This course uses the basic tools of microeconomics to analyse the role of government and the rationale for and design of taxation and  expenditure policy. The topics to be covered include a review of basic microeconomics, welfare economics, cost-benefit analysis,  public goods,  externalities,  public choice, public expenditure programs (including education, health, pensions and welfare payments),  and taxation (including efficiency and equity issues, tax incidence, Australian tax policy, and fiscal federalism).

By the end of the course students should have an appreciation of the principal forms of market failure that provide a justification for government intervention, be familiar with the main policy instruments used to mitigate market failures and the principles that guide their optimal use, but also understand the limitations of government intervention - for instance, understand how the presence of information problems both explains the forms that policy intervention take and imposes limits on what can be achieved by it.

The course also covers topics on public choice and provides an alternative, more critical, view of government. The public choice perspective places more emphasis on modelling the political process and argues that this, like the market mechanism, has readily identifiable sources of failure.

Upon successful completion of the requirements for this course, students should be able to:
• understand the principal forms of market failure that provide a justification for government intervention;
• understand the main policy instruments used to mitigate market failures and the principles that guide their optimal use;
• understand the limitations of government intervention - for instance, understand how the presence of information problems both explains the forms that policy intervention take and imposes limits on what can be achieved by it.
• understand the trade-offs captured by public economics models; including the assumptions, relevance, and limitations of those models.
• analyse policy problems and assess arguments appearing in the policy debate.
• understand the differences between the normative and the positive approaches to public economics; in particular, become familiar with public choice models of government.

In-class tests, a mid-semester examination and an end-of-semester examination. Details to be determined at the commencement of the course.

12 hrs (including 3.5 contact hours in teaching weeks)

At least an average of 65% (or equivalent) in the final two years of an Australian undergraduate degree with introductory level courses in Economics, Statistics and Econometrics

Please see Course Website