公共部门经济学(双语)教案

《公共部门经济学（双语）》（07115020）课程教案

甘行琼、胡洪曙

一、授课对象

本课程适用于财政学专业、税收专业的大三以上学生学习，在学习本课程之前应先学习大学英语、西方经济学、财政学等课程。课时方面应设置3学分51课时。

三、教材使用情况

《Public Finance: A Contemporary Application of Theory to Policy》（第八版），David N. Hyman著，北京大学出版社，2005年7月。

四、教学手段

主要采取讲授与案例教学，全部课程采用多媒体。

五、参考资料

1．《Public Finance》(第七版)，Harvey S. Rosen著，清华大学出版社，2005年8月。

2．《Public Finance in Theory and Practice》，Holley H. Ulbrich著，清华大学出版社，2004年3月。

六、教学内容安排

Chapter 1 Individuals and Government

教学目标：After studying this chapter, the students should be able to:

1. Use a production-possibility curve to explain the trade- off between private goods and services and government goods and services.

2. Describe how the provision of government goods and services through political institutions differs from market provision of goods and services and how government affects the circular flow of income and expenditure in a mixed economy.

3. Discuss the various categories of federal, state, and local government expenditures in the United States and the way those expenditures are financed.

内容提要：Public finance is the field of economics that studies government activities and alternative means of financing government expenditures. Modern public finance emphasizes the relationships between citizens and governments. Government goods and services are supplied through political institutions, which employ rules and procedures that have evolved in different societies for arriving at collective choices. Government goods and services are usually made available without charge for their use, and they are financed by compulsory payments (mainly taxes) levied on citizens and their activities. A major goal in the study of public finance is to analyze the economic role of government and the costs and benefits of allocating resources to government use as opposed to allowing private enterprise and households to use those resources.

重点难点：The allocation of resources between government and private use; The structure of state and local government expenditure; Market failure and the functions of government: how much government is enough? Government transfer payments; Nonmarket rationing.

有关提示：这一部分是公共部门经济学的引言部分，应让学生明白公共部门和私人部门的区别，以及他们各自是如何配置资源的，另外也要熟悉美国政府支出的增长情况。在这部分内容中主要应使学生对公共部门经济学有一个感性的认识。

课堂设计：首先和学生讲明本章的教学目的和重点、难点。结合教材相关内容提问学生如下问题：

1. Give four examples of government goods or services and discuss how they are

distributed to citizens.

2. What is the difference between government purchases and government transfer

payments?

讲稿内容：

1. Individuals, Society and Government

a. Public finance is the field of economics that studies government activities and the alternative means of financing government expenditures.

b. Governments are organizations formed to exercise authority over the actions of persons who live together in a society and to provide and finance essential services.

c. Political Institutions are rules and generally accepted procedures that evolve for determining what government does and how government outlays are financed

d. Examples of Political Institutions:

Majority rule; Representative government

2. The Allocation between Private and Government Resources

a.Private:

Food; Housing; Cars; Clothing

b. Government:

National Defense; Public Schools; Police

c. A Production-Possibility Frontier

d. Distribution of Government Goods and Services

Nonmarket rationing: Prices and willingness to pay those prices are not applicable to goods like national defense.

3. The Mixed Economy: Markets and Politics

a. Pure Market Economy

Virtually all goods and services are supplied by for-profit private firms.

Supply and demand determine price.

b. Mixed Economy

A mixed economy is one in which government supplies a considerable amount of goods and services and regulates private economic activity.

4. Government Expenditures in the United States

a. Government purchases of

labor; land; capital

b. Government Transfer Payments

Welfare; Social Security

c. Structure of Federal Government Expenditures

Purchases of Goods and Services; Transfer Payments; Grants in Aid to State and Local Governments; Net Interest Paid

d. The Structure of State and Local Government Expenditures in the United States

Education; Civilian Safety; Transportation; Executive, Legislative, and Judicial; Income Security; Health and Hospitals; Recreational and Cultural Activities

5. Financing Government Expenditures in the US

a. Taxes:

Income (Corporate and Personal); Payroll; Excise; Customs

b. State Budget Crunch of 2002

37 states were forced to reduce their budgets.

Revenues were typically 10% less than anticipated.

States with the most severe deficits: AK, AZ, CA, NY, NC, OK, OR, VA, and WA

c. Causes

a)Cuts in taxes on business and individuals in the 1990s

b)No sales tax collections on services

c)Growth in costs of Medicaid

d. Implications of a Graying America

Social Security

a) In 2008 baby-boomers start to retire and collect

b)The ratio of workers to retiree falls

e. Medicare

Health care inflation is substantially higher than overall inflation

f.Medicaid

Increased use of long-term care for baby-boomers

6. How Much Government is Enough?

The question of how much government is enough is an important one in any society.

