Correcting a Market Failure

Your Task
The first half of this course addresses the government’s role in correcting market failures associated
with externalities, public goods, asymmetric information, and behavioral mistakes. You are to 1)
choose a U.S. government policy that aims to correct such a market failure and 2) write a paper that
recommends changing the policy along some dimension. In particular, your paper should answer
the following questions:
• What is the current government policy?
• What are the motivations/rationales for the current policy?
• What is your recommendation for changing the current policy?
• What are the theoretical implications of your recommendation for e

ciency and equity?
• What empirical evidence supports your recommendation? And why is the evidence credible?
Choosing a Government Policy
The government policy that you choose must be related to one of the topics in the first half of
the course. That is, you must choose a policy in one of the following broad areas: climate change,
education, unemployment insurance, disability insurance, health insurance, or Social Security.
You must also aim to recommend a policy change that is su

ciently narrow in scope to allow for a
nuanced and thoughtful analysis. For example, recommending that the government not be involved
in the market for higher education is too broad. But focusing on the terms of federal college loans is
appropriate. Recommending that the American health care system be replaced with the Canadian
model is too broad. But focusing on the tax treatment of employer-provided health insurance, the
generosity of Medicaid, or the Medicare reimbursement model are each appropriate in scope.
I encourage you to discuss your policy proposal with me via email or during o

ce hours for feedback.

Your Audience
The intended reader for your paper is one of your peers in this class. Thus, you can assume that
the reader understands, without definition, concepts like externalities, deadweight loss, Utilitarian
social welfare, adverse selection, and intergovernmental grants. But while your reader may be
familiar with the broad topic of your paper, you should not assume they know the details of the
policy you recommend changing.


Tips for a Strong Paper
• Motivate your policy recommendation. Explain why the reader should care.
• Provide a clear and direct thesis statement that makes a specific policy recommendation for
particular reasons.
• Include a “roadmap” that tells the reader how the paper is organized.
• Provide “sign posts” to help the reader follow the structure of your analysis.
• Write using the present tense and active voice. Use of the first person is acceptable and
encouraged. Pay attention to how economists write in the optional readings for this class and
use that as a model.
• Analyze and assess — do not simply summarize.
• Be precise and allow for nuance. Every policy change has costs and benefits.
• Rarely, if ever, use direct quotes. Use your own words to explain/interpret the work of others.
• If you must write a conclusion, keep it short. I will not read it.
• Follow directions and read the grading rubric.
Technical Guidelines
• The paper should be typed with 12-point font, double-spaced, and 5-6 pages in length with
1 inch margins.

• Cite all sources, both in the popular press and in academic journals. Use the author-date
system for parenthetical citations. For example, when indirectly referencing a result from a
paper by Esther Duflo from 2003, you should include the parenthetical citation at the end of
the sentence, e.g., “There is evidence from South Africa that the preferences of grandparents
matter for the health of the grandchildren (Duflo, 2003).” Or, if referring to the paper
directly, you can say, “Duflo (2003) provides evidence from South Africa that the preferences
of grandparents matter for the health of the grandchildren.”
• A list of references with complete bibliographic information should follow at the end of the
paper. I do not care about the formatting of your references, as long as it is consistent. The
reference list does not count as part of your 5-6 page requirement.
• The paper is due at 5pm on Monday November 4th. You may submit it to me via email
or by placing a paper copy in the basket outside my o
ce door.

• Failure to submit the policy paper on time will result in a reduction of the paper’s grade by
one third of a letter grade (A

to B+, for example) for each 24 hours that it is late.
Second-Stage Writing Requirement: Email me by 5pm on Monday November 4th if you would

like to designate this course as your writing course for satisfying the economics major’s second-
stage writing requirement. Note that you can only designate one course as your writing course this

semester. Writing proficiency will be evaluated based on the quality of the two policy papers.



Adapted with Permission from Prof. Upson-Saia

Critical analysis Evidence & Development Structure/Logical flow Writing Authority/Style

Focused, clear, sophisticated, and
compelling discussion; supported by
insightful analysis of evidence
throughout the paper; thorough
integration of course material and

Paper’s arguments are thoroughly
supported by a range of strong,
specific, and highly-appropriate
evidence; evidence analyzed and
connected to argument logically and
clearly (developed and explicit
reasoning); sources cited thoroughly
and properly
Paper as a whole flows logically and
Demonstrates confident and mature
grasp of argument and material;
mechanics (grammar, syntax etc.)
polished so as to aid the reader in
accessing the argument; eloquent
prose; demonstrates careful revision
and editing

Good analysis that engages course
material and concepts well (though
might need further focus and
Paper’s arguments are linked to some,
relevant evidence (though
analysis/reasoning may not be fully
developed); sources cited properly
Well-constructed flow of ideas; a few
flaws of organization that interrupt the
reader’s ability to grasp the paper’s
arguments clearly
Demonstrates control over paper’s
main arguments and evidence; a few
mechanical & prosaic flaws that
interrupt the reader’s ability to grasp
the paper’s arguments clearly;
demonstrates revision and editing

Paper has a weak analysis (possibly
too summative or general, rather than
analytical and detailed), with slim/brief
connection to course material and
concepts; requires more depth and

Paper’s arguments are supported by
limited use of evidence that is
somewhat relevant; connections
between argument and evidence
somewhat clear, though sometimes
disconnected and/or imprecise; some
citation problems

Paper jumps from one idea to the next
incoherently and lacks a unifying
structure/organization; several
organizational errors that confuse to
the reader

Demonstrates an unfolding of ideas as
the author has them; NOT a paper
composed with the intent to persuade
the reader; several mechanical &
prosaic flaws that are distracting and
confusing to the reader; demonstrates
little revision or editing

Analysis hazy, weak, or unclear; paper
includes some insights (but is mostly a
REPORT, not ANALYSIS); fragmented
and disconnected with course
Insufficient use of evidence; sources
misconstrued or misrepresented;
connections between argument and
evidence unclear or inconsistent;
many citation problems
Paper wanders, making it difficult for
the reader to distill the argument,
reasoning, and evidence
No control over paper’s ideas; many
mechanical & prosaic errors; no
revision or editing

Incomplete or incomprehensible;
demonstrates little to no connection
with course material
Paper’s argument is based in little to
no evidence; connections absent or
incorrect; no citations



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