EC 581 Syllabus

EC581 Syllabus

Last edited: January 15, 2014

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Spring 2014

Randall P. Ellis, Professor

Room 555, Economics Department, Boston University

270 Bay State Road; Boston MA 02215

Tel: 617 353-2741

My e-mail address is ellisrp at bu dot edu. I check it regularly.

Office hours for spring term: Tuesdays 2-3:30, and fridays 11:00-12:30, or by appointment. (Thursdays are reserved for research.)

You are encouraged to sign up for office hours here.

Teaching assistant: Tianxu Chen <>; Office hours: Thursdays 12:30 p.m. to 2 p.m.

Location: 264 Bay State Road, B03B (Econ Building Basement).  Cell phone: (919) 323-0052


This is a masters level course in health economics, and hence I will assume that students are comfortable with calculus, statistics and economic models.

Students will learn how to apply economic analysis tools to understanding the economics of health and health care markets. The class will cover such topics as moral hazard, risk aversion, adverse selection, physician-patient interaction, managed care, regulation, payment systems for providers, and various international health topics. The course outline below highlights the topics covered. Additional readings will likely be added during the term.

Last year I held six joint meetings with a course in the law school, Health Care Law and Economics. I will not be doing that this year, since law professor Kevin Outterson is on sabbatical.


The only prerequisite for the course is EC501 Microeconomic Theory. It will be very helpful if you have also had some level of econometrics, such as EC508 or EC414, although you can probably get by if you have had at least one of the statistics classes, EC507 or EC305. You are expected to be able to read papers that use econometrics rather than derive econometric techniques and proofs. Talk to or email me if you are uncertain of your background.


There will be approximately five homework assignments, two in class midterms, and one final examination. As described below, you are invited to write an independent term paper instead of taking the final exam, but you have to tell me about this choice before March 21. Homework assignments and their due dates will be provided on the web site and announced in class.

I will be experimenting with a set of interactive exercises in class that may be included along with homework in a few cases.

Independent Term Paper Option.

Most economics MA students at BU do not get a chance to write a term paper. I invite you to do so. The length is not the primary consideration, although 6-8 pages typed would seem a reasonable minimum. It could either be a reexamination and extension of a topic already developed in a published paper, original work on a new analytical model, or the estimation of something interesting using data. It should be written up in a finished paper format, with a cover page (that includes a title, your name, the date, and an abstract), introduction, a BRIEF discussion of the relevant literature, methodology, results, conclusion, and bibliography. I encourage you to talk to me as soon as possible if you wish to do this option. The deadline for turning in a title and short abstract if you would like to do the paper is March 20 (First Wednesday after the March break) although the paper itself is not due until the day of the final exam.

The two midterm tests will be held on Monday March 3 and Monday March 31. These tests are held during regular class time and will probably not last the full class.

The final examination will be held at the regularly scheduled time which is not yet known. The location for the final examination will be announced later.

The coverage of the two midterms will cover the material covered only up through one week prior to the exam. Hence material covered through Friday February 24 will appear on the first midterm exam, and material covered through March 24 will be on the second exam. Tests may include the readings even if those readings are not covered in class. The coverage of the Final Exam is the entire course. For all exams I will help define what papers and articles to focus on, and share study questions that can be used to prepare.

THE FINAL EXAM DATE IS Thursday May 8 from 3:00-5:00 p.m. Room TBA

Please do not make any plans to leave before then unless you are writing a term paper.

Grading weights will be as follows.

Homework/In class exercises  15%

Midterm Test 1 20%

Midterm Test 2 20%

Final Examination or term paper 45%

Students are allowed to work on on homework assignments together, but must write up their answers independently.

Grades of homework assignments handed in after class on the due dates will be reduced by 50%. Please turn them in on time.

There will not be any makeup midterms

If you choose to miss an exam for any reason, the grade for the rest of the course will be given greater weight. For example, if you miss the first midterm, then since it is worth 20%, the average score on the remainder of the course will be divided by .80. If you miss two tests (not recommended), the remainder of the course scores will be divided by .60. All homework and test scores are normalized for the class average on that component so that each has the same mean and standard deviation, and the final course score is a weighted average as shown above.  Students who miss the Final must take a makeup Final Exam at a later date.

Cheating and academic misconduct

It is a student’s responsibility to know and understand the provisions of the CAS Academic Conduct Code. This code, which includes a very useful discussion of plagiarism, is available at

Suspected cases of academic misconduct will be handled according to these guidelines, with sanctions that include reducing your grade, failing the course, probation, suspension and expulsion.
Please don’t cheat.


There is no standard text book for the course. The following book is strongly recommended.

Thinking, Fast & Slow [Paperback] Daniel Kahneman, October 2011

The book reflects my new interests in behavioral economics, I hope to draw from it regularly.

It is available on for under $20.

If you feel like you would like to read a traditional health economics text book, then the following is the best one available. ($90-140 on line)

Folland, Goodman and Stano (FGS), “The Economics of Health and Health Care“, Prentice Hall.

It is an undergraduate text that may be useful for background material, but is not required. Most recent edition is the sixth. There are few changes from earlier editions.

Original articles, review articles and many of my own writings will be the primary readings. Most articles will be posted on the course web site (Accessible only to the BU community).  The selection of readings and web links will be posted during the course in light of student interests. You are encouraged to let me know of your particular interests.