Normal view MARC view ISBD view

Economics of the public sector / Joseph E. Stiglitz, Jay K. Rosengard.

By: Stiglitz, Joseph E [author]

Contributor(s): Rosengard, Jay K

Language: English Publisher: New York : W. W. Norton & Company, Inc., [2015]Copyright date: c2015Edition: Fourth editionDescription: xxxii, 923 pages : illustrations ; 24 cmContent type: text Media type: unmediated Carrier type: volumeISBN: 9780393925227 (pbk.); 9780393937091Subject(s): Finance, Public -- United States | Fiscal policy -- United StatesDDC classification: 336.73 LOC classification: HJ257.2 | .S84 2015

Contents:

1. Defining Public Sector Responsibilities -- The Economic Role of Government -- The Mixed Economy of the United States -- Different Perspectives on the Role of Government -- An Impetus for Government Action: Market Failures -- Achieving Balance between the Public and Private Sectors -- The Emerging Consensus -- Thinking Like a Public Sector Economist -- Analyzing the Public Sector -- Economic Models -- Case Study Musgrave's Three Branches -- Normative versus Positive Economics -- Disagreements among Economists -- Differences in Views on How the Economy Behaves -- Disagreement over Values -- Case Study Public Sector Economics and the Global Economic Crisis -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 2. Measuring Public Sector Size -- What or Who Is the Government? -- Types of Government Activity -- Providing a Legal System -- Government Production -- Government's Influence on Private Production. Note continued: Government Purchases of Goods and Services -- Government Redistribution of Income -- Overview of Government Expenditures -- Gauging the Size of the Public Sector -- Growth in Expenditures and Their Changing Composition -- Case Study Estimating the Full Budgetary and Economic Costs of War -- Comparison of Expenditures across Countries -- Government Revenues -- Taxes and the Constitution -- Federal Taxation Today -- State and Local Government Revenues -- Comparison of Taxation across Countries -- Deficit Financing -- Playing Tricks with the Data on Government Activities -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 3. Market Efficiency -- The Invisible Hand of Competitive Markets -- Welfare Economics and Pareto Efficiency -- Case Study On the Prowl for Pareto Improvements -- Pareto Efficiency and Individualism -- The Fundamental Theorems of Welfare Economics -- Efficiency from the Perspective of a Single Market. Note continued: Analyzing Economic Efficiency -- The Utility Possibilities Curve -- Exchange Efficiency -- Production Efficiency -- Product Mix Efficiency -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 4. Market Failure -- Property Rights and Contract Enforcement -- Case Study Property Rights and Market Failures: The Tragedy of the Commons Revisited -- Market Failures and the Role of Government -- 1. Failure of Competition -- 2. Public Goods -- 3. Externalities -- 4. Incomplete Markets -- Case Study Student Loans: Incomplete Reform of an Incomplete Market -- 5. Information Failures -- 6. Unemployment, Inflation, and Disequilibrium -- Interrelationships of Market Failures -- Case Study Market Failures: Explanations or Excuses? -- Redistribution and Merit Goods -- Two Perspectives on the Role of Government -- Normative Analysis -- Positive Analysis -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems. Note continued: 5. Public Goods And Publicly Provided Private Goods -- Public Goods -- Public Goods and Market Failures -- Paying for Public Goods -- The Free Rider Problem -- Case Study Economists and the Free Rider Problem -- Pure and Impure Public Goods -- Case Study Property Rights, Excludability, and Externalities -- Publicly Provided Private Goods -- Rationing Devices for Publicly Provided Private Goods -- Efficiency Conditions for Public Goods -- Demand Curves for Public Goods -- Pareto Efficiency and Income Distribution -- Limitations on Income Redistribution and the Efficient Supply of Public Goods -- Distortionary Taxation and the Efficient Supply of Public Goods -- Efficient Government as a Public Good -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- Appendix: The Leftover Curve -- 6. Externalities And The Environment -- The Problem of Externalities -- Private Solutions to Externalities -- Internalizing Externalities. Note continued: The Coase Theorem -- Using the Legal System -- Case Study The Exxon Valdez Oil Spill -- Failures of Private Solutions -- Public Sector Solutions to Externalities -- Case Study Double Dividend -- Market-Based Solutions -- Regulation -- Innovation -- Information Disclosure -- Compensation and Distribution -- Protecting the Environment: The Role of Government in Practice -- Air -- Water -- Land -- Concluding Remarks -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 7. Efficiency And Equity -- Efficiency and Distribution Trade-Offs -- Analyzing Social Choices -- Determining the Trade-Offs -- Evaluating the Trade-Offs -- Two Caveats -- Social Choices in Practice -- Measuring Benefits -- Ordinary and Compensated Demand Curves -- Consumer Surplus -- Measuring Aggregate Social Benefits -- Measuring Inefficiency -- Case Study Drawing a Poverty Line -- Quantifying Distributional Effects -- Case Study The Great Gatsby Curve. Note continued: Three Approaches to Social Choices -- The Compensation Principle -- Trade-Offs across Measures -- Weighted Net Benefits -- The Trade-Off between Efficiency and Fairness Revisited -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- Appendix: Alternative Measures of Inequality -- The Lorenz Curve -- The Dalton-Atkinson Measure -- 8. Public Production Of Goods And Services -- Natural Monopoly: Public Production of Private Goods -- The Basic Economics of Natural Monopoly -- Regulation and Taxation (Subsidies) -- No