Public Finance [antikvár]

Preface I ^ ^ ^t is a foolish thing to make a long prologue." (II Maccabees 2:32) I shall once again follow this Biblical advice, and be brief .in describing the features of this third edition. The field of public finance has been changing rapidly in recent years. On the theoretical side, one of the main achievements has been to integrate the analysis of government spending and taxing more closely with basic economic theory. A prime example is the literature on optimal taxation, which has attempted to derive prescriptions for government fiscal behavior using standard economic tools, rather than to annunciate a set of ad hoc "principles" for tax design. On the empirical side, the most exciting development has been the widespread application of the tools of econometrics to understanding how expenditure and tax policies affect individual behavior and how the government itself sets its policies. The results of modern research have been slow in entering traditional texts. This book takes its readers to many of the frontiers of current research. The approach to the material, while accessible to undergraduates, is the same as the approach shared by most economists who are now active in the field. The development of public finance has not proceeded free of controversy. In this book, disputes concerning both methodological and substantive issues are discussed at length. One reviewer of an early draft of the manuscript warned against displaying too much of the profession's dirty laundry in public. My feeling, however, is that "full disclosure" should apply not only in the market for securities, but also in the market for ideas. There is some tendency for economic analysis to lose touch with the reality it is supposed to describe. I have tried to avoid this tendency. The relevant institutional and legal settings are described in ample detail. Moreover, the links between economic analysis and current political issues are constantly emphasized.