SEEK 470: PUBLIC POLICY ANALYSIS FOR MANAGERS
Kellogg School of Management
Northwestern University
Spring Quarter 2006
Section 81,Tuesday, 6:30-9:30 p.m., Evanston Campus
Syllabus
****Preliminary: Subject to Change****
Professor David Besanko and Professor Therese McGuire
E-mail: AND
Office (DB): 613 Leverone, 847-491-7753
Office (TM): 622 Leverone, 847-491-8683
Course Overview and Goals:
On November 1, 2005, the President’s Advisory Panel on Federal Tax Reform released its report and recommendations for fundamental tax reform. Were the recommendations pro-business? Why was the report pronounced DOA?
Beginning in January, 2006 aged and disabled individuals who qualify for Medicare will be able to obtain coverage for prescription drug purchases under the new Medicare Plan D program. Why have major newspapers placed their coverage of Medicare Plan D in their business sections, and why are major corporations encouraging their retired employees not to enroll in Medicare Plan D?
The domestic policy hallmark of President Bush’s first administration was the No Child Left Behind legislation. Have school performance and student achievement improved since passage of the law? Why have some schools chosen to forego federal grant monies in order not to have to comply with NCLB?
Senior executives of government, not-for-profit, and business organizations are expected to be knowledgeable about these questions. It may seem obvious that this would be a requirement for leaders in the public sector, and it is plausible that leaders of not-for-profits or NGOs would also need to be well informed on the public policy issues of the day. But why would business leaders need to know anything about public policy?Surely knowledge of areas such as finance, marketing, and accounting is far more critical to one’s effectiveness as a business leader than knowledge of public policy.
Perhaps surprisingly, if you spend time conversing with CEOs of major companies, you soon learn that they can converse with insight, even eloquence, about public policy issues. They do so because they have to: public policy choices, whether in the area of tax policy, health insurance, or education, can have an important impact on a firm’s shareholders and its employees. Some of these impacts are fairly clear, sometimes they are more subtle. Even if your firm is (apparently) unaffected by a particular public policy, the opinions of CEOs are often solicited, whether in the form of membership on “blue ribbon” commissions, testimony before Congress, or in one-on-one meetings with senior public officials. In light of this, an ability to discuss public policy with intelligence and clarity is an essential part of the leadership training that may someday bring you to the corner office. And even if your job is below the “C” level, you will, almost surely, find yourself in a position in which you need to be able to express your thoughts and views about particular public policies. To do this, you will need to understand society’s problems, the range of possible public solutions that can be formulated to deal with these problems, and approaches to analyzing the impact and efficacy of those solutions.
The purpose of this course is to give you knowledge, frameworks, and tools that you would need in order to understand why government intervention may be needed and to identify the array of possible public solutions to society’s problems. A special feature of the class will be detailed analyses of five current public policy issues: education, environmental policy, Medicare and Medicaid, Social Security, and federal tax reform.
The course is grounded in the discipline of public finance economics. Public finance is the branch of economics that deals with the questions of when and how government should intervene in the private marketplace and how do government interventions affect economic outcomes. Public finance economics is built on the foundation of microeconomics, the material you studied in MECN 430. Much of the economics you will study in this course will be familiar from MECN 430. However, there will be new microeconomic theory that will be taught in the class.
Who Would Especially Benefit from this Course?
Students (of any major) who are pursuing a program in general management who aspire to rise to senior leadership positions in business firms, not-for-profit organizations, and government agencies.
Students majoring in
- Social Enterprise at Kellogg (SEEK)
- Management & Strategy
Prerequisites: MECN 430 (Microeconomic Analysis) is a prerequisite for this course
Textbook and Readings
Public Finance and Public Policy, Jonathan Gruber, Worth Publishers, 2005.
Case packet of readings
Additional readings will be handed out as the class progresses.
How Will I be Graded?
Grades will be based on four homework assignments (problem sets, memos, essays), one group project, one midterm exam, and one final exam. There are 200 possible points in the course, divided up as follows:
- Homework Assignments...... (5 points each) 20 points
- Midterm Exam...... 60 points
- Final Exam...... 60 points
- Group written report...... (40 group points, 20 individual points) 60 points
TOTAL POSSIBLE POINTS...... 200 points
Though not explicitly graded, participation in class discussions of lecture material, readings, and other distributed materials is expected, and it will be taken into account in determining grades in borderline cases.
Homework
We will hand out short homework assignments to test your understanding of the concepts and topics and to practice for the exams. The homework assignments will be graded on a “check”, “check-plus,” and “check-minus” basis.
Midterm and final exams
The exams will be closed-book/closed-notes in-class exams. Each exam will be 90 minutes long and will consist of true-false, problem-solving, and short-answer questions. The midterm will take place in the second 90 minute portion of class on April 25 (Week 5) and will cover all lectures and readings from the first four weeks of class.
The final will take place on Tuesday evening of Finals Week (Tuesday, June 6) and will cover the material from the second half of the course.
