Class Information

Economics 336: Public Economics II

2005 Edition.

Class meets Wednesdays, 10h00-12h00, Commerce 013

Crampton's office hours: Thursdays, 15h00-17h00

Tutorial Sessions, Room C540:

Please note that this page was established for a previous year's version of a course taught by Eric Crampton. As time passes, linkrot will accumulate. As the page is only here to serve as archive, I will not be updating the page to fix linkrot.

Update 4 April, 2006 This page will soon be moved to 336-2005.html. I'll be updating my pointers. I doubt anybody points to this page, but if you do, update your pointers as well. The 336.html link will soon provide a 2006 iteration of the same course. Additional course evaluation details for Econ 336 have become available via Survey and Testing Unit. Some interesting summary statistics below; all stats relative to undergraduate courses offered in the Faculty of Commerce.

This was a well organised course This course helped to stimulate my interest in the course area The overall workload in this course was reasonable (1 too low, 5 too high) The level of difficulty of this course was reasonable (1 too low, 5 too high) The course developed my ability to engage in research-related activities The assessment in this course encouraged learning for understanding Overall, this was a good quality course
90th Percentile4.
Econ 3364.

Update 6 June Hope everyone's enjoying their take home exam. For those who need a slight break, Caplan's been doing some interesting blogging over at EconLog. Enjoy!

Update 31 May Follow this link to registered party expenditures. The spending caps seem not to be binding constraints.

Update 30 May Some relevant considerations for those of you who spent a lot of time discussing high levels of campaign expenditures in the US:

What does that mean? If we were to scale up party spending limits here by the relative sizes of the economies (and account for the exchange rate), we'd expect the big parties to be facing limits around $190 million and the minor ones to be facing limits around $80 million. Four minor parties at around $80 million; 2 majors at $190 million each -- about $700 million in PPP-adjusted dollars. Hmmm. That's looking an awful lot like the "staggering" donation levels y'all are citing for the US and contrasting to the very strict limits in New Zealand, isn't it?

Some relevant considerations for those of you who spent a lot of time discussing the lack of campaign spending/donation regulation in the US:

A lot of money is spent in the US on election campaigns. A lot of money is spent on everything in the United States, because it's a huge, rich economy. If you don't correct for size, you're liable to wind up saying some very silly things.

Update 26 May (b) Bryan Caplan also blogs at EconLog. His new posting on Political Business Cycles is pretty interesting....

Update 26 May Office hours are moved from Thursday afternoon to Monday afternoon; apologies. (So no office hours this afternoon; I have to be out). I'm also available on email though if there's anything urgent.

Update 25 May Ok folks. Check the library's webpage on plagiarism, and follow their links to tons of useful material on how to avoid it.

Update 19 May Wonderful little bit of pork-barreling in Alaska; $1.5 million was obtained for a bus stop upgrade by Senator Ted Stevens. Whenever I find stuff like this, I save it in my Furl archive. My pork barrel archive has lots of fun little stories like that one. Unfortunately, for any of them sourced from the National Post (indicated by an NP in the first line), you won't be able to get the full story; the Post is subscription based. The 2004 10 03 piece that's furled in the archieve is wonderful; rich with institutional detail about how things work. The 2005 05 16 WSJ piece on a new omnibus defense base closings bill is also quite nice. Enjoy!

Update 14 May I discussed the concept of fiscal illusion during the tutorials this week. Here are a few helpful links. First is a short primer on tax incidence that I wrote when I was working for the Mercatus Center as a grad student at George Mason University. The second is the experiment run by Tyran that I talked about in the tutorial. Stephen Entin at the Heritage Center for Data Analysis has a very thorough discussion of tax incidence: Tax Incidence, Tax Burden, and Tax Shifting: Who really pays the tax?, which also includes some of the nifty graphs I'd put up on the board. Enjoy!

Update 10 May (c) Why do so many of you spell b-a-r-g-a-i-n as b-a-r-g-i-n? Is this some strange New Zealand version of the word that nobody's told me about?