It is the tradeoff between public and private goods. When government gets bigger, its increased involvement comes at the expense of less private consumption.

课后思考题：

1. How does the mechanism for distributing and rationing most government services differ from that for distributing goods through markets?

2. What is a production-possibility curve? Show how such a curve can be used to explain how private goods and services must be sacrificed to obtain government goods and services.

3. Discuss the trends in government expenditures and outlays as a percentage of GDP.

Chapter 2 Efficiency, Markets, and Governments

教学目标：After studying this chapter, the students should be able to:

1. Discuss the difference between positive and normative economics.

2. Define the efficiency criterion and show the marginal conditions for efficiency can be used to identify the efficient output of a goods or service.

3. Demonstrate how taxes and subsidies affect incentives and how they can prevent competitive markets from achieving efficient outcomes.

内容提要：Resources are efficiently allocated when the well-being of any one person cannot be increased without harming another. This condition is attained when all goods are consumed over any period up to the point at which the marginal social benefit of each good equals its marginal social cost.

When prices in competitive markets reflect marginal social costs and benefits, market exchange achieves efficiency. Individuals opposing actions that improve efficiency act rationally. They are simply better of with a larger share of a smaller pie. To predict outcomes any political process, it is necessary to know the benefits of any changes proposed, to whom they accrue, and what changes in the distribution of income result.

重点难点：Normative evaluation of resource use: the efficiency criterion; Markets, prices, and efficiency conditions; Market failure: a preview of the basis for government activity; compensation criteria; Utility-possibility curve.

有关提示：这一部分是公共部门经济学的基础理论部分，应着重培养学生对相关概念的辨别能力和记忆能力，要提示学生帕累托最优只存在于理论当中，在现实当中是很难达到的。

课堂设计：这部分应结合课件中的大量图示来给学生讲明本章中出现的大量重要概念和基本理论，以老师讲解为主。结合教材相关内容提问学生如下问题：

1. Under what circumstances will a resource allocation be efficient?

2. What are the marginal conditions for efficiency?

3. Describe how taxes can affect incentives and cause losses in net benefits.

讲稿内容：

1. Positive and Normative Economics

a.Positive Economics explains “what is,” without making judgments about the

appropriateness of “what is.”

b.Normative Economics: designed to formulate recommendations about what

“should be.”

2. Normative Evaluation of Resource Use:The Efficiency Criterion

a. Pareto Optimality

The efficiency criterion is satisfied when resources are used over any given period of time in such a way as to make it impossible to increase any one person’s well-being without reducing any other person’s well-being.

b. Marginal Conditions for Efficiency

Total Social Benefit; Total Social Cost

Net Benefit = TSB–TSC

Maximum Net Benefit occurs where MSB = MSC

3. Conditions under which the Market is Pareto Optimal

a. A perfectly competitive market system exists if:

a) All productive resources are privately owned.

b) All transactions take place in markets, and in each separate market many competing sellers offer a standardized product to many competing buyers.

c) Economic power is dispersed in the sense that no buyers or sellers alone can influence prices.

d) All relevant information is freely available to buyers and sellers.

e) Resources are mobile and may be freely employed in any enterprise.

b. If These Conditions are Met

P = MPB = MSB and P = MPC = MSC

So P = MSB = MSC

c. When Does Market Interaction Fail to Achieve Efficiency?

Monopoly; Taxes; Subsidies

4. Market Failure: A Preview of the Basis for Government Activity

a. Government intervention may be warranted if a market exhibits:

a)Monopoly power by one supplier

b)Effects of market transactions on third parties

c)Lack of a market for a good where MSB>MSC (i.e. a public good)

d)Incomplete information about goods being sold

e)An unstable market

b. The Tax System and the Birth Rate

a)Families with children pay less tax than families without children: personal

exemption; child tax credit.

b)Historical data shows that an increase in the real value of the personal

exemption is associated with increases in the birth rate.

5. Equity vs. Efficiency

Equity: perceived fairness of an outcome.

Horizontal equity is achieved when equal people are treated equally.

Vertical equity is achieved when people are treated fairly along the socio-economic continuum.

6. Positive Analysis Trade-off Between Equity and Efficiency

a. When making choices about public policy issues, we are usually faced with the inevitable situation that you make one person worse off while making another better off. (Taxes must be paid by some in order that public goods can be purchased; these benefits accrue to people other than taxpayers.) Some economists attempt to overcome this with the Compensation Criteria.

b. Compensation Criteria

a)An attempt is made to compare the dollar value of the gain to the gainers

and the dollar value of the loss to the losers.

b)If the gainers gain more than the losers lose, then the gainers can pay the

losers enough to compensate the losers for their loss.

c)Everyone can be made at least as well off as they were without the change

as long as compensation is paid.

c.International View: Agricultural Subsidies, International Trade Restrictions and Global Efficiency

a)Many nations subsidize farmers with: Production subsidies; Export subsidies;

Import constraints.

b)This results in reduced agricultural efficiency.

c)Since WTO agreements, such subsidies and import constraints have been

reduced.

