Montclair State University
School of Business 
Department of Economics and Finance

ECON 508 	Dr. P. LeBel 
Economics of Public Management	Fall 2005
PA-217	M 19:00-21:30 p.m.

Course Description

Application of capital theory in the decision making processes of government and alternative approaches to government project evaluation and important practical issues encountered by state development planners.  Specific applications of project analysis in the area of physical and human resource management such as water resource management, public health, and education.  

Course Objectives

The Economics of Public Management draws on fundamental concepts from macroeconomic theory, public finance, and financial analysis to analyze the allocation of resources in the public sector economy. Although part of the course will encompass a necessary reformulation of fundamental concepts in economic theory, much of the emphasis will be on the linking of appropriate policy criteria to contemporary public management issues. This includes how static and dynamic models may be used to illuminate the nature of optimal resource allocation in such areas as water resources, public health, education, and allied topics involving physical and human resource management.  In so doing, the student will acquire expanded analytical skills to better evaluate existing and alternative public policy alternatives.  Descriptive, geometric and quantitative methods will be used throughout the course.  Class sessions, which are based on a student's prior reading of assigned materials, require a significant degree of student participation. Extensive use will be made of the course website.  The URL is:  http://netdrive.montclair.edu/~lebelp/plebel.html.  Should this link fail to open, select "LeBel" in Google and it will redirect you to the web site.

A student who has completed this course is expected to demonstrate a mastery of essential concepts in several areas of the field of public management.  The most important of these areas are:

1.	a geometric and quantitative formulation of market success and market failure conditions and an assessment of their implications for public management;

2.	an overview of alternative criteria for social welfare choices, including the Pareto, Hicks-Kaldor, Scitovsky, and related measures, and a comparative assessment of these decision rules as they pertain to public management issues;

3.	a detailed examination of private firm capital budgeting techniques and how these dynamic choices are shaped by public sector management decisions to attain a socially optimal allocation of resources;

4.	a detailed examination of public sector cost-benefit analysis techniques that will be contrasted with private sector capital budgeting, and which will encompass such issues as specific measures of consumer and producer surplus, the measurement of external costs and benefits, the public treatment of risk, and the choice of an appropriate rate of social discount;

5.	an application of public management tools to selected contemporary issues, including, but not limited to, mass transit, water supply management, public recreation facilities, education and health, and economic growth.

The student's knowledge in each of the above areas will be tested in a mid-term and final examination, periodic case studies, as well as in a detailed term paper.  A student who has mastered an understanding of the concepts, analytical tools, and policy issues in these areas will be well prepared to pursue advanced studies in individual allied disciplines, as well as to pursue direct career  experience.

Educational Dimensions of the Strategic Charter Supported by the Course:
1.	Discipline Specific Knowledge and Competencies – Students will acquire knowledge and skills in analyzing fundamental economic issues.  The perspective will vary across individual consumers, firms, and the public sector.  Emphasis in all instances will be on practical applications of basic techniques in economic analysis.
2.	Thinking Skills – Students will use computer spreadsheets to analyze economic conditions relating to market equilibrium under various market structures, taxation, international trade, and income distribution, through both homework assignments and in-class case studies.  In addition, various links to internet data sites will be used to develop a student’s research and organizational skills.
3.	Communications Skills – Students will make periodic presentations regarding classroom case studies they have completed, as well as to analyze contemporary economic issues.
4.	Change Management – Students will be encouraged to think about how economic factors shape institutional decisions at a social level as well as how it affects personal and professional choices.

Montclair State University
School of Business
Department of Economics and Finance

ECON 508	P. LeBel
Economics of Public Management	Fall 2005
PA-217	M 19:00-21:30

Syllabus

Most of the material used in this course is found in the text materials listed below, in the electronic pdf reserve readings, and in the course web links. We will not cover all of the reserve readings listed here. Those that are required will be designated by the instructor for each class.

Text: 	Jonathan Gruber. Public Finance and Public Policy. (New York: Worth Publishers, 2005).

Supplementary Materials:
The Wall Street Journal, student subscription service
The New York Times, student subscription service
Useful Economic Data Links

