ECON 369-1 – Public Sector Economics
Fort Lewis College – Spring 2016
CRN 30963 (4 credits)
Time: MWF 12:35-1:45
Location of Class: EBH 108
INSTRUCTOR INFORMATION
Instructor’s Name: Dr. Deborah Walker
Office Location: EBH 184
Telephone Number: 247-7624
Cell phone Number (for texts): 970-946-5325
E-mail address: walker_d@fortlewis.edu
Please - when you e-mail me or text me, please let me know which class you are in (for example, just say you are in ECON 369). And if you text me, please let me know who you are in the text. Thanks.
Web Page address: http://faculty.fortlewis.edu/walker_d/ (This is an important address -- all class handouts, homework assignments, study questions, etc. will be posted on this web site.)
Office Hours: Monday 3:15-4:15, Tuesday and Thursday 1:00-3:30 and by appointment. I will be in my office during these days/times unless I have a meeting or other appointment I cannot miss. In that case I will let you know ahead of time (will post it on my web site) when I will not be available.
NOTE: If my office door is closed -- please knock. The only time that I request you do not stop by my office is during the 10 minutes prior one of my classes starting. THANK YOU.
COURSE INFORMATION
Introduction:
This is a course about how economists study the public sector (i.e., government). To really understand the public sector, we must understand not only how the government might allocate resources internally (traditionally known as Public Finance), but also how the political decisions of voters and their elected representatives will tend to be translated into public sector policies (known as Public Choice). Therefore, Public Sector economics is a combination of public finance and public choice.
Public Finance, as traditionally taught, studies individual behavior in the private realm of his or her activity. It does not examine individual behavior in the public realm of activity. This is where Public Choice theory has contributed to, and in my opinion, substantially strengthened our understanding of political decision-making. Economic theory has been developed mostly to explain how organized markets work with respect to the use of scarce resources. It has only been recently (the last 35 years or so) that economists have started to devote a substantial amount of time to the study of individual participation in collective decision-making. Part of the reason for this increase in emphasis on resource allocation through political means instead of through private means is because of the increase in the size of government.
Public Finance: As the head of the Department of Defense -- should you allocate more revenue into intelligence or into tanks? How should the government raise its revenue -- income tax, sales tax, head tax, etc.? How does an individual respond to an increase in their income tax (work more or less, for example). So an economist might study the decisions that people make in their "private" lives due to changes in the rules of the game related to financing the government. Includes individual workers, owners of business firms, etc.
Public Choice: "Politics without romance," according to James Buchanan. How is it that one department in the government (defense, for example) might end up with more revenue than another department (education, as an example)? Or why is Bob, on net, subsidized by taxpayers, while Deb is a net payer of taxes? Why do consumers and taxpayers end up footing the bill for Bob, an individual in a special interest group? Why does an individual vote for one tax and not another, etc. -- decisions people make in their "public" lives. Includes politicians, bureaucrats, voters, etc.
So this course will combine the traditional approach to Public Finance with the contributions of Public Choice analysis to study how changes in rules will in turn change the behavior of individuals, both in their private and public lives, which in turn will ultimately change economic outcomes.
Just as markets should be studied as ever-changing processes that emerge from the interaction of individuals, so should politics (in my opinion). The political arena is a social arena - where people deal with each other. And out of those "dealings" we get political outcomes; just as we get economic or social outcomes from people dealing with each other through market exchange.
Of course, what develops in the political arena has vast consequences for the market arena - they are not mutually exclusive by any means.
But also - I want to bring in what might be called some "cutting edge" topics in public sector economics (mostly public choice): for example, perhaps talk about some empirical public opinion research, ideology, some critiques of the political failure literature, some different voting models, and the economics of anarchy (after all, is it really prudent to just assume that government should exist in the first place?).
So why study the public sector?
Catalog Description: Application of economic theory to the study of non-market (political) decision making. An analysis of the types, incidences, and consequences of taxation; government expenditures and borrowing and their economic effects.
Course Delivery Format: This class is a lecture class including both in class and out of class student exercises.
