What can economics contribute to public policy?

I’ve been thinking about what would be covered in my ideal course on economics for public policy. What would really shape economics students into well-informed citizens about government decisions, and useful recruits into the public policy world, while satisfying their evident appetite to engage with the big issues of the day? Behind this lies the broader question of what economic analysis can contribute to public policy, something I’ve been mulling over for a bit via some lectures (the Tanner lectures in Oxford in 2012 and the Pro Bono Economics lecture in 2013).

If you look around at the public policy economics courses and reading lists available online, universities typically either approach the subject from the perspective of the theory of public goods, public choice theory and transactions cost/institutional economics. Or they take a topics approach so cover, say, education fees and vouchers, valuing the environment, competition policy etc. This is necessarily context-specific, so the readings are about individual countries. Finally, there’s the traditional public finance focus, tax, spending, the welfare state. My undergraduate option a million years ago was in this tradition – our textbook was Musgrave and Musgrave’s Public Finance in Theory and Practice. It’s rather interesting to see that there are completely distinct approaches.

The most-used texts (in the UK) seem to be:

The Economics of the Welfare State - Nicholas Barr

The Economics of the Public Sector – Joseph Stiglitz

The Economics of Social Problems – Julian LeGrand, Carol Propper and Sarah Smith

I have on my shelf Lee Friedman’s The Microeconomics of Public Policy Analysis, which I like, although it’s US-centric. Jonathan Gruber’s Public Finance & Public Policy has been recommended to me, but it’s a silly price.

There are obviously some classics too, at least for the first approach, such as Tullock’s The Calculus of Consent, Olson’s Logic of Collective Action, Ostrom’s Governing the Commons, Schelling’s Micromotives and Macrobehaviour (one of my all-time favourite books).

My thoughts are still unformed, so I’d be interested to know what other people would recommend.

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One thought on “What can economics contribute to public policy?

  1. Do any of your suggested books provide criteria for students to consider if the structure of modern money and the financial system is “fit for purpose”?

    Do they review of what The Economist of January 6, 1990 described in their article “A Brief History of Funny Money? ( I have posted the article at: https://drive.google.com/?usp=chrome_app#all) Do the present arguments for and against floating currencies?