	Readings on Reserve: 
Acemoglu,  Daron and Thierry Verdier, "The Choice between Market Failures and Corruption,"American Economic Review, 90:1 (March 2000), 194-211.
Acemoglu, Daron and James A.Robinson, "A Theory of Political Transitions",  American Economic Review 91:4 (September 2001), 938-963.
Aghion, Philippe, Eve Caroli, Cecilia Garcia-Penalosa, "Inequality and Economic Growth:  The Perspective of the New Growth Theories," Journal of Economic Literature, 37:4 (December 1999), 1615-1660.
Alesina,  Alberto, Reza Baqir, and William Easterly, "Public Goods and Ethnic Divisions," Quarterly Journal of Economics, 114:4 (November 1999), 1243-1284.
Alesina, Alberto and Roberto Perotti, "Economic Risk and Political Risk in Fiscal Unions", Economic Journal, 108 (July 1998), 989-1008.
Andreoni, James, Brian Erard, and Jonathan Feinstein, "Tax Compliance", Journal of Economic Literature, 36:2 (June 1998), 818-860.
Arrow, Kenneth J., "Invaluable Goods", Journal of Economic Literature, 35:2 (June 1997), 757-765.
Bator, Francis M., "The Anatomy of Market Failure", Quarterly Journal of Economics, 72:3 (August 1958), 351-379.
Blank, Rebecca M., "Evaluating Welfare Reform in the United States," Journal of Economic Literature, 40:4 (December 2002), 1105-1166.
Bohn, Henning, "The Behavior of U.S. Public Debt and Deficits", Quarterly Journal of Economics, 113:3 (August 1998), 949-963.
Bowles, Samuel and Herbert Gintis, "The Inheritance of Inequality", Journal of Economic Perspectives, 16:3 (Summer 2002), 3-30.
Datta-Chaudhuri, Mrinal, "Market Failure and Government Failure",  Journal of Economic Perspectives, 4:3 (Summer 1990), 25-39.
Downs, Anthony, "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, 65:2 (April 1957), 135-150.
Duggan, John and Joanne Roberts, "Implementing the Efficient Allocation of Pollution", American Economic Review, 92:4 (September 2002), 1070-1078.
Feldstein, Martin and Elena Ranguelova, "Individual Risk in an Investment-Based Social Security System", American Economic Review, 91:4 (September 2001), 1116-1125.
Haveman, Robert and Barbara Wolfe, "The Determinants of Children's Attainments:  A Review of Methods and Findings", Journal of Economic Literature, XXXIII (December 1995), 1829-1878.
Jorgenson, Dale W., "Did We Lose the War on Poverty?", Journal of Economic Perspectives, 12:1 (Winter 1998), 79-96.
Kniesner, Thomas J. and James P. Ziliak, "Tax Reform and Automatic Stabilization",  American Economic Review, 92:3 (June 2002), 590-612.
Krueger, Alan B. and Mikael Lindahl, "Education for Growth:  Why and For Whom?", Journal of Economic Literature, 39:4 (December 2001), 1101-1136.
Ladd, Helen F., "School Vouchers:  A Critical View",  Journal of Economic Perspectives, 16:4 (Autumn 2002), 3-24.
Lindbeck, Assar, "The Swedish Experiment", Journal of Economic Literature, 35:3 (September 1997), 1273-1319.
McGuire, Martin C. and Mancur Olson, Jr., "The Economics of Autocracy and Majority Rule:  The Invisible Hand and the Use of Force," Journal of Economic Literature, 34:1 (March 1996), 72-96.
Mieszkowski, Peter and George R. Zodrow, "Taxation and the Tiebout Model:  The Differential Effects of Head Taxes, Taxes on Land Rents, and Property Taxes," Journal of Economic Literature, 27:3 (September 1989), 1098-1146.
Papadimitrious, Dimitri B., Ansar M.Shaikh, Claudio H. Dos Santos, and Gennaro Zezza, "How Fragile is the U.S. Economy?", The Levy Institute of Bard College, Strategic Analysis (March 2005), 1-12.
Pauly, Mark V., "Taxation, Health Insurance, and Market Failure in the Medical Economy", Journal of Economic Literature, 24:2 (June 1986), 629-675.
Pechman, Joseph A., "The Future of the Income Tax", American Economic Review, 80:1 (March 1990), 1-20.
Pemberton, James, "Social Security:  National Policies with International Implications", Economic Journal, 109:457 (July 1999), 492-508.
Persson,Torsten, Gerard Roland, and Guido Tabellini, "Comparative Politics and Public Finance", Journal of Political Economy, 108:6 (December 2000), 1121-1161.
Ramsey, Frank P., "A Contribution to the Theory of Taxation", Economic Journal, 37:145 (March 1927), 47-61.
Shleifer,Andrei, "State versus Private Ownership", Journal of Economic Perspectives, 12:4 (Autumn 1998), 133-150.
Stiglitz, Joseph E., "The Private Uses of Public Interests:  Incentives and Institutions", Journal of Economic Perspectives, 12:2 (Spring 1998), 3-22.
Tiebout, Charles M., "A Pure Theory of Local Expenditures", Journal of Political Economy, 64:5 (October 1956), 416-424.

All class sessions are based on the student's prior reading of assigned material.

***

 I.   An Overview of Public Sector Management Issues
Class   1 – The Economic Significance of the Public Sector
(9/12/05)   Text, (1-56)
	Key Terms:  public finance, income taxes, payroll taxes, social insurance, deficits vs. debt, the size distribution of government, political economy, CBO, direct vs. indirect effects of taxation, public goods, grants-in-aid, constrained utility maximization, marginal rate of substitution, income and substitution effects, TANF (Temporary Asssistance for Needy Families), welfare economics, own-price elasticity of demand, marginal productivity, social efficiency, first fundamental theorem of welfare economics, deadweight loss, second fundamental theorem of welfare economics, equity-efficiency tradeoff, social welfare function, risk vs. uncertainty.
	Reserve Readings: 
	Application Modules: Circular Flow Diagram; Functions of the Public Sector; Supply and Demand
	Data Sets: Global Data; U.S. Budget and Trade Balances; U.S. Budget Trends; U.S. Balance of Payments  
Sample Case Study: Quick Review of Economic Fundamentals: Basic Supply and Demand

Class   2 -  Mathematical and Empirical Tools of Public Finance 
(9/19/05)   Text (57-114)
	Key Terms:  Empirical public finance, correlation-causality distinctions, randomized trials, treatment group, control group, time series analysis, cross-section analysis, pooled vs. panel regression, quasi-experimental variation, structural modeling, reduced form estimates, entitlement spending, discretionary spending, Graham-Rudman-Hollings Deficit Reduction Act of 1985, balanced budget requirement, real vs. nominal prices, consumer price index, standardized or structural budget deficit, cyclically adjusted budget deficit, cash accounting vs. capital accounting, static vs. dynamic scoring, implicit obligations, present discounted values, intertemporal budget constraint, generational accounting, short-run stabilization, automatic stabilization, discretionary stabilization, Ricardian equivalence, intergenerational equity
	Reserve Readings: Aghion, Philippe, Eve Caroli, Cecilia Garcia-Penalosa, "Inequality and Economic Growth:  The Perspective of the New Growth Theories," Journal of Economic Literature, 37:4 (December 1999), 1615-1660; 
	Application Modules: Regression Supply and Demand Model; The Equation of Exchange; Loanable Funds Equilibrium; Income Substitution Effects
	Data Sets: Growth and Development; Economic Freedom and Corruption; U.S. Budget Trends; Inflation and the Dollar; 
	Sample Case Study: Macroeconomic Equilibrium; The Basic Harrod Domar Model
	
