Public Finance

A Normative Theory


  • Richard Tresch, Boston College, Massachusetts, U.S.A.
  • Richard Tresch, Boston College, Massachusetts, U.S.A.

Featuring a general equilibrium framework that is both cohesive and versatile, the Second Edition of Public Finance: A Normative Theory brings new and updated information to this classic text. Through its concentration on the microeconomic theory of the public sector in the context of capitalist market economics it addresses the subjects traditionally at the heart of public sector economics, including public good theory, theory of taxation, welfare analysis, externalities, tax incidence, cost benefit analysis, and fiscal federalism. Its goal of providing a foundation, rather than attempting to present the most recent scholarship in detail, makes this Second Edition both a valuable text and a resource for professionals.
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Advanced undergraduate and graduate students enrolled in courses in public finance and public economics.


Book information

  • Published: May 2002
  • ISBN: 978-0-12-699051-5


"This volume offers a detailed introduction to theoretical work on many of the core issues in contemporary public economics. Careful and comprehensive, it will provide readers with an ideal springboard to further research." —James M. Poterba, Mitsui Professor of Economics, Massachusetts Institute of Technology "This clear and comprehensive text will be a valuable resource for both students and faculty." --Peter Diamond, Massachusetts Institute of Technology "This is the book teachers of public finance have been waiting for. It is outstanding in the breadth of its coverage, in the quality of exposition, and in the balance between theory and policy. It is especially good at melding newer approaches to the normative study of the public sector with traditional ones." --Robin Boadway, Queen's University in Kingston, Ontario, Canada "I have hoped for years that Richard Tresch would revise his Public Finance text. This volume is well worth the wait. It is comprehensive, up-to-date, and very clearly written. It is a natural reading for a graduate course in public finance. It will also serve as a fine reference for specialists in the field." --Harvey Rosen, Department of Economics, Princeton University "The second edition of Public Finance: A Normative Theory contains the unified and systematic treatment of the field that for many years made the first edition a favorite among graduate students. The revisions only improve the text, including a new chapter on taxation under asymmetric information. Any student or professor with an interest in the normative side of public economics will want to own this book. --John D. Wilson, Michigan State University "The arrival of the Second Edition of Dick Tresch's Public Finance is simply the best of news for students of public finance. The first edition never left my reading list because it taught more about how to do policy analysis than any other book; it was chock-full of tips and techniques. The second edition is even stronger--I am particularly fond of the new chapter about using the social welfare function in policy analysis. Students benefit not only from a cohesive introduction to normative policy analysis, and a tutorial in developing modeling skills for their applications, but also from the enhanced bibliography." --Douglas J. Holtz-Eakin, Syracuse University

Table of Contents

Part I: Introduction: The Content and Methodology of Public Sector TheoryIntroduction to Normative Public Sector TheoryA General Equilibrium Model for Public Sector AnalysisFirst-Best and Second-Best Analysis and the Political Economy of Public Sector EconomicsPart II: The Theory of Public Expenditures and Taxation: First-Best AnalysisThe Social Welfare Function in Policy AnalysisThe Problem of Externalities: An OverviewConsumption ExternalitiesProduction ExternalitiesThe US Anti-Pollution Policies: An Application of Externality TheoryThe Theory of Decreasing Cost ProductionThe First-Best Theory of TaxationApplying First-Best Principles of Taxation: What to Tax and HowPart III: The Theory of Public Expenditures and Taxation: Second-Best AnalysisIntroduction to Second-Best AnalysisThe Second-Best Theory of Taxation in One-Consumer Economies with Linear Production TechnologyThe Second-Best Theory of Taxation with General Production Technologies and Many ConsumersTaxation under Asymmetric InformationThe Theory and Measurement of Tax IncidenceExpenditure Incidence and Economy-Wide Incidence StudiesThe Second-Best Theory of Public Expenditures--OverviewTransfer Payments and Private InformationExternalities in a Second-Best EnvironmentDecreasing Costs and the Theory of the Second Best--the Boiteux ProblemGeneral Production Rules in a Second-Best EnvironmentPart IV: Cost-Benefit AnalysisIntroduction--the Issues of Cost-Benefit AnalysisThe Rate of Discount for Public InvestmentsUncertainty and the Arrow-Lind ProblemMeasurement Problems in Cost-Benefit AnalysisCo