The Role of Government in Market Economies - Harvard Business School MBA Program

The Role of Government in Market Economies

Course Number 1195

Professor Matthew Weinzierl
Fall; Q2; 1.5 credits
14 sessions

Course Overview and Objectives

This course is about one question: What is the proper role of the government in the market economy? We study the role of government as it plays out in the real world, using vivid case studies from many countries, decades, and policy angles. At the same time, we align these cases with a rigorous theoretical framework that clarifies the circumstances under which government intervention in the market can improve outcomes.

The goal of this course is to deepen your insight into and influence on the debate over economic policy. Private-sector managers are better able to position their organizations, both defensively and offensively, if they understand why and how governments act. Moreover, exceptional private-sector leaders are now widely expected to provide informed, intelligent leadership on the policy issues at the heart of this course.

Career Focus

The course is designed for students who aim to lead private-sector institutions of systemic importance, influence public debates over government policy, or occupy policymaking positions at some point in their careers. The skills and knowledge it develops, however, are increasingly valuable to the broad range of businesses, non-profit organizations, and civil society institutions whose activities intersect with government policy.

Course Structure

The course opens with a case on why a hypothetical competitive market economy can be used as a starting point for analyzing what role government should play. Market economies are miraculous when at their best: flexible, decisive, and self-correcting.

But markets are not always at their best, and the first module of the course confronts major real-world departures from this hypothetical starting point. These departures mean that government policy can improve the efficiency of the economy, in principle making all individuals better off. Policy areas addressed here include antitrust regulation, environmental protection, education, health care, and fiscal and monetary policy.

We may want the government to do more than remove inefficiencies, so the second module tackles questions of economic justice and their implications for the government's role. In particular, in this module we study central debates over the taxation of individuals and firms, the provision of economic assistance, and the determination of the boundaries of policy.

As this summary shows, the cases we discuss take us step-by-step through a rigorous conceptual framework that provides the intellectual backbone for the course. At the same time, each case gives us a chance to examine an important policy area in some depth. Accompanying each case are a set of core concepts and suggested readings. The core concepts represent fundamental insights into the role of government, so an understanding of them can substantially increase one's ability to analyze a given policy decision. The suggested supplemental readings are starting points for pursuing areas of particular interest in greater detail. They include many foundational pieces of scholarship, as well as newer and less scholarly works that shed light on these issues.

Course Administration

Course grades will be based on class participation (50%) and a short paper (50%). For the paper, students will apply the tools and ideas from the course to prepare, with one or two partners if they wish, an analysis of a government policy problem of their choice. The course is designed so that the time required to prepare the paper is comparable to the time a student would devote to a final exam. Throughout the term, Professor Weinzierl will be available to meet with students by appointment. To arrange a meeting, please contact his assistant, Chris Grosse, by email (