Backhaus / Wagner Handbook of Public Finance

1. Auflage 2006
ISBN: 978-1-4020-7864-4
Verlag: Springer US
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 554 Seiten, eBook

The Handbook of Public Finance provides a definitive source, reference, and text for the field of public finance. In 18 chapters it surveys the state of the art - the tradition and breadth of the field but also its current status and recent developments. The Handbook's intellectual foundation and orientation is truly multidisciplinary. Throughout its examination of the standard material of public finance, it explores the connections between that material and such neighboring fields as political science, sociology, law, and public administration. The editors and contributors to the Handbook are distinguished scholars who write clearly and accessibly about the political economy of government budgets and their policy implications. To address the needs and interests of international scholars, they place European issues next to the American agenda and give attention to the issues of transformation in Central Eastern Europe and elsewhere.General Editors: Jürgen G. Backhaus, University of Erfurt Richard E. Wagner, George Mason UniversityContributors: Andy H. Barnett, Charles B. Blankart, Thomas E. Borcherding, Rainald Borck, Geoffrey Brennan, Giuseppe Eusepi, J. Stephen Ferris, Fred E. Folvary, Andrea Garzoni, Heinz Grossekettaler, Walter Hettich, Scott Hinds, Randall G. Holcombe, Jean-Michel Josselin, Carla Marchese, Alain Marciano, William S. Peirce, Nicholas Sanchez, David Schap, A. Allan Schmid, Russell S. Sobel, Stanley L. Winer, Bruce Yandle.

Zielgruppe

Research

Autoren/Hrsg.

Backhaus, Jürgen

Wagner, Richard E.

Inhaltsverzeichnis

Society, State, and Public Finance: Setting the Analytical Stage.- Welfare Economics and Public Finance.- Fiscal Contitutionalism.- Growth in the Real Size of Government Since 1970.- Rules, Politics and the Normative Analysis of Taxation.- Taxation, Production, and Redistribution.- Public Revenue from Land Rent.- Debt, Money, and Public Finance.- Regulation by Taxation.- Taxation, Black Markets, and Other Unintended Consequences.- Public Enterprise: Retrospective Review and Prospective Theory.- Privatization, Nationalization, and Aspects of Transition.- Social Insurance.- Redistribution, Poor Relief, and the Welfare State.- Economic Analysis and Efficiency in Public Expenditure.- Local Public Finance.- Federalism and Subsidiarity in National and International Contexts.- Fiscal Sociology: What For?.

Leseproben

Chapter 6 TAXATION, PRODUCTION, AND REDISTRIBUTION (p. 139-140)

Randall G. Holcombe
Florida State University
[e-mail]

Abstract
In one sense the public choice revolution of the 20th century ocurred because economic and political analysis now routinely takes into account the incentives of political decision-makers, and recognizes that political decision-making can result in inefficiencies. In another sense, this public choice revolution is seriously incomplete, because while it has succeeded in producing a theory of government failure, it has not taken the next step to develop a framework for optimal public policy in light of the characteristics of collective decision-making. This chapter takes a step in that direction by sketching out optimal policies for taxation, production and redistribution, taking into account that these public policies are products of the political system. Public choice might be thought of as applying the tools of economics to analyze political decision-making. This chapter uses the results of public choice to redevelop the theory of public finance.

Keywords
Benefit principle, commodity taxes, income taxation, optimal taxation, public choice revolution

JEL classification: H00, H20

At the beginning of the 21 st century, few economists would take issue with the idea that to maximize the well-being of a nation’s citizens, market allocation of resources is superior to government planning.1 At the same time, most economists would also argue that some role for government is necessary in an economy to undertake those activities for which the market is not wellsuited. 2 Some of those activities might be fundamental requirements for the operation of a market economy. For example, market exchange is predicated on the clear definition and protection of property rights, and the protection of property rights is one of the roles that has traditionally been undertaken by government.3 Other government actions might be desirable if they could overcome problems that markets might have in allocating resources, such as may arise with externalities and public goods. The purpose of this chapter is not to debate the optimal role and scope of government, but rather to look at the methods by which economic analysis has dealt with those questions. The conventional method of public finance has been to identify problems that might arise in the market allocation of resources and then to determine some type of optimal policy that can be used to correct this problem. The typical analysis assumes that the government can costlessly identify and implement this optimal policy. One of the important insights of public choice, as Buchanan (1975) clearly explains, is that there may be inefficiencies in government allocation of resources too, and that methodologically, an analysis should treat public sector decision-makers in the same framework as private sector decision-makers. Government can fail to allocate resources efficiently for many reasons, ranging from having inadequate information to understand or solve the problem to being unable to implement or enforce the optimal solution. This chapter ignores many of these very real problems, and focuses solely on the problems that arise from the collective decision-making process.

The chapter unrealistically assumes that a benevolent dictator would be able to produce a government policy that would result in an optimal use of resources, in order to focus on the problems that arise solely as a result of having to decide on what policy to follow through democratic decision-making. For example, one might see that air pollution is caused by excessive use of an unpriced resource, which creates an externality. However, internalizing the externality might require more information than the government has regarding how much pollution is coming from various sources, and what regulations and/or pricing mechanisms would result in the optimal control of the externality. Even if the government could figure out the optimal course of action, it may not be able to force citizens to follow the optimal course of action it has calculated. These problems are assumed away, however, to focus on the problems that arise solely as a result of the government’s decision-making process. Public choice theory already has much to say about the inefficiencies of the collective decision-making process. The purpose of this chapter is to apply that body of public choice theory to the issues dealt with by standard public finance.

There is a well-established theory of optimal taxation, for example, but that theory does not take into account the fact that taxes are the product of a political decision-making process. This chapter looks at optimal taxation from a public choice perspective and concludes that an optimal tax system is significantly different if it is produced by a democratic decision-making process than if it is created by a benevolent dictator.