1、Prepared by:FERNANDO QUIJANO, YVONN QUIJANO,KYLE THIEL & APARNA SUBRAMANIAN1Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan GruberPublic Finance and Public Policy, 2/eJonathan GruberChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finan
2、ce and Public Policy, 2/e, Jonathan Gruber2 of 28Why Study Public Finance?1.4 Conclusion1.3 Why Study Public Finance Now? Policy Debates over Social Security, Health Care, and Education1.2 Why Study Public Finance? Facts on Government in the United States and Around the World1.1 The Four Questions o
3、f Public FinanceControversies about the proper role of the government raise the fundamental questions addressed by the branch of economics known as public finance.The goal of public finance is to understand the proper role of the government in the economy.Chapter 1Chapter 1 Why Study Public Finance?
4、 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber3 of 28The Four Questions of Public Finance1 . 1public finance The study ofthe role of the government inthe economy.four questions of public finance When should the government intervene in the economy? How might the governm
5、ent intervene? What is the effect of those interventions on economic outcomes? Why do governments choose to intervene in the way that they do?Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber4 of 28market failure Problem thatcauses the m
6、arket economy to deliver an outcome that does not maximize efficiency.When Should the Government Intervene in the Economy?Market Failures1 . 1The Four Questions of Public FinanceChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber5 of 28The
7、 Measles Epidemic of 19891991A P P L I C A T I O N After the measles vaccine was introduced in 1963, measles cases had become relatively rare in the U.S. by the 1980s. Over the period from 1989 to 1991, however, there was a huge resurgence in measles. It is clear that this outbreak resulted from ver
8、y low immunization rates among disadvantaged inner-city youths. These unimmunized children were imposing a negative externality on other children who had received their immunizations but for whom immunization may have worn off. The federal government responded to this health crisis in the early 1990
9、s:The government publicly encouraged parents to get their children immunized. The government also paid for the vaccines for low-income families.The result was impressive. Immunization rates, which had never been above 70% before the epidemic, rose to 90% by 1995. Government intervention clearly redu
10、ced this negative externality.Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber6 of 28redistribution The shifting ofresources from some groups insociety to others.When Should the Government Intervene in the Economy?Redistribution1 . 1The
11、 Four Questions of Public FinanceChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber7 of 28How Might the Government Intervene?Tax or Subsidize Private Sale or Purchase1 . 1One way that the government can try to address failures in the priv
12、ate market is to use the price mechanism, whereby government policy is used to change the price of a good in one of two ways:1. Through taxes, which raise the price for private sales or purchases of goods that are overproduced, or2. Through subsidies, which lower the price for private sales or purch
13、ases of goods that are underproduced.The Four Questions of Public FinanceChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber8 of 28How Might the Government Intervene?Restrict or Mandate Private Sale or Purchase1 . 1The Four Questions of Pu
14、blic FinancePublic ProvisionThe government can directly restrict the private sale or purchase of goods that are overproduced, or mandate the private purchase of goods that are underproduced and force individuals to buy that good.The government can provide the good directly, in order to potentially a
15、ttain the level of consumption that maximizes social welfare.Public Financing of Private ProvisionGovernments may want to influence the level of consumption but may not want to directly involve themselves in the provision of a good.Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Fin
16、ance and Public Policy, 2/e, Jonathan Gruber9 of 28What Are the Effects of Alternative Interventions?Direct Effects1 . 1The Four Questions of Public Financedirect effects The effects ofgovernment interventions thatwould be predicted if individualsdid not change their behavior inresponse to the inter
17、ventions.Indirect Effectsindirect effects The effects ofgovernment interventions thatarise only because individualschange their behavior inresponse to the interventions.Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber10 of 28The Congres
18、sional Budget Office: Government ScorekeepersA P P L I C A T I O N The methods and results derived from empirical economicsare central to the development of public policy at all levelsof government. The Congressional Budget Office (CBO) provides Congress with the objective, timely, nonpartisan analy
19、ses needed for economic and budget decisions. The CBO increasingly plays a critical role as a “scorekeeper” for government policy debates. Legislative spending proposals that are to become law must first have their costs estimated by the analysts at the CBO.It is not an overstatement to say that the
20、 economists who work at the CBO frequently hold the fate of a legislative proposal in their hands. The large price tag that the CBO assigned to the Clinton administrations plan to reform health care in the United States in 1994 is often cited as a key factor in the defeat of that proposal. Chapter 1
