Foundations in Public EconomicsIn this book, Professor David Starrett organizes within a single framework the major theoretical foundations of modern public sector economics. He presents a unified treatment of market failure that encompasses externalities, pure public goods, local public goods and natural monopolies. Professor Starrett then develops and assesses the efficacy of the various planning procedures - including representative voting, benefit cost analysis, incentive compatible design mechanisms and the free market. He devotes attention to both national and local issues, with the aim of identifying those methods that are best suited to each arena separately. Special attention is paid to financial arrangements, techniques for eliciting necessary information that is not readily available, and identification of biases that will result from incorrect procedures. This study will be useful to graduate students and economists who are interested in public finance or welfare economics. |
Contents
Introduction | 3 |
Social objectives and direct decision making | 8 |
21 Interpersonal comparisons | 11 |
22 Majority voting | 15 |
23 Bowen model | 18 |
24 Political decentralization | 20 |
Market decentralization | 25 |
31 Command economy | 26 |
102 Formulas based on secondbest decomposition | 164 |
103 Case of tradeable goods | 167 |
104 Formulas based on optimal taxation | 168 |
105 General expressions for marginal cost of government spending | 172 |
Local public goods | 175 |
111 Direct taxation | 176 |
112 Local commodity taxes | 184 |
113 Biases in club choice | 186 |
32 General Lagrangian procedure and the envelope theorem | 31 |
33 Market decentralization | 33 |
34 Extensions to an intertemporal context with uncertainty | 36 |
Theory of collective goods | 40 |
41 Typology of collective goods | 42 |
42 Efficient allocation of a collective consumption good | 44 |
43 Classical theory of clubs6 | 47 |
44 Heterogeneous clubs | 52 |
45 Persistent scale economies in club size | 55 |
46 Spatial clubs | 58 |
Decision making in a mixed economy | 63 |
Planning mechanisms | 65 |
52 Problem of the common | 73 |
53 Tiebouttype models of club decentralization | 77 |
Henry George theorem | 83 |
55 General mechanism design | 85 |
Models of a mixed economy | 90 |
61 Static model | 91 |
62 Intertemporal considerations | 95 |
63 Uncertainty and missing markets | 100 |
Government budgeting and fiscal decentralization | 104 |
71 Unified government budget | 105 |
72 Impact of intergenerational and other governmental transfers | 109 |
73 Capital account for government | 112 |
74 Problems in budget coordination | 113 |
75 Fiscal federalism | 115 |
Public pricing and optimalcommodity taxation | 120 |
82 DiamondMirrlees optimalcommoditytax framework | 124 |
83 Fullcommoditytax discretion | 128 |
84 Limitations on tax discretion | 133 |
85 Broadly based taxes | 135 |
86 Practical problems with uniform tax systems | 140 |
87 Distributional concerns | 141 |
Firstorder project analysis | 143 |
Decompositions and general theory of second best | 145 |
91 DiamondMirrlees framework | 146 |
92 Intermediategoods taxation and quantity constraints | 151 |
93 Nonlinear taxes | 156 |
94 Practical rules and pitfalls of benefitcost analysis | 158 |
Principles of shadow pricing | 161 |
101 Categories of shadow prices | 162 |
Intertemporal contexts with uncertainty | 191 |
barebones model | 195 |
123 Risk premiums in the DiamondDreze model | 198 |
124 Model with full sequential structure | 203 |
125 Project analysis with uncertainty and incomplete markets | 210 |
Identifying shadow values hedonic methods and capitalization | 212 |
131 Identification based on spanning | 213 |
132 Identification with similar agents | 216 |
133 Relationships between hedonic methods and capitalization | 218 |
134 Internal capitalization | 219 |
135 External capitalization | 225 |
136 Comparison and perspective on capitalization measures | 227 |
Evaluating large projects | 231 |
Search for exact measures | 233 |
141 Marginal analysis in presence of nonconvexity | 234 |
142 Compensating variation in a market context | 236 |
143 Measures for a mixed economy | 243 |
144 Uncertainty and expected surplus | 244 |
Surplus approximations | 246 |
151 Secondorder approximations of individual utility | 247 |
152 Aggregation of secondorder measures | 249 |
153 Secondorder measures for a mixed economy | 253 |
154 Upper and lower bounds | 254 |
155 Direct use of naive surplus | 258 |
Practical methods for largeproject evaluation | 260 |
161 Recovering willingness to pay for collective goods | 261 |
162 Parametric econometric identification | 264 |
163 GrovesClarke mechanism | 268 |
164 Commonly used framework | 272 |
165 Project interactions and concept of alternative cost | 273 |
Peakload problem | 277 |
171 General welfare problem | 278 |
172 Peakload phase | 280 |
173 Optimal capacity for single project | 283 |
174 Optimal timing of recursive investments | 285 |
Epilog | 293 |
| 294 | |
| 307 | |
| 310 | |
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Common terms and phrases
agents aggregate allocation analysis argument asset associated assume assumptions benefits budget constraint capital Chapter choice choose club collective commodity compensation consumer consumption context debt decentralization decision defined demand functions derivatives discount discussion distribution economic effects efficient envelope theorem equilibrium evaluate ex ante example expect externality firms first-best first-order households income income effects incomplete markets indifference curve indirect utility indirect utility function individual inputs involves Lagrangian land levels lump-sum marginal cost marginal utility maximize measures mechanism methods mixed economy Nash equilibrium natural nonexcludable numeraire opportunity cost optimal optimal-tax outcome parameters particular planner preferences problem procedure production profits pseudoprice relevant represents restrictions revenue risk premium second-best shadow price social status quo structure Suppose surplus tax base tax rates taxation tion utility function variables vector welfare weights λη