US Capital
Public Economics
Econ 441
WVU, Fall 2019 
Professor Roger D. Congleton
Old Roman
                    Capital (the Palatine)
Class room and time: Ming Hsieh Hall 126 4:00-5:15 Tuesday -Thursday

Office:   405 B&E 
Phone:   304.293.7866
E-Mail:  (the most reliable contact method)
Office Hours: 
Wed.: 2:00-3:30,
Thursday: 2:00-3:30 
and by appointment
Suggested Texts:
Holcombe, R. (2005) Public Sector Economics: The Role of Government in the American Economy. NY: Prentice Hall.
Hillman, A. L. (2019) Public Finance and Public Policy, Responsibilities and Limitations of Government. (third edition) Cambridge: Cambridge University Press.  (Either  the first [AH1]  or second edition [AH2] is fine. AH3 below refers to chapters in the third edition, AH2 to chapters in the second edition.)
Class Notes,  available via this website
 Public Finance Links
Introduction: Why Study Public Economics? Growth of Government and Taxation in the United States and OECD countries, changing composition of, increasing centralization and regulation.

Methodology of Public Economics: Positive and Normative Analysis. Positive and normative analysis in public economics: Cost-Benefit Analysis, the Pareto principles. The rational choice approach to choice and social science.
US Statistical Abstract
World Bank Statistics
H: 1, 2 / AH3: Preface,1
AH2: 1.1 S1A, S1B
Deficits (Fred) Size AEI
Review of Economic Tools: The Net Benefit Maximizing Model of human choice, applied to demand and supply,  consumer surplus and profit, efficiency of competitive markets. 
Principles and Effects of Taxation: Impact of taxes on market prices and output; deadweight loss in the long and short run; neutral taxes and excess burden; Ramsay taxation, progressive and proportional income taxes and the labor-leisure tradeoff. Applications: property taxes, excise taxes, head taxes, and income taxes.  Tax Data: Overviews (WP table of effects of  Taking Stock of Recent Economic Policies (WSJ, Schultz et al)
H: 2, 10, 11, 12, 13
 AH3: 1, 8
AH2: 4.1, 4.2, and 9.1
US Tax History / Wiki
Principles and Effects of Subsidies: Impacts of subsides on market equilibria, deadweight losses in the long and short run, conditional marginal and lump sum subsides. Normative issues. Applications: farm subsidies, food stamps, rent subsidies, public education, and unemployment insurance.    Data from the Statistical Abstract of the United States
H: 5, 8
AH3:  2.1, 5.2
AH2: 2.1, 5.1
Why Governments are Useful: Externality Problems and Solutions. Externalities and Market Failures, Coasian Contracts, Pigovian taxes and subsidies. Applications: noise, air and water pollution, global warming. Are Carbon taxes Pigovian taxes?
H: 4, 5
AH3: 3, 4
AH2: 3.1, 5.1, 5.2, 5.3
10/01 Discussion and Review for the First Exam
Study Guide I
First Examination
Exams returned and Reviewed

Why Governments are Useful: Public Goods and Solutions. Public and Private Goods, the free rider problem; Pareto optimal supply of public goods, Samuelsonian and Lindahl Taxes; Consensus-inducing property of Lindahl taxes. The demand revelation problem.. Applications: gasoline taxes as Lindahl taxes, use fees and national parks, air quality, national defense, gravity. 
H: 4, 5
AH3: 3, 4
AH2: 1.1, 3.1, 5.1, 5.2, 5.3
10/17 Policy Making in Democratic Polities: The Electoral Demand for Public Goods and Taxes. The median voter model and the demand for public services. Convergence to median voter ideal point(s). Dynamics of public policy caused by changes in median voter circumstances or knowledge. Rational ignorance and fiscal illusion. Government Failures.
 H: 7 
AH3: 11, 12, B.10
AH2: 6.1, 6.2
Interest Groups and Public Policy: Olson's Model of Collective Action, Stigler's Capture model, Rent-Seeking Losses, Bureaucracy as a Special Interest Group. Why are some groups more influential than others?
AH3: 1.4, 2, 12, B.2
AH2: 2.1, 2.2, 2.3
Election Day--No Classes

Public Finance and Relationships Between Governments: Fiscal Federalism, Decentralized Policy Making,  Intergovernmental externalities, Conditional grants, Revenue sharing. The Tiebout Model of intergovernmental competition: voting with one's feet, Yardstick competition. Applications: the decentralization theorem, subsidiarity principle, capital flight. (Pew on Central Gov as Source of State Revenues.)
H: 24
AH3: 9.1
AH2: 9.3

Paper Topics
The Welfare State: Notes on Social Security and Medicare OASDI, the lock box myth, true distribution of tax burden varies with supply and demand, politics of social security (and medicare) benefits--an aging median voter. Entitlement Growth and future taxes and/or deficits. Supplemental References and resourcesSocial Security Annual Report , (OASDI HistoryMedicare Reforms, Medicare Annual Trustiees Report CBO](Feldstein on reform), (notes on the Demand for Social Insurance):
H 20 ,  AH2: 8
AH3: 7, 8
RJ Samuelson

Deficits Finance and Reform:  Debt Finance as Intertemporal Taxation  Government debt for revenue smoothing, government debt as an inter-generational transfer, government debt and fiscal illusion. Ricardian equivalence, the politics of deficits and debt, Entitlement deficits and national debt. Supplemental References and resources: Revenues, Expenditures, Deficits etc. (Plot of deficits as fraction of GNP), GAO deficit forecast, GAO debt forecast] Some Survey Evidence of Support for Reform
AH3: 2.6, 5.7
CBO Report 2014
CBO Report 2018
11/23 - 12/1 Fall Recess/Thanksgiving Break
Review for Second Exam Study Guide II
Second Examination

Exams Returned
Forest From Trees Lecture / Paper Workshop
H: 20, 22
AH3: Part V
AH2: 8.1, 8.2, 8.3
Research Paper Due at Midnight