Government Intervention -- Government Failures -- Case Study Rent Control and Agricultural Price Supports: Case Studies in Government Failure -- Comparison of Efficiency in the Public and Private Sectors -- Case Study National Performance Review -- Sources of Inefficiency in the Public Sector -- Organizational Differences -- Individual Differences -- Bureaucratic Procedures and Risk Aversion -- Corporatization. Note continued: Case Study Privatizing Prisons -- A Growing Consensus on Government's Role in Production -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 9. Public Choice -- Public Mechanisms for Allocating Resources -- The Problem of Preference Revelation -- Individual Preferences for Public Goods -- The Problem of Aggregating Preferences -- Majority Voting and the Voting Paradox -- Arrow's Impossibility Theorem -- Single-Peaked Preferences and the Existence of a Majority Voting Equilibrium -- The Median Voter -- The Inefficiency of the Majority Voting Equilibrium -- The Two-Party System and the Median Voter -- Case Study Social Choice Theory -- Alternatives for Determining Public Goods Expenditures -- Lindahl Equilibrium -- Politics and Economics -- Why Do Individuals Vote? -- Elections and Special Interest Groups -- The Power of Special Interest Groups -- Other Aspects of the Political Process -- Case Study Campaign Finance Reform. Note continued: The Altruistic Politician? -- The Persistence of Inefficient Equilibrium -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- Appendix: New Preference-Revelation Mechanisms -- 10. Framework For Analysis Of Expenditure Policy -- Need for a Program -- Market Failures -- Case Study Higher Education in the United States -- Alternative Forms of Government Intervention -- The Importance of Particular Design Features -- Private Sector Responses to Government Programs -- Efficiency Consequences -- Income and Substitution Effects and Induced Inefficiency -- Distributional Consequences -- Evaluating the Distributional Consequences -- Case Study Incidence of Education Tax Credits -- Fairness and Distribution -- Equity-Efficiency Trade-Offs -- Public Policy Objectives -- Political Process -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 11. Evaluating Public Expenditure -- Private Cost-Benefit Analysis. Note continued: Present Discounted Value -- Social Cost-Benefit Analysis -- Consumer Surplus and the Decision to Undertake a Project -- Measuring Nonmonetized Costs and Benefits -- Valuing Time -- Valuing Life -- Case Study Children, Car Safety, and the Value of Life -- Valuing Natural Resources -- Shadow Prices and Market Prices -- Discount Rate for Social Cost-Benefit Analysis -- Case Study Climate Change and Discount Rates -- The Evaluation of Risk -- Risk Assessment -- Distributional Considerations -- Cost Effectiveness -- Post-Expenditure Evaluation: Assessing and Improving Government Performance -- Case Study Taking a Bite Out of Crime in the Big Apple -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 12. Defense, Research, And Technology -- Defense Expenditures -- The Value of Marginal Analysis -- Defense Strategy -- Case Study Game Theory, the Arms Race, and the Theory of Deterrence -- Case Study Converting Swords into Plowshares. Note continued: Increasing the Efficiency of the Defense Department -- Defense Procurement -- Defense Conversion -- Accounting and the Defense Department -- Research and Technology -- Market Failures -- Case Study The Scope of the Patent: Can the Human Body Be Patented? -- Government Direct Support -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 13. Health Care -- The Health Care System in the United States -- The Private Sector -- The Role of Government -- Other Expenditure Programs -- Tax Expenditures -- Rationale for a Role of Government in the Health Care Sector -- Imperfect Information -- Limited Competition -- Absence of Profit Motive -- Special Characteristics of the U.S. Market -- The Role of the Health Insurance Industry -- Case Study Medical Malpractice -- Insurance and Excessive Expenditures on Health Care -- Consequences of Inefficiencies in Health Care Markets -- Poverty, Incomplete Coverage, and the Role of Government. Note continued: Reforming Health Care -- Cost Containment -- Case Study Comprehensive Health Care Reform -- Extending Insurance Coverage -- Medicare Reform: Easing Long-Term Fiscal Strains -- Reforming Medicaid -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 14. Education -- The Structure of Education in the United States -- Federal Tax Subsidies to Private and Public Schools -- Why Is Education Publicly Provided and Publicly Financed? -- Is There a Market Failure? -- The Federal Role -- Issues and Controversies in Educational Policy -- Education Outcomes -- Do Expenditures Matter? -- School Vouchers: Choice and Competition -- Case Study Vouchers: The San Jose and Milwaukee Experiments -- School Decentralization -- Performance Standards: No Child Left Behind and Race to the Top -- Inequality -- Aid to Higher Education -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems. Note continued: Appendix: How Should Public Educational Funds Be Allocated? -- 15. Welfare Programs And The Redistribution Of Income -- A Brief Description of Major U.S. Welfare Programs -- AFDC and TANF -- Earned Income Tax Credit -- Food Stamps/SNAP -- Medicaid -- Housing -- Other Programs -- Rationale for Government Welfare Programs -- Dimensions of the Problem -- Analytic Issues -- Labor Supply -- Cash versus In-Kind Redistribution -- Inefficiencies from In-Kind Benefits -- Are In-Kind Benefits Paternalistic? -- Categorical versus Broad-Based Aid -- Is Means Testing Objectionable in Its Own Right? -- Other Distortions -- Case Study Conditional Cash Transfer Programs -- Welfare Reform: Integration of Programs -- The Welfare