Preliminary

PA 7328 - 5U1.11 (CN 50947) Summer 2010 (3 hrs) Professor Simon Fass
R: 6:00-10:00 p.m. WSTC: 1.302 Office:
Office hours: R: 4:00-6:00, and by appointment tel: 972 883 2938
e-mail: e-learning for course purposes, or
fass@utdallas.edu when e-learning unavailable

Economic Theory for Public Affairs

also known as:
Economics for Public and Nonprofit Management

Economics is the area of psychology that concerns itself with understanding the behaviors of
people in their individual (or micro-) roles as consumers and producers of goods and services,
with their interactions in market and non-market contexts, and with the aggregate (or macro-)
effects of these behaviors and relationships.

In this course, we look at the individual decider through the lens of microeconomic theory, and
explore how this conceptual framework helps to better understand and predict decisions by
different actors in market and non-market, public and non-profit arenas. The focus especially is
on government and non-profit organizations and their constituents and clients, on the economic
logics through which they choose what goods and services to supply, how to distribute the
resources needed to provide them, to whom and at what price to make them available, and how
to finance their production and distribution. Applications through class exercises, discussions
and readings are varied. They range across a spectrum of themes that may include:
• improving the efficiency of government and nonprofit service provision,
• privatization of public universities,
• dynamics of philanthropy,
• the challenge of budgeting under uncertainty,
• college tuition,
• stuffing sports facilities,
• forecasting demand for natural gas, aquarium attendance and nurses,
• replacing postal workers with machinery,
• government and nonprofit failure,
• minimum costs versus best value in government competitive sourcing,
• telecoms regulation,
• selling broadband spectrum,
• traffic congestion,
• internal control systems in nonprofits,
• measuring managerial performance and, ultimately,
• infinity, the good life and the road to hell
  
Preliminary
A. Learning Outcomes: Students will become familiar with the:
™ particular language of microeconomic theory commonly used to understand and analyze
social, economic, political, institutional and managerial issues;
™ microeconomic lens through which to understand how and why individuals, firms,
governments and nonprofit organizations make the decisions and choices that they do;
™ logic of how government and nonprofits might further improve social welfare; and
™ circumstances under which it may be more and less appropriate to let microeconomic
theory inform perception and thought

B. Pre-requisites: There are no specific requirements.

C. Required Texts:
There are two texts for the course, shown below. The Keating and Keating book requires
purchase. Burkitt is accessible as an e-book through the library. All other essential readings
will be posted on e-learning.

Keating, Barry P. and Keating, MaryAnn O. 2009. Microeconomics for Public Managers,
Wiley-Blackwell, Wiley and Sons [KK]

Burkett, John P. 2006. Microeconomics: Optimization, Experiments, and Behavior,

Oxford University Press. [B]

D. Grades: The grade structure is:

A (4.00) A- (3.67) B+ (3.33) B (3.00) B- (2.67)
C+ (2.33) C (2.00) F (0.00)
Grading is based on:
• In-class exercises (40%): I will assign chapter-end exercises from KK and other
assignments to different students each week or so. Students have a week submit a
typed answer, and to use it as a basis for leading class discussion of the exercise.
• Midterm examination (40%): This is a shorter, in-class exam that covers all materials
covered in class through June 30.
• Final examination (20%): This is a comprehensive take-home examination
distributed on July 28. It is due, in electronic and hard copy form, on or before
August 11.

E. Class Schedule and Readings

1. May 26
[KK] Ch. 1: Managerial Economics in Public and Nonprofit Administration: Overview
• economic thinking, scarcity, institutions, behavior, choice and costs
  
Preliminary
2. June 2
[KK] Ch. 2: Characteristics of the Nonprofit and Government Sectors
• property rights, public goods, types of not-for-profit firm, external and
internal differences of the government and nonprofit sectors with respect to
sources of revenue and types of expenditures, and interactions between sectors
Article: A Government Safety Net Is Not Enough
Article: The Charity Revolt
3. June 9
[KK] Ch. 2: Characteristics of The Nonprofit and Government Sectors - continued
• Class exercises: 2.4, 2.6, 2.9, 2.18, and 2.20
4. June 16
[KK] Ch. 3: Demand and Supply
• individual and market demand, firm and market supply, equilibrium, price as
rationing mechanism, consumer and producer surplus, economic welfare,
price controls and demand for public goods and services
• Class exercises: 3.3, 3.4, 3.5 and 3.6
5. June 23
[KK] Ch. 4: Estimating Client Choice
• indifference curves, elasticity, tax burdens and forecasting
• Class exercises: 4.1, 4.2 and 4.3

[B] Ch. 12: The Context and Framing of Choice

6. June 30
[KK] Ch. 5: Market Failure and Public Choice
• market failure, common bond, managerial discretion, public choice, the
impossibility theorem
• Class exercises: 5.8 and 5.17
7. July 7 Midterm examination during initial part of class
[KK] Ch. 6: Production and Costs
• productivity, fixed/variable costs, the long run, the short run, and MRP=MRC
• Class exercises: 6.1, 6.2, 6.3, 6.7 and 6.8
Article: Pro Football’s College Tuition Bill
8. July 14
[KK] Ch. 7: Market Structure in Government and Nonprofit Industries
• perfect competition, monopoly, price discrimination
• Class exercises: 7.6, 7.8 and 7.9

[B] Ch. 15: Oligopoly and Oligopsony

Article: God Will Provide-Unless the Government Gets There First

Article: Helping Themselves
  
Preliminary
9. July 21
[KK] Ch. 8: Selecting the Right Niche and Setting Client Fees
• differentiation, game theory, cost plus pricing
• Class exercise: 8.1

[B] Ch. 21: Game Theory and Modern Models of Oligopoly

Article: Arts Organizations on the Brink Are Turning to Him for Advice

10. July 28 - Final exam distributed at the end of class…. due on or before August 11
[KK] Ch. 9: Strategic Goals: If Not Profit, What?
Ch. 11: Cost – Benefit Analysis
• favored, neutral, and preferred output, cross subsidization, contract failure,
• Class exercises: 9.1, 11.1, 11.2

Article: Giving Capitalism Its Due

Article: Philanthropy and Its Enemies

11. August 4 - TBD