Course Meeting Times

Lectures: 2 sessions / week, 1.5 hours / session

Recitations: 1 session / week, 1 hour / session

Course Description

Explores the role of government in the economy, applying tools of basic microeconomics to answer important policy questions such as government response to global warming, school choice by K-12 students, Social Security versus private retirement savings accounts, government versus private health insurance, setting income tax rates for individuals and corporations.


14.01 Principles of Microeconomics

Requirements and Grading

There are three sets of requirements for this course:

Midterm exam 25%
Final exam 50%
Problem sets 25%


The only required reading is my textbook:

Gruber, Jonathan. Public Finance and Public Policy. 3rd ed. Worth Publishers, 2009. ISBN: 9781429219495.


There will be a midterm exam worth 25% of the grade, and a final worth 50%. The midterm will be in class, 85 minutes, and closed book/closed notes.

Problem Sets

There will be 5 problem sets throughout the semester, each of which will consist of both mathematical exercises and essay questions. This requirement will be worth the remaining 25% of the grade. No late problem sets will be accepted for any reason. Grading will be based on the top 4/5 grades (your lowest homework grade will be dropped).


1 Why study public finance?  
2 Externalities in theory and practice  
Public goods in theory and practice
3 Basic theory, optimality and pricing Homework 1 due
4 Cost/benefit analysis  
5 Political economy  
6 Local public goods and fiscal federalism Homework 2 due
7 Public provision of private goods: education  
  Midterm exam  
Social insurance and redistribution
8 Overview  
9 Social security  
10 Unemployment insurance, disability insurance and workers' compensation  
11 Health insurance Homework 3 due
12 Redistribution and welfare policy  
13 The institutions and theory of taxation  
Taxation and individual behavior
14 Taxation and labor supply Homework 4 due
15 Taxation and savings  
16 Taxation, risk taking and wealth  
17 Corporate taxation Homework 5 due
18 Tax reform  
  Final exam