课后思考题：

1. How does trading improve efficiency? Why are trades that apparently provide mutual gains to those involved not undertaken?

2. Show how equating the total social benefit of a good with its total social cost will result in more than the efficient output of the good.

3. Efficiency can correspond to more than one distribution of well-being. Can the efficiency criterion be used to rank one distribution over another?

Chapter 3 Externalities and Government Policy

教学目标：After studying this chapter, the students should be able to:

1. Define an externality and explain how positive and negative externalities can prevent efficiency from being achieved even when markets are perfectly competitive.

2.Describe how corrective taxes and subsidies can be used to internalize externalities.

3.Explain the Coase theorem and its significance.

内容提要：Externality are costs or benefits of market transactions not reflected in prices. They are a dominant form of market failure to achieve efficiency in industrial economies. When the marginal external cost or benefit is priced so that buyers and sellers consider it in their decisions, an externality is internalized. To internalize an externality, the parties involved must be identified and the marginal external cost or benefit must be measured.

The Coase theorem shows that, government assignment of rights to resource use,

along with facilitation of free exchange of those rights, achieves efficiency, independent of which party is granted the right. When larger numbers of individuals are involved, a solution will require collective action to internalize the externality. Among the techniques used for this are corrective taxes and subsidies, regulations, and the establishment of standards.

重点难点：Internalization of externalities; Property rights to resource use and internalization of externalities: the Coase theorem; Corrective tax; Transactions costs

有关提示：这一部分涉及到公共部门经济学的一个重要概念――外部性，以及对这一问题的解决办法之一科斯定理。外部性是政府介入的理由之一，但很多外部性靠明晰产权也能解决，这就是科斯定理介绍的方法。应着重培养学生对解决问题的发散性思维。

课堂设计：这部分内容以案例讲解为主，通过周围的大量事件介绍，告诉学生哪些造成了负的外部性，哪些具有正的外部性，以及分别采取哪些办法来解决，在课堂中应引导学生进行积极的思考。结合教材相关内容提问学生如下问题：

1. What does it mean to internalize an externality?

2. What is the Coase theorem? How is it significant to the understanding of social conflicts caused by externalities?

3. Explain why the efficient level of pollution abatement is unlikely to be 100 percent.

讲稿内容：

1. Externalities

a. Externalities are costs or benefits of market transactions not reflected in prices.

Negative externalities are costs to third parties.

Positive externalities are benefits to third parties .

b. Externalities and Efficiency

The marginal external cost is the dollar value of the cost to third parties from the production or consumption of an additional unit of a good. These occur when market transactions for a good produce negative externalities.

Social Costs

MSC = MPC + MEC

Market equilibrium occurs where

MPC = MSB

Efficiency Requires that

MSC = MPC + MEC = MSB

c. Positive externalities

The marginal external benefit is the dollar value of the benefit to third parties from an additional unit of production or consumption of a good. These occur when the market for a good creates positive externalities.

Social Benefit

MSB = MPB + MEB

2. Internalization of Externalities

An externality can be internalized under policies that force market participants to account for the costs of benefits of their actions.

a. Corrective Taxes to Negative Externalities

Setting a tax equal to the MEC will internalize a negative externality.

Results of a Corrective Tax:

Price rises.

The tax revenue is sufficient to pay costs to third parties.

Socially optimal levels of production are achieved.

b. Using a Corrective Tax

The greenhouse effect and a “Carbon Tax”

The greenhouse effect is caused by burning carbon-based fuels. A carbon tax can be imposed to limit greenhouse gasses to their socially optimal levels.

It is called a carbon tax because the amount of the tax would depend on the amount of carbon in the fuel.

c. Theory of the Second Best

When one condition for an optimum is violated, then maintaining the others will not guarantee a second-best solution.

d. A Polluting Monopolist

Chapter 2 showed that monopoly creates a loss to society. This chapter shows that a negative externality causes a loss as well.

The losses do not necessarily add to one another. In fact, they can cancel each other out.

e. Corrective Subsidies

Setting a subsidy equal to MEB will internalize a positive externality.

Property Rights and Internalization of Externalities

Externalities arise because some resource users’ property rights are not considered in the marketplace by buyers or sellers of products.

Governments can give businesses the right to emit wastes in the air and water or it can give individuals the right to clean air and water.

