The course examines the microeconomics and welfare foundation of public economic policy. The course begins with an introduction of basic concepts such as Pareto optimality, social choice, externality and second best. Then, we will discuss the appropriate ultimate objectives in public policy, the attainment and impediments to Pareto optimality, ways to solve the paradox of social choice, incentive compatibility in preference revelation for public goods, the dilemma of second best, the tradeoff between efficiency and equality and the optimal level of public spending; while taking into account related issues like environmental quality, relative income effects, and recent results in happiness studies.
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