98234 - BEHAVIOURAL PUBLIC ECONOMICS AND POLICY

Learning outcomes

At the end of the class, the student has acquired knowledge of how behavioral economics is used to design more effective public policy in areas of taxation, education and labor markets. In particular, the student understands the neoclassical approach to public economics, the shortcomings of the neoclassical model in public economics and how behavioral economics may be applied. The student will understand the theoretical implications of behavioral welfare analysis, analyze and engage in public policy design.

 

Course contents

The standard neoclassical theory used in Public Economics and Public Policy rests on basic assumptions on individual selfishness, rationality and utility maximization. However, research at the intersection of Psychology and Economics (i.e., Behavioral Economics) challenges many of these underlying assumptions and aims to develop more descriptive models of individual and market behavior.

This course aims to study classic topics in Public Economics and Policy, including taxation, education and policy instruments but accounting for the shortcomings of the standard neoclassical model and supplementing the neoclassical treatment of these topics with insights from behavioral economics.

We will begin each topic of the course with an introduction to the neoclassical treatment of the topic. We will then explore the implications of the neoclassical model and ask what identify potential limitations of the assumptions of the standard model. For example, consider the question of whether taxing cigarettes can lead to higher welfare. The standard model posits that individuals make utility maximizing choices and thus the choice to smoke is optimal and imposing taxes leads to a deadweight loss. However, what if individuals are not utility maximizing and instead make errors in deciding whether or how much to smoke? If so, imposing a tax on cigarette consumption may serve to “correct” this error in decision-making and thereby improve consumer welfare. We will then identify a current public policy related to the topic and discuss how we might analyze its effectiveness.

We will cover both theoretical foundations in behavioral public economics and the design and testing of public policies.

The course will also highlight the link between theory and practice. We will do this with one or two guest lectures from individuals who span this divide between academia and "real world" policy design.

A solid foundation in microeconomics and applied mircoeconometrics is a pre-requisite for attending the course.

Topics include

1. Introduction to Behavioral Public Economics.
2. Theory of Welfare.
3. Theory of Policy interventions: Taxation & Nudges.
4. Health issues and policies.
5. Environmental issues and policies.
6. Savings & Retirement.
7. Education & Labor Market (e.g., minimum wage policies, discrimination)
   
8. Experimental design, RCTs and Policy Evaluation.

Readings/Bibliography

All readings will be made available to students. There will be no need to purchase a textbook. Readings listed in alphabetical order.

Bernheim, B. D., & Taubinsky, D. (2018). Behavioral public economics. Handbook of Behavioral Economics: Applications and Foundations 1, 1, 381-516.

Chetty, R. (2015). Behavioral economics and public policy: A pragmatic perspective. American Economic Review, 105(5), 1-33.

 

Teaching methods

Each week will be devoted to the discussion of one core issue in behavioral public economics and public policy. We will discuss the theoretical background of each topic which will then be followed by studying and discussing the seminal papers on the topic.

 

Each class will have a lecture and discussion component.

 

In this class, teaching participates in the University's didactic innovation project by allocating up to 6 hours of online learning that will allow us to invite up to 2 guest speakers. This online component allows us to invite speakers from outside Bologna to provide practical insights at the intersection of behavioral economics and public policy.

Assessment methods

There is one final assessment for this class which is in the form of a final oral presentation/discussion of a paper during the final week of the course. Students will have several examples throughout the course of the type of presentation that is expected and will be given ample time to ask questions and work on their presentation. The aim of the presentation is to assess (1) students understanding of the course material and how it relates to the paper; and 2) students ability to synthesize and discuss the complex ideas and concepts.

The grade is graduated as follows:

<18 failed
18-23 sufficient
24-27 good
28-30 very good
30 e lode excellent

Teaching tools

Dedicated page on the VIRTUALE platform containing:

• News and updated information.
• Lectures slides.
• References to relevant articles published on scientific journals.
  

Office hours

See the website of Stephanie Heger