This course is the first in a two-part sequence. It offers a comprehensive treatment of the economics of externalities, both theoretically and empirically. In doing so, it provides a natural foundation for the economic analysis of public policy, given that many interesting and challenging economic issues involve externalities.

We characterize externalities from a theoretical perspective, how they can be regulated, then how to measure them, drawing out their practical implications for the organization of economic activity. We will also cover related topics: public goods theory, the theory and empirics of local public goods provision — education especially — and environmental (and other) regulation. The course will emphasize the ways that economic analysis can help address pressing issues of our time, including issues relating to equity.