Update 10 May (b) One of you has stopped by to ask me basic questions about the structure of US government. I'm happy to answer such questions, but I really wish that such questions would have been asked weeks ago; I could have and would have spent a tutorial session going over it. To summarize then. The American government is split into legislative, executive, and judicial branches. The legislative branch writes and passes legislation; the executive branch implements the legislation passed by the legislature -- it oversees the execution of legislation. The judicial branch arbitrates disputes and ensures that passed legislation is in compliance with the Constitution. The Executive branch is headed by the President, who is elected every 4 years by the nation as a whole. The President appoints people to head the various executive agencies -- people who are not members of Congress. The Legislative branch includes Congress and some Legislative Agencies like the Government Printing Office and the Congressional Budget Office. Congress is made up of two parts -- the House of Representatives and the Senate. To become a law, a bill must pass both the House and the Senate and be signed by the President. A piece of legislation will typically be introduced in the House, passed by it, considered by the Senate, passed by it, then signed by the President. If the Senate modifies the legislation passed by the House, the House must go back and approve the changes; sometimes, a Conference Committee is struck to reconcile differences between the bills passed by the two bodies (with a modified bill being brought back to the House and Senate for them both to approve). Let me know if there are further questions.

Update 10 May All seems on track to have stuff back to you on Wednesday. In other news, Jonathan Rauch has a nice post on ReasonOnline regarding American campaign finance reform that some of you may find interesting.

The McCain-Feingold campaign finance reform law (officially, the Bipartisan Campaign Reform Act) was signed into law in March 2002. The Supreme Court upheld and unleashed it in December 2003, only 18 months ago. Only one election cycle has passed since then. Yet Congress is already working on new restrictions. This might reflect, as proponents of the new restrictions argue, that conditions change rapidly in the political world. Or it might suggest, as opponents retort, that the law itself is radically unstable. Unfortunately, both sides are right.

Update 8 May WashingtonWatch provides a nice cost breakdown of legislation and regulatory proposals currently before Congress in the US. For example, S. 231, The Wallowa Lake Dam Rehabilitation and Water Management Act of 2005, which will cost the average family $0.28 but provide some nicely concentrated benefits for the folks living in that area. Recall Olson's Logic of Collective Action?

And in other news, recall my caution in class about how there are always ways to be found to get around restrictions on campaign spending or on campaign donations? The NZ Herald reports that there's now a Serious Fraud Office investigation into Tamihere's 1999 election campaign financing. The allegations are that he routed donations through the Te Tahi Trust.

"SFO papers reveal that Mr Tamihere told investigators that the trust was for people to donate money to his political campaign without their identities being revealed."
Of course, that's small potatoes compared to the shenanigans going on in Canada. The Gomery Commission is investigating some particularly nasty dealings involving the governing Liberal Party. Witnesses have testified that they were awarded inflated contracts by the government in exchange for kickbacks that went to the Liberal re-election warchest. Sometimes the kickbacks would be official on-the-record campaign contributions. Sometimes the firms would channel the kickbacks by having their employees make individual private donations. And, sometimes the money would just be delivered to the appropriate Liberal Party officials in brown paper bags in restaurants. Nasty stuff. And fascinating. (Oh, and it also seems that lawyers who gave lots of money to the Liberals did way better in securing judicial appointments than one might have thought.) Have a flip through blogs run by Andrew Coyne, Paul Wells, and Warren Kinsella if you're interested in this one. Some interesting reporting on it here, here, and here. Enjoy!

Update 4 May(b) Warren's question in class regarding whether it's anywhere delimited in the US what powers accrue to the national government and what powers accrue to the state governments is one that brings to mind a massive current debate within the US on that very topic. The Constitution of the United States very clearly sets out those powers accruing to the national government. The tenth amendment (the first ten amendments are collectively known as the Bill of Rights) clearly states that everything not specifically granted to the national government is reserved to the state governments, or to the People. Interpretation of the Constitution has varied a fair bit, but especially in the period since the 1930s.

