Public Economics 1
Econ 741
WVU, Fall 2011 

Professor Roger D. Congleton
Old Roman
                      Capital (the Palatine) 
PDF Syllabus with More Extensive Reading List and Details about Grades

 Class Room: B&E  401, Class Time: M&W: 1:00 - 2:15
Snow News 
Hillman, A. L. (2009) Public Finance and Public Policy, Responsibilities and Limitations of Government. Cambridge: Cambridge University Press

Tanzi, V. and L. Schuknecht (2000) Public Spending in the 20th Century: A Global Perspective. Cambridge: Cambridge University Press.

Congleton, R. D. and B. Swedenborg (2006) Democratic Constitutional Design and Public Policy. Cambridge Mass: MIT Press.
  Office Hours: 
Mondays, 3:30-4:45,
Wednesdays 3:30-4:45 

and by appointment
Class Notes,  available via this website, (will be updated during semester)

8/24 - 29
(1.) Introduction: What is Public Economics?

Measuring the size of the Public Sector, Trends in government finance and regulation in the West. Methodological Distinctions:  Positive and nomative analysis: the Pareto principles, Cost-Benefit Analysis, Social Welfare Functions, Contractarianism.

(2.) Some Useful Microeconomic Tools, with applications to Public Economics: the net benefit maximizing model of rational choice, markets, efficienty, and externalities. The burden of taxation, a voter's perferred levels of public services and regulation. 
Congleton (2001)
AH: 1 T&S 2, 5

GAO overview of
US Gov Finances (report)
US Statistical Abstract
World Bank Statistics

(3.) Setting the Stage: Productive and Extractive Models of the State. Three Simple Rational Choice Models of the origin of the state: conquest, monopoly, and contract. Encompassing interest as a reason for authoritarians to supply government services.
AH: 6
Olson and McGuire(1996)
Labor Day Reccess, no class

9/7 - 12 (4.) The Political Demand for Government Services (and Taxes) in Democracies The median voter model and the demand for public services, Fiscal Illusion and Condercet's  jury theorem. AH: 9.1
Median Voter Model
Congleton (2007)
9/14 - 19 (5.) Interest Groups and Public Policy: Economic and Ideological Special Interests, Rent-Seeking Losses, Rent Extraction,  Bureaucracy as an Interest Group, Niskanan Model
AH: 6.1, 6.2,  6.3, 6C
Tullock (1967)
9/21 - 26
(6.) Public Goods: Choosing among public delivery systems: Regulation, purchase, or production? Public and Private Goods, the free rider problem; Pareto optimal supply of public goods, Samuelsonian,and Lindalh Taxes; Applications: national defense, clean air and water, highways, welfare
AH: 5, 2
Samuelson (1954)
Demsetz (1970)
9/28 - 31
(7.) Externalities: Choosing among public delivery systems: Regulation, purchase, or production? Externalities and Market Failures, Pigovian taxes, Cap and Trade, and the Coase Theorem(s). AH: 5, 2
Buchanan (1962)
Liebowitz and Margolis (1994)
10/3 -  5
(8) The Demand for Social Insurance: Choosing among delivery systems: Transfers or Social Insurance Is "it" about security or transfers? Applications to the political demand for economic, health, and longevity insurance. Has social insurance become the "main product" of Western democracy?
10/10 - 12
(9) Choosing among Financial Sytems: Principles of Tax Analysis Impact of taxes on market prices and output; deadweight loss in the long and short run; neutral taxes, equitable taxes, and excess burden.

Normative Principles of Tax Analysis
   Theories of Optimal Taxation: Ramsay and Henry Georgian taxation (minimizing dead weight loss), Utilitarian: progressive and regressive taxation, neutral taxation, Contractarian theories of taxation (Buchanan and Rawls), Benefit Taxation (Lindalh), generality norms. Applications: property taxes, excise taxes, head taxes, and income taxes.

AH: 2E, 7.1 and 7.2
US Tax History
Tax Data: Overviews

AH 2,5,7
Mirrlees (1976)
Brennan and Buchanan (1980)
Samuelson (1986)
(10) Choosing among Financial Sytems: The Political Economy of Public Debt: . Deficits and Debt, Recardian Equivalency, burden smoothing, and intergenerational burden shifting, political biases. Appendix: The Geometry of Expenditure Analysis.
AH:  2.1, 5.2;
T&S 3, 5
Data from the Statistical Abstract of the United States

OECD data on Debt
(11) Institutions and the Effective Demand for Government Services: The effects of electoral systems, bicameralism, presidential and prime ministerial institutions on government expenditures, taxation and debt. Aggregating Preferences, Information, and Intra-Governmental Bargaining.
C&S 1, 3,11; T&S 8
Congleton (2007)

Paper Topics
(12) Public Economics and Relationships Between Governments. Voting with Your Feet (the Tiebout Model) and Yardstick Competition. Decentralization, intergovernmental externalities and economies of scale (an optimal federal system), regulatory externalities.. Applications: decentralization, fiscal federalism, capital flight, government failure, treaties.
AH: 3.1, 3.2, 4.2
C&S 8 
Tiebout (1956)
Mueller on Federalism
10/31 Discussion and Review for the First Exam
Study Guide
EXAM / Sample PF Examination

11/7-9 (13) Applications to Contemporary Public Finance Issues: Social Security and Medicare-Medicaid Nature of program, paygo, digressive taxation, Myth of the "Lock Box,"  SS History, History of Medicare Lit Review on Welfares State, Future of SS, Future of Medicare and Medicaid, Affects on Finances (GAO),  Excell Data Set, OECD AH: 5.1, 5B, 10.1, 10.B
Rise of the Welfare State
WHO on Healthcare
(14) Applications to Contemporary Public Finance Issues: Deficits: the Politics of Deficits, Post WWII Trends in OECD countries. How to measure national debt: unfunded pension liabilities, insurance programs, and other promises. The roles of institutions in generating and reducing government debt. The pros and cons of balanced budget amendments. How does public debt produce a crisis? CBO on Debt (2008) , Excell Data Set , Estimates of "Unfunded" Pension Liabilities.
S&T: 3, 5
CBO overview
OECD deficits
GAO 2006 overview of
US Gov Finances
No Class: Thanksgiving Break
GEF  Paper
(15) Applications to Contemporary Public Finance Issues: Crisis Managment and the Public Sector. Methods and problems: ex post insurance as crisis insurance, command and control, mistakes. Bailouts as ex post insurance (slides). Applications: terrorism,  natural disasters, asset bubbles, and financial contractions.
AH: 7A, 7B, 7
Congleton (2005 2006 2009 2011wp)
Higgs (1989)
12/5-7 "Dead Week," Paper Workshop and Forest from the Trees Lecture: An Overview of Public Sector Economics
C&S 1

15-22 Page research paper due midnight via e-mail on an applied public finance topic


 ** A Few Dates may be changed.