3. Coase's Theorem

By establishing rights to use resources, government can internalize externalities when transactions or bargaining costs are zero.

a. The Significance of Coase’s Theorem

a)The efficient mix of output will result simply as a consequence of the

establishment of exchangeable property rights.

b)It makes no difference which party is assigned the right to use a resource.

c)If the transactions costs of exchanging the rights are zero, the efficient

mix of outputs among competing uses of the resource will emerge.

b. Limitations of Coase’s Theorem

a)Transactions costs are not zero in many situations.

b)However you allocate the property rights, the distribution of income is

affected.

c. Applying Coase's Theorem

a)The Clean Air Act of 1990 allows for the sale of the "right to pollute." Firms

face a tradeoff when they pollute. If they pollute, they forgo the right to sell their emission permits to others.

b)In markets for electricity, Clean Air Act has motivated firms to shift to

natural gas and away from coal as a means of producing electricity.

4. Recycling

Recycling may be a less efficient and more polluting use of labor, land and capital than simple land fill disposal because:

a) Collecting waste for recycling costs three times as much as collecting it for disposal.

b) Rural land is inexpensive.

c. Recycling paper creates more water pollution and does not “save” trees; it simply reduces the number that are plante

d.

5. Regulatory Solutions

Instead of using market forces to force firms to internalize externalities, we can use emission standards and apply these to all market players.

a. Markets for Pollution Rights

The Clean Air Act of 1990 allowed firms the right to trade Sulfur Dioxide emissions allowances.

The market for the allowances began in 1991.

Firms must have the allowances to emit Sulfur Dioxide.

Firms increasing production can buy permits or use pollution controls to keep their total emissions constant.

Firms that reduce their emissions can sell their allowances to others.

b. Global Externalities:

CFC’s; Deforestation; Global Warming

c. Costs and Benefits to the EPA

The EPA estimates that annual compliance costs could be in the range of $225 billion per year.

The EPA estimated in 1990 that the benefits of the Clean Air Act were nearly 50 times the costs.

Ninety percent of the benefits are estimated to come from laws pertaining to power plants and factories.

课后思考题：

1. Explain why externalities prevent the attainment of efficiency when goods

are traded in competitive markets.

2. How can a corrective tax adjust costs to reflect externalities? What effects

will a corrective tax have on prices, output, and pollution?

3. Under what conditions are externalities likely to be internalized without

the necessity of government intervention?

Chapter 4 Public Goods

教学目标：After studying this chapter, the students should be able to:

1. Define public goods and discuss their characteristics.

2. Explain the difference between pure public goods and pure private goods.

3. Discuss cooperative methods of supplying pure public goods and the

characteristics of the Lindahl equilibrium.

4. Analyze the free-rider problem.

内容提要：A pure public good is one that is consumed by all members of a community as soon as it is produced for any one member. Its benefits are nonrival and nonexcludable to consumers. Efficiency requires that the production of pure public goods be undertaken to the point where the sum of marginal private benefits is exactly equal to the marginal social cost of production.

Ideally, an efficient output of a pure public good could be achieved if each person contributed an amount equal to the marginal benefits received per unit of a public good. This is known as the Lindahl equilibrium. However, problems in inducing households to reveal their true preferences for public goods resulting from free-rider effects make this solution difficult to implement.

重点难点：Characteristics of public goods; Efficient output of a pure public good; The free-rider problem; Lindahl Equilibrium.

有关提示：这一部分是公共部门经济学的核心理论之一，应着重教授学生对公共产品概念的理解，及公共产品有效率的供给方法。要提示学生解决公共产品的效率供给是一个很复杂的问题，其主要原因之一是存在消费者的搭便车心理。

课堂设计：这部分应结合大量实例来给学生说明公共产品和私人产品所具有的不同特点，以及与此相对应的不同的供应方法。。结合教材相关内容提问学生如下问题：

1. What are the characteristics of public goods?

2. Under what conditions is the output level of a pure public good efficient?

3. How does the free-rider problem affect the effectiveness of voluntary

cooperative methods in achieving efficient levels of output for pure public goods?

讲稿内容：

1. Public Goods

a. Public Goods are goods for which exclusion is impossible.

One example is National Defense: A military that defends one citizen from invasion does so for the entire public.

b. Characteristics of Public Goods

a)Nonexclusion: The inability of a seller to prevent people from consuming a

good if they do not pay for it.

b)Nonrivalry: The characteristic that if one person “consumes” a good,

another person’s pleasure is not diminished, nor is another person prevented from consuming it.

c. Pure Public Goods and Pure Private Goods

Pure Public Good: No ability to exclude and no rivalry for benefits.