There's a fair bit of current debate between those who think that the Supreme Court should interpret the Constitution as it is written (and to seek changes to the Constitution if they do not like the outcomes) and those who argue that the Constitution is a living document, the interpretation of which must change with the times. With that as background, check out this current debate between Cass Sunstein and Randy Barnett. Both are very, very good lawyers and very serious academics. I'm in awe of both of them, though I tend to agree more with Barnett. Sunstein publishes at an almost inhuman rate; I wonder if he has a dictaphone wired directly into his brain so that he can write while he's in the shower. Barnett's fantastic as well; his argument before the Supreme Court (Ashcroft v. Raich) in favour of allowing the medical use of marijuana was riveting: check out some of the discussion of it on Legal Theory Blog. Note especially this bit of the debate between Barnett and Justice Souter:

Stevens: If you reduce demand, then you will reduce prices? Wouldn’t it increase prices?

Barnett: No, if you reduce demand, you reduce price.

Stevens: Are you sure?

Barnett: Yes.

Great stuff! Stevens would have failed Econ 104. Barnett continues in great form:

Barnett: It is important to remember that the law confines medical cannabis use to the people who are sick and have a physicians recommendation. Wickard v. Filburn’s aggregation principle does not apply if the activity involved is noneconomic.

Souter: But isn’t the argument that it is economic activity if it has a sizeable effect on the market?

Barnett: No. The effect on the market is only relevant if it is market activity.

Souter: But in Lopez wasn’t the effect on the market much more remote than the effect involved in this case?

Barnett: The point is that economic activity and personal liberty are two different categories.

Souter: That is not a very realistic premise.

Barnett: The premise is that it is possible to differentiate economic activity from personal activity. Prostitution is economic activity, and there may be some cross substitution effects between prostitution and sex within marriage, but that does not make sex within marriage economic activity. You look at the nature of the activity to determine whether or not it is economic.

Bam! A knock-out blow! The whole issue there is whether the Court's ruling in Wickard v Filburn applies here -- if allowing medical marijuana in California has an effect on interstate commerce. In Wickard v Filburn, a farmer feeding his own wheat to his cattle has an effect on interstate commerce because it has a tiny effect on the price of wheat -- the aggregation principle Barnett refers to is the idea that a bunch of small intrastate transactions can have an effect on interstate commerce when taken as a whole because a bunch of small effects can aggregate up to having big effects. Barnett makes the contrast here by stating that medical marijuana in California cannot possibly have an effect on an interstate market in marijuana because such a market does not legally exist. Hence the parallel: if the justices rule that California cannot allow medical use of marijuana based on its effects on interstate commerce, the federal government could plausibly seek to regulate maritial relations between spouses because of the effect on interstate commerce (prostitution - an illegal market in the US). I can't wait to see how the Court rules on the case. And note throughout the massively expansionary reading of the Commerce clause. Article I. Section 8 of the Constitution gives the national government the power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes". The whole point of that clause was to prevent some states from erecting trade barriers or tariffs against imports from other states. Now it's read to permit the national government to get involved in anything that could possibly have any effect on interstate commerce.

Update 4 May Your assignment, due 11 May, 1 PM, no more than 4 pages double-spaced (normal font, normal margins), is as follows.

I have given tons of examples of how things work in an American political system regarding rent-seeking, political competition, lobbying, and political advertising. Of course, we do not live in the US. New Zealand has an entirely different political system with different and interesting constraints like the Fiscal Responsibility Act; particular restrictions on campaign advertising; and, much stronger party systems due to differences in legislative structure (Parliamentary versus Presidential), to name but a few examples. Provide me with an interesting and detailed example of how something I have been talking about would have to be modified in application to the New Zealand context. Would the modification cause any of our conclusions to be overturned, or would it just change the details of the application of a phenomenon we have been discussing? Note that I said interesting -- don't just tell me "Oh, well, New Zealand doesn't have state level governments so nobody will lobby state level governments in New Zealand." That isn't interesting. Something that would be interesting would be something like "How might rent-seeking and lobbying activity change in a strong party system like New Zealand where Cabinet basically makes the decisions but where minor parties have some influence?" That would be really interesting. Your grade depends partially on your ingenuity in coming up with things that could lead to interesting differences, so a good answer to the question above might get a decent grade while a good answer to an interesting question you've come up with on your own would lead to a really good grade.

