Semester:
Offered:
Oliver D. Hart (Department of Economics)
First-Year Seminar 42C 4 credits (spring term)
Economists have a very positive view of the role of markets. The intellectual foundations of this are the first and second theorems of welfare economics. The purpose of the seminar is to introduce the students to these results but also to their limitations. Most economists think that market outcomes will fail to be efficient in the presence of large-scale externalities/public goods, and government intervention is then justified. Examples are national defense, clean air, and the mother/father of them all: global warming resulting from carbon emissions. Another very topical issue is inequality. There is no particular reason to think that a market economy will yield an equitable distribution of income, and given this what is the appropriate government response? Throughout the seminar the analysis of ideas and concepts will be interspersed with policy issues such as whether and what limitations should be placed on the right to smoke or consume drugs, the right to marry, and the right to buy and sell organs. We will also consider the pros and cons of affirmative action, the Affordable Care Act (Obamacare) and the role of government nudges.