II.   Market Failure vs. Public Sector Failure in the Allocation of Resources
Class   3 -  Externalities and Public Goods 
(9/26/05)  Text (115-214)
	Key Terms:  Positive vs. negative externalities, market failure, private vs. social marginal cost, private vs. social marginal benefit, consumption vs. production externalities, the Coase Theorem, the holdout problem, the free rider problem, transaction costs, corrective taxation, subsidies, price vs. quantity regulation, tradable emission permits, acid rain, sulfur dioxide emissions, Clean Air amendments, global warming, the greenhouse effect, the Kyoto Accords of 1997, the Montreal Protocol of 1987,  Center for Disease Control, actuarial adjustments, internalities vs. externalities, public goods, pure public good, non-rivality in consumption, non-excludability criterion, impure public goods, numéraire goods, optimal provision of public goods, social capital, natural capital, human capital, warm glow model, crowding-out effects of public goods, cost-benefit analysis,  cash-flow accounting in capital budgeting, opportunity cost, imperfect markets, social vs. private discount rates, contingent valuation models, revealed preferences to value time, compensating differentials, cost-effectiveness analysis.
	Reserve Readings: Bator, Francis M., "The Anatomy of Market Failure", Quarterly Journal of Economics, 72:3 (August 1958), 351-379; Datta-Chaudhuri, Mrinal, "Market Failure and Government Failure",  Journal of Economic Perspectives, 4:3 (Summer 1990), 25-39; EU Council Directive on Energy Taxation; Acemoglu,  Daron and Thierry Verdier, "The Choice between Market Failures and Corruption,"American Economic Review, 90:1 (March 2000), 194-211; Alesina, Alberto and Roberto Perotti, "Economic Risk and Political Risk in Fiscal Unions", Economic Journal, 108 (July 1998), 989-1008; Arrow, Kenneth J., "Invaluable Goods", Journal of Economic Literature, 35:2 (June 1997), 757-765; Duggan, John and Joanne Roberts, "Implementing the Efficient Allocation of Pollution", American Economic Review, 92:4 (September 2002), 1070-1078.
	Application Modules: Externalities; 
	Data Sets: Growth and Development; Global Warming Indicators;  
	Sample Case Study: Externality Taxation  

Class   4 -  Political Economy,  State and Local Government Expenditures 
(10/03/05) Text (215-272)
	Key Terms: Lindahl pricing, marginal willingness to pay, benefit taxation principle, preference revelation problem, preference knowledge problem, preference aggregation problem, recall elections, referendum, voter initiatives, majority voting, cyclical majorities, Arrow impossibility theorem (1951), single-peaked preferences, median voter theorem, median voter, representative democracy, single dimentional voting, full information, lobbying, political business cycle, government failure model, public choice theory of Buchanan and Tullock, Leviathan theory, corruption, optimal fiscal federalism, intergovernmental grants, property tax, fiscal equalization, the Tiebout model (1956), lump-sum taxation, zoning, house price capitalization, tax-benefit linkages, matching vs. block grants, conditional block grants, flypaper effect, school finance equalization, tax price of equalization.
	Reserve Readings: Downs, Anthony, "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, 65:2 (April 1957), 135-150; Tiebout, Charles M., "A Pure Theory of Local Expenditures", Journal of Political Economy, 64:5 (October 1956), 416-424; Alesina, Alberto and Roberto Perotti, "Economic Risk and Political Risk in Fiscal Unions", Economic Journal, 108 (July 1998), 989-1008; Mieszkowski, Peter and George R. Zodrow, "Taxation and the Tiebout Model:  The Differential Effects of Head Taxes, Taxes on Land Rents, and Property Taxes," Journal of Economic Literature, 27:3 (September 1989), 1098-1146.
	Application Modules: 
	Data Sets: Essex County Property Tax Profiles; U.S. Government State Transfers; 
	Sample Case Study:

III.  The Provision of Public Goods
Class   5 -  Education, and Social Insurance 
(10/10/05)  Text (273-327)
	Key Terms:  No Child Left Behind Act of 2001, educational credit market failure, educational attainment, public education crowding out effect, educational vouchers, voucher excess school specialization, voucher segregation, natural monopoly dimension of public education, special education programs, magnet schools, charter schools, returns to education, education as human capital, education as a screening device, school quality, state provision, Pell grants, guaranteed student loans, direct student loans, Lifetime Learning Tax Credit of 1998, National Assessment of Educational Progress (NAEP).
	Reserve Readings: Krueger, Alan B. and Mikael Lindahl, "Education for Growth:  Why and For Whom?", Journal of Economic Literature, 39:4 (December 2001), 1101-1136; Ladd, Helen F., "School Vouchers:  A Critical View",  Journal of Economic Perspectives, 16:4 (Autumn 2002), 3-24; Bowles, Samuel and Herbert Gintis, "The Inheritance of Inequality", Journal of Economic Perspectives, 16:3 (Summer 2002), 3-30.
	Application Modules: Educational Forecasting Model; 
	Data Sets: Education and Income; Global Information Levels; U.S. Social Programs;    
	Sample Case Study: 
	TERM PAPER TOPIC SELECTION DEADLINE

Class   6 -  Social Security 
(10/17/05)  Text (328-389)
	Key Terms: asymmetric information, adverse selection, moral hazard, social insurance programs, unemployment insurance, disability insurance, workers' compensation, Medicare, Medicaid, means-tested programs, consumption smoothing, states of the world, expected utility model, actuarially fair premium, risk aversion, risk premium, pooling equilibrium, separating equilibrium, experience rating, administrative costs, self-insurance, UI replacement rate (ratio of unemployment insurance benefits to pre-unemployment earnings), reduced precaution against entering the adverse state, increased odds of entering the adverse state, increased expenditures when in the adverse state, supplier response to insurance gainst the adverse state, mathematical models of expected utility, annuity payments, primary insurance amount (PIA), average indexed monthly earnings (AIME), replacement rate, full benefits age (FBA), early entitlement age (EEA), Delayed Retirement Credit (DRC), legacy debt, social security wealth (SSW), retirement hazard rate, Social Security Trust Fund, privatization of Social Security, Temporary Extended Unemployment Compensation Act (TEUC) of 2002,  no-fault insurance, moral hazard effects of unemployment insurance, job match quality.
	Reserve Readings: Feldstein, Martin and Elena Ranguelova, "Individual Risk in an Investment-Based Social Security System", American Economic Review, 91:4 (September 2001), 1116-1125; Blank, Rebecca M., "Evaluating Welfare Reform in the United States," Journal of Economic Literature, 40:4 (December 2002), 1105-1166; Bohn, Henning, "The Behavior of U.S. Public Debt and Deficits", Quarterly Journal of Economics, 113:3 (August 1998), 949-963.
	Application Modules: Pension Systems; The Gini Inequality Model
	Data Sets: U.S. Personal Savings Rate; U.S. Gross Saving and Investment; Fundamentals of Finance;  
	Sample Case Study: Income Distribution