You've only got 4 pages, so you're not going to be able to tell me everything about everything. Just pick something interesting and give me a nice analysis. Enjoy!

Update 3 May This is pretty cool. can help you to find the lobbyist to solve your problem. Need to find a lobbyist with connections with the right party and knowledge on the right issues? Run the search. They've got a database of more than 12,000 federal lobbyists; they're bound to have the one who can help you out.

Update 21 April For those who were in today's tutorial, here's the graph that I said I'd put up.

Update 20 April For those who missed class today, the exam tonight is going to be held in A3, from 6:30 to 8:30 PM.

Update 14 April Again, my apologies for having to reschedule. My wife was involved in a minor car accident Wednesday morning. She was going straight through a green light when a fellow going the opposite way on the same street decided it would be a good idea to make a right turn. She hit him; he admitted fault to the attending police officer; I spent the morning with her at the emergency room while she was x-rayed and checked for any damage; we then spent the afternoon chatting with the insurance folks and making those sorts of arrangements. We're rescheduled for Monday morning, 10 am, same tutorial room as usual. The tutorial will last one hour; there's a tutorial for Econ 211 in the same room at 11 am. See you then!

Update 13 April Tutorial's off -- sorry -- details to follow -- will reschedule --- apologies...

Update 12 April Tutorial's on for tomorrow...see you then! I may have the assignments finished by then (fingers crossed)...estimate 50/50 chance.

Update 11 April We've got 10 folks signed up for the tutorial. 2 more and we'll have our session. Let me know if you'd be there...

Update 5 April So far 7 folks have indicated that they're interested in coming to the tutorial suggested below. If we get 5 more, the tutorial is on. Speak up if you're interested!

Update 31 March I'd mentioned this at the tutorial last week. If there is sufficient demand for a tutorial session in the last week of break, I'll put one on. 10 - 11 am, Wednesday, 13 April. Send me an email if you'd attend such a review tutorial if it were offered. I don't want to put it on if only a few folks would show up; if I get at least 12 people saying they'll be there, I'll put on the tutorial. Send me an email if you'll attend. Emailing me saying you're interested in the tutorial at that time but then not showing up counts negatively against participation marks.

Update 22 March I've prepared some review questions for the upcoming midterm. As we've only got the tutorial session on Thursday prior to the midterm (the first Wednesday after the break), you might want to have a peek through them to see if there are any in particular you'd like to go over during Thursday's tutorial.

Update 17 March Bryan Caplan and Arnold Kling have some interesting things to say about the relevance of intransitivity in the real world. Caplan thinks it's a load of nonsense; Kling is more sympathetic. Both blog at EconLog, a nice little economics blog.

Erratum. On p.280 of your main text is the sentence: "Proportional representation thus fragments parties by empowering all parties, whereas plurality rule consolidates parties by not stripping power from minority parties." Of course, the "not" should be stripped from that sentence: it's a typo. Similarly, on p.283 you find "Theory predicts an increase in gerrymandering with high magnitude districts..." -- that should, of course, read "with low magnitude districts". Kudos to Warren for finding them!

Update 10 March Assignment 1 was handed out in class on Wednesday; if you lose your copy, it's also on the website now. It's due in class next Wednesday.

If you were interested in the Caplan-Cowen readings, there are a couple other short bits here you might be interested in.

Here's a nice debate between Richard Epstein, David Friedman, Randy Barnett and James Pinkerton on the viability of libertarian anarchy. Great fun. Those of you who are doing a joint degree with Law might recognize Epstein's name...very prominent US legal scholar. Friedman and Barnett are fans of anarcho-capitalism. I don't know Pinkerton though.

Brad DeLong blogs a bit on the debate. DeLong's invoking of Hume, Smith and Hobbes is hilarious.

Update 7 March The UCSA wants lecturers to call attention to the UCSA's call for student representatives. They've changed things a bit -- rather than looking for one person per class, they're now wanting two reps from each course level (i.e. two people to represent each of 100 level, 200 level, 300 level economics). If you're interested, fill in the form at the UCSA's website.