Pure Private Good: Clear ability to exclude and rivalry for benefits.

d. Marginal Costs for Provision of Public Goods

The marginal cost of allowing another person to benefit from a pure public good is zero, while the marginal cost of providing a greater level of public good is positive.

Example: Bread versus Heat

Bread – Clearly a pure private good because there is the ability to exclude

and there is rivalry to consume.

Heat – Clearly a pure public good because there is no ability to exclude and there is no rivalry to consume.

2. Provision of Private Good and Public Goods: Markets and Government

a. Price Excludable Public Goods vs Congestible Public Goods

a) Price Excludable Public Goods (Excludability, but no rivalry)

Another type of good is a price-excludable public good: no rivalry but exclusion is easy.

Examples: Country Clubs, Cable TV

b) Congestible Public Goods (Rivalry but no excludability)

There are public goods where, after a point, the enjoyment received by the consumer is diminished by crowding or congestion. These are called Congestible Public Goods.

Examples: roads and parks

b. Education as a Public Good

Education is a service that has some characteristics of a public good and some characteristics of a private good.

a) External benefits:

It helps us live in a civil society.

It has a “socializing ” function.

It teaches the importance of following rules, obeying orders, and working together.

It provides students with basic skills like punctuality and the ability to follow directions that increase their productivity as workers.

It helps students identify their abilities and choose appropriate occupations, thereby increasing productivity levels for a nation.

b) Education as a Private Good

Education has characteristics of a private good:

Wide disparities exist in the quantity and quality of education provided among school districts.

The level of support that parents can give students at home increases with income and home support is an important factor in learning for children.

There is no way to prevent parents who want more than a standardized quantity and quality of education for their children from buying it in the marketplace.

3. Demand For a Pure Public Good

Market demand for a Pure Private Good is derived by adding quantities demanded at each price.

Demand for a Pure Public Good is derived by adding how much people will be willing to pay at each quantity.

Efficient Output of a Pure Public Good

The socially optimal level of the public good requires that we set the Marginal Social Benefit of that good equal to its Marginal Social Cost. MSB = MSC Lindahl Pricing: Everyone in a group cooperates and participants each pay their marginal benefit.

We can demonstrate this issue mathematically, numerically (using a table), and graphically.

Mathematically: Lindahl Pricing

Recall from Figure 4.5 that the marginal social benefit for a pure public good is the sum of the individual marginal benefits.

That is: MSB =ΣMB

Efficient output is therefore:

MSB =ΣMB = MSC.

Numerically: Lindahl Pricing

Suppose we have three people who are discussing the issue of hiring security guards. Note that each person places a different value on the levels of security.

A Numerical Example

If the cost of security guards is $450 per week, then no individual will hire even one guard, even though to the group one guard is worth $750. The group should hire three.

If they each pay their marginal benefit, then three guards are hired. Person A pays $600 ($200 per guard), person B pays $450 ($150 per guard) and person C pay $300 ($100 per guard).

Lindahl Equilibrium

The amount each person contributes, ti, depends on individual desires for the public good.

The sum of the contributions equals the total cost of the public good.

?S tiQ* = MC(Q*) = AC(Q*)

?S ti = MC = AC

All individuals agree to pay their shares.

4. Freeriding

Freeriding occurs when people are not honest in stating their Marginal Benefit, because if they understate it, they can get a slightly reduced level of the public good while paying nothing for it.

Freeriding is easier with:

Anonymity: If everyone knows who contributes, there can be powerful social stigmas applied to shirkers.

Large numbers of people: It’s easier to determine the shirkers in a small group

and the punishment is more profound when people close to you shun you for not paying your share.

5. Illustrating Voluntary Contributions to a Public Good: The Gulf War

Under the premise that defeating Iraq in the Gulf War in 1990 was a public good to be consumed by the industrialized economies and Arab nations, each nation was expected to contribute.

The U.S. and UK contributed the bulk of the fighting forces.

Saudi Arabia, Kuwait, the UAE, Japan, and Germany voluntarily paid $54 billion of the estimated $61 billion cost.

6. National Defense and Homeland Security

National defense is a classic example of a public good.

a. Defense

From 1968 to 1978, defense spending fell from 9% of GDP to 5%.

Between 1978 and 1986, it increased to 6.3%.

By 1999, it had fallen to less than 4%.

In 2002, it was 4.5%.

b. Homeland Security

The new department merged several agencies from the departments of Justice, Transportation, Treasury, Agriculture, Energy, Health and Human Services, and Commerce.

The Homeland Security Department could ultimately have 170,000 employees working in border and transportation security, emergency preparedness and response, biological warfare defense, and computer security. It will also house the Secret Service and Coast Guard.

课后思考题：

1. What are the essential differences between pure public goods and pure private goods?

2. Although the marginal cost of producing a pure public good is always positive, some consumers can enjoy the benefits of pure public goods at zero marginal costs. Explain the apparent paradox, if there is one!

