Public Economics 1
Econ 741
WVU, Fall 2023 

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

 Class Room: Reynolds Hall 6202, Class Time: T/Th: 1:00 - 2:15
Office Hours: W and Th 2:30-3:30
Snow News 
 Optional Texts:
Hillman, A. L. (2019) Public Finance and Public Policy, Responsibilities and Limitations of Government. Cambridge: Cambridge University Press. (Earlier editions are fine.) [available in kindle format]

Tanzi, V. and L. Schuknecht (2000) Public Spending in the 20th Century: A Global Perspective. Cambridge: Cambridge University Press. [available in kindle format]
  Office Hours: 
Wednesday, 2:30-3:30,
Thursday 2:30-3:30 

and most other times by appointment
 Required Text
Class Notes linked to this website, (to be updated during the semester)

(1.)  Introduction: What is Public Economics?

(A) Public Economics as the effects of public policy on economy. Relevance today vs 1900. Where do public policies come from? Public Choice and Constitutional Political Economy. The systems approach to public economics. A short history of government finance and regulation in the West.

(B) Methodological Distinctions: 
Positive and normative analysis. Methodological Individualism. Normative theories of individual behavior. Evaluating social states: Utilitarianism, Welfare Economics, the Pareto principles, and Contractarianism, Cost-Benefit Analysis as a rationales for "ideal" public policy.

(C) A Short Review of Undergraduate Public Finance, The geometry of public economics: the net benefit maximizing model of rational choice, demand and supply, markets, efficiency of markets, effects of taxation on social net benefits, tax burden and burden shifting, voter demand for public goods.
AH: Preface, 1, 2; T&S 2, 5

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

Buchanan (1991, 1964, 1949)
Congleton (2018, 2019, 2020)

See also my undergraduate set of class notes.
(2.) Taxation

(2a) Exogenous Taxation:
Calculus-based characterizations of demand, supply, and tax burden.--a partial equilibrium approach. Spillover effects across markets, Effects of Income taxes with and without analysis of effects on labor supply. The mathematics behind incidence diagrams

(2b) Endogenous Taxation: Origins of the State and the Aims of Taxation Two Theories of the Origin of Government and Government Policies.
Taxation in Extractive and Productive states. Olson  and Buchanan on the escape from anarchy, Conquest vs Contract. The benefits and costs of law and order. Tax aims and tax rates. Why both "origin" theories may be right.
AH: 1, 2, 3, 4

Browning (1976)
Buchanan (1975)
Olson (1993)
Congleton (2011, 2013)

(3.) The Electoral Demand for Government Services (and Taxes)

(A) The median voter model as a Nash equilibrium/not a representative agent..
(B) Economics of voter ideal points and demands for public services. The simultaneous determination of demand for and financing of government services.
(C) Fiscal Illusion and both natural and rational ignorance, Stochastic voter models
(D) The problem of majoritarian cycles--do we see them or not?
AH: 9.1

Downs (1957, 1960)
Coughlin and Nitzan (1981)
Hettich and Winer (1988)
Hettich et al (1998)
Congleton (2001, 2007, 2020)

(4.) The Electoral Demand for Tax-Financed Services, Private Goods, Public Goods, Social Insurance, and Transfers: Choosing among services and delivery systems. The choice between private and government sources. Differences between demands for Social Insurance and Transfers. Why do the poor receive so many types of transfers if they do not vote (e.g. have low turnout)? Ideology, private interests, and the bureaucracy. [the second and third of these three lectures are prerecorded]
AH 7.3, T&S 1
Feldstein (1974)
Browning (1975)
Congleton and Bose (2010)
Batinti and Congleton (2018)
Jacobs et al (2021)
(5) Choosing among Revenue Sources: Normatiave Principles of Tax Analysis The conflict among taxpayers, points of agreement. Normative analysis of tax systemsL dead-weight loss in the long and short run; neutral taxes, equitable taxes, and excess burden.  [precorded part 1]