Class   7 -  Mid-Term Examination
(10/24/05) Text (chapters 1-14)

Class   8 -  Health Insurance I 
(10/31/05)  Text (390-420)
	Key Terms:  Difference in difference estimates in quasi-experimental analysis, nongroup insurance market,  risk pool, employer-provided private insurance, tax subsidy, Medicare, Medicaid, TRICARE, Civilian Health and Medical Program for the Department of Vetersns Affairs (CHAMPVA), uncompensated care, job lock, first-dollar coverage, flat of the curve inefficient overuse of medicine, tax subsidy of health insurance, health savings accounts (HSA), retrospective reimbursement, managed care, preferred provider organizations (PPO), health maintenance organization (HMO), prospective reimbursement.
	Reserve Readings: Haveman, Robert and Barbara Wolfe, "The Determinants of Children's Attainments:  A Review of Methods and Findings", Journal of Economic Literature, XXXIII (December 1995), 1829-1878; Jorgenson, Dale W., "Did We Lose the War on Poverty?", Journal of Economic Perspectives, 12:1 (Winter 1998), 79-96; Pemberton, James, "Social Security:  National Policies with International Implications", Economic Journal, 109:457 (July 1999), 492-508.
	Application Modules: 
	Data Sets: International Health Care; 
	Sample Case Study:
	TERM PAPER PRELIMINARY BIBLIOGRAPHY SUBMISSION        
     DEADLINE.

Class   9 -  Health Insurance II, Income Distribution and Welfare Programs 
(11/7/05)  Text (421-484)
	Key Terms:  prescription drug benefit, medicare, medicaid, Children's Health Insurance Progam (CHIP), cost-effectiveness, Medicare Part A, Medicare Part B, Prospective Payment System (PPS), Diagnostic Related Group, Adjusted Average Per Capita Costs (AAPCC), premium support, long-term care, mandate, incremental cost controls, national health insurance, welfare caseloads, Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), relative income inequality, absolute deprivation, poverty line,  categorical welfare programs, means-tested welfare programs, cash welfare, in-kind welfare, Temporary Assistance for Needy Families (TANF), Aid to Familites with Dependent Children (AFDC), benefit guarantee, benefit reduction rate, Supplemental Security Income (SSI), food stamps, public housing, Special Supplemtal Nutrition Program for Women, Infants, and Children (WSIC), moral hazard costs of welfare policy, social welfare function (SWF), iron triangle of cash welfare programs, ordeal mechanisms, welfare training programs, child support, welfare "lock".
	Reserve Readings: Papadimitrious, Dimitri B., Ansar M.Shaikh, Claudio H. Dos Santos, and Gennaro Zezza, "How Fragile is the U.S. Economy?", The Levy Institute of Bard College, Strategic Analysis (March 2005), 1-12; Pauly, Mark V., "Taxation, Health Insurance, and Market Failure in the Medical Economy", Journal of Economic Literature, 24:2 (June 1986), 629-675.
	Application Modules: Optimal Food Stamp Pricing; 
	Data Sets: Homeless in America; 
	Sample Case Study:
	TERM PAPER OUTLINE WITH REVISED PRELIMINARY 
     BIBLIOGRAPHY DEADLINE

IV.  The Structure of Public Taxation
Class 10 -  Comparative International Taxation Regimes 
(11/14/05)  Text (485-544)
	Key Terms: Gramm-Rudman-Hollings Budget Act, payroll taxes, individual income taxes, capital gains taxes, corporate income taxes, wealth taxes, property taxes, estate taxes, consumption taxes, sales taxes, excise taxes,  gross income, adjusted gross income (AGI), exemption, standard deduction, itemized deductions, taxable income, tax base, tax credits, withholding, Alternative Minimum Tax (AMT), marginal tax rate, average tax rate, statutory tax rates, effecvtive tax rates, vertical equity, horizontal equity, progressive tax, proportional (flat) tax, regressive tax, Haig-Simons comprehensive income definition, charitable giving, marginal versus inframarginal effects of tax subsidies,  crowd-out vs. crowd-in,  consumer sovereignty vs. imperfect information, mortgage, tax deductions vs. tax credits, refundable credits, tax expenditures, the "marriage tax', tax incidence, statutory incidence, economic incidence, tax wedge, gross vs. after-tax prices, full shifting, own-price elasticity of demand and supply and the burden of taxation, factor tax incidence, minimum wage, monopoly markets, tax incidence in oligopolies, balanced budget incidence, partial equilibrium tax incidence, general equilibrium tax incidence, Congressional Budget Office (CBO), current vs. lifetime tax incidence.
	Reserve Readings: Lindbeck, Assar, "The Swedish Experiment", Journal of Economic Literature, 35:3 (September 1997), 1273-1319; McGuire, Martin C. and Mancur Olson, Jr., "The Economics of Autocracy and Majority Rule:  The Invisible Hand and the Use of Force," Journal of Economic Literature, 34:1 (March 1996), 72-96; Kniesner, Thomas J. and James P. Ziliak, "Tax Reform and Automatic Stabilization",  American Economic Review, 92:3 (June 2002), 590-612; Andreoni, James, Brian Erard, and Jonathan Feinstein, "Tax Compliance", Journal of Economic Literature, 36:2 (June 1998), 818-860.
	Application Modules: Effects of Alternative Tax Regimes;	
	Data Sets: Ownership of U.S. Public Debt; Tax Havens; 
	Sample Case Study: Optimal Excise Taxation; 