3. How will shares in the finance of public goods vary among contributors in

a model of voluntary cooperative supply of such goods?

Chapter 5 Public Choice and the Political Process

教学目标：After studying this chapter, the students should be able to:

1. Define a public choice and the concept of political equilibrium.

2. Discuss the characteristics of political equilibrium for a single public good under majority rule, the importance of the median voter, and how cycling of outcomes can result when all voters do not have single-peaked preferences.

3. Describe the role of political parties and special-interest groups in the political process.

内容提要：A political equilibrium is an agreement on the level of production of one or more public goods, given a specified rule for making the public choice

and the distribution of tax shares among individuals. Collective, or public, choices are agreements resulting in political equilibria on issues of common concern. Political equilibria are influenced by politicians and bureaucrats. When all voters have single-peaked preferences, parties will tend to move to the median position to win elections.

When all voters do not vote, the median most-preferred outcome of all citizens could differ from the median most-preferred outcome of all voters. Logrolling is the explicit trading of votes on issues of great interest to voters. When two or more issues are voted on simultaneously, implicit logrolling can occur. Models of bureaucratic behavior presume that bureaucrats attempt to maximize the size of their budgets.

重点难点：A Model of political equilibrium under majority rule; Uniqueness and cycling of outcomes under majority rule; Voting on more than one issue at a time: logrolling; Arrow’s impossibility theorem; rational ignorance.

有关提示：公共选择是公共部门经济学在理论上的一个较新的发展，逻辑性较强，有的地方学生难以理解，应把这一理论的基本规则给学生阐明。在这一部分中，应着重培养学生的逻辑推理能力和学科创新能力，并提示学生民主投票并不一定能产生唯一结果。

课堂设计：这部分应结合课件中的案例图示来给学生讲明不同投票规则将容易产生不同的结果，以老师讲解为主。结合教材相关内容提问学生如下问题：

1. Under what circumstances does a rational voter choose to vote in favor of

a proposal to increase the output of a public good? Why do some voters choose not to vote?

2. What are the major determinants of a political equilibrium?

3. Who is the median voter?

4. What can cause cycling of outcomes under majority rule?

讲稿内容：

1. The Supply of Public Goods Through Political Institutions

Public Choice involves decisions being made through political interaction of many persons according to pre-established rules.

2. Political Equilibrium

A political equilibrium is an agreement on the level of production of one or more public goods, given the specified rule for making the collective choice and the distribution of tax shares among individuals.

a. Tax Shares or Tax Prices

Tax shares, sometimes called tax prices, are pre-announced levies assigned to citizens.

They are a portion of the unit cost of a good proposed to be provided by government.

ti = tax share to individual i

Σti = average cost of good

b. Individual's Choice

Individuals make choices given their most preferred political outcomes.

Each person will favor the quantity of the government-supplied good corresponding to the point at which the person’s tax share is exactly equal to the

marginal benefit of the good to that person.

c. The Choice to Vote or Not

Rational Ignorance is the idea that, to many voters, the marginal cost of obtaining information concerning an issue is greater than the marginal benefit of gaining that information. This leads the voter to fail to gather the information and then not to vote.

d. Determinants of Political Equilibrium

The public choice rule

Average and marginal costs of the public good

Information available on the cost and benefit

The distribution of the tax shares

Distribution of benefits among voters

3. Median Voter Model

The median voter model assumes that the voter whose most-preferred outcome is the median of the most-preferred political outcomes of all those voting will become the political equilibrium.

Implications of Median Voter Model

Only the median voter gets his most-preferred outcome.

Others get either too little or too much.

4. Political Externalities

Political Externalities are the losses in well-being that occur when voters do not obtain their most-preferred outcomes, given their tax shares.

Political Transactions Costs

Political Transactions Costs are the measures of the value of time, effort, or other resources expended to reach or enforce a collective agreement.

5. Preferences

a) Single-peaked preferences

A unique optimal outcome exists

b) Multi-peaked preferences

As people move away from their most preferred outcome, they become worse off until a certain point. After that point, as they move further away from their most-preferred outcome they become better off.

6. Pairwise Cycling

Pairwise cycling is a phenomenon in which each outcome can win a majority, depending on how it is paired on a ballot.

a. Arrow's Impossibility Theorem

It is impossible to devise a voting rule that meets a set of conditions that can guarantee a unique political equilibrium for a public choice.

b. Conditions of Arrow’s Impossibility Theorem

All voters have free choice; no dictator.

We cannot rule out multi-peaked preferences.

If all voters change their rankings of a particular alternative, the public choice that emerges must not move in the opposite direction.

Public choices are not influenced by the order in which they are presented.

