2020 Public Economics

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

To study fundamentals and applications of economic theories (e.g. microeconomics, transport economics, game theory and mechanism design) utilized for analyzing and evaluating infrastructure development. Also to study the practices of infrastructure-related economic policy.

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) Economic analysis of transport policies; (4) Institutional design with economic incentives; (5) Fundamentals of governance theory; and (6) Energy industries 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 Exercises for economic evaluation of infrastructure facilities - Cost-benefit analysis - General equilibrium model - Computable urban economic model
Class 8 Hidden actions and moral hazard problem - Resource allocation problem - Examples of hidden actions - Purpose, classification and implementation of regulation
Class 9 Hidden information and adverse selection - Hidden information / asymmetric information - Example of adverse selection problems
Class 10 Corporate governance and agency theory - Partnerships - The Owner-Employee relationship
Class 11 Theory of auctions - Vickrey type auction - Revenue equivalence theorem
Class 12 Public goods and preference revelation - Pivotal mechanism - Groves mechanisms
Class 13 Characteristics of transportation infrastructure and its evaluation - Social capital and its characteristics - Evaluation method of transportation infrastructure investment - Infrastructure development by public sector
Class 14 Financing and managing transportation infrastructure - Financing transportation infrastructure - Cross subsidy for transportation infrastructure - Transportation infrastructure as local public goods


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 or report (40%), Final exam or report (40%), Small report & 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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