The events of the last decade have challenged the contemporary neo-classical synthesis in all branches of economics, but particularly public finance. The most notable feature of the 2nd edition of Public Finance in Theory and Practice is the infusion of behavioral economics throughout the text, with an end of chapter question inviting the student to apply a behavioral lens to some question or issue. There continues to be an emphasis on the importance of the institutional context, drawing on examples from many countries and emphasizing the role of lower level governments in a federal system. The first five chapters establish this context by reviewing the role of government in a market system, the description of government structure from an economic perspective, the basic data about revenue and expenditures, the elements of public choice, and the distributional role of government.
The book has been substantially reorganized to put more emphasis on public expenditure. Expanded treatment of public goods includes common property resources and congestible or club goods. Expanded discussion of budgeting and cost-benefit analysis provides some practical application of the theory. Updated discussions of social security, public education and health care address these three major contemporary public finance issues. The traditional emphasis on revenue (taxes, fees and grants) has been retained but follows rather than precedes the discussion of expenditures.
Part 1: Government and the Market 1. Government and the Market 2. Measuring the Size and Scope of Government 3. The Structure of Government 4. Decision Making in the Public Sector 5. Equity, the Distribution of Income and the Social Safety Net Part 2: Government Expenditures and Budgets 6. Public Goods 7. Externalities 8. Budgeting in the Public Sector 9. Deficits, Debt, and Capital Spending 10. Cost-Benefit Analysis Part 3: Funding Government: Taxes, Fees and Grants 11. Principles of Taxation I: Efficiency and Equity Issues 12. Principles of Taxation II: Practical Problems in Tax Design 13. Taxation of Income 14. Taxes on Sales and Consumption 15. Taxes on Property and Wealth 16. Fees and Charges as a Revenue Source 17. Intergovernmental Grants 18. Public Education 19. Social Security 20. Health Care. Glossary. Bibliography