Reform Bill of 1996 -- Block Granting -- Analytics of State Responses to Block Grants -- Time Limits -- Mandatory Work -- The Welfare Reform Debate of 1996 -- Case Study The Person or the Place? -- Concluding Remarks -- Review and Practice. Note continued: Summary -- Key Concepts -- Questions and Problems -- 16. Social Insurance -- The Social Security System -- Social Security, Private Insurance, and Market Failures -- High Transactions Costs -- Risk Mitigation -- Lack of Indexing: The Inability of Private Markets to Insure Social Risks -- Adverse Selection, Differential Risks, and the Cost of Insurance -- Moral Hazard and Social Security -- Retirement Insurance as a Merit Good -- Social Security, Forced Savings, and Individual Choice -- Is There a Need to Reform Social Security? -- The Nature of the Fiscal Crisis -- Savings -- Labor Supply -- The Rate of Return -- Inequities -- Reforming Social Security -- Reducing Expenditures -- Increasing Revenues -- Structural Reforms -- Case Study Social Security Abroad -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 17. Introduction To Taxation -- Background -- Forms of Taxation -- Changing Patterns of Taxation in the United States. Note continued: Comparisons with Other Countries -- The Five Desirable Characteristics of Any Tax System -- Economic Efficiency -- Administrative Costs -- Case Study Corrective Taxes and the Double Dividend -- Flexibility -- Transparent Political Responsibility -- Fairness -- Case Study Corruption-Resistant Tax Systems -- General Framework for Choosing among Tax Systems -- Utilitarianism -- Rawlsian Social Welfare Function -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 18. Tax Incidence -- Tax Incidence in Competitive Markets -- Effect of Tax at the Level of a Firm -- Impact on Market Equilibrium -- Does It Matter Whether the Tax Is Levied on Consumers or on Producers? -- Case Study The Incidence of Government Benefits -- Ad Valorem versus Specific Taxes -- The Effect of Elasticity -- Taxation of Factors -- Case Study The Philadelphia Wage Tax -- Tax Incidence in Environments without Perfect Competition. Note continued: Relationship between the Change in the Price and the Tax -- Ad Valorem versus Specific Taxes -- Tax Incidence in Oligopolies -- Equivalent Taxes -- Income Tax and Value-Added Tax -- Equivalence of Consumption and Wage Taxes -- Equivalence of Lifetime Consumption and Lifetime Income Taxes -- A Caveat on Equivalence -- Other Factors Affecting Tax Incidence -- Tax Incidence under Partial and General Equilibrium -- Case Study Behavioral Economics, Managerial Capitalism, and Tax Incidence -- Short-Run versus Long-Run Effects -- Open versus Closed Economy -- Associated Policy Changes -- Case Study Tax Incidence of Specific Tax Provisions -- Incidence of Taxes in the United States -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- Appendix: Comparison of the Effects of an Ad Valorem and Specific Commodity Tax on a Monopolist -- 19. Taxation And Economic Efficiency -- Effect of Taxes Borne by Consumers. Note continued: Substitution and Income Effects -- Quantifying the Distortions -- Measuring Deadweight Loss Using Indifference Curves -- Measuring Deadweight Loss Using Compensated Demand Curves -- Calculating the Deadweight Loss -- Effect of Taxes Borne by Producers -- Effects of Taxes Borne Partly by Consumers, Partly by Producers -- Taxation of Savings -- Quantifying the Effects of an Interest Income Tax -- Taxation of Labor Income -- Effects of Progressive Taxation -- Case Study The 1993, 2001, and 2003 Tax Reforms -- Secondary Labor Force Participants -- Measuring the Effects of Taxes on Labor Supplied -- Statistical Techniques Using Market Data -- Experiments -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- Appendix: Measuring the Welfare Cost of User Fees -- 20. Optimal Taxation -- Two Fallacies of Optimal Taxation -- The Fallacy of Counting Distortions -- Misinterpretations of the Theory of the Second Best. Note continued: Optimal and Pareto Efficient Taxation -- Lump-Sum Taxes -- Why Impose Distortionary Taxes? -- Case Study Estimating the Optimal Tax Rate -- Case Study Rent Seeking, Inequality, and Optimal Taxation -- Designing an Income Tax System -- Why Does More Progressivity Imply More Deadweight Loss? -- A Diagrammatic Analysis of the Deadweight Loss of Progressive Taxation -- Choosing among Flat-Rate Tax Schedules -- Case Study The -- Tax Increase on Upper-Income Individuals: A Pareto Inefficient Tax? -- General Equilibrium Effects -- Case Study Flat-Rate Taxes Arrive on the Political Scene -- Differential Taxation -- Ramsey Taxes -- Differential Commodity Taxes in Advanced Countries with Progressive Income Taxes -- Interest Income Taxation and Commodity Taxation -- Taxes on Producers -- The Dependence of Optimal Tax Structure on the Set of Available Taxes -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems. Note continued: Appendix A: Deriving Ramsey Taxes on Commodities -- Appendix B: Derivation of Ramsey Formula for Linear Demand Schedule -- 21. Taxation Of Capital -- Should Capital Be Taxed? -- Relationship among Consumption Taxes, a Wage Tax, and Exempting Capital Income from Taxation -- Equity Issues -- Efficiency Arguments -- Administrative Problems -- Effects on Savings and Investment -- Effects of Reduced Savings in a Closed Economy -- The Distinction between Savings and Investment -- National Savings and Budget Neutrality -- Effects of Reduced Savings in an Open Economy -- Impact on Risk Taking -- Why Capital Taxation with Full Loss Deductibility May Increase Risk Taking -- Case Study Tax Incentives for Risk Taking -- Why Capital Taxation May Reduce Risk Taking -- Measuring Changes in Asset Values -- Capital Gains -- Case Study Equity and the Reduction in Capital Gains Taxes -- Depreciation -- Case