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Public Policy and Public Finance

This course will introduce the subjects of public finance and public policy in such a way that it will equip participants to understand how to approach a wide range of contemporary public policy problems.

In addition to lectures and seminars covering key aspects of public finance and public policy theory, the course will feature a series of talks from former leading politicians, policymakers, advisors, central bankers and civil servants on applied topics raised in the course. In 2017, speakers included the Chief Economist of the Bank of England, Andy Haldane; former Cabinet Minister Rt. Hon Ruth Kelly; the former Director of NIESR Professor Jonathan Portes; and Chris Snowdon and Dr Stephen Davies from the Institute of Economic Affairs amongst others. A similar line-up of speakers will participate in 2018.

Academic field trips are also planned to the Bank of England and the Houses of Parliament.

This course will be taught at an intermediate level. Prior study of economics is not a pre-requisite for this course, but the material is relevant for anybody who is studying for an economics degree or a degree in a related subject. It is also suitable for anyone who is studying or has studied Politics, Political Economy, Public Policy, Sociology or Mathematics at undergraduate level. Public policy practitioners from government or industry with any academic background are welcome and the course team is happy to discuss any inquiries as to whether your background is suitable for this course.

Course Aims

The course aims to apply economic principles to public policy making, but using a framework based on wider assumptions than those that underpin the traditional way of thinking about such matters in undergraduate economics courses. As such, it will overlap with the discipline of political economy. After taking the course, students will understand public policy and public finance problems from a wide range of perspectives. Students will then be given a grounding in areas of economics for which Nobel Prizes have been awarded in the last 30 years and which provide a wider perspective of public policy issues. This includes public choice economics, Austrian economics, behavioural economics and institutional economics. The course also aims to give students the ability to apply the ideas to a set of contemporary public policy problems.

Syllabus and Course overview

This course will apply economic principles to public policy and public finance. Underlying the course will be the presentation of a set of approaches to economics that differ from the traditional university neo-classical and Keynesian models so that it is possible to have more realistic debates about public policy and public finance in the context of these different models. During the course, a series of current public policy and public finance issues will be examined by applying some of the theoretical ideas to the analysis of the policy.

As well as providing the background of public finance and public policy that will allow participants to understand how to better approach a wide range of public policy problems, the course will feature a series of talks from former leading politicians, policymakers, advisors, central bankers and civil servants on applied topics raised in the course. In 2017, speakers included the Chief Economist of the Bank of England, Andy Haldane; former Cabinet Minister Rt. Hon Ruth Kelly; the former Director of NIESR Professor Jonathan Portes; and Chris Snowdon and Dr Stephen Davies from the Institute of Economic Affairs amongst others. Alberto Asquer, Lecturer in Public Finance and Management at SOAS and author of the recently published book Public Sector Revenue – Principles, Policies and Management (Routledge, 2017), will be collaborating in the public finance lectures. Academic field trips are also planned to the Bank of England and the Houses of Parliament.

This course is designed and taught by Philip Booth and Andre Alves. Philip Booth is Professor of Finance, Public Policy and Ethics at St Mary's University and former Academic and Research Director at the Institute of Economic Affairs. Andre Alves is Research Director at the Institute for Political Studies of the Catholic University of Portugal and Reader in Economics, Political Economy, and Public Policy at St Mary’s University.

The topics to be covered include:

  • Theory and general principles: market failure and government failure
  • The role of public policy in the neo-classical model
  • Overview of public finance, levels of public spending and functions on which governments spend money at different stages of development
  • Financing government spending by taxation – the impacts of different taxes, principles of good taxes and the sort of tax systems we see in practice
  • Why some tax systems are sub-optimal
  • Sub-national government – arguments for and against decentralisation and the different approaches that are taken in different countries; direct democracy
  • How government debt finances spending, an examination of its build up and what happens when debt becomes too high
  • Behavioural economics and public policy
  • Public choice economics - 'the economics of politics' (visit to Houses of Parliament)
  • Interest groups and public policy - the economics of voting and rent seeking
  • Theories of institutional change and economic development
  • Austrian economics and entrepreneurship
  • Monetarism, Keynesianism and Austrian economics - debates about fiscal policy, monetary policy and central banking (visit to the Bank of England)
  • Religion, the state and public policy in Britain
  • Islam and public policy: entrepreneurship, the family, civil society, the state and usury
  • The scholastic foundations of economics and public policy

The course will include various case studies taken from the list of topics below:

  • Rent controls
  • The regulation of wages
  • The euro crisis
  • Sin taxes
  • The economics of prisons
  • The financial crisis
  • Institutions, foreign aid and development
  • Modern slavery
  • Pay-as-you-go social security systems - is the West bankrupt?
  • Institutions and the preservation of the environment
  • Healthcare and education – public policy and 'market failure'
  • The economics and political economy of migration
  • Investment, research and development
  • Current debates in trade – the gains from trade and the contrast between free trade, customs unions and trade agreements

Learning outcomes

  • Understand the application of neo-classical market failure models to public policy problems and the difficulties with such models.
  • Understand how economics problems are resolved in theory through political systems.
  • A knowledge of the importance of institutions for economic growth.
  • A knowledge of the importance of entrepreneurship and its relationship with public policy.
  • An understanding of the application of theory to the analysis of specific public policy problems.
  • An understanding of how the political system can work in practice to subvert the implementation of good economic policy.
  • An understanding of the functions of government, government spending and revenue raising.

Course structure

For this course, there will be an average of about 4 hours of teaching per day, comprised mainly of lectures and presentations based on case studies and applications to contemporary public policy and public finance problems. The structure will be:

  • 20-25 hours of lectures
  • 10-15 hours of presentations on case studies by current and former leading public policy practitioners
  • 6-8 hours of seminars in small groups.
  • Two off-site visits relevant to the course (Houses of Parliament and Bank of England).

Students will also be given time each day for independent study. Towards the end of the third week, students will be provided with specific sessions and time for revision.

Course Assessment

At the beginning of the course, students will be allocated to small groups. Each group will prepare a 10 minute video or give a 10 minute presentation on a particular public policy topic towards the end of the course. The module will be assessed via the 10 minute video or presentation (worth 30% of the total mark) and a 2-hour examination (worth 70% of the total mark). It is not compulsory, but anyone wishing to obtain a transcript of results for the Warwick Summer School must sit this examination.

Course Reading list