Prerequisites: None
Required Readings:
Class handouts (handed out in class and/or posted on my web page).
Note that there is no textbook assigned for this class. That is because I don’t like any of the Public Finance or Public Choice texts on the market. Therefore, the notes from the class lectures will be very important. I will post outlines of the lectures on my web page and hand them out in class. But remember, these are just outlines and need to be filled in with notes from class. If you miss a class it is your responsibility to get the notes from one of your classmates and not from me!! Do not expect me to redo an entire lecture just for you.
The following list of books includes most (but not all) of the sources I will be using for the class:
The Calculus of Consent by James M. Buchanan and Gordon Tullock
Readings in Public Choice Economics, ed. by Jac C. Heckelman
Fiscal Sociology and the Theory of Public Finance: An Exploratory Essay by Richard E. Wagner
Public Sector Economics: The Role of Government in the American Economy by Randall Holcombe
Economic Policy in a Liberal Democracy by Richard E. Wagner
Public Finance in Democratic Process: Fiscal Institutions and Individual Choice by James M. Buchanan.
The Myth of the Rational Voter: Why Democracies Choose Bad Policies by Bryan Caplan
The Elgar Companion to Public Choice by Michael Reksulak, Laura Razzolini and William F. Shughart II
Government Failure: A Primer in Public Choice by Gordon Tullock, Arthur Seldon and Gordon L. Brady.
Public Finance and Public Choice: Two Contrasting Visions of the State by James M. Buchanan and Richard A. Musgrave.
Beyond Politics: Markets, Welfare, and the Failure of Bureaucracy by William C. Mitchell and Randy T. Simmons.
The Logic of Collective Action: Public Goods and the Theory of Groups by Mancur Olson
Public Finance and Public Policy in the New Century, ed. By Sijbren Cnossen and Hans-Werner Sinn.
Public Finance and the Price System by Edgar K. Browning and Jacquelene M. Browning.
Economic Politics: The Costs of Democracy by William R. Keech
Public Finance and the American Economy by Neil Bruce.
Environmental Politics: Public Costs, Private Rewards by Michael S. Greve and Fred L. Smith.
Economics of the Public Sector by Joseph E. Stiglitz.
What Should Economists Do? by James M. Buchanan.
Fair Play by Steven Landsburg
The Machinery of Freedom by David Friedman
The Armchair Economist by Steven Landsburg
Crony Capitalism in America, 2008-2012 by Hunter Lewis
Deficits, Debt, and Democracy by Richard Wagner
Power and Market by Murray Rothbard
The Social Dilemma by Gordon Tullock
The Strategic Constitution by Robert Cooter
What Americans Know About Politics and Why It Matters by Michael Delli Carpini and Scott Keeter
Democracy and Decision by Geoffrey Brennan and Loren Lomasky
The Myth of Democratic Failure by Donald Wittman
Collective Preferences in Democratic Politics by Scott Althaus
Bureaucracy by Ludwig von Mises
Law, Legislation and Liberty by Friedrich Hayek
Also various journal articles and various publications by the American Legislative Exchange Council, the Mercatus Center, the Manhattan Institute, the CATO Institute, the Mises Institute and other public policy organizations.
Learning Outcomes
Program Learning Outcomes:
Students completing this course will:
Course Learning Outcomes:
The following are my own personal goals or outcomes for this class:
General Outcomes -
Students completing this course successfully will be able to:
More Specific Outcomes (subject to the time constraint of the class) -
Students completing this course successfully will be able to:
Course Assessment Tools:
Exams (including definitions, multiple choice questions, essay questions, graphical analysis, analytical problems), homework assignments (including definitions, essay questions, graphical analysis, analytical problems), in class exercises, and readings quizzes. Also a project (see below).