Public choices must not be affected by the elimination or addition of alternatives to the ballot.

Public choice, like all economic choices, should be transitive.

7. Political Processes

Constitutions; Minority Rule; Majority Rule

a. Costs and Benefits of Collective Action

Benefit: decrease in political externalities

Cost: increase in political transaction costs

b. Possible Alternatives Methods

Unanimity

Relative unanimity (2/3, 7/8 etc.)

Plurality rule (more than 3 outcomes possible)

Point-count voting (enables voters to register the intensity of their preference)

Instant Runoffs

8. Political Institutions in U.S. Cities

a. In the United States, municipal government takes two basic forms.

City Manager Form: The city manager makes day-to-day decisions, and advises elected officials. The mayoral and council elections are typically nonpartisan.

Mayor –City Council Form: The mayor makes day-to-day decisions and elections are typically partisan.

b. Researchers have found that relative to cities run by managers, those run by elected mayors:

a) Have greater capital stock (roads, parks, police and fire stations),

b) Use relatively less labor in providing public services,

c) Spend the same amount of money.

c. Forms of City Government and their Effects on Spending

a)Manager/Council Government

Unelected city manager makes most executive decisions, with policy recommendations by elected city council.

b)Mayoral Government

Elected mayor makes most executive decisions.

c)Results:

Similar total expenditures

Mayoral systems utilize more capital intensive public goods production.

9. Logrolling or Vote Trading

Logrolling is the act of voting for something you would ordinarily vote against so that someone else will vote for something that they would ordinarily vote against.

This is typically done when people care deeply about passage of their issue and less about other issues.

a. Implicit Logrolling

Implicit logrolling occurs when political interests succeed in pairing two (or more) issues of strong interest to divergent groups on the same ballot or the same bill.

The willingness of each special-interest group to vote for the combined package is a function of the relative intensity of preference on the two issues.

b. State Government Spending and the size of the Legislature

The theory of logrolling suggests that, as more districts are available to distribute the costs of public spending, there will be more incentives for individual legislators to engage in vote trading to expand state government spending.

Researchers found a positive relationship between the size of the state Senate and spending.

Spending on highways and education were most affected by the size of the legislature.

10. Special Interests

Special Interests are groups that lobby on particular issues.

An example of a special interest is unions and/or steel companies lobbying for Tariffs and Import Quotas to protect their jobs or profits.

Efficiency losses per job saved almost always exceed the pay of the retained worker.

Estimates of the net effect run between –$9000 and –$38,000

11. Bureaucracy and the Supply of Public Output

Officials measure their power in terms of the size of their budgets, not the efficiency of the outcomes they generate. This causes bureaucrats to have a self-interest in inefficiently high levels of government spending.

课后思考题：

1. How does a person decide to vote on any issue that proposes to change the amount of public goods supplied by the government?

2. Given tax shares, explain why only the median voter consumes his most-preferred quantity of a public good under majority rule.

3. Under what conditions will the median peak correspond to an extreme outcome, such as no output of a good?

4. What is logrolling? Under what conditions is logrolling likely to emerge? How can logrolling prevent the attainment of efficiency?

A exercise of speech：

Imitation of president or finance minister

Chapter 6 Introduction to Government Finance

教学目标：After studying this chapter, the students should be able to:

1. Discuss alternative means of financing government expenditures, the effects they have on the economy, and issues relating to the distribution of the burden of government finance.

2. Understand the basic terminology used to analyze the impact of taxes on the economy, including the tax base and the tax rate structure.

3. List the criteria used to evaluate alternative means of financing government expenditures.

内容提要：Government finance transfers use of productive resources from individuals and business firms to the government. Taxes are the major method of government finance. The method of government finance used can have an impact on political and market equilibria and on the efficiency with which resources are employed in the private sector.

A basic problem in government finance is the distribution of the costs of financing public goods among citizens. No one best way of accomplishing this exists that will satisfy all citizens. In addition to affecting the political equilibrium, the method of government finance chosen often has significant and complicated effects on the private choices made by citizens.

重点难点：Principles of taxation; How should the burden of government finance be distributed? Criteria for evaluating alternative methods of government finance; Earmarked taxes; Government-induced inflation;

有关提示：这一部分着重阐述了政府财政支出的来源，尤其是重点论述了作为主要来源的税收的基本理论，如税率、税基及各种税的形态。应着重培养学生对费和税等概念的辨别能力，并提示学生要满足政府支出在现实中很难找到一个最优的方法。

课堂设计：这部分应结合现实中的大量实例来给学生讲明费和税的区别，在政府筹资中它们各有何优缺点。另外，也要给学生阐明按能纳税和按受益原则纳税的不同，以及它们在现实中的具体实践。教学设计以老师讲解为主，学生讨论为辅。结合教材相关内容提问学生如下问题：

1. What is a tax base? List three major classes of tax bases, and give an example of a particular type of tax levied on each of the three major bases.

