Public Economics 1
Econ 741
WVU, Fall 2019 

Professor Roger D. Congleton
Old Roman
                      Capital (the Palatine) 
PDF Syllabus with More Extensive Reading List and Details about Grades

Optional Texts:
 Class Room: B&E  244, Class Time: Tues: 6:00 - 8:50
Office Hours: W and Th 2:30-3:30
Snow News 
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: 
Wednesday, 2:30-3:30,
Thursday 2:30-3:30 

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 Economics?

(1A) 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.
Trends in government finance and regulation in the West.

(1B) Methodological Distinctions: 
Positive and normative analysis. Normative theories of individual behavior: Theology, Aristotelian and Kantian ethics, Utilitarianism. Social ethics: evaluating social states: the Pareto principles, and Contractarianism, Cost-Benefit Analysis, Social Welfare Functions. Pragmatic versus normative theories as rationales for public policy.

(1C) 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.
AH: Preface, 1, 2; T&S 2, 5

GAO overview of
US Gov Finances (report)
US Statistical Abstract
World Bank Statistics
Congleton (2018)
Amacher, Higgens, Shughart, Tollison (1985)
Congleton and Bose (2010)

Layard (2006)
Buchanan (1991, 1949)
(2.) Taxation

(2a) Exogenous Taxation: The simple geometry and calculus of taxation. (See 2nd part of the review of tools notes above)

(2b) Exogenous Taxation: Why are there taxes? Two Theories of the Origin of Government and Government Policies.
Extractive and Productive states. Olson, Hobbes, Locke, Buchanan, and the escape from anarchy. The benefits and costs of law and order. Contrast with Utilitarian benevolent planner reasoning.
AH: 1, 2, 3, 4

Downs (1957, 1960)
Buchanan (1967)
Buchanan and Wagner (1977)
Mankiw, Weinzierl, and Yagan (2009), Congleton (2011)

(3.) Democracy: The Electoral Demand for Government Services (and Taxes)

(3A) The median voter model as a Nash equilibrium/not a representative agent..
(3B) Economics of voter ideal points and demands for public services.
(3C) Neo-Downsian equilibria with rational ignorance, Stochastic voter models.
AH: 9.1

Downs (1957, 1960)
Hettich and Winer (1988)
Congleton (2001, 2007, 2018, 2020 forthcoming)
Coughlin and Nitzan (1981)

(4.) The Demand for Public Services, Transfers, and Social Insurance: Choosing among services and delivery systems: Public Goods, Transfers or Social Insurance Is government policy about  public goods, transfers, or risk management? The political demand for public goods, transfers, economic, health, and longevity insurance. Has social insurance become the "main product" of Western democracy? Sustainability in the long run.
AH 7.3, T&S 1
Feldstein (1974)
Browning (1975)
Congleton (2007)
Congleton and Bose (2010)
Batinti and Congleton (2018)
(5) Choosing among Financial Systems: Principles of Tax Analysis Impact of taxes on market prices and output; deadweight loss in the long and short run; neutral taxes, equitable taxes, and excess burden.

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

Mirrlees (1976)
Brennan and Buchanan (1980)
Samuelson (1986)
Mankiw, Weinzierl, and Yagan (2009)
(6) Choosing among Financial 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
Barro (1974)
Buchanan (1976)
Buchanan and Roback (1987)
Reinhart and Rogoff (2010)
Reinhart, Reinhart, and Rogoff (2012)
Exam 1 / Sample PF Examination Study Guide 1
Review of Exam
(7) Information Problems and Public Policy: 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 campaigning.
AH 6, 11.2
Downs (1960)
Stigler (1961)
Wagner and Weber (1977)
Congleton (2001, 2007)
Oates (2012), Somin (2013)
10/22 (8.) Agency Problems: Rent Seeking and Corruption: Interest Groups and Public Policy: Economic and Ideological Special Interests, Rent-Seeking Losses, Rent Extraction,  Bureaucracy as an Interest Group, Niskanan Model AH: 6.1, 6.2,  6.3, 6C
Olson (1965)
Tullock (1967), Niskanen (1968), Congleton (2015, 2018)
Congleton and Hillman (2015)
Aidt (2003, 2016)
(9.) Leviathan and Dictatorship. The political economy of dictatorships. Why dictatorships tend to be stable regimes--even though leaders change. Supreme values as an explanation for differences between pragmatic and totalitarian states. Differences in policy choices. Transitions to democracy.
AH: 5, 2
Brennan and Buchanan (1977)
Olson (1993)
Congleton and Lee (2009)
Congleton (2018)
Acemoglu and Robinson (2019)

Constitutional Political Economy.
Differences among democracies. Differences among electoral system, organization of legislature/parliament, centralization. The effects of electoral systems, bicameralism, presidential and prime ministerial institutions on government expenditures, taxation and debt.
AH: 5, 2
Buchanan and Tullock (1962)
Poterba (1995)
Knack and Keefer (1995)
Persson, Roland, and Tabellini (2000)
Doucouliagos and Ulubasaglu (2008)
Congleton and Yoo (2018)
(12) Public Economics and Relationships Between Governments. Voting with Your Feet (the Tiebout Model) and Yardstick Competition. Decentralization, intergovernmental externalities and economies of scale (an optimal federal system), regulatory externalities.. Applications: decentralization, fiscal federalism, capital flight, government failure, treaties.
AH: 3.1, 3.2, 4.2
C&S 8 
Tiebout (1956), Oates (1972)
Mueller on Federalism (2006)
Shleifer (1985), Belleflamme and Hindriks (2005), Inman (2008)
(13) Fiscal Federalism Continued / Paper Workshop / Discussion and Review for Second Exam. Study Guide 2
Paper Topics
No Class Thanksgiving Break


12/10 Exams Returned and discussed / Paper Work Shop / Forest from the Trees Lecture
Congleton (2018, 2020 forthcoming)

Course Appendix
  Other Topics and 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: 5.1, 5B, 10.1, 10.B
Rise of the Welfare State
WHO on Healthcare

(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.
S&T: 3, 5
CBO overview
OECD deficits
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
Congleton (2005 2006 2009 2011wp)
Higgs (1989)

15-22 Page research paper due midnight via e-mail on an applied public finance topic