Class 11 -  Criteria for Optimal Tax Regimes 
(11/21/05)  Text (545-584)
	Key Terms:  deadweight loss of taxation, tax avoidance, marginal deadweight loss, pre-existing distortions, tax "smoothing", optimal commodity taxation, Ramsey taxation, Ramsey rule, value of additional government revenues, inverse elasticity rule, optimal income taxation, Laffer curve, tax benefit linkages.
	Reserve Readings: Acemoglu, Daron and James A.Robinson, "A Theory of Political Transitions", American Economic Review 91:4 (September 2001), 938-963; Pechman, Joseph A., "The Future of the Income Tax", American Economic Review, 80:1 (March 1990), 1-20; Persson,Torsten, Gerard Roland, and Guido Tabellini, "Comparative Politics and Public Finance", Journal of Political Economy, 108:6 (December 2000), 1121-1161; Ramsey, Frank P., "A Contribution to the Theory of Taxation", Economic Journal, 37:145 (March 1927), 47-61.
	Application Modules: 
	Data Sets: 
	Sample Case Study: Excise Tax Cuts;

Class 12 -  The Effects of Taxation on Labor Supply and Savings 
(11/28/05)  Text (585-632)
	Key Terms:  substitution and income effects on labor supply taxation, overtime pay rules, primary earners, secondary earners, quasi-experimental evidence, Earned Income Tax Credit (EITC), child care allowances, broadest definition of tax wedges, imputing home earnings, deductible child care costs.
	Reserve Readings: Shleifer,Andrei, "State versus Private Ownership", Journal of Economic Perspectives, 12:4 (Autumn 1998), 133-150.
	Application Modules: 
	Data Sets: U.S. Civilian Population; U.S. Civilian Labor Force; U.S. Union Membership
	Sample Case Study:

Class 13 -  The Effects of Taxation on Risk Taking and Wealth 
(12/05/05)  Text (633-656)
	Key Terms:  Retirement Savings Accounts (RSA), capital income taxation, intertemporal choice, intertemporal budget constraint, substitution and income effects of taxes on savings, nominal interest rate, real interest rate, precautionary saving models, liquidity constraints, self-control model, commitment devices, pension plan, tax subsidy to employer-provided pensions, defint benefit pension plan, defined contribution pension plan, 401(k) accounts, Individual Retirement Account (IRA), Keough accounts, Roth IRA, taxation and risk taking, basic financial investment model, expected return, less-than-full tax offset, tax loss offset, redistributive taxation, capital gains taxation, taxation on accrual, taxation on realization, basis, lock-in effect, prospective capital gains tax reduction, transfer tax, gift tax,  property tax, Tiebout model.
	Reserve Readings: Stiglitz, Joseph E., "The Private Uses of Public Interests:  Incentives and Institutions", Journal of Economic Perspectives, 12:2 (Spring 1998), 3-22.
	Application Modules: The Measurement of Risk;	
	Data Sets: Risk and Growth; World Profitability and Risk in Globalization; International R and D Patterns
	Sample Case Study:

Class 14 -  Corporate Taxation and Alternative Models of Tax Reform 
(12/12/05)  Text (657-718)
	Key Terms:  shareholders, agency problem, board of directors, debt finance, bonds, equity finance, dividend, capital gain, pure profits, economic profits, accounting profits, retained earnings, depreciation allowances, economic depreciation, depreciation schedules, expensing investments, investment tax credit (ITC), effective corporate tax rate, negative effective tax rates, Modigliani-Miller theorem, corporte tax integration, multinational firms, subsidiaries, territorial tax system, global tax system, foreign tax credit, repatriation, foreign dividend repatriation, transfer prices, tax compliance, tax evasion, Forbes flat tax, direct effect of tax changes, indirect effects of tax changes, tax shelters, transitinoal inequities, tax capitalization, transitional inequities from tax reform, Tax Reform Act of 1986 (TRA), consumption taxation, Value Added Tax (VAT), expenditure tax, cash-flow tax, flat tax.
	Reserve Readings: 
	Application Modules: U.S. National Income Accounting; 
	Data Sets: Income Differentials;
	Sample Case Study:
 TERM PAPER SUBMISSION DEADLINE.

***

Policies and Procedures:
	1.  Grading:   Mid-term examination	 25%
	   Final Examination:	             30% (Monday, 12/19/05, 19:45-21:45)
	   Term Paper:	35%
	   Class Participation	10%
1.	Term Paper:  Each student is to select, with prior approval by the instructor, a specific aspect of public management policy issues and prepare an analysis in terms of: past performance and effectiveness of policy, an assessment of present and future conditions, and recommendations for change within a well defined theoretical framework.  Each report is to be prepared in accordance with standard term paper usage, e.g., Kate Turabian's Manual for Term Papers and Theses.  The deadline for approval of the term paper topic is class 5. The deadline for the preliminary bibliography is class 8. A term paper outline reflecting the preliminary bibliography is due by class 9.  The final version of the paper is due no later than class 14, after which grading penalties accrue for each daily delay. 
3.    Office Hours: Office hours will be posted on the Current Course Materials website page, at the Department of Economics, and on my Partridge Hall office door.
Partridge Hall, Room 412.
	Office telephone:    (973 )–655-7778.  
	e-mail:  Lebelp@mail.montclair.edu

Reading List
The following materials are supplementary to the literature cited in the syllabus.  In addition to alternative texts and quantitative source materials are also identified.
1.	Texts on Public Finance: (see also:  Academic Publishers)
Aronsson, Thomas, Karl-Gustaf Löfgren, and Kenneth Backlund.  Welfare Measurement in Imperfect Markets.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2004).
Buchanan, J.M., and Flowers, M. The Public Finances, fourth edition. (Homewood Illinois: Richard D. Irwin, 1975).
Cullis, AJohn and Phillip Jones.  Public Finance and Public Choice, second edition.  (New York:  Oxford University Press, 1998).
Due, John F. and Friedlaender, Ann F. Government Finance: Economics of the Public Sector, seventh edition. (Homewood, Illinois: Richard D. Irwin, 1981).
Eckstein, Otto.  Public Finance, second edition. (Englewood Cliffs, New Jersey: Prentice-Hail, 1967).
Heilbroner, Robert L., and Bernstein.  Peter.  A Primer on Government Spending. (New York: Vintage Books, 1963).
Hyman, David N.  Public Finance, sixth edition.  (New York:  Harcourt Brace Jovanovich, 2004).
Just, Richard E., Darrell L. Hueth, and Andrew Schmitz.  The Welfare Economics of Public Policy.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2005).
Johansen, Leif.  Public Economics. (Chicago: Rand McNally and Company, 1965).
Lee, R.D. and Johnson, R.W. Public Budgeting Systems. (Baltimore, Maryland: University Park Press, 1973). 
Musgrave, Richard A. and Musgrave, Peggy B. Public Finance in Theory and Practice, fifth edition. (New York: McGraw-Hill, 1989).
Musgrave Richard.  Fiscal Systems. (New Haven: Yale University Press, 1968).
Rosen, Harvey. Public Finance, fifth edition.  (New York:  McGraw-Hill, 2006)
Shoup, Carl.  Public Finance. (Chicago: Aldine Publishing Company, 1969).
Stiglitz, Joseph E. Economics of the Public Sector, third edition.  (New York:  W.W. Norton Publishers, 2000). 
Tresch, Richard W. Public Finance: A Normative Theory, second edition. (New York:  Academic Press, 2002).