Study Distortions from Depreciation -- Neutral Taxation. Note continued: Inflation -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 22. The Personal Income Tax -- Outline of the U.S. Income Tax -- Legislated versus Actual Tax Rates -- Case Study A Loophole in the Earned Income Tax Credit? -- Other Taxes -- Principles Behind the U.S. Income Tax -- The Income-Based Principle and the Haig-Simons Definition -- The Progressivity Principle -- The Family-Based Principle -- The Annual Measure of Income Principle -- Practical Problems in Implementing an Income Tax System -- Determining Income -- Timing -- Personal Deductions -- Deductions versus Credits -- Case Study Temporary Tax Changes -- Special Treatment of Capital Income -- Housing -- Savings for Retirement -- Interest on State and Municipal Bonds -- Capital Gains -- Concluding Remarks -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 23. The Corporation Income Tax -- The Basic Features of the Corporation Income Tax. Note continued: The Incidence of the Corporation Income Tax and Its Effect on Efficiency -- The Corporation Income Tax as a Tax on Income from Capital in the Corporate Sector -- Shifting of the Corporate Tax in the Long Run -- The Corporation Tax for a Firm without Borrowing Constraints -- Incidence of the Corporation Income Tax with Credit-Constrained Firms -- The Corporation Tax as a Tax on Monopoly Profits -- Managerial Firms: An Alternative Perspective -- Depreciation -- Combined Effects of Individual and Corporate Income Tax -- Distributing Funds: The Basic Principles -- The Dividend Paradox -- Mergers, Acquisitions, and Share Repurchases -- Does the Corporate Tax Bias Firms toward Debt Finance? -- Distortions in Organizational Form Arising because Some Firms Do Not Have Taxable Income -- Are Corporations Tax Preferred? -- Calculating Effective Tax Rates -- The Corporation Tax as Economic Policy. Note continued: Case Study The Proposed Incremental Investment Tax Credit of 1993: An Idea before Its Time? -- Taxation of Multinationals -- Case Study Foreign Income and the Corporation Income Tax -- Should There Be a Corporation Income Tax? -- Why Is There a Corporate Income Tax at All? -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 24.A Student's Guide To Tax Avoidance -- Principles of Tax Avoidance -- Postponement of Taxes -- Shifting and Tax Arbitrage -- Case Study Shorting against the Box -- Tax Shelters -- Case Study The Economics of Tax Avoidance -- Who Gains from Tax Shelters -- Middle-Class Tax Shelters -- Tax Reform and Tax Avoidance -- The 1986 Tax Reform -- Minimum Tax on Individuals -- Subsequent Tax Acts -- Equity, Efficiency, and Tax Reform -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 25. Reform Of The Tax System -- Fairness -- Horizontal Equity Issues -- Vertical Equity -- Efficiency. Note continued: Case Study Marginal Tax Rates and the 1986 Tax Reform -- Base Broadening -- Interaction of Fairness and Efficiency Concerns -- Simplifying the Tax Code -- Assessing Complexity -- Increasing Compliance -- Reducing Tax Avoidance -- Reducing Administrative and Compliance Costs -- Sources of Complexity -- The 1986 Tax Reform -- Transition Issues and the Politics of Tax Reform -- Tax Reforms for the Twenty-First Century -- Reforms within the Current Framework -- Major New Reforms -- Case Study Ordinary Income versus Capital Gains -- Case Study IRAs and National Savings -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 26. Intergovernmental Fiscal Relations -- The Division of Responsibilities -- Other Interaction between the Federal Government and the State and Local Governments -- The Size of Financial Transfers -- Case Study Unfunded Mandates -- Principles of Fiscal Federalism -- National Public Goods versus Local Public Goods. Note continued: Case Study International Public Goods -- Do Local Communities Provide Local Public Goods Efficiently? -- Tiebout Hypothesis -- Market Failures -- Redistribution -- Other Arguments for Local Provision -- Production versus Finance -- Effectiveness of Federal Categorical Aid to Local Communities -- The Federal Tax System and Local Expenditures -- Concluding Remarks -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 27. Subnational Taxes And Expenditures -- Tax Incidence Applied to Local Public Finance -- Local Capital Taxes -- Property Tax -- Case Study The U.S. Property Tax Revolt -- Income, Wage, and Sales Taxes -- Distortions -- Limitations on the Ability to Redistribute Income -- Rent Control -- Capitalization -- Incentives for Pension Schemes -- Choice of Debt versus Tax Financing -- Short-Run versus Long-Run Capitalization -- Who Benefits From Local Public Goods? The Capitalization Hypothesis. Note continued: Absolute versus Relative Capitalization -- The Use of Changes in Land Rents to Measure Benefits -- Testing the Capitalization Hypothesis -- Public Choice at the Local Level -- Problems of Multijurisdictional Taxation -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems -- 28. Fiscal Deficits And Government Debt -- The U.S. Deficit Problem since the 1980s -- Sources of the Deficit Problem -- Factors Not Contributing to the Deficit Problem -- Success in Taming the Deficit: The Experience of the 1990s -- Case Study Measuring Budget Deficits: What's Large, What's Real, and What's Right? -- Consequences of Government Deficits -- How Deficits Affect Future Generations When the Economy Is at Full Employment -- Alternative Perspectives on the Burden of the Debt -- Case Study Austerity in a Recession: Expansionary or Contractionary? -- Improving the Budgetary Process -- Budget Enforcement Act and Scoring -- Capital Budgets. Note continued: Other Strategies -- The Long-Term Problem: Entitlements and the Aged -- Review and Practice -- Summary -- Key Concepts -- Questions and Problems.

