The purpose of this module is to provide students with theoretical and empirical perspectives on important issues in public finance. The module pays particular attention to the economics of regulation. It provides a detailed analysis of the role, scope and nature of economic regulation in modem economies. In particular the module provides insights into the regulation of utilities and transport sectors as well as covering the economics of public procurement.

The syllabus covers the following topics: Analysis of the outcomes of competitive markets and the role for government intervention; Analysis of public goods; financing public goods through private payments; methods for solving the public good asymmetric information problem; public goods and cost benefit analysis; The financing of public goods through taxation and government borrowing; private resolution of externalities; the case for govemment resolution of externalities; paternalistic public policies. Introduction to regulation - public capital expenditure, infrastructure and productivity; Regulating utilities - methods of regulation (rate of return regulation, price regulation, incentive regulation, franchise bidding, public enterprise); regulatory failure. Private sector participation and public procurement economics of contracting - monopoly as a contracting problem; transaction cost theory; choice of regulatory strategy - private contracts, concession contracts, discretionary regulation, variants and hybrids; Sectoral regulation (gas, electricity, roads, aviation, water).

Set out the prima facie case for competitive markets and explain how the outcome of competitive markets serves as the benchmark for judging whether public finance and public policy provide social improvement. Identify solutions to the problem of public good asymmetric information and explain how cost-benefit analysis is used to obtain information that allows efficient decisions to be made about public spending on public goods. Describe the prospects for private resolution of externalities and the public policy means for correcting externalities, and debate the case for patemalistic public policies that override personal preferences. Assess the effectiveness of different forms of regulation in different contexts. Describe different methods of regulation and understand their strengths and weaknesses.

Understand the consequences of tax-financing of public goods and when governments ideally should use borrowing rather than taxes to finance public spending on public goods. Understand the rationale and scope for economic regulation of infrastructure in different sectors.

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