2. How does the relationship between the marginal tax rate(MTR) and the average tax rate(ATR) vary, depending on whether a tax rate structure is proportional, progressive, or regressive?

3. What are the two major “philosophies” of taxation used to guide the way the burden of government finance is distributed?

讲稿内容：

1. Federal, State, and Local Revenue

a. $3 trillion annually

b. Sources:

a) Taxes:

Payroll; Income (Corporate and Personal); Property; Sales and Excise; Estate; Tariffs

b) Fees

c) Tuition

d) Licenses

2. Purpose and Consequences of Government Finance

a. Political Equilibrium

b. Market Equilibrium and Its Efficiency

c. The Distribution of Income

3. Taxes

Taxes are compulsory payments to government

a. Tax Base

The item or activity that is to be taxed

A general tax is one that taxes all of the components of the economic base, with no exclusions, exemptions, or deductions from the tax base.

A selective tax is one that taxes only certain portions of the tax base, or it might allow exemptions and deductions from the general tax base.

An excise tax is a selective tax on the manufacture or sale of a particular good or service.

b. Tax Rate Structure

The relationship between the amount that is to be paid in tax and the tax base for a given accounting period

a) Marginal Tax Rate

The amount by which the tax increases when the tax base increases

b) Average Tax Rate

The total amount of tax divided by the total amount of the tax base

c) Tax bracket

The range of the tax base in which the marginal rate is constant

d) Descriptors of the Tax Rate Structure

A Progressive Tax has a structure where the marginal tax rate is increasing and greater than the average tax rate.

A Proportional Tax has a structure where the marginal tax rate is constant and equal to the average tax rate. (Sometimes called a Flat Tax)

A Regressive Tax has a structure where the marginal tax rate is decreasing and less than the average tax rate.

e) Average Tax Rates in the US

4. How Should the Burden of Government Be Financed?

a. Benefit Principle

Those who benefit the most from a particular program should pay the most for that program (Lindahl Tax principle at work).

b. Ability-to-Pay Principle

Those who have the greatest ability to pay should be required to pay the most.

5. Criteria for Evaluating Methods of Government Finance

a. The Criteria are:

a) Equity

The distribution of the government finance burden should coincide with commonly held notions of fairness and ability-to-pay.

b) Efficiency

The system of government finance should raise revenues with the least loss in efficiency in the private sector.

c) Administrative ease

A government finance system should be relatively easy to administer consistently, without excessive costs to collect, enforce, and comply with taxes and tax laws.

b. Horizontal and Vertical Equity

Horizontal equity is achieved when individuals of the same economic capacity (measured, for example, by income) pay the same amount of taxes per year (or over

their lifetimes).

Vertical equity is accomplished when individuals of differing economic ability pay annual tax bills that differ according to some collectively chosen notion of fairness.

c. Both concepts are subjective.

a) “Economic capacity” is difficult to measure and administer.

b) “Ability to pay” requires value judgments on the proper income distribution.

d. Tax Compliance, Avoidance and Evasion

Tax Evasion is the term for illegal ways to avoid paying taxes. It is typically the result of not declaring income or overstating otherwise legal deductions.

Tax Avoidance is the term for legal ways to avoid paying taxes, typically the result of avoiding activities that are taxed, delaying the time at which taxes are owed, or taking an action designed to lower a tax burden.

6. Alternatives to Taxation

a. Debt Finance is the means of financing expenditures by issuing bonds.

b. Inflationary Finance is the means of financing expenditures through the printing of money.

c. More alternatives to Taxation

a) Donations

Money (but more usually time) is voluntarily given to government. Military service or work in the Peace Corps can be considered a donation when the compensation is less than the market value of the time.

b) User Charges

Users of a government service can expect to pay for that service. Examples include tuition, fees paid to enter state parks, greens fees at publicly owned golf courses.

c) Earmarked Taxes

Taxes can be implemented to fund specific public goods. Examples include gasoline taxes and tolls designed to fund road and bridge repair.

d. User Charges and the Transportation Infrastructure

Economists argue that voters demand better roads and airports in part because the price to use them (usually zero) is less than the true marginal cost (which should include congestion costs.)

e. User Charges and Efficiency

Roads and Bridges wear out when too much weight is concentrated on too few axles.

Tolls motivate the wrong behavior in that they tax per axle rather than on pounds per axle.

Estimates suggest that taxing pounds per axle and using the revenue to create stronger roads would pay for itself more than eight-fold.

7. Government Enterprise

Local Utilities

8. Lotteries

State Lotteries