Learning Outcomes:
After completing this module students should be able to:
1. Provide an historical perspective on the size of the state, and on the level of and trends in inequality;
2. Understand and demonstrate the First and Second Welfare Theorems as applied to a simple exchange economy;
3. Discuss the efficiency costs (e.g. deadweight losses) and incidence (statutory versus economic) of taxation;
4. Justify the role of the state on efficiency grounds (e.g. correction of market failures due to externalities, public good provision, adverse selection);
5. Justify the role of the state on equity grounds (e.g. concave social welfare, risk aversion);
6. Describe the main results of optimal taxation;
7. Apply the theoretical concepts to analyze policies in the real world.