II.	Readers on Public Finance:
Ackerman, Frank, Neva R. Goodwin, Laurie Dougherty, and Kevin Gallagher.  The Political Economy of Inequality.  (Washington, D.C.:  Island Press, 20000.
Blinder Alan, editor.  The Economics of Public Finance. (Washington, D.C.: The Brookings Institution, 1974).
Goodin, Robert E. and Deborah Mitchell, editors.  The Foundations of the Welfare State.  (Northampton, Mass.:  Edward Elgar Publishing Company, 2000).
Ladd, Helen F.  Local Government Tax and Land Use Policies in the United States.  (Northampton, Mass.:  Edward Elgar Publishing Company, 1998).
Musgrave, Richard A., and Peacock, Allan T., editors.  Classics In the Theory of Public Finance. (New York: Macmillan Publishing Company, 1958).
David Newbery and Nicholas Stern. The Theory of Taxation for Developing Countries. (New York: Oxford University Press, for the World Bank, 1981).
Oates, Wallace.  The Economics of Fiscal Federalism and Local Finance.  (Northampton, Mass.:  Edward Elgar Publishing Company, 1998).
Joseph A. Pechman, editor.  Comparative Tax Systems: Europe, Canada, and Japan. (Arlington, Virginia: Tax Analysts, 1987).
Phelps, Edmund S., editor.  Private Wants and Public Needs, second edition. (New York: W.W. Norton and Company, 1965).
Schnitzer, Martin, and Chen, Yung-Ping, editors.  Public Finance and Public Policy Issues. (Scranton, Pennsylvania: lntext Publishers, 1972).