More information about the midterm and final exams will be made available as the dates approach.
Group project
The group project will be a capstone experience. Students will be divided into groups to serve on “mock commissions” charged with making recommendations to an elected official (for example, mayor, governor, president, legislative body) who faces a particular public policy dilemma. Each student member of the commission will be given a role (labor leader, CEO, public servant, etc.) and will be required to contribute to the commission’s report and to write a brief addendum to the commission’s report that explains how the interests of his/her business/organization diverge (or not) from society’s interests. Each commission report will contain a statement of the problem, a statement of appropriate policy objectives and criteria, a presentation of the available evidence, a discussion of possible solutions, and a recommended course of action. In the last week of the quarter, four student-group commissions will be selected at random to present and defend their report and recommendations to the class.
Grades for the group projects will be based on three components. Each member of the group will receive a common score (40 maximum possible points) based on the instructors’ evaluation of the written report. Second, each member of the group will receive an individual score based on the instructors’ evaluation of the member’s contributed addendum to the report (10 maximum possible points). Finally, each member of the group will give a score to every other member of the group, which will be reported confidentially to the instructors (10 maximum possible points per person).
At the beginning of the third week of the quarter, groups will be expected to submit a one-page outline of their project. The outline should indicate the public policy issue the group will make recommendations about, the roles that students will play in writing addenda, and likely sources of information that the group will draw upon in researching their topic.
Students are free to form their own groups of 4 to 6 individuals. However, in order to minimize logistical problems (e.g., scheduling meeting times and locations), we strongly suggest that TMP students form groups with other TMP students and full-time students form groups with other full-time students. Of course, if you believe that the logistical problems can be managed, you are welcome to form groups with whomever you wish.
A list of possible topics will be distributed the first week of class. Students will be free to choose a topic from the list or to propose a topic of their own device.
Class Etiquette:
Students are expected to adhere to the general principles of Kellogg'sClassroom Etiquette Policy, as described on page 20 of the Policies and Procedures manual for Kellogg students:
Specific adjustments to this policy for this class are listed below:
Students arriving more than three minutes late for class will be
asked to contribute three dollars to the SEEK 470 Charitable Contributions
Fund. Proceeds will be donated to a charitable organization of
students' choosing at the end of the term.
If other commitments will cause you to arrive late or leave early,
you will be exempted from this policy if you alert one of us by sending an e-mail by noon the day of class.
Finally, to minimize distractions and facilitate discussion, please do not use laptop computers, personal digitalassistants, or iPods during class sessions, and please turn cellular telephones off.
Course Web-page:
The course will have a Blackboard site. We will post electronic copies of course materials, including lecture slides and homework assignments and answers, on the Blackboard site after the materials have been presented or are due.
Course Outline:
Week 1- March 28, 2006
(a) Introduction to Public Economics and the U.S. Public Sector
(b) Review of Microeconomic Underpinnings
Readings:
Gruber, Chapters 1 and 2.
Week 2 - April 4, 2006
Role of Government Part 1 --- Public Goods
Readings:
Gruber, Chapter 7.
Week 3 - April 11, 2006
Public Provision of Private Goods --- Education
Readings:
Gruber, Chapter 11.
Current Public Policy Issue: Education Reform
Homework assignment #1 due.
Week 4 - April 18, 2006
(a) Role of Government Part 2 --- Income Inequality, Poverty and Redistribution
Readings:
Gruber, Chapter 17.
Homework assignment #2 due.
(b) Role of Government Part 3 --- Social Insurance and Social Security
Readings:
Gruber, Chapter 12 and 13.
Week 5 - April 25
(a) Guest Speaker: Deborah Lucas, Professor of Finance, Kellogg
Current Public Policy Issue: Social Security
(b) Midterm Exam
Week 6–May 2
Role of Government Part 4 --- Externalities and Environmental Policy
Readings:
Gruber, Chapters 5 and 6, pp. 115 – 156, only.
Current Public Policy Issue: Environmental Policy
Week 7 - May 9
Welfare Policy and Publicly Provided Health Insurance
Readings:
Gruber, Chapter 16 and review Chapter 17, pp. 452 – 462 and 479 -484.
Current Public Policy Issue: Medicaid and Medicare
Homework assignment #3 due.
Week 8 - May 16
Financing Government Part 1 --- Principles of Taxation
Readings:
Gruber, Chapters 19 and 20.
Week 9 - May 23
(a)Financing Government Part 2 --- Taxation Today
Readings:
1. Gruber, Chapters 18 and 25.
Homework assignment #4 due.
(b) Guest Speaker: Rosanne Altshuler, Associate Professor of Economics, RutgersUniversity
Current Public Policy Issue: Federal Tax Reform
Week 10 - May 30
Wrap-Up and Student Group Presentations
Readings: none
Commission Reports Due
Student Presentations of Randomly Selected Mock Commission Reports
Finals Week - June 6, Tuesday, 6:30-8:00
Final Exam
1