WVU, Fall 2021
Professor Roger D. Congleton
||(future link to online lectures)
| Class Room:
B&E 401, Class
Time: T: 4:00 - 6:50
Office Hours: W and Th 2:30-3:30
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:
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
(A) Public Economics as the effects of public policy on economy. 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. 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) Some Useful Geometric Tools from Microeconomics, applications to Public Economics: the net benefit maximizing model of rational choice, markets, efficiency, and taxation, burden and burden shifting.
Preface, 1, 2; T&S 2, 5
GAO overview of
US Gov Finances (report)
World Bank Statistics
Buchanan (1991, 1964, 1949)
Congleton (2018, 2019, 2020)
See also my undergraduate set of class notes.
(2a) Exogenous Taxation: The simple geometry and calculus of taxation. (See 2nd part of the review of tools notes above)
(2b) Endogenous Taxation: Why are there taxes? Two Theories of the Origin of Government and Government Policies. Extractive and Productive states. Olson, Hobbes, Locke, and Buchanan on the escape from anarchy. The benefits and costs of law and order. Contrast with Utilitarian benevolent planner reasoning.
Democracy: 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.
(C) Neo-Downsian equilibria with rational ignorance, Stochastic voter models.
|(4.) The Demand for Public
Services, Transfers, and Social Insurance: Choosing
among services and delivery systems. The political demand
for public goods, private goods, transfers, and social
insurance. Has social insurance become the "main product" of
Western democracy? What became of pure public goods?
Normative theories and the demand for government services.
Congleton and Bose (2010)
Batinti and Congleton (2018)
Jacobs et al (2021)
||(5) Choosing among Financing Systems:
Principles of Tax Analysis: Impact of
taxes on market prices and output; dead-weight loss in the
long and short run; neutral taxes, equitable taxes, and
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.
|AH: 1. 2, 8, 9
US Tax History
Tax Data: Overviews
Brennan and Buchanan (1980)
Mankiw, Weinzierl, and Yagan (2009)
||(6) Choosing among Financing Systems: The Political Economy of Public Debt: . Deficits and Debt, Recardian Equivalency, burden smoothing, and inter-generational burden shifting, political biases, as macro economic policy. 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
Buchanan and Roback (1987)
Reinhart and Rogoff (2010)
Reinhart, Reinhart, and Rogoff (2012)
||Exam 1 (take home)||Study
Sample PF Examination
||Review of Exam
(7) Information Problems and Public Finance: 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.
|AH 6, 11.2
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.
6.2, 6.3, 6C
Tullock (1967), Niskanen (1968), Congleton (2015, 2018)
Congleton and Hillman (2015)
Aidt (2003, 2016)
Political Economy. 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
AH: 5, 2
Buchanan and Tullock (1962)
Knack and Keefer (1995)
Persson, Roland, and Tabellini (2000)
Doucouliagos and Ulubasaglu (2008)
Congleton and Yoo (2018)
(10) Public Economics and 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
|(11.) Leviathan, Totalitarians, and Divided Governance. The political economy of dictatorships. Authoritarian and Totalitarian Regimes. Supreme values as an explanation for differences between pragmatic and totalitarian states. The king and council model and the spectrum between dictatorship and democracy. Differences in policy choices. Transitions to democracy.||AH: 5, 2
Brennan and Buchanan (1977)
Congleton and Lee (2009)
Acemoglu and Robinson (2019)
(12) Forest from the Trees Lecture / Paper Workshop / Discussion and Review for Second Exam.
Study Guide 2
No Class Thanksgiving Break
sample final exam
||EXAM 2 (take home)||
|12/7||Exams Returned and
discussed / Paper Work Shop
|12/15||15-22 Page research paper due midnight via e-mail on an applied public economics topic|
|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:
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.
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
(A) Lecture on Theory and Estimation
EC709 (B) Lecture on the Significance of Priors