black, Duncan (1948) On the Rationale of Group Decision Making. Journal of Political Economy 56:1, 23-34.

Common resources: Hardin, Garrett (1968) The Tragedy of the Commons. Science 162:3859, 1243-1248.

Clarke tax: Tideman, Nicolaus and Gordon Tullock (1976) A New and Superior Process for Making Social Choices. Journal of Political Economy 84:6, 1145-1159.

Coase theorem: Coase, Ronald (1960) The Problem of Social Cost. Journal of Law and Economics 3:1, 1–44

Tiebout model: Tiebout, Charles (1956) A Pure Theory of Local Expenditures. Journal of Political Economy 64:5, 416–424



1: markets and governments

efficiency of ideal markets (1.1), and market failure.

basic game theory review.

efficiency and social justice (1.2), anarchy vs. rule of law (1.3).


2: institutions and governance

political principal-agent problem: moral hazard, imperfect representation, special interests vs. public interest, rent seeking (2.1).

government bureaucracy (2.2).

communism (2.3).


3: public goods – non-rival and non-excludable

heterogeneous preferences for public goods. social optimum, Nash equilibrium, voting with equal cost-sharing, Lindahl prices

Clarke tax (3.2.B).

excludable public goods (a.k.a. natural monopolies) – non-rival but excludable. user prices (3.2.C).

Tiebout sorting (3.2.D).

public goods, taxation, and the size of government (see writeup above).


5: externalities

Pigovian taxes and subsidies.

common goods – rival but non-excludable. tragedy of the commons.

Coase theorem.


6. voting (see election systems list above)

comparing single winner methods: plurality, runoff, IRV, minimax, Borda, ranked pairs, Benham. strategic voting.

proportional representation: list PR, mixed member, STV. Hare vs. Droop quotas.


7: redistribution

Rawlsian, leaky bucket redistribution.