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Item type	Current location	Home library	Call number	Status	Date due	Barcode	Item holds
BOOK	COLLEGE LIBRARY	COLLEGE LIBRARY SUBJECT REFERENCE	336.73 St529 2015 (Browse shelf)	Available		CITU-CL-47492

Total holds: 0

Includes bibliographical references (pages 880 - 892) and index.

1. Defining Public Sector Responsibilities --
The Economic Role of Government --
The Mixed Economy of the United States --
Different Perspectives on the Role of Government --
An Impetus for Government Action: Market Failures --
Achieving Balance between the Public and Private Sectors --
The Emerging Consensus --
Thinking Like a Public Sector Economist --
Analyzing the Public Sector --
Economic Models --
Case Study Musgrave's Three Branches --
Normative versus Positive Economics --
Disagreements among Economists --
Differences in Views on How the Economy Behaves --
Disagreement over Values --
Case Study Public Sector Economics and the Global Economic Crisis --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
2. Measuring Public Sector Size --
What or Who Is the Government? --
Types of Government Activity --
Providing a Legal System --
Government Production --
Government's Influence on Private Production. Note continued: Government Purchases of Goods and Services --
Government Redistribution of Income --
Overview of Government Expenditures --
Gauging the Size of the Public Sector --
Growth in Expenditures and Their Changing Composition --
Case Study Estimating the Full Budgetary and Economic Costs of War --
Comparison of Expenditures across Countries --
Government Revenues --
Taxes and the Constitution --
Federal Taxation Today --
State and Local Government Revenues --
Comparison of Taxation across Countries --
Deficit Financing --
Playing Tricks with the Data on Government Activities --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
3. Market Efficiency --
The Invisible Hand of Competitive Markets --
Welfare Economics and Pareto Efficiency --
Case Study On the Prowl for Pareto Improvements --
Pareto Efficiency and Individualism --
The Fundamental Theorems of Welfare Economics --
Efficiency from the Perspective of a Single Market. Note continued: Analyzing Economic Efficiency --
The Utility Possibilities Curve --
Exchange Efficiency --
Production Efficiency --
Product Mix Efficiency --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
4. Market Failure --
Property Rights and Contract Enforcement --
Case Study Property Rights and Market Failures: The Tragedy of the Commons Revisited --
Market Failures and the Role of Government --
1. Failure of Competition --
2. Public Goods --
3. Externalities --
4. Incomplete Markets --
Case Study Student Loans: Incomplete Reform of an Incomplete Market --
5. Information Failures --
6. Unemployment, Inflation, and Disequilibrium --
Interrelationships of Market Failures --
Case Study Market Failures: Explanations or Excuses? --
Redistribution and Merit Goods --
Two Perspectives on the Role of Government --
Normative Analysis --
Positive Analysis --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems. Note continued: 5. Public Goods And Publicly Provided Private Goods --
Public Goods --
Public Goods and Market Failures --
Paying for Public Goods --
The Free Rider Problem --
Case Study Economists and the Free Rider Problem --
Pure and Impure Public Goods --
Case Study Property Rights, Excludability, and Externalities --
Publicly Provided Private Goods --
Rationing Devices for Publicly Provided Private Goods --
Efficiency Conditions for Public Goods --
Demand Curves for Public Goods --
Pareto Efficiency and Income Distribution --
Limitations on Income Redistribution and the Efficient Supply of Public Goods --
Distortionary Taxation and the Efficient Supply of Public Goods --
Efficient Government as a Public Good --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
Appendix: The Leftover Curve --
6. Externalities And The Environment --
The Problem of Externalities --
Private Solutions to Externalities --
Internalizing Externalities. Note continued: The Coase Theorem --
Using the Legal System --
Case Study The Exxon Valdez Oil Spill --
Failures of Private Solutions --
Public Sector Solutions to Externalities --
Case Study Double Dividend --
Market-Based Solutions --
Regulation --
Innovation --
Information Disclosure --
Compensation and Distribution --
Protecting the Environment: The Role of Government in Practice --
Air --
Water --
Land --
Concluding Remarks --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
7. Efficiency And Equity --
Efficiency and Distribution Trade-Offs --
Analyzing Social Choices --
Determining the Trade-Offs --
Evaluating the Trade-Offs --
Two Caveats --
Social Choices in Practice --
Measuring Benefits --
Ordinary and Compensated Demand Curves --
Consumer Surplus --
Measuring Aggregate Social Benefits --
Measuring Inefficiency --
Case Study Drawing a Poverty Line --
Quantifying Distributional Effects --
Case Study The Great Gatsby Curve. Note continued: Three Approaches to Social Choices --
The Compensation Principle --
Trade-Offs across Measures --
Weighted Net Benefits --
The Trade-Off between Efficiency and Fairness Revisited --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
Appendix: Alternative Measures of Inequality --
The Lorenz Curve --
The Dalton-Atkinson Measure --
8. Public Production Of Goods And Services --
Natural Monopoly: Public Production of Private Goods --
The Basic Economics of Natural Monopoly --
Regulation and Taxation (Subsidies) --
No Government Intervention --
Government Failures --
Case Study Rent Control and Agricultural Price Supports: Case Studies in Government Failure --
Comparison of Efficiency in the Public and Private Sectors --
