Theory of Economic Policy (MAGKS PhD Course)

Time and place	Monday, February 3: 13:00 - 18:00 PM Tuesday, February 4: 09:00 - 12:00 and 13:30 - 18:00 PM Wednesday, February 5: 09:00 - 12:00 and 13:30 - 18:00 PM Thursday, February 6: 09:00 - 12:00 and 13:30 - 15:00 PM Room: US-A 234 (Unteres Schloß 3, 57072 Siegen)
Syllabus	Download here
Course Materials	Download here
Outline	Part I: Classical Theory 1.1. Tinbergen: Controllability and Neutrality 1.2. Theil: Trade Offs and the Utility Function 1.3. The Assignment Problem 1.4. Targets and Instruments 1.5. Additive and Multiplicative Uncertainty Literature: Accocella et al. (2012, Part I), Accocella and Di Bartolomeo (2006, 2008), Hughes Hallett (1989). Part II: Policy Neutrality and Strategic Interaction 2.1. The Lucas-Critique and Strategic Interaction 2.2. Strategic Games 2.3. Policy Non-Neutrality Resurrected 2.4. The “New” Theory of Economic Policy Literature: Accocella et al. (2012, Part II), Accocella and Di Bartolomeo (2004), Docker and Neck (2008), Drazen (2000, Ch. 4), Hughes Hallett (1989). Part III: Credibility of Policymaker 3.1. Policy Rules: Benefits and Costs 3.2. Contingent Rules 3.3. Uncertainty about Policymaker’s Type 3.4. Benefits and Costs of Delegation Literature: Drazen (2000, Ch. 5, 6), Hefeker and Neugart (2024), Persson and Tabellini (2000, Ch. 15). Part IV: Policy Spillovers and Cooperation 4.1. Spillovers and Pareto-Inefficiency 4.2. Uncertainty and the Incentive to Cooperate 4.3. Cooperation and Insurance Literature: Ghosh and Masson (1994), Hefeker and Neugart (2018), Persson and Tabellini (2000, Ch. 18).
Literature	Main texts: Acocella, Nicola, Giovanni Di Bartolomeo and Andrew Hughes Hallett (2012) The Theory of Economic Policy in a Strategic Context, Cambridge: Cambridge University Press. Drazen, Allan (2000) Political Economy in Macroeconomics, Princeton: Princeton University Press. Additional readings: Acocella, Nicola and Giovanni Di Bartolomeo (2004) Non-neutrality of Monetary Policy in Policy Games, European Journal of Political Economy 20, 695-707. Acocella, Nicola and Giovanni Di Bartolomeo (2006) Tinbergen and Theil Meet Nash: Controllability in Policy Games, Economics Letters 90, 213-218. Acocella, Nicola and Giovanni Di Bartolomeo (2008) Towards a New Theory of Economic Policy: Continuity and Innovation, in R. Neck et al (eds) Quantitative Economic Policy, Berlin: Springer, 15-34. Dockner, Engelbert and Reinhard Neck (2008) Time Consistency, Subgame Perfectness, Solution Concepts and Information Patterns in Dynamic Models of Stabilization Policies, in R. Neck et al (eds) Quantitative Economic Policy, Berlin: Springer, 51-101. Ghosh, Atish and Paul Masson (1994) Economic Cooperation in an Uncertain World, Basingstoke: Blackwell. Hefeker, Carsten and Michael Neugart (2018) Non-Cooperative and Cooperative Policy Reforms under Uncertainty and Spillovers, Journal of Comparative Economics 46, 94–102. Hefeker, Carsten and Michael Neugart (2024) Policy Rules and Political Polarization, Journal of Public Economic Theory 26, e12710. Hughes Hallett, Andrew (1989) Econometrics and the Theory of Economic Policy: The Tinbergen–Theil Contributions 40 Years On, Oxford Economic Papers 41, 189-214. Persson, Torsten and Guido Tabellini (2000) Political Economics: Explaining Economic Policies, Cambridge: MIT-Press.

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