Public Finance

Author: Guo Qingwang
Publisher:
Publish Date: 2002-07-01
Features: After three years of effort, we have finally completed the writing of this Public Finance. Although we had long planned to write a textbook on public finance and had been continuously thinking and accumulating relevant content over the past decade, putting it into practice still felt challenging. Despite the many insights we gained during the writing process, we did not want to write a lengthy preface but rather wanted to briefly outline the chapter structure and main features of the book. One of the key economic phenomena of the 20th century was the rapid expansion of government departments: in developed economies, government departments became powerful economic entities; in developing economies, the share of economic resources mobilized by government departments has been steadily increasing. The economic theory analysis of government functions primarily focuses on four aspects: (1) examining the trend of growing government size and its control; (2) analyzing the impact of government financing methods on social welfare; (3) exploring the effects of government revenue and expenditure activities on private economic activities and social resource allocation; (4) studying the fiscal and monetary policies governments implement to achieve economic stability and growth. The theoretical analysis surrounding these issues constitutes the main content of public finance. This book is divided into four parts. Part I (Chapters 1 and 2) primarily clarifies the role of the government in a market economy, with a focus on the fiscal functions under market conditions. Part II (Chapters 3 to 7) provides a theoretical framework for analyzing fiscal expenditures, and subsequently explores the scale, structure, efficiency, and economic impact of fiscal expenditures. Part III (Chapters 8 to 13) examines the fundamental theories of taxation, including tax principles, tax shifting and incidence, and tax effects, while also discussing institutional issues such as tax system development and reforms. Part IV (Chapters 14 to 16) comprehensively explores theoretical issues related to fiscal outcomes, including fiscal imbalances, fiscal deficits, public debt, and fiscal policy. Since this book is designed for undergraduate students of public finance, the content selected emphasizes theoretical rigor and cutting-edge research. Some topics are not covered in this book, such as the fiscal relationship between central and local governments, which we plan to address as a key focus in the upcoming Public Economics textbook for the 21st Century Curriculum Textbooks—Public Administration Courses in Higher Education.
Key Features of This Book
First, this book primarily adopts the method of welfare economics. Currently, there are two main approaches to writing public finance textbooks internationally: one based on welfare economics