PAM 5170

Course information provided by the Courses of Study 2014-2015.

This course examines rationales for and effects of government intervention in the marketplace. We begin with study of the marginal analysis that describes the "optimal" or the "efficient" amount of any activity. We then examine the basic model of a market that describes how the price mechanism allocates resources if prices are able to move freely. We move on to several basic policy rationales for intervention in a market. Those include externalities, public goods, natural monopoly, and contracting problems, among others. We consider various forms of intervention, including taxes and subsidies, industry and economy-wide regulation, as well as innovative approaches such as tradable property rights and permits. Both normative and positive theories of regulation are examined, including the capture, economic (or private interest), pure public interest, and hybrid theories. Those approaches are applied to specific types of regulation, including individual industry-level regulation (e.g. electricity, trucking, postal services), as well as to broader social regulation (e.g. health, safety, environment). The effect of deregulation and other regulatory reforms in several industries will be assessed. Current policy issues related to government intervention in the marketplace will also be discussed along the way.

When Offered Fall.

  • Students will be able to explain the motivation and rationale for various types of government intervention in the marketplace.
  • Students will be able to explain the standard set of rationales for government intervention, as well as the importance of history and the details of institutional arrangements to thoroughly understand that intervention.
  • Students will be able to explain the actual effect of intervention and why some forms of regulation have been eliminated or modified over time.

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