Update, 2 March James Buchanan, the father of public choice, has a nice summary article, Public Choice: Politics without romance available. I think I'm going to use this piece next year in the Week 1 readings. It isn't required reading for this year, but some of you might enjoy it. Pierre Lemieux also provides another nice survey article on public choice: The Public Choice Revolution.

Update, 22 February The library has asked me to make my students aware of the following:

As you may be aware, Alison McIntyre and I are offering a library programme called InformEd Certificate Programme for Advancing Commerce students. This is for stage 2 & 3 students and offers a series of core and specialist workshops during semester one. We would like you to support this by advertising this programme to your students. Please do this by writing the following link on the white board in your lectures during week one and two. In addition to this, an email message will be sent to students enrolled in your courses. The link is as follows;

Update, 21 February Many thanks to Felicity, who pointed out that the university web system lists the class as being in C013 rather than 112 (where I'd been told it would be, and where it's listed as being in other places). The class will in fact be held in C013. See you Wednesday!

Update, 17 February I've noticed that the CourseWeb thing has some textbooks listed for the class as recommended readings. I think that they pulled that from a draft course outline that I'd submitted in November of 2003 for the class in 2004; I can't be sure though. In any case, feel free to read those books if you like as they're very good books. However, don't go out trying to buy them thinking that they're required. There's a course reader available, and I'll be distributing a CD-ROM with all the readings for the class. No need to buy anything if you don't want to (the course reader just gives a printed version of most of the readings from the CD-ROM).

Update, 10 February Hi Everyone. The reading list and syllabus are now available. Some readings are changed a bit from last year -- mostly where I've found articles that better illustrate the points I want to get across. As I did last year, I will be distributing a CD-ROM containing the readings during the first class. Don't lose your CD! If you do, you'll have to pop by my office with a blank one for me to make a new copy. In response to popular demand from last year, I've also made available a course reader for the class. It contains most of your readings, but not all of your readings. The course reader is available from the usual place that one acquires course readers. Or at least it should be -- I OKed the proof copy on 9 February, and Print Services here seem to be pretty competent. There are some readings missing from the reader though that are on the CD ROM...I did this on purpose. One of them is a small file on the CD-ROM that provides a weblink to a chapter of Buchanan and Tullock's classic The Calculus of Consent; the Liberty Fund website makes the chapter available, but not in a format condusive to non-web-based distribution. There are also prepublication versions of two textbooks on the CD-ROM; I only make use of some chapters from each though. Upshot: buy the course reader if you prefer having paper copies of journal articles to read; don't bother if you're happy to read things off your computer screen. Either way, you'll still need the CD-ROM for the additional readings.

I'm looking forward to meeting you in a couple of weeks time; last year's Econ 336 was great fun and I hope that this year's will be as well. Get ready to do lots of reading and debating of the topics...see you soon!

Public Choice applies economic theory and methodology to the study of nonmarket decision-making (typically political decision-making). As economists, we look not to the benevolence of the butcher for our meat but rather to his self-interest. What happens when we realize that politicians and voters are no different? Simply put, we achieve a much better understanding of real-world policy, economic and otherwise. The course provides an overview of positive and normative public choice theory, highlighting work in the economic theory of constitutions, voting rules, bureaucracy, democracy, collective action, dictatorship, the theory of clubs, expressive voting, political business cycles, lobbying, legislative structures, political competition, as well as criticisms of public choice theory. A familiarity with algebra is assumed on the part of students, as is a strong background in microeconomic theory; I will attempt to keep the calculus to lim x --> e (very little).

Evaluation will consist of:

This course is taught very much in the arts tradition within economics. What does that mean?

So, the course will be a lot of work, especially if you're not accustomed to lots of reading and writing. But, I think it's worth it. So do the students who took it last year; feel free to have a look at their evaluations of last year's Econ 336. I'm not changing very much in how I'm running the class. I've made some very minor changes to the reading list, and I plan to do a bit more to highlight what folks should be looking for in each reading. I may write a tiny bit more on the board than I did last year, but not much more.

Please feel free to contact me via email if you have any questions about the class or if you're wondering about taking it. Also check out the page I maintained for last year's Econ 336 class as that gives a decent feel for what the class is like. Hope to see you in the fall!


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