Case Study National Performance Review --
Sources of Inefficiency in the Public Sector --
Organizational Differences --
Individual Differences --
Bureaucratic Procedures and Risk Aversion --
Corporatization. Note continued: Case Study Privatizing Prisons --
A Growing Consensus on Government's Role in Production --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
9. Public Choice --
Public Mechanisms for Allocating Resources --
The Problem of Preference Revelation --
Individual Preferences for Public Goods --
The Problem of Aggregating Preferences --
Majority Voting and the Voting Paradox --
Arrow's Impossibility Theorem --
Single-Peaked Preferences and the Existence of a Majority Voting Equilibrium --
The Median Voter --
The Inefficiency of the Majority Voting Equilibrium --
The Two-Party System and the Median Voter --
Case Study Social Choice Theory --
Alternatives for Determining Public Goods Expenditures --
Lindahl Equilibrium --
Politics and Economics --
Why Do Individuals Vote? --
Elections and Special Interest Groups --
The Power of Special Interest Groups --
Other Aspects of the Political Process --
Case Study Campaign Finance Reform. Note continued: The Altruistic Politician? --
The Persistence of Inefficient Equilibrium --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
Appendix: New Preference-Revelation Mechanisms --
10. Framework For Analysis Of Expenditure Policy --
Need for a Program --
Market Failures --
Case Study Higher Education in the United States --
Alternative Forms of Government Intervention --
The Importance of Particular Design Features --
Private Sector Responses to Government Programs --
Efficiency Consequences --
Income and Substitution Effects and Induced Inefficiency --
Distributional Consequences --
Evaluating the Distributional Consequences --
Case Study Incidence of Education Tax Credits --
Fairness and Distribution --
Equity-Efficiency Trade-Offs --
Public Policy Objectives --
Political Process --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
11. Evaluating Public Expenditure --
Private Cost-Benefit Analysis. Note continued: Present Discounted Value --
Social Cost-Benefit Analysis --
Consumer Surplus and the Decision to Undertake a Project --
Measuring Nonmonetized Costs and Benefits --
Valuing Time --
Valuing Life --
Case Study Children, Car Safety, and the Value of Life --
Valuing Natural Resources --
Shadow Prices and Market Prices --
Discount Rate for Social Cost-Benefit Analysis --
Case Study Climate Change and Discount Rates --
The Evaluation of Risk --
Risk Assessment --
Distributional Considerations --
Cost Effectiveness --
Post-Expenditure Evaluation: Assessing and Improving Government Performance --
Case Study Taking a Bite Out of Crime in the Big Apple --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
12. Defense, Research, And Technology --
Defense Expenditures --
The Value of Marginal Analysis --
Defense Strategy --
Case Study Game Theory, the Arms Race, and the Theory of Deterrence --
Case Study Converting Swords into Plowshares. Note continued: Increasing the Efficiency of the Defense Department --
Defense Procurement --
Defense Conversion --
Accounting and the Defense Department --
Research and Technology --
Market Failures --
Case Study The Scope of the Patent: Can the Human Body Be Patented? --
Government Direct Support --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
13. Health Care --
The Health Care System in the United States --
The Private Sector --
The Role of Government --
Other Expenditure Programs --
Tax Expenditures --
Rationale for a Role of Government in the Health Care Sector --
Imperfect Information --
Limited Competition --
Absence of Profit Motive --
Special Characteristics of the U.S. Market --
The Role of the Health Insurance Industry --
Case Study Medical Malpractice --
Insurance and Excessive Expenditures on Health Care --
Consequences of Inefficiencies in Health Care Markets --
Poverty, Incomplete Coverage, and the Role of Government. Note continued: Reforming Health Care --
Cost Containment --
Case Study Comprehensive Health Care Reform --
Extending Insurance Coverage --
Medicare Reform: Easing Long-Term Fiscal Strains --
Reforming Medicaid --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
14. Education --
The Structure of Education in the United States --
Federal Tax Subsidies to Private and Public Schools --
Why Is Education Publicly Provided and Publicly Financed? --
Is There a Market Failure? --
The Federal Role --
Issues and Controversies in Educational Policy --
Education Outcomes --
Do Expenditures Matter? --
School Vouchers: Choice and Competition --
Case Study Vouchers: The San Jose and Milwaukee Experiments --
School Decentralization --
Performance Standards: No Child Left Behind and Race to the Top --
Inequality --
Aid to Higher Education --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems. Note continued: Appendix: How Should Public Educational Funds Be Allocated? --
15. Welfare Programs And The Redistribution Of Income --
A Brief Description of Major U.S. Welfare Programs --
AFDC and TANF --
Earned Income Tax Credit --
Food Stamps/SNAP --
Medicaid --
Housing --
Other Programs --
Rationale for Government Welfare Programs --
Dimensions of the Problem --
Analytic Issues --
Labor Supply --
Cash versus In-Kind Redistribution --
Inefficiencies from In-Kind Benefits --
Are In-Kind Benefits Paternalistic? --
Categorical versus Broad-Based Aid --
Is Means Testing Objectionable in Its Own Right? --
Other Distortions --
Case Study Conditional Cash Transfer Programs --
Welfare Reform: Integration of Programs --
The Welfare Reform Bill of 1996 --
Block Granting --
Analytics of State Responses to Block Grants --
Time Limits --
Mandatory Work --
The Welfare Reform Debate of 1996 --
