Fall 2010

ECO 350K
POLITICAL ECONOMY

Syllabus
Instructor: Marina Azzimonti, Assistant Professor of Economics
email: azzimonti@eco.utexas.edu
office: BRB 3.152

Teaching Assistant: TBA

email:
office:

Lecture hours: TBA

Website: Blackboard system

Class Outline

Course Description:

Traditional economic theories of the public sector view the government as an exogenous, benevolent
economic agent. This view, though politically naive, is not without merit. For some public issues a
consensus may be reached, and then the naive approach may suffice to explain government behavior.
But more often, redistributive effects are central; then government actions can be understood only as
a consequence of the political forces that enable it to maintain power. Political Economy regards
income redistribution, taxation, the production of public goods, and other actions of the public sector
as determined by a political process simultaneously with the economic process of exchange and
production. In this course, we will investigate the connection between public policies and the
political forces that shape them. We will attempt to explain why the government behaves as it does
and how its behavior influences and is in turn influenced by the behavior of private citizens. We will
also investigate the effects of political institutions on political and economic outcomes and assess the
relative performance of different political systems.

We will heavily rely on formal economic modeling. We will therefore extensively use
microeconomic tools that you have learned in previous courses. It is very important that you be
familiar with these tools, and feel comfortable using and manipulating them. If you are taking
this class, I will assume this to be the case. I strongly encourage you to review the material from
your previous calculus and microeconomics courses.

Carefully going over class notes and textbook readings, as well as understanding the material in the
problem sets, along with class attendance, is the best way to do well in this class. If you are
experiencing problems, please come to talk to me as early as possible so that these problems may be
addressed. Finally, I strongly encourage you to talk to the TA if you have difficulties solving
problems.
Prerequisites: Intermediate Microeconomics. Knowledge of calculus is necessary.

Course Requirements

Class attendance:
Part of your responsibility as a student is to attend classes and take notes. This is an essential part of
the learning process. I will post on the website some lecture materials, but not detailed lecture notes.

Problem Sets. There will be problem sets, due one week after they are made available on
Blackboard. Each problem set is due at the beginning of the class period on the due date.

Late homework will not be graded. Answers will be subsequently discussed in class, and posted on
the course Blackboard system. You are encouraged to discuss problems with your classmates, but
you must write up your own answers. On the front page of your homework, please record the names
of the people you worked with.

In addition, there will be an extra homework due on the second class at the beginning of the
class. I will post this homework Thursday afternoon. You have to hand in this homework even
if you leave it blank. For this homework alone, I encourage you to work on your own.

Exams. There are two midterm exams. Dates for the exams are given below. All exams are closed
book. Calculators are allowed in all exams.

Grading: The final grade is determined as

Problem Sets 20%

Midterm Exam 40% TBA
Final Exam 40% TBA

[If your religion interferes with one of the exam dates, please let me know within two weeks from
the first day of class.]

There is no make-up exam. There will be no make-up dates for the midterm. In case you miss the
midterm for a documented illness or emergency, your final exam score will receive the weight of the
midterm in addition to its own weight.

Regrading: If you believe that your problem set or exam was graded incorrectly, you can ask me
for a re-grade. The TAs cannot change a score, once it is assigned. You must submit your entire
exam or problem set to me with a written explanation of the mistake you think occurred. I will then
grade the entire exam or problem set again. Note that this procedure may actually lower your score
as well as increase it.

Academic Integrity: If a student is found in violation of academic integrity, it is at the professor's

discretion to give the student a failing grade for the assignment and the course. Do not cheat.

Texts:
 - Class Handout, posted in Blackboard
- Persson, T. and Tabellini, G., Political Economics: Explaining Economic Policy, MIT Press,
2002.

Course Outline

1. Overview and Introduction

2. Preliminaries: Basic Tools in Microeconomics

3. Preliminaries: Basic Tools in Political Economy

4. Political Economy of Public Goods Provision

5. Political Economy of Redistribution

6. Political Economy of Health Insurance

7. Time consistency and Capital Taxation

8. Politics and Intertemporal Policies: Pubic Debt Management