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Economics of Policy Issues

Module Code: EC3060

Module Title: Economics of Policy Issues

  • ECTS Weighting: 10
  • Semester/Term Taught: Michaelmas & Hilary Term
  • Contact Hours: 44 hours of lectures and 12 hours of tutorials
  • Module Personnel: Lecturers - Professor Andrea Guariso / Professor Michael King

Module Learning Aims

Michaelmas Term:

The first part of the module will provide an introduction to, and survey of, the theory of welfare economics. We will examine the broad philosophical and legal basis of a market economy, paying particular attention to the issues of property rights and the rule of law. We will then explore in some details the issue of collective benefits arising from public goods, highlighting the information problem associated with the optimal provision of such goods. This will be followed by a detailed discussion of externalities, where, among other things, we will study the different ways in which they are addressed: private solutions, public policy, and prohibition of markets. 

Hilary Term:

Lectures will focus on the challenges inherent in the pursuit of social justice and will analyse entitlements such as health care and old age pensions. Discussion of voting behaviour and the impact of forms of government and electoral rules on redistribution will be followed by an examination of issues related to optimal taxation. The module concludes with a discussion of public funding and  a more philosophical discussion on the overall need for government in society.

Learning Outcomes

On successful completion of this module, you will be able to:

  • Identify and analyse the key issues involved in welfare economics
  • Discuss the basic economic and broad philosophical principles underlying these issues
  • Understand the consequences of various forms of voting systems
  • Articulate the dynamics of social welfare economics within the modern economy
  • Discuss the attributes of various forms of welfare entitlements
  • Understand the concept of optimal taxation for labour and capital taxes
  • Formulate a balanced, critical judgment on the status of each of these debates

Module Content

Michaelmas Term:

  • The market, responsibilities and limitations of government and social justice. A first account.
  • Property rights and the rule of law. Principles. Life under maximal government.
  • Public goods. Types of public goods. Prisoners' Dilemma. Information problems. Cost-benefit analysis. Financing.
  • Externalities, private and public solutions.
  • Prohibition of markets: paternalism and hyperbolic discounting.

Hilary Term:

  • Social justice and insurance. Moral Hazard and social justice without government.
  • Voting rules and political competition. The impact of voting on income redistribution.
  • The attributes and consequences of entitlements. Old age and health care entitlements.
  • The choice of taxation. Optimal taxation and alternative tax bases.
  • The growth of government and competing views on the need for government.


Recommended Reading List

The core book is Arye L. Hillman, Public Finance and Public Policy: Responsibilities and Limitations of Government (2nd Edition) Cambridge University Press 2009 and it is advised that you order this now through any bookshop.

Assessment Details

Marks for the course will be allocated as follows;
Michaelmas Term: 15 per cent for test in Week 8 of MT.

Hilary Term: Hilary Term: 10 per cent examination in Week 8, HT. and 10 per cent will be a group assessment.

Annual Exam: 65 per cent

Module Website

Michaelmas Term: Blackboard
Hilary Term:

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