2017 Public Economics

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Academic unit or major
Undergraduate major in Civil and Environmental Engineering
Fukuda Daisuke  Sakano Tatsurou  Umauchi Hirotaka 
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Course description and aims

To study fundamentals and applications of economic theories (e.g. microeconomics, transport economics and game theory) utilized for analyzing and evaluating infrastructure development.

Student learning outcomes

Studying fundamental ways of economic thinking about infrastructure projects such as: (1) Microeconomic theory on costs and prices; (2) Economic evaluation method of infrastructure projects; (3) Macroeconomic impacts of public works/investments; (4) Characteristics of public services and their financial and pricing systems; and (5) Logistics and Private Finance Initiative (PFI).


Economics, Microeconomics, Transportation and Urban Economics, Public Economics, Market Failure, Externality, Economic Policy, Mechanism design

Competencies that will be developed

Specialist skills Intercultural skills Communication skills Critical thinking skills Practical and/or problem-solving skills

Class flow

While theoretical foundations of economics are explained, mid-term exam will be set. The final exam will also be set.

Course schedule/Required learning

  Course schedule Required learning
Class 1 Role of economic analysis for evaluating infrastructure develpment - Infrastructure project and its economic analysis - History of cost benefit analysis - What is the economics way of thinking?
Class 2 Foundations of consumer behavior theory - Consumption possible frontier (budget constraint) - Preference, utility, indifference curve, marginal rate of substitution - Choice (utility maximization) - Demand function, price/income elasticities - Consumer surplus and benefit calculation - Duality
Class 3 Foundations of producer/firm behavior theory - Variable input, Fixed input, diminishing marginal productivity - Short term, Long term/Average, Marginal costs - Variable/Fixed Costs - Cost Minimization Problem and Cost Function - Production Technology - Profit Maximization and Production Function - Producer Surplus - Variable/Fixed Cost Functions
Class 4 Theory of market - Law of Single Price - Price Taker and Price Maker - Market Equilibrium - Excess Demand/Supply - Partial/General Equilibrium - Consumer/Producer/Social Surplus - The 1st Theorem of Welfare Economics - Monopoly and Law of decreasing Marginal Cost, Oligopoly
Class 5 Market failure and its correction - Monopoly - Externality - Congestion charging - Public goods
Class 6 Cost-benefit analysis - Principle and history of cost benefit analysis - Social discount rate - Definition and measurement of economic benefit
Class 7 Marcoeconomic impacts of public investment - Public investment - Multiplier effects - Inflation and deflation
Class 8 Mid-term exam and its description Mid-term exam and its description
Class 9 Hidden actions and moral hazard problem - Resource allocation problem - Examples of hidden actions - Purpose, classification and implementation of regulation
Class 10 Hidden information and adverse selection - Hidden information / asymmetric information - Example of adverse selection problems
Class 11 Corporate governance and agency theory - Partnerships - The Owner-Employee relationship
Class 12 Theory of aucktions - Vickrey type auction - Revenue equivalence theorem
Class 13 Public goods and preference revelation - Pivotal mechanism - Groves mechanisms
Class 14 Structure of energy-related industry - Current situation of energy related industries in Japan - Production and demand for energy resource in Japan
Class 15 History and prospects of utilization of private financing - What is Private Finance Initiative? - Agency-based theory of contract


Particularly not. Handouts will be circulated during the class and also be uploaded to OCWi.

Reference books, course materials, etc.

The followings are all study-aid books.
- Takeuchi (2008) Introduction to transportation economics, Yuhikaku.
- Yamauchi & Takeuchi (2002) Transportation economics, Yuhikaku.
- Hatta (2009) Introduction to Microeconomics 1 & 2, Toyokeizai.
- Fujii (2010) Public works saving Japan, Bunshun.
- Campbell, D.E. "Incentives: Motivation and the Economics of Information (2nd Ed.)" Cambridge University Press, 2006.

Assessment criteria and methods

Mid-term exam (40%), Final exam (40%), Assignments & Small quiz (20%)

Related courses

  • CVE.D201 : Fudamentals of Infrastructure Planning
  • CVE.D210 : Planning Theory for Civil and Environmental Engineering
  • CVE.D312 : Behavioral Theory of Public Systems
  • CVE.D301 : Traffic and Transportation Systems
  • CVE.D403 : Transportation Economics
  • CVE.D211 : Introduction to National Land Use and City Planning
  • ARC.P305 : National and City Planning

Prerequisites (i.e., required knowledge, skills, courses, etc.)

It is recommend to take "CVE.D201 : Fudamentals of Infrastructure Planning", "CVE.D210 : Planning Theory for Civil and Environmental Engineering" and "CVE.D301 : Traffic and Transportation Systems" in advance.

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