COURSE POLICIES
Attendance and Attitude Policy: I will take attendance. Part of your grade will be based on attendance and class participation (mostly attitude – see below). If you have not attended class on a regular basis, I will take that into consideration when I am determining your final grade. It has been my experience that some students think they don't have to come to class to pass -- this might be true, but I believe you are here at Fort Lewis to learn how to think for yourself and to learn how to be a responsible human being. Coming to class is an important part of that learning/maturing process. Therefore, if you don't think you will choose to come to class on a regular basis, please drop now. I want serious, responsible students who want to learn in my classes.
Specifically: You have three "free" absences (this includes the first day of class if you are on the roster). Your "free" absences should be used for days when you are sick, in court, going to a wedding, funeral, family reunion, picking up your mom from the airport, etc. - use your "free" absences wisely. E-mailing me and telling me you don't feel well and won't be in class does not excuse your absence. Once you miss 4 classes, 20 points will be deducted from your total points. For every absence thereafter 10 points will be deducted from your total points.
Note: Every three times you are late and/or you break a rule listed in the syllabus (see below under attitude problems) = one absence. Also - coming into class more than 10 minutes late or leaving the class more than 10 minutes before the end of the class (or during class) will count as an absence for that day.
If you have extenuating circumstances that keep you from coming to class you need to let me know and you might not be counted absent -- if you have evidence to back up your claim. An example of an extenuating circumstance is having to have an emergency operation to remove your appendix. Having to go to court is NOT an extenuating circumstance.
Points might also be deducted because you looked at or used your cell phone or iPad (or any other such device) during class and/or because of other attitude problems (see below). Leaving and returning to the class while it is being held will result in an absence. GO TO THE REST ROOM PRIOR TO CLASS.
Again, I will deduct points for attitude problems. Every three times one of these rules is broken = one absence. Attitude problems include, but are not limited to, the following:
· Letting your politics drive your education -- not respectfully listening and discussing ideas that you do not agree with. I don't care if you agree with any of the ideas presented in this class -- but I do care that you understand them. After all, how can you disagree with something you don't understand? A disrespectful attitude towards the professor or a fellow student will NOT be tolerated.
· Getting up and leaving and returning in the middle of class. This is college -- not grade school. Please use the rest room and/or make your important phone calls before class begins (if you have a medical condition that requires you to leave the classroom on occasion, please let me know at the beginning of the semester and bring me the appropriate documentation). If you are gone for more than 10 minutes during a class, you will be counted absent for that day.
· Getting up to throw something away during class. Hold on to it until the class is over.
· Consistently coming into class late - coming into class late on a regular basis is, in my opinion, very rude and disruptive to class (and is irresponsible on your part). A few minutes late a couple of times per semester is understandable -- but coming into class late on a regular basis will not be acceptable. If you have a legitimate reason for being late to class on a regular basis, let me know at the beginning of the semester.
· Looking at your cell phone or listening to earphones while class is in session (this includes while taking an exam). Please do not use any electronic devices during class. Each time that you look at your cell phone during class will = broken rule! You may use a calculator but not your cell phone for calculations. See below regarding computer use during class.
· Reading or writing material that is not related to the class or interrupting class by talking or laughing while the instructor or a fellow student is speaking.
· Leaving class early without notifying the instructor beforehand. If you must leave early for some reason let me know at the beginning of class. Remember - leaving the class more than 10 minutes before the end of the class will count as an absence for that day.
· Eating meals in class. Snacks/drinks are fine -- but please do not bring in full meals to class. This is very disruptive to students sitting around you and to the instructor (not to mention it distracts you as well). FOOD Policy: You may eat candy bars, snacks, etc. in class. However, complete meals, sunflower seeds, tobacco or any other foods that require you to spit are not allowed in class.
I want to create a classroom atmosphere that is conducive to learning – respect for your fellow classmates and for the professor is necessary for this to be achieved. If you cannot follow these classroom rules, please drop this class.
Please turn off all cell phones during class (including exam days). Use of cell phones, head phones, earphones, or any other electronic device (except calculators) is not allowed during class.
If your T-shirt or sweatshirt or coat, etc. has a hood, you must put the hood down during class. Sunglasses are also not allowed in class.