Ill.   Evaluation Criteria In the Public Economy:
Atkinson, Anthony B. The Economics of Inequality.  (Oxford:  Oxford University Press, 1983).
Arrow, K.J. Social Choice and Individual Values. (New Haven: Yale University Press, 1951, 1972).
Arrow, K., and Lind, R.C., 'Uncertainty and the Evaluation of Public Investment Decisions', American Economic Review (December 1970).
Arrow, K.  The Limits of Organizations.  (New York:  W.W. Norton and Company, 1974).
Bator, F.M., 'The Simple Analytics of Welfare Maximization', American Economic Review (March 1957): 22-59.
Bator, F.M., 'The Anatomy of Market Failure', Quarterly Journal of Economics 72 (August 1958): 351-379.
Baumol, W.J. Welfare Economics and the Theory of the State, second edition. (Cambridge, Massachusetts: Harvard University Press, 1969).
Baumol, W.J., 'On Taxation and the Control of Externalities', American Economic Review (June 1972).
Blank, Rebecca.  It Takes a Nation – A New Agenda for Fighting Poverty. (New York:  Russell Sage Foundation, 1997).
Boiteux, M., "On the Management of Public Monopolies Subject to Budgetary Constraint', Journal of Economic Theory (September 1971).
Borcherding, Thomas E.  “The Causes of Government Expenditure Growth:  A Survey of the U.S. Evidence,” Journal of Public Economics 28:3 (December 1985): 359-82.
Brent, Robert J.  Cost-Benefit Analysis and Health Care Evaluations.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2003).
Buchanan, J.M., and Tullock, G. The Calculus of Consent. (Ann Arbor: Ann Arbor Packerbacks, 1962, 1971).
Callen, J., Matthewson, G., and Mohring, H., 'The Benefits and Costs of Rate of Return Regulation', American Economic Review (June 1976).
Clarke, E.H., 'Multipart Pricing of Public Goods", Public Choice (Fall 1971).
Coase, R.H., 'The Problem of Social Cost', Journal of Law and Economics 2 (October 1960): 1-44.
Coase, R.H.  “The Lighthouse in Economics,” Journal of Law and Economics (October 1974): 357-76.
Cowen,Tyler and Eric Crampton, editors.  Market Failure or Success:  The New Debate.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2004).
Davis, O.A., and Whinston, A., "Externalities, Welfare, and the Theory of Games,” Journal of Political Economy 70 (June 1962): 241-262.
Diamond, P., and Mirlees, J., 'Optimal Taxation and Public Production', American Economic Review (March 1971).
Diamond, P., and McFadden, J., 'Some Uses of the Public Expenditure Function in Public Finance, Journal of Public Economics (February 1974).
Downs, A. An Economic Theory of Democracy. (New York: Harper and Row, 1957, 1974).
Feldstein, Martin, “Tax Avoidance and the Deadweight Loss of the Income Tax,” Working Paper No. 5055, (Cambridge, Mass.:  National Bureau of Economic Research, March 1995).
Fuchs, Victor R. Individual and Social Responsibility. (Chicago: University of Chicago Press, 1996).
Graaf, J. De V.  Theoretical Welfare Economics. (Cambridge: Cambridge University Press, 11957).
Green, J., and Sheshinski, Ed., 'Apportioning the Efficiency Gains of Tax Reforms', Journal of Public Economics (April 1979).
Hanushek, Eric A.  “Measuring Investment in Education,” Journal of Economic Perspectives 10 (Fall 1996): 9-30.
Hanushek, Eric A., editor. The Economics of Schooling and School Quality.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2003).
Hochman, H.M., and Rodgers, J.D., 'Pareto Optimal Redistribution', American Economic Review 59 (September 1969): 542-557.
Holtermann, S., 'Alternative Tax Systems to Correct for Externalities and the Efficiency of Paying Compensation', Journal of Public Economics (February 1976).
Johnsen, L., 'The Theory of Public Gooas: Misplaced Emphasis?' Journal of Public Economics (February 1977).
Johnes,  Geraint and Jill Johnes, editors.  International Handbook on the Economics of Education.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2004).
Jorgenson, Dale W. and Kun-Young Yun, “The Excess Burden of Taxation in the United States,” Journal of Accounting, Auditing and Finance 6: 4 (Fall 1991): 487-508.
Kemp, M.C., and Ng, Y-K, 'On the Existence of Social Welfare Functions and Social Decision Functions',Economica (February 1976).
Kemp, M.C., and Ng, Y-K, 'More on Social Welfare Functions: The Incompatibility of Individualism and Ordinalism', Economica (February 1977).
Krauss, M, and Mohring, H., 'The Role of Pollution Taxes in Externalties Problems', Economica (May 1975).
Lipsey, R.O., and Lancaster, K., 'The General Theory of the Second Best', Review of Economic Studies 24 (December 1956): 1-32.
Little, I.M.D. A Critique of Welfare Economics. (Oxford: Oxford University Press, 1950, 1973).
Maital, S., 'Apportionment of Public Goods Benefits to Individual", Public Finance 3 (1975).
Marglin, S., 'The Opportunity; Costs of Public Investment', Quarterly Journal of Economics (May 1963).
Margolis, J. The Analysis of Public Output. (New York: National Bureau of Economic Research, 1970).
Markandya, Anil and  Marialuisa Tamborra.  Green Accounting in Europe.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2005).
Miliband, Ralph.  The State In Capitalist Society. (New York-.  Basic Books, 1969).
Mueller, Dennis., 'Public Choice: A Survey', Journal of Economic Literature, (June 1976).
Mueller, Dennis.  The Public Choice Approach to Politics.  (Northampton, Mass.:  Edward Elgar Publishing Company, 1993).
Murray, Charles A.  Losing Ground: American Social Policy, 1950-1980.  (New York:  Basic Books, 1984).  
Netzer, Dick.  The Property Tax, Land Use, and Lang Use Regulation.  (Northampton,  Mass.:  Edward Elgar Publishing, Inc. 2003).
Ng, Y-K, 'The Paradox of Universal Externalities', Journal of Economic Theory (April 1975).
Nozick, Robert.  Anarchy, State, and Utopia. (New York: Basic Books: 1974).
Parker, David and David Saal, editors.  International Handbook on Privatization.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2005).
Pigou, Arthur Cecil. The Economics of Welfare, fourth edition. (London: MacMillan and Company, Ltd., 1932).
Rawis, John.  A Theory of Justice. (Cambridge, Massachusetts: Harvard University Press, 1971).
Rein, Martin and Winfried Schmäl.  Rethinking the Welfare State:  The Political Economy of Pension Reform.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2004).
Rogerson, William P.  “Economic Incentives and the Defense Procurement Process,” Journal of Economic Perspectives 8 (Fall 1994): 65-90.
Samuelson, Paul A. , The Pure Theory of Public Expenditure', Review of Economics and Statistics 36 (November 1954).
Samuelson, Paul A., 'A Diagrammatic Exposition of a Theory of Public Expenditures', Review of Economics and Statistics 37 (November 1955): 350-356.
Samuelson, Paul A., 'Social Indifference Curves', Quarterly Journal of Economics (February 1956).
Samuelson, Paul A., 'Reaffirming the Existence of 'Reasonable' Bergson-Samuelson Social Welfare Functions', Economica (February 1977).
Sandmo, A., 'Optimal Taxation', Journal of Public Economics (JulyAugust 1976).
Sen, Amartya K. Inequality Revisited.  (Oxford:  The Clarendon Press, 1997).
Slemrod, Joel, “Do We Know How Progressive the Income Tax System Should Be?” National Tax Journal 36:3 (September 1983): 361-70.
Stiglitz, Joseph and Dasgupta, Partha, 'Differential Taxation, Public Goods and Economic Efficiency', Review of Economic Studies (April 1971).-
Tachibanaki, Toshiaki, editor.  The Economics of Social Security in Japan.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2004).
Tideman, T.N, and Tullock, G., 'A New and Superior Proces for Making Social Choices', Journal of Political Economy (December 1976).
Thurow, Lester, "The Income Distribution as a Pure Public Good', Quarterly Journal of Economics 85 (May 1971): 327-336.
Tiebout, Charles, “A Pure Theory of Local Expenditures,” Journal of Political Economy 63 (1956): 416-24.
Viscusi, W. Kip,  “The Value of Risks to Life and Health,” Journal of Economic Literature 31 (December 1993): 1912-46.
Winter, Stanley L., and Hirofumi Shibata.  Political Economy and Public Finance.  (Northampton, Mass.:  Edward Elgar Publishing, Inc., 2003).

IV.	Quantitative Methods of Public Accounting and Evaluation:
Boardman, Anthony E, David H. Greenberg, Aidan R. Vining, and David  Weimer.  Cost-Benefit Analysis:  Concepts and Practice.  (New York:  Prentice-Hall, 1996).
Partha Dasgupta, S. Marglin, and A. Sen. Guidelines for Program Evaluation. (New York: United Nations, 1972).
Folland, Sherman, AllenC. Goodman, and Miron Stano.  The Economics of Health and Health Care.  (New York:  Macmillan Publishing Company, 1993).
Gass, S.I., and Sisson, R.L. A Guide to Models In Government Planning and Operations. (Washington, D.C.: Environmental Protection Agency, 1971).
Goldman, T.A. Cost-Effectiveness Analysis. (New York: Praeger Publishers 1967, 1971).
Layard, R, editor.  Cost-Benefit Analysis. (Baltimore, Maryland: Penguin Books, 1972).
Lee, Robert D., Jr., and RonaldW. Johnson.  Public Budgeting Systems, sixth edition.  (Gaithersburg, Maryland:  Aspen Publishers, 1998).
I.M.D. Little and J.A. Mirrlees.  Project Appraisal and Planning for Developing Countries. (London: Heinemann, 1974).
Mishan, E.J. Cost-Benefit Analysis, second edition. (New York: Praeger Publishers, 1976).
Musgrave, R.A., 'Cost-Benefit Analysis and the Theory of Public Finance', Journal of Economic Literature 7 (September 1969): 797-806.
Pechman, J.A. Federal Tax Policy, third edition. (Washington, D.C.: The Brookings Institution, 1977).