Case Study The Person or the Place? --
Concluding Remarks --
Review and Practice. Note continued: Summary --
Key Concepts --
Questions and Problems --
16. Social Insurance --
The Social Security System --
Social Security, Private Insurance, and Market Failures --
High Transactions Costs --
Risk Mitigation --
Lack of Indexing: The Inability of Private Markets to Insure Social Risks --
Adverse Selection, Differential Risks, and the Cost of Insurance --
Moral Hazard and Social Security --
Retirement Insurance as a Merit Good --
Social Security, Forced Savings, and Individual Choice --
Is There a Need to Reform Social Security? --
The Nature of the Fiscal Crisis --
Savings --
Labor Supply --
The Rate of Return --
Inequities --
Reforming Social Security --
Reducing Expenditures --
Increasing Revenues --
Structural Reforms --
Case Study Social Security Abroad --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
17. Introduction To Taxation --
Background --
Forms of Taxation --
Changing Patterns of Taxation in the United States. Note continued: Comparisons with Other Countries --
The Five Desirable Characteristics of Any Tax System --
Economic Efficiency --
Administrative Costs --
Case Study Corrective Taxes and the Double Dividend --
Flexibility --
Transparent Political Responsibility --
Fairness --
Case Study Corruption-Resistant Tax Systems --
General Framework for Choosing among Tax Systems --
Utilitarianism --
Rawlsian Social Welfare Function --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
18. Tax Incidence --
Tax Incidence in Competitive Markets --
Effect of Tax at the Level of a Firm --
Impact on Market Equilibrium --
Does It Matter Whether the Tax Is Levied on Consumers or on Producers? --
Case Study The Incidence of Government Benefits --
Ad Valorem versus Specific Taxes --
The Effect of Elasticity --
Taxation of Factors --
Case Study The Philadelphia Wage Tax --
Tax Incidence in Environments without Perfect Competition. Note continued: Relationship between the Change in the Price and the Tax --
Ad Valorem versus Specific Taxes --
Tax Incidence in Oligopolies --
Equivalent Taxes --
Income Tax and Value-Added Tax --
Equivalence of Consumption and Wage Taxes --
Equivalence of Lifetime Consumption and Lifetime Income Taxes --
A Caveat on Equivalence --
Other Factors Affecting Tax Incidence --
Tax Incidence under Partial and General Equilibrium --
Case Study Behavioral Economics, Managerial Capitalism, and Tax Incidence --
Short-Run versus Long-Run Effects --
Open versus Closed Economy --
Associated Policy Changes --
Case Study Tax Incidence of Specific Tax Provisions --
Incidence of Taxes in the United States --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
Appendix: Comparison of the Effects of an Ad Valorem and Specific Commodity Tax on a Monopolist --
19. Taxation And Economic Efficiency --
Effect of Taxes Borne by Consumers. Note continued: Substitution and Income Effects --
Quantifying the Distortions --
Measuring Deadweight Loss Using Indifference Curves --
Measuring Deadweight Loss Using Compensated Demand Curves --
Calculating the Deadweight Loss --
Effect of Taxes Borne by Producers --
Effects of Taxes Borne Partly by Consumers, Partly by Producers --
Taxation of Savings --
Quantifying the Effects of an Interest Income Tax --
Taxation of Labor Income --
Effects of Progressive Taxation --
Case Study The 1993, 2001, and 2003 Tax Reforms --
Secondary Labor Force Participants --
Measuring the Effects of Taxes on Labor Supplied --
Statistical Techniques Using Market Data --
Experiments --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
Appendix: Measuring the Welfare Cost of User Fees --
20. Optimal Taxation --
Two Fallacies of Optimal Taxation --
The Fallacy of Counting Distortions --
Misinterpretations of the Theory of the Second Best. Note continued: Optimal and Pareto Efficient Taxation --
Lump-Sum Taxes --
Why Impose Distortionary Taxes? --
Case Study Estimating the Optimal Tax Rate --
Case Study Rent Seeking, Inequality, and Optimal Taxation --
Designing an Income Tax System --
Why Does More Progressivity Imply More Deadweight Loss? --
A Diagrammatic Analysis of the Deadweight Loss of Progressive Taxation --
Choosing among Flat-Rate Tax Schedules --
Case Study The --
Tax Increase on Upper-Income Individuals: A Pareto Inefficient Tax? --
General Equilibrium Effects --
Case Study Flat-Rate Taxes Arrive on the Political Scene --
Differential Taxation --
Ramsey Taxes --
Differential Commodity Taxes in Advanced Countries with Progressive Income Taxes --
Interest Income Taxation and Commodity Taxation --
Taxes on Producers --
The Dependence of Optimal Tax Structure on the Set of Available Taxes --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems. Note continued: Appendix A: Deriving Ramsey Taxes on Commodities --
Appendix B: Derivation of Ramsey Formula for Linear Demand Schedule --
21. Taxation Of Capital --
Should Capital Be Taxed? --
Relationship among Consumption Taxes, a Wage Tax, and Exempting Capital Income from Taxation --
Equity Issues --
Efficiency Arguments --
Administrative Problems --
Effects on Savings and Investment --
Effects of Reduced Savings in a Closed Economy --
The Distinction between Savings and Investment --
National Savings and Budget Neutrality --
Effects of Reduced Savings in an Open Economy --
Impact on Risk Taking --
Why Capital Taxation with Full Loss Deductibility May Increase Risk Taking --
Case Study Tax Incentives for Risk Taking --
Why Capital Taxation May Reduce Risk Taking --
Measuring Changes in Asset Values --
Capital Gains --
Case Study Equity and the Reduction in Capital Gains Taxes --
Depreciation --
Case Study Distortions from Depreciation --
Neutral Taxation. Note continued: Inflation --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