Computer Use in Class: If you choose to use a computer to take notes while in class then the following rules apply:
1. You must write a paragraph stating why the use of a computer for note taking is something you feel is necessary. If I agree with your proposal, then you also must:
2. You must sit in the first row of class.
3. You may use the computer for ONE reason: taking notes. This means that there is no reason for you to be on the web or any other site during class. I will always have the outlines posted on my web site up in front of the class. You can copy and paste the notes from the web site into a word document and then use that document for note-taking.
4. You must sign an additional contract regarding computer use. If you are going to use a computer, ask me for this contract. Basically - if you break rule number three, you may never use the computer in the class again AND 50 points will be deducted from your point total for the class.
AND - I DO NOT ACCEPT HOMEWORK VIA E-MAIL Unless otherwise specified under unusual circumstances.
Withdrawals and Census Date:
Disenrollment Policy - You will be disenrolled from this course if you miss the first day of class. If you are disenrolled from the class, you may re-register if space is available.
Withdrawal from Course - You may add and drop classes without any record through Tuesday, January 26 at 4 pm.
The last day to withdraw from FLC classes with a grade of "CW" (course withdrawal) is 4 p.m. the Friday after midterm grades are posted (Friday, March 4). This is a college-wide deadline that is not negotiable. To withdraw from this course, go to the Registrar's Office, Room 160, Miller Student Services Building before the course withdrawal deadline. They will help you through the process. You do not need my signature on the course withdrawal request form.
REMEMBER: Starting Fall 2013 Census date, all students have a lifetime limit of three individual course withdrawals from FLC courses. If you have withdrawn from classes before Fall 2013, these will not count towards your lifetime limit. Also, withdrawing entirely from a semester (all classes ) does not count against your lifetime "CW" limit. Semester withdrawal is handled under a different policy and procedure. Please refer to the Academic Policies section of the Fort Lewis College Catalog of Courses for more information about course and semester withdrawal policies and procedures.
Student Athletes/Musicians/Etc.: Please let me know at the beginning of the semester which athletic team/sport or musical group in which you participate. Also -- if you are going to be out of town for an athletic/musical event, please remind me a day or two before you will be gone. If you are going to miss an exam while out of town -- then let me know a week prior to the date you will miss the exam. In class exercises are posted on my web page -- you can complete the questions for points if you miss an exercise due to an athletic/musical event. You must turn this in the day you return to class to receive credit. ALL HOMEWORK MUST BE TURNED IN BEFORE THE DUE DATE OR IT WILL BE COUNTED LATE OR WILL NOT BE ACCEPTED IF WE HAVE GONE OVER THE ANSWERS IN CLASS -- IF YOU ARE GOING TO MISS CLASS WHEN HOMEWORK IS DUE - TURN IT IN PRIOR TO LEAVING FOR YOUR EVENT.
Also - I must be informed of your absence by your coach (or Lynn Andrew) that you will be missing classes or I will not excuse the absence.
Accommodations for Disabilities: Students with disabilities have equal access and equal opportunity in this course. If you require reasonable accommodations to fully participate in course activities or meet course requirements, you must register with Disability Services, 280 Noble Hall, 970-247-7459. If you qualify for services, bring your letter of accommodation to me as soon as possible. It is your responsibility to remind me to send your exam to the testing center before every exam if you need to use that facility.
Academic Integrity/Honesty Statement: Academic dishonesty includes all forms of unethical or illegal behavior which affects a student’s academic standing, including, but not limited to, cheating on exams, plagiarism, forgery of academic documents, falsification of information on academic documents, providing and/or accepting information to other students about an exam or assignment, or unauthorized access to computer files containing academic information. Academic dishonesty may result in sanctions ranging from a lowered grade on a particular assignment to an “F” in the class and report submitted to the Office of the Vice President of Academic Affairs. The policy on academic dishonesty by students can be found at http://www.fortlewis.edu/Portals/12/Docs/PART-III-Academic-Dishonesty.pdf Cheating is highly unethical and I will not tolerate it!
