The goals of this course are to (i) acquire a structured insight into the important role of the state in modern market economies, (ii) learn about the functioning and performance of the state and its interactions with markets, and (iii) understand and critically reflect upon recent developments and discussions concerning issues of the public sector like inequality, taxation, or climate protection.

Public economics is the study of the role of government in the economy. It involves answering the following four broad questions: When should the government intervene in the economy? How might the government intervene? What is the effect of those interventions on economic outcomes? Why do governments choose to intervene in the way that they do? The topics include (i) taxation, redistribution, inequality, poverty, and fairness, (ii) market failures such as incomplete information, public goods, and externalities, as well as (iii) political decision-making and elections. These topics will be analyzed from a normative (welfare economic) as well as from a positive (explanatory) perspective, with emphasis on the relevance and limitation of traditional economic theory.

Textbook: Jean Hindriks and Gareth D. Myles (2013), Intermediate Public Economics, second edition, MIT Press, Cambridge, MA.

Students who enroll in this course should have knowledge and understanding of mathematics and microeconomics (in particular game theory, industrial organization, general equilibrium theory), at a level comparable to the second year economics course microeconomics. Exchange students need economics as a major and an advanced level of English to enroll in this course.