	V.	The Incidence of Taxation:
Aaron, Henry J. Who Pays the Property Tax? (Washington, D.C.: The Brookings Institution, 1 974).
Aaron, H.T. Shelters and Subsidies: Who Benefits from the Federal Housing Subsidies? (Washington, D.C.: The Brookings Institution, 1972).
Aaron, Henry J. and William G. Gale, editors.  Economic Effects of Fundamental Tax Reform (Washington, D.C.:  The Brookings Institution, 1996)
Anthony B. Atkinson and Joseph E. Stiglitz.  Lectures in Public Economics. (New York: McGraw-Hill, 1980).
Anthony B. Atkinson.  Public Economics in Action.  (Oxford:  Oxford University Press, 1996).
Advisory Commission on Intergovernmental Relations, Measuring the Fiscal Capacity and Effort of State and Local Areas. (Washington, D.C.: U.S. Government Printing Office, 1972).
Break, George F., and Pechman, Joseph A. Federal Tax Reform. (Washington, D.C.: The Brookings Institution, 1975).
Center for Local Tax Resources.  Effective Real Property Tax Rates In the Metropolitan Area of New York. (New York: CLTR, 1976).
Gayer, D. The Burden of Now York City Taxes and Expenditures. (New York: Community Service Society, April 1976).
Goode, Richard.  The Individual Income Tax, revised edition. (Washington, D.C.: The Brookings Institution, 1976).
Gramlich, Edward.  'The New York City Fiscal Crisis: What Happened and What is to be Done?' American Economic Review (May 1976): 415-429.
Hall, Robert E., and Alvin Rabushka, The Flat Tax, 2nd ed.  (Stanford, California:  Hoover Institution Press, 1995).
Hamilton, K. Recommendations for a More Equitable Real Estate Tax System. (New York: Community Service Society, January 1978).
Joint Economic Committee, U.S. Congress.  The Economics of Federal Subsidy Programs. (Washington, D.C.: U.S. Government Printing Office, 1972).
Lynn, A.D. Property Taxation, Land Use, and Public Policy. (Madison, Wisconsin: University of Wisconsin Press, 1976).
Poterba, James M., “Taxation and Housing,” American Economic Review (May 1992):  237-42.
Schiff, G. Value-Added Taxation In Europe. (Washington, D.C.: The American Enterprise Institute, 1973).

VI.	National Income Theory and Policies:
Barro, Robert J.  Macroeconomics, second edition.  (New York:  John Wiley and Sons,1987).
Branson, William H.  Macroeconomic Theory and Policy, third edition.  (New York:  Harper & Row, 1989).
Colander David C.  Macroeocnomics.  (Glenview, Illinois:  Scott, Foresman and Company, 1986).
Dernberg, Thomas A., and McDougall, D.M. Macroeconomics, sixth edition. (New York: McGraw-Hill, 1980).
Dombusch, Rudiger and Fischer, Stanley.  Macroeconomics, second edition. (New York: McGraw-Hill, 1981).
Gordon, Robert J. Macroeconomics, sixth edition. (Boston: Little, Brown and Company, 1994).
Hall, Robert E., and John B. Taylor, Macroeconomics, fourth edition.  (New York:  W.W. Norton and Company, 1993).
Heal, Geoffrey M.  The Theory of Economic Planning.  (Amsterdam:  North-Holland Publishing Company, 1979).
David B. Johnson.  Public Choice: An Introduction to the New Political Economy. (Mountain View, California: Mayfield Publishing Company, 1991).

VII. 		Book Chapter Sources:
Henry Aaron and Martin McGuire. Public Goods and Income Distribution. (Washington, D.C.: (The Brookings Institution, 1971).
Henry J. Aaron and Joseph A. Pechman, editors. How Taxes Affect Economic Behavior. (Washington, D.C.: The Brookings Institution, 1981).
Alan J. Auerbach and Joel Slemrod, “The Economic Effects of the Tax Reform Act of 1986”, Journal of Economic Literature XXV (June 1997): 589-632.
Edward M. Gramlich.  A Guide to Benefit-Cost Analysis, second edition.
       (Englewood Cliffs, New Jersey: Prentice-Hall, 1990).
Anthony F. Herbst. Capital Budgeting: Theory, Quantitative Methods, and Applications. (New York: Harper & Row, 1982).
E.J. Mishan. Cost-Benefit Analysis, third edition.. (New York: George Allen and Unwin, 1982).
Richard A. Musgrave and Peggy B. Musgrave. Public Finance in Theory and Practice, fifth edition. (New York: McGraw-Hill, 1989).
Joint Economic Committee. The Analysis and Evaluation of Public Expenditures: The PPB System, volume 1. (Washington, D.C.: U.S. Govt. Printing Office, 1969).

VIII.    Quantitative Source Materials: (see also:  Useful Economic Data Links)
Blechman, Barry M., Gramlich, Edward M., and Joseph A. Pechman. Setting National Priorities: The 1982 Budget. (Washington, D.C: The Brookings Institution, 1981).
Council of Economic Advisors.  Economic Report of the President, annual. (Washington, D.C.: U.S. Government Printing Office).
Office of Management and Budget.  The Budget of the United States Government. (Washington, D.C.: U.S. Government Printing Office).
The Tax Foundation.  Facts and Figures on Government Finance, occasional. (Washington, D.C.: The Tax Foundation).
U.S. Bureau of the Census:
 a.	Government Finances
         b.      State Government Finances
         c.      State Tax Collections
	 d.      City Government Finances
              (Washington, D.C.: U.S. Government Printing Office).

IX.  Periodicals: (see also:  On Line Journals)
American Economic Review
Economica
Economic Journal
Journal of Economic Literature
Journal of Economic Theory
Journal of Finance
Journal of Political Economy
Journal of Public Economics
National Tax Journal
Public Finance
Public Choice
Quarterly Journal of Economics
Review of Economics and Statistics
Review of Economic Studies