COURSE REQUIREMENTS AND EXPECTATIONS:
In addition to spending 4 hours per week attending class, the typical student in this 4 credit lecture course should expect to spend at least 8 hours per week of concentrated attention on course-related work, including but not limited to time attending class, as well as out-of-class time spent reading, reviewing, doing out of class exercises, preparing for upcoming quizzes/ exams, and other activities that enhance learning.
1. Exams: There will be five mid semester exams and a final. These exams will include definitions, short answer and essay questions (which might include graphs), and some multiple choice. Exam material will come from class handouts, from class notes (most important) and from the reading assignments.
NOTE: once an exam has been handed out in class, you are not allowed to leave the classroom for any reason. If you come into an exam late and someone has already finished the exam and left the classroom, you will not be allowed to take the exam and will be given the grade of zero for that exam. For every minute you are late for an exam (including the final) one point will be deducted from your exam grade. The final exam will cover the material we go over after the fifth exam and will also include some comprehensive questions.
I DO NOT GIVE MAKE-UP EXAMS (or reading quizzes) EXCEPT UNDER VERY SPECIAL CIRCUMSTANCES. If you miss a exam WITH MY PRIOR PERMISSION, I might allow you to make up the exam-- but only if you obtain my permission PRIOR TO THE EXAM you are going to miss AND have a VERY good reason for missing it. Without this permission, you will simply lose the points from a missed exam. Permission to miss an exam will be given for VERY special circumstances, circumstances that must be documented in some way. A phone call the day of the exam saying you are not feeling well is not a valid excuse to miss a exam. Taking your parents (or anyone else) to the airport (or picking them up) is also not a valid excuse. You must take responsibility for showing up and taking all of the exams - the dates are posted ahead of time!
2.
Reading Assignments and Reading Quizzes:
I will expect you to keep up with any assigned readings. The class will include
discussions about the handouts I will put on my web page or hand out in class --
therefore, if you have not read the assigned reading, you will not be able to
participate in the discussions and will not gain as much from the lectures.
3. Homework Assignments: Students will be given written assignments to complete and turn in throughout the semester (typically once every other week). I will announce these assignments and their due dates during the course of the semester. The purpose of these assignments will be to further students understanding of the topics and issues discussed in class. In particular, these assignments are designed to enhance student exposure to and understanding of classroom material. General directions for all assignments are as follows:
NOTE: I do NOT accept homework via e-mail and you must turn in your own homework assignments.
General directions for all homework assignments are as follows:
· All assignments must be turned in at the beginning of class (this does not mean 5 minutes into the class) on the day they are due. Late assignments will be accepted with a deduction in points (20% if turned in the same day, 30% thereafter).
· No late assignments will be accepted once the assignment has been returned to the class. No exceptions.
· All essay and number answers should be typed. Graphs do not have to be typed. If your answer is not typed I will not grade it. Points will be deducted for not following directions. Repeat offenders will be subject to me not accepting their homework at all.
· All assignments having more than one page must be stapled. If you do not staple your assignments you can buy a staple from me - the price for one of my staples is 1 point deducted from your homework grade.
4. Super Committee Analysis Paper:
You can do an individual paper or work in a group up to 3 people. Your choice.
A few years ago a "super committee" was formed from members of both political parties (democrats and republicans) in order to come up with $1.2 trillion in cuts to the federal government's budget deficit - over a 10 year period. They were supposed to decide on both “spending cuts” and “revenue enhancements” - fancy phrase for tax revenue increases. Of course, the debt has just increased since then because federal government deficits have gone through the roof.
So now we are going to form another committee and ....
You are now on the "super committee" - but you are to come up with $2 trillion in cuts over a 3 year period. You need to decide how you are going to do this and then justify your decision.
So your analysis should include:
1. Your strategy and be specific. If you are cutting from defense - say what/where you are cutting. This also includes any assumptions you might make regarding behavior changes due to your changes. For example - will increasing the income tax rate increase tax revenue? Maybe, or maybe not -- so what are your assumptions regarding these kinds of strategies and make sure you back them up with good theory.