22. The Personal Income Tax --
Outline of the U.S. Income Tax --
Legislated versus Actual Tax Rates --
Case Study A Loophole in the Earned Income Tax Credit? --
Other Taxes --
Principles Behind the U.S. Income Tax --
The Income-Based Principle and the Haig-Simons Definition --
The Progressivity Principle --
The Family-Based Principle --
The Annual Measure of Income Principle --
Practical Problems in Implementing an Income Tax System --
Determining Income --
Timing --
Personal Deductions --
Deductions versus Credits --
Case Study Temporary Tax Changes --
Special Treatment of Capital Income --
Housing --
Savings for Retirement --
Interest on State and Municipal Bonds --
Capital Gains --
Concluding Remarks --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
23. The Corporation Income Tax --
The Basic Features of the Corporation Income Tax. Note continued: The Incidence of the Corporation Income Tax and Its Effect on Efficiency --
The Corporation Income Tax as a Tax on Income from Capital in the Corporate Sector --
Shifting of the Corporate Tax in the Long Run --
The Corporation Tax for a Firm without Borrowing Constraints --
Incidence of the Corporation Income Tax with Credit-Constrained Firms --
The Corporation Tax as a Tax on Monopoly Profits --
Managerial Firms: An Alternative Perspective --
Depreciation --
Combined Effects of Individual and Corporate Income Tax --
Distributing Funds: The Basic Principles --
The Dividend Paradox --
Mergers, Acquisitions, and Share Repurchases --
Does the Corporate Tax Bias Firms toward Debt Finance? --
Distortions in Organizational Form Arising because Some Firms Do Not Have Taxable Income --
Are Corporations Tax Preferred? --
Calculating Effective Tax Rates --
The Corporation Tax as Economic Policy. Note continued: Case Study The Proposed Incremental Investment Tax Credit of 1993: An Idea before Its Time? --
Taxation of Multinationals --
Case Study Foreign Income and the Corporation Income Tax --
Should There Be a Corporation Income Tax? --
Why Is There a Corporate Income Tax at All? --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
24.A Student's Guide To Tax Avoidance --
Principles of Tax Avoidance --
Postponement of Taxes --
Shifting and Tax Arbitrage --
Case Study Shorting against the Box --
Tax Shelters --
Case Study The Economics of Tax Avoidance --
Who Gains from Tax Shelters --
Middle-Class Tax Shelters --
Tax Reform and Tax Avoidance --
The 1986 Tax Reform --
Minimum Tax on Individuals --
Subsequent Tax Acts --
Equity, Efficiency, and Tax Reform --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
25. Reform Of The Tax System --
Fairness --
Horizontal Equity Issues --
Vertical Equity --
Efficiency. Note continued: Case Study Marginal Tax Rates and the 1986 Tax Reform --
Base Broadening --
Interaction of Fairness and Efficiency Concerns --
Simplifying the Tax Code --
Assessing Complexity --
Increasing Compliance --
Reducing Tax Avoidance --
Reducing Administrative and Compliance Costs --
Sources of Complexity --
The 1986 Tax Reform --
Transition Issues and the Politics of Tax Reform --
Tax Reforms for the Twenty-First Century --
Reforms within the Current Framework --
Major New Reforms --
Case Study Ordinary Income versus Capital Gains --
Case Study IRAs and National Savings --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
26. Intergovernmental Fiscal Relations --
The Division of Responsibilities --
Other Interaction between the Federal Government and the State and Local Governments --
The Size of Financial Transfers --
Case Study Unfunded Mandates --
Principles of Fiscal Federalism --
National Public Goods versus Local Public Goods. Note continued: Case Study International Public Goods --
Do Local Communities Provide Local Public Goods Efficiently? --
Tiebout Hypothesis --
Market Failures --
Redistribution --
Other Arguments for Local Provision --
Production versus Finance --
Effectiveness of Federal Categorical Aid to Local Communities --
The Federal Tax System and Local Expenditures --
Concluding Remarks --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
27. Subnational Taxes And Expenditures --
Tax Incidence Applied to Local Public Finance --
Local Capital Taxes --
Property Tax --
Case Study The U.S. Property Tax Revolt --
Income, Wage, and Sales Taxes --
Distortions --
Limitations on the Ability to Redistribute Income --
Rent Control --
Capitalization --
Incentives for Pension Schemes --
Choice of Debt versus Tax Financing --
Short-Run versus Long-Run Capitalization --
Who Benefits From Local Public Goods? The Capitalization Hypothesis. Note continued: Absolute versus Relative Capitalization --
The Use of Changes in Land Rents to Measure Benefits --
Testing the Capitalization Hypothesis --
Public Choice at the Local Level --
Problems of Multijurisdictional Taxation --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems --
28. Fiscal Deficits And Government Debt --
The U.S. Deficit Problem since the 1980s --
Sources of the Deficit Problem --
Factors Not Contributing to the Deficit Problem --
Success in Taming the Deficit: The Experience of the 1990s --
Case Study Measuring Budget Deficits: What's Large, What's Real, and What's Right? --
Consequences of Government Deficits --
How Deficits Affect Future Generations When the Economy Is at Full Employment --
Alternative Perspectives on the Burden of the Debt --
Case Study Austerity in a Recession: Expansionary or Contractionary? --
Improving the Budgetary Process --
Budget Enforcement Act and Scoring --
Capital Budgets. Note continued: Other Strategies --
The Long-Term Problem: Entitlements and the Aged --
Review and Practice --
Summary --
Key Concepts --
Questions and Problems.

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