POLITICAL ECONOMY 304

ECONOMICS AND POLICY-MAKING


Professor: Douglas Nelson

Office: Tilton 108 (Murphy Institute), Phone: 865-5317

Office Hours: Tuesday and Thursday, 3:30-5:00

email: dnelson@mailhost.tcs.tulane.edu



Virtually all contemporary economies are characterized by extensive relations between the economic and political systems. In this course we study both the effect of government policy on the economy and the effect of political action on the economic policy of the government. In the first part of the course we review and extend tools from microeconomics that have proved useful in designing and evaluating public policies. This branch of economics is generally called welfare economics. In the second part of the course we will apply these tools to the analysis of attempts to regulate the economy in the interest of improving economic welfare. One set of issues with which we will be particularly concerned is the meaning of “economic welfare” and how it comes to be defined in particular cases.


Your performance in this course will be evaluated on the basis of two examinations (worth 100 points each); and a paper worth 100 points. To receive an A, you must earn at least 270 points out of the total of 300 points available. To pass the course you must earn at least 120 total points. Grades between these limits will be determined on the basis of your performance relative to that of the class as a whole.


With regard to the examinations. Each of the examinations will be made up of a number of identification and short-answer questions, and an essay question that asks you to synthesize material from the part of the course immediately preceding the examination. The midterm examination will be given only on Wednesday, 4 March in class. The final examination will be given only on Monday, 4 May 1998 at 8:00 am. Do not make travel or other plans that conflict with this date.


With regard to the paper. It is in the nature of a course of this sort that much of the material presented will be at a fairly high level of generality. Thus, in an effort to provide you with the opportunity to develop some more detailed expertise, every student will select an industry, or arena of regulation, for detailed study. A satisfactory paper must examine the economics and politics of regulation in the industry you choose to study. By the end of the third week of class, each student will present, in writing, the industry or specific regulation which s\he proposes to study. This is intended to be a substantial piece of research. An A paper must express a clear, positive argument and present evidence in support of that argument in a coherent fashion. I would expect most papers to be in the 25-30 page range. I expect you to use available primary and secondary sources, and I expect you to cite the authorities you use accurately and honestly. Plagiarism will not be tolerated. The paper is due by 5:00 pm on the last regularly scheduled day of class (29 April 1998). Late papers will not be accepted and will receive a grade of zero.


Readings for the course will be drawn from the following books:


P.-O. Johansson (1991). An Introduction to Modern Welfare Economics. New York: Cambridge University Press. [Johansson]


K. Viscusi, J. Vernon, and J. Harrington (1995). Economics of Regulation and Antitrust. Cambridge: MIT. [VVH]


SYLLABUS FOR POLITICAL ECONOMY 304

Economics and Policy-Making



            Week 1: General Course Introduction


Part I: Some Tools for Economic Policy Analysis


            Week 2: General Equilibrium and Basic Welfare Analysis


                        Johansson, Chapter 2

 

Week 3: Social Welfare Judgements


                        Johansson, Chapter 3

 

Week 4: Measuring Welfare Change

 

Johansson, Chapter 4 and 9


                        Paper proposals due

 

Week 5: Distortions, Public Goods and Welfare-Improving Intervention


                        Johansson, Chapter 5

                        VVH, Chapter 4

 

Week 6: Public Goods and Welfare-Improving Intervention

 

Johansson, Chapter 6



Midterm Examination4 March 1998



Part II: The Law and Economics of Economic Regulation

 

Week 8: Historical Background and Evolution of US Regulatory Policy

 

-VVH, Chapter 2 and 3

 

Week 9: Implementing Competition: Introducing the Law and Economics of Antitrust


                        -VVH, Chapter 3

 

Week 10: Implementing Competition, I: Oligopoly, Collusion, and Antitrust

 

-VVH, Chapter 5

 

Week 11: Implementing Competition, II: Law and Economics of Horizontal Control

 

-VVH, Chapter 7

 

Week 12: Implementing Competition, III: Monopolization and Price Discrimination

 

-VVH, Chapter 9

 

Week 13: Implementing the Optimum?: Introduction to the Law and Economics of Regulation


                        -VVH, Chapter 10

 

Week 14: Natural Monopoly Regulation

 

-VVH, Chapter 12

 

Week 15: Introduction to Social Regulation

 

-VVH, Chapter 19

 

Week 16: Social Regulation--The Case of Environmental Protection


                        -VVH, Chapter 21


Paper Due: Last Regularly Scheduled Class-Wednesday, 29 April.


Final Examination: 4 May, 8:00-12:00