2. Your justification. Justify each of your strategies - on both the spending side and the tax revenue side.
3. Who will benefit and who will lose (you can only talk about this in terms of money - not in terms of subjective utility).
4. What economic outcomes will take place due to your strategies? Will more jobs be created? Explain why. Will businesses outsource more or less? Explain why. Etc.
5. You will give a short briefing of your analysis to the class. A short PowerPoint is probably in order for your presentation since it will include numbers.
The paper should be a maximum of 4-5 pages long (not including any graphs or other diagrams you might want to use) - longer papers will NOT be graded (typed, double-spaced using 12 point font) – there is no minimum length.
I will be grading mostly on your explanations as to why you chose the cuts you made based on economic analysis (not simply political ideology), clarity and thoroughness in your arguments, and overall presentation.
Here is the cite to the 2016 budget - to get you started. Please make sure you cite any sources you use with appropriate information (including web page addresses).
Grading Policy:
Your semester grade will be determined as follows: (approximately 700 points total)
Exams (5 at 50 points each = 250 points)
Written homework assignments (100-150 points -- this point total is approximate)
Reading Quizzes (12 pts. each, 72-120 pts.)
Super Committee Paper - (100 pts) Short Presentation - (20 pts.)
Class participation, mostly attitude, attendance, etc. (points at my discretion and via the syllabus)
Final Exam (100 points)
Total Points Possible: 700 points (tentative) possible for the class. I will grade on a curve. The person with the highest number of points in the class will set the curve. For example, if the highest number of points earned in this class is 550 points, any student with 90 to 100% of 550 points (495-550 points) will receive an A or A- in the class; any student with 80 to 89% of 550 points will receive a B+, B or B- in the class; and so on. An A requires 94% or higher in the class. An A- requires 90% - 93.9%. B- requires 80 to 83.9%. B requires 84 to 86.9%. B+ requires 87 to 89.9%. Use these same percentages to determine C-, C, C+, D, D-, D+ but in the 70 and 60% ranges.
Course Schedule and Dates of the Exams and Super Committee Analysis:
Please see the course schedule with topics on the Handouts and Assignments page of my web site.
Exams: There will be five mid-semester exams and a final exam (which will have some comprehensive questions on it).
EXAM DATES (NOTE: For every minute you are late for an exam you will lose one point on that exam - this includes the final exam)!
FIRST EXAM: Wednesday, Jan. 27
SECOND EXAM: Friday, Feb. 12
THIRD EXAM: Wednesday, March 2
FOURTH EXAM: Wednesday, March 23
FIFTH EXAM: Friday, April 8
FINAL EXAM: Monday, April 25 (9:45-11:45) SEE NOTE BELOW - You must take the final exam on the day/time that it is scheduled. http://www.fortlewis.edu/registrar/StudentInformationandPolicies/FinalsSchedule.aspx
Note: “But my Mom made the plane reservations and I can’t change them” is not a valid excuse to take the final exam early. Neither is "but I have to work." YOU MUST TAKE THE FINAL EXAM DURING ITS SCHEDULED DAY AND TIME. PLEASE DO NOT ASK FOR AN EXCEPTION.
I DO NOT GIVE MAKE-UP EXAMS (or make-up reading quizzes) EXCEPT UNDER VERY SPECIAL CIRCUMSTANCES. If you miss a exam WITH MY PRIOR PERMISSION, I might allow you to make up the exam-- but only if you obtain my permission PRIOR TO THE EXAM you are going to miss AND have a VERY good reason for missing it. Without this permission, you will simply lose the points from a missed exam. Permission to miss an exam will be given for VERY special circumstances, circumstances that must be documented in some way. A phone call the day of the exam saying you are not feeling well is not a valid excuse to miss a exam. Taking your parents (or anyone else) to the airport (or picking them up) is also not a valid excuse. You must take responsibility for showing up and taking all of the exams - the dates are posted ahead of time!
DUE DATE for the Super Committee Analysis Paper Assignment is Wednesday, April 20. We will have presentations on that class day and maybe the next if necessary.