21、 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber11 of 28Why Do Governments Do What They Do?1 . 1The Four Questions of Public Financepolitical economy The theoryof how the political process produces decisions that affect individuals and the econo
22、my.Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber12 of 28The Size and Growth of Government1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldChapter 1 Why Study Public Finance? 2007 Worth Publi
23、shers Public Finance and Public Policy, 2/e, Jonathan Gruber13 of 28The Size and Growth of Government1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan G
24、ruber14 of 28Decentralization1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldA key feature of governments is the degree of centralization across local and national government unitsthat is, the extent to which spending is concentrated at higher (federal) le
25、vels or lower (state and local) levels.Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber15 of 28Spending, Taxes, Deficits, and Debts1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldChapter 1 Why
26、 Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber16 of 28Spending, Taxes, Deficits, and Debts1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldChapter 1 Why Study Public Finance? 2007 Worth Publishers Public
27、Finance and Public Policy, 2/e, Jonathan Gruber17 of 28Spending, Taxes, Deficits, and Debts1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber18 of
28、 28Spending, Taxes, Deficits, and Debts1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber19 of 28Spending, Taxes, Deficits, and Debts1 . 2Why Stud
29、y Public Finance? Facts on Government in the United States and Around the WorldChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber20 of 28Distribution of Spending1 . 2Why Study Public Finance? Facts on Government in the United States and A
30、round the WorldChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber21 of 28Distribution of Spending1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldChapter 1 Why Study Public Finance? 2007 Worth Pu
31、blishers Public Finance and Public Policy, 2/e, Jonathan Gruber22 of 28Distribution of Spending1 . 2Why Study Public Finance? Facts on Government in the United States and Around the Worldpublic goods Goods for whichthe investment of any one individual benefits everyone in alarger group.social insura
32、nce programsGovernment provision of insurance against adverse events to address failures in the privateinsurance market.Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber23 of 28Distribution of Revenue Sources1 . 2Why Study Public Finance
33、? Facts on Government in the United States and Around the WorldChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber24 of 28Distribution of Revenue Sources1 . 2Why Study Public Finance? Facts on Government in the United States and Around the
34、 WorldChapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber25 of 28Regulatory Role of the Government1 . 2Why Study Public Finance? Facts on Government in the United States and Around the WorldAnother critical role the government plays in all
35、 nations is that of regulating economic and social activities. The Food and Drug Administration (FDA) regulates the labeling and safety of nearly all food products and bottled water, tests cosmetics to ensure their safety, and approves drugs and medical devices to be sold to the public. The Occupati
36、onal Safety and Health Administration (OSHA) is charged with regulating the workplace safety of the 115 million Americans employed at 7.2 million job sites. The Federal Communications Commission (FCC) regulates interstate and international communications by radio, television, wire, satellite, and ca
37、ble. The Environmental Protection Agency (EPA) is charged with minimizing dangerous pollutants in the air, water, and food supplies.Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber26 of 28Social Security1 . 3Why Study Public Finance Now
38、? Policy Debates over Social Security, Health Care, and EducationSocial Security is the single largest government expenditure program. The financing structure of this program is basically that todays young workers pay the retirement benefits of todays old.Health CareThere are currently 45.8 million
39、Americans without any health insurance, about 18% of the non-elderly U.S. population. Projections suggest that health care will consume almost half of our GDP within the next century.Social Security, health care, and education are each the subject of debate, with both the “liberal” and “conservative
40、” positions holding differing views in their approach to each problem.Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber27 of 28Education1 . 3Why Study Public Finance Now? Policy Debates over Social Security, Health Care, and EducationThe
41、re is an enormous dissatisfaction with our current educational system, highlighted by the dismal performance of U.S. students on international tests. Chapter 1 Why Study Public Finance? 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber28 of 281 . 4ConclusionIt is clear fro
42、m the facts presented here that the government plays a central role in the lives of all Americans. It is also clear that there is ongoing disagreement about whether that role should expand, stay the same, or contract.The facts and arguments raised in this chapter provide a backdrop for thinking about the set of public finance issues that we explore in the remainder of this book.
