1. Course code:
2. Numbers of credits: 2
3. Prerequisite courses: Microeconomics for Public Policy
4. Teaching language: English
Vu Hoang Linh, Ph.D., Vietnam- Japan University
Shigeto Naka, Professor, Ph.D., University of Tsukuba
This course provides students with the basic tools of microeconomics and public economics to
understand and analyze public policy in a market economy. The first half of the course teaches
introductory microeconomics to understand the workings of market economies without public
goods. The second half explicitly looks at various situations of market failure, in particular, when
there are public goods or/and externalities. Additionally, the perspectives of the political
economy is introduced, including the emergence of the state, a problem of collective decisionmakings, and rent-seeking.
7. Learning outcomes
7.1 Knowledge competence
Basic knowledge about public policy in a market economy should be achieved.
Logical thinking about public policy.
Potential impacts of public policy on markets should be understood.
8. Assessment methods/Grading system
8.1 Attendance & class participation
Class participation is compulsory. Note that you will lose your credit if you miss three
classes or more.
8.2 Mid term & final exams
There is one mid-term exam in the end of the first half during the course. Moreover, there
is the final exam at the end of the semester. Grades are determined based on the sum of
the attendance, the two results. Attendance is 10%, mid-term exam 30%, and final exam
9. Leaning materials
(Listed in the order: author’s name, book title, and publisher, year of publication)
9.1 Required textbook and other material
N. Gregory Mankiw, Principles of Economics, 6th edition, South-Western
Cengage Learning, 2010
L. Arye Hillman, Public Finance and Public Policy, Cambridge, 2003.
9.2 Reference material
10. Course description
The first half of the course presents the introduction to microeconomics by using graphs
and tables so that no advanced mathematics is required. In particular, we discuss what
economics is, a market, demand/supply, and welfare achieved in a market economy. The
latter half of the course introduces the fundamentals of public economics. We focus on the
topics such as public goods, externalities, as well as majority voting and other political
economic perspectives. The discussions are intuitive while utilizing graphs and tables.
11. Course contents
Class 1: Ten principles of economics (Mankiw, Chapter 1)
We provide ten principles of economics about how people make decisions, how people
interact, and how the economy as a whole works.
Class 2: Thinking like an economist (Mankiw, Chapter 2)
We deal with how an economist thinks about an economy as a scientist and a policy
Class 3: Interdependence and the gains from trade (Mankiw, Chapter 3)
Our economy is interdependent with any in another country. We consider how we gain
trades among countries.
Classes 4, 5, and 6: The market forces of supply and demand (Mankiw, Chapter 4)
We introduce the theory of supply and demand, and then consider how buyers and
sellers behave and how they interact with one another in a market economy. The goal is
to understand how supply and demand determines prices in a market economy and how
prices, in turn, allocate the economy’s scarce resources.
Classes 7, 8, and 9: Elasticity and its application (Mankiw, Chapter 5)
Elasticity Elasticity is a measure of how much buyers and sellers respond to changes
in market conditions. When studying how some event or policy affects a market, we
can discuss not only the direction of the effects but their magnitude as well. We
introduce such a notion of elasticity and its applications.
Classes 10 and 11: Supply, demand, and government policies (Mankiw, Chapter 6)
We analyze various types of government policy using only the tools of supply and
demand. We begin by considering policies that directly control prices such as rentcontrol laws and the minimum wage laws. Then we discuss the impact of taxes.
Classes 12, 13, and 14: Consumers, producers, and the efficiency of markets (Mankiw,
We take up the topic of welfare economics, the study of how the allocation of
resources affects economic well-being. We begin by examining the benefits that
buyers and sellers receive from taking part in a market. We then examine how society
can make these benefits as large as possible. This analysis leads to a profound
conclusion: The equilibrium of supply and demand in a market maximizes the total
benefits of buyers and sellers.
Class 15: Mid-term exam
Class 16, and 17: Review of the market system, and the emergence of the state (Hillman,
Chapter 1). We review the model of perfect competition and see how the market system
achieves the efficient allocation of resources. We then examine the theory of market
failures. We try to understand how a strong yet good government is needed to support
the market system. We also discuss Olson’s (1993) concept of how governments emerge
and what that model implies.
Class 18, 19, 20, and 21: Public goods and the normative role of the government
(Hillman, Chapter 2). We discuss the concept of public goods and analyze their efficient
provisions. Also we discuss the Nash-response (free-riding behavior) in relation to the
provision of public goods and related problems.
Class 20, and 21: Voting and public goods (Hillman, Chapter 3). We discuss the
importance as well as problem of majority voting in relation to the provision of public
goods. Various paradoxes and problems pertaining to the institution of voting are
Class 25, 26, and 27: Externalities (Hillman, Chapter 4). We discuss the problems of
external economies and diseconomies, and analyze the normative role of the
government. Particularly, we consider how public policies are conducted in order to
resolve or mitigate these externality problems.
Class 28: Rent-seeking and political economy (Hillman, Chapter 6). We briefly discuss
various theories of government failure.
Class 29: Overall review
Class 30: Final-exam.