``Business Enterprise and Public Policy,'' G406 Spring 2017


     This courses teaches how to apply the tools of economic reasoning to a variety of topics in which businesses create or react or public policies. The central ideas are surplus, rent- seeking, and incentives. Changes in economic surplus--- consumer and producer surplus at its simplest--- show who gains and loses from policies, and hence predicts how a business is most likely will react in the public arena. A policy is "efficient" if it maximizes the sum of everyone's surplus, and this is the benchmark for creating policy that maximizes social wealth. Rent-seeking is the attempt by different interest groups to use the political process to transfer surplus from other groups to themselves. Rent-seeking is one source of inefficiency. Any policy provides incentives as a result of its effect on surplus, and care must be taken that these incentives lead to the desired outcome. Understanding how to apply these three ideas is a major objective for an economics education. The hardest part is learning how to apply them in different contexts, which is the aim of this course. In the course of so doing, students will also learn the facts involved in a wide variety of public policy problems in government regulation, ranging from antitrust laws to pollution regulation, public-utility pricing, labor policy, and the safety of consumer products.

Instructor: Professor Eric Rasmusen. Email: [email protected] Office phone: 855-9219; direct: 855-3356. Office: Hodge Hall 3080.
Canvas: https://iu.instructure.com ; also http://rasmusen.org/g406/0.g406.htm.

  • Class times: Monday and Wednesday, 4-5:15 p.m in Hodge Hall, HH1000.

  • Office hours: By appointment--- email me at [email protected] or use Canvas. I will ordinarily be able to see you the day you email or the next day.

  • Text: The text is the draft book at http://rasmusen.org/g406/chapters/. At the end of each chapter are citations to five "Media Clippings". I will assign two of these from each chapter.

         There will be 4 problem sets (10%), 3 quizzes (20%), a midterm test (20%), and a final examination (30%). The midterm will be on March 1 and the final will be on May 1 from 2:45 to 4:45.

    Participation will make up 10% of the grade (for details see http://rasmusen.org/g406/scribes.doc) and will be graded at the end of the semester based on class participation, response to minor assignments, attendance, special helpfulness in class, etc. You will also complete a regulation public comment in teams of two, as I will explain on Canvas, and that will be 10% of the grade. I am happy to talk about the answers to test questions if regrading is not the subject, but if you think that something was graded wrongly, even something as trivial as that the points were not added up correctly, write me a memo.

    Lecture slides are in the directory http://rasmusen.org/g406/slides/.

  • Laptops and Cellphones: You may not use cellphones in class. You may use laptops. I do not mind if you multi-task: casually checking your email, looking at your schedule for the day, looking up a baseball score. I do mind if you single-task on something other than G406 that distracts the students behind you or shows disrespect. Thus, you cannot work on a paper assignment or play games.


         The Kelley School's Honor Code is something you have all read. It is online at http://www.kelley.iu.edu/ugrad/honorcode.cfm. Living up to the Honor Code's integrity is not hard. Don't cheat, and tell me if you see somebody else cheating. I will take appropriate disciplinary actions against any offenders. Again: Do not cheat! I am strict about that, and have used the official procedures of the Dean of Students before. Cheating is immoral, whether or not you get caught, and despite the careless attitude of some departments at IU. Leave this course with your honor intact.

    Markets. Chapter 1.

    Market failure. Chapter 2 .

    Government failure. Chapter 3.

    Government design. Chapter 4.

    Time and life. Chapter 5 .

    Externalities. Chapter 6 .

    Conservation. Chapter 7.

    Monopolizing. Chapter 8.

    Natural monopoly. Chapter 9.

    Information. Chapter 10.

    Regulating labor. Chapter 11 .

    Regulating capital. Chapter 12.

    URL: http://www.rasmusen.org/g406/0.g406.htm. Indiana University, Department of Business Economics and Public Policy, in the Kelley School of Business , 1309 East Tenth Street, Bloomington, Indiana 47405-1701, (812) 855-9219.

    Other Stuff

    Learning Goals. The business school accreditation people like professors to put on their syllabi linkage to ``Learning Goals'' in the style of Schools of Education. To please them, I will note that this course helps with BEPP Learning Goal 1, An Integrative Point of View, because students will have to use various finance and accounting concepts such as the CAPM, efficients markets, depreciation, balance sheets, present value, and weighted average cost of capital, and of course lots of other economics. It will help with Learning Goal 2, Ethical Reasoning, because students need to differentiate between the goals of the themselves, their employers, and the public interest, and will learn to detect hypocrisy and self-seeking policies. It will help with Learning Goal 3, Critical Thinking and Decision Making, because it's all about predicting the effects of different policies and piercing fake reasons and reasoning. It will help with Learning Goal 5, Quantitative Analysis and Modeling, because there are lots of graphs, equations, and numbers.

    Learning Outcomes. What students will learn in this course is how to think logically and follow a sequence of reasoning, how regulations are made and carried out, how they should be made and carried out, and their effects on people and businesses.

    Standard Kelley Notice: Portions of this course may be subject to electronic proctoring. Video cameras may be used to monitor the room during student assessment activities, including but not limited to, exams, tests, and quizzes. Video recordings may be used to investigate or support disciplinary action. All access to and use of video equipment and recordings will follow applicable IU policies.

    Standard IU Notice: As your instructor, one of my responsibilities is to help create a safe learning environment on our campus. Title IX and our own Sexual Misconduct policy prohibit sexual misconduct. If you have experienced sexual misconduct, or know someone who has, the University can help.

    If you are seeking help and would like to speak to someone confidentially, you can make an appointment with:

    The Sexual Assault Crisis Service (SACS) at 812-855-8900
    Counseling and Psychological Services (CAPS) at 812-855-5711
    Confidential Victim Advocates (CVA) at 812-856-2469
    IU Health Center at 812-855-4011