Normative Principles of Tax Analysis
: Mainstream 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. Types of governments and "optimal" taxation.  Voter interests in transparent tax systems.
AH: 1. 2, 8, 9
US Tax History
Tax Data: Overviews
Samuelson (1954, 1955)
Mirrlees (1976)
Brennan and Buchanan (1980)
Samuelson (1986)
Mankiw, Weinzierl, and Yagan (2009), Congleton (2023)
(6) Choosing among Financing Systems: The Political Economy of Public Debt: . Trends in deficits and debt. Advantages and disadvanages of debt finance. Recardian equivalency, burden smoothing, and inter-generational burden shifting. Debt crises. Appendix: The Logic and Geometry of Expenditure Analysis. AH:  2.1, 3.5, 11
T&S 3, 5
Data from the Statistical Abstract of the United States
Barro (1974)
Buchanan (1976)
Buchanan and Roback (1987)
Reinhart and Rogoff (2010)
Reinhart, Reinhart, and Rogoff (2012)
Fall Break

Exam 1 (take home)  (Open Notes, Open Books, No other resources permitted) Study Guide 1
Sample PF Examination
Exams Returned and Reviewed

(7) Information Problems and Elections: Rational Ignorance, Fiscal Illusion, and the Jury Theorem. The role of information in choice, the costs and benefits of information, biased expectations, the statistical nature of median voter outcomes. Median estimation and the jury theorem. Effects of ignorance vs small samples on policy choices. Informational campaigns. (slides)
AH 6, 11.2
Downs (1960)
Stigler (1961)
Wagner and Weber (1977)
Congleton (2001, 2007)
Oates (2012), Somin (2013)


(8.) Agency Problems: Rent Seeking and Corruption: Interest Groups and Public Policy:
Economic and Ideological Special Interests, Regulatory Capture, Rent-Seeking Losses, Rent Extraction,  Bureaucracy as an Interest Group, Niskanan Model, Agency Problems and Corruption.
AH: 6.1, 6.2,  6.3, 6C
Olson (1965)
Tullock (1967), Niskanen (1968), Congleton (2015, 2018)
Congleton and Hillman (2015)
Aidt (2003, 2016)
10/24 (9) Fiscal Federalism Relationships Between Governments. Voting with one's feet (the Tiebout Model). Yardstick Competition. Decentralization. Regional externalities, economies of scale , regulatory externalities, and optimal federalism. Intergovernmental grants. The pork barrel dilemma. International treaties as Coasian contracts.
AH: 3.1, 3.2, 4.2
C&S 8 
Tiebout (1956), Oates (1972)
Mueller on Federalism (2006)
Shleifer (1985), Belleflamme and Hindriks (2005), Inman (2008),
Congleton (2022)
11/02 (10.) International/Comparative Political Economy: Democracies. Institutions affect policy choices at the margin. Authoritarian versus democratic public policy making. Differences among democracies: electoral system, organization of legislature/parliament, centralization. The effects of electoral systems, bicameralism, presidential and prime ministerial institutions on government expenditures, taxation and debt. (optional divided government slides) (optional rise of welfare state slides)
AH: 5, 2
Buchanan and Tullock (1962)
Poterba (1995)
Knack and Keefer (1995)
Persson, Roland, and Tabellini (2000)
Doucouliagos and Ulubasaglu (2008)
Congleton and Yoo (2018)

(11.) International/Comparative Political Economy: Treaties.  International Externalities, Regulatory Externalities, Absence of national solutions, International Treaties as Coasian Contracts, Self-Enforcing? or Free Riding. International Treaty Organizations.  Illustrating treaties and results. AH: 5, 2
Vaubel (1986, 2006)
Congleton (1992, 1995, 2020)
Sandler, Murdoch, and Sargent (1997)
Bernholz, et al (2004)
Batabyal (2017)
11/16 (12)  Forest from the Trees Lecture / Discussion and Review for Second Exam. Congleton (2018)
Study Guide 2
No Class Thanksgiving Break
old sample final exam
EXAM 2 (Due Via Email, before class on Tuesday 11/28) No Class on Tuesday.

11/30 Exams Returned and discussed / Paper Work Shop

Extended Office Hours 1-4:00 T-Th, for Meetings and Advice on Final Papers Paper Topics
12/14 15-22 Page research paper due midnight via e-mail on an applied public economics topic

Course Appendix
  Other Topics and Unused Lecture Notes of Possible Interest 

(A) 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
Congleton, Kim, and Marsella (2019)
Congleton and Bose (2010)

(B) 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

(C) Applications to Contemporary Public Finance Issues: Crisis Management 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)

EC709 (A) Lecture on Theory and Estimation
EC709 (B) Lecture on the Significance of Priors