Economic Policy [3HEFEK151V]

Time and Place

Lecture (Prof. Dr. Carsten Hefeker)

Wednesday 8-10 in US-A 234. 

• rescheduled meeting on Monday, April 17 (16-18) in US-A 234 instead of Wednesday, July 12.  

Mechanics

The course is based mainly on the textbooks by Mueller and Persson and Tabellini which are available in the library. Additional sources are indicated below and will be specified in class.
Slides and problem sets are available via UNISONO if you are registered for the course. Slides cover all relevant material but will not be sufficient to pass the course.

• Unisono 

Requirements

This course has 9 Credit Points.

To obtain those points, students will have to pass the final exam successfully. Details will be given in class.

Content

Part I: Social Planner and Efficiency

1. The Role of the State in the Economy

Property Rights, Transaction Costs and Economic Efficiency

2. Traditional View of Economic Policy

3. Social Welfare

Part II: Democratic Economic Policy

1. Aggregation of Preferences

Majority Voting and its Problems

The Median-Voter

2. Economic Policy as a Principal-Agent Problem

Probabilistic Voting

Interest Groups and Bureaucracy

Part III: Implementation of Economic Policy

1. The Golden Rule

2. Targets and Instruments, Assignment

3. Uncertainty

4. Rational Expectations and Time-Consistency

5. Rules vs. Discretion in Economic Policy

Part IV: Partisan Economic Policy

1. Partisan Politics and Distributional Conflicts

Debt and Common Pool-Problems

War-of-Attrition

Tying the Hands of One's Sucessor

2. Political Business Cycles 

Opportunistic Cycles

Ideological Cycles 

Part V: Economic Policy in Practice

         Economic Policy Aims: Some Examples

Literature

Acemoglu, Daron (2003) Why Not a Political Coase Theorem?, Journal of Comparative Economics 31, 620-652.

Acocella, Nicola, Giovanni Di Bartolomeo and Andrew Hughes Hallett (2012) The Theory of Economic Policy in a Strategic Context, Cambridge: Cambridge University Press.

Besley, Timothy (2006) Principled Agents? The Political Economy of Good Government, Oxford: Oxford University Press.

Dixit, Avinash (1996) The Making of Economic Policy, Cambridge: MIT-Press.

Drazen, Allan (2000) Political Economy in Macroeconomics, Princeton: Princeton University Press.

Hillman, Arye (2018) Public Finance and Public Policy, 3rd ed., Cambridge: Cambridge University Press. (You may also use older editions.)

Mueller, Dennis C. (2003) Public Choice III, Cambridge: Cambridge University Press.

North, Douglass C. (1990) A Transaction Cost Theory of Politics, Journal of Theoretical Politics 2, 355-367.

Persson, Torsten and Guido Tabellini (2000) Political Economics: Explaining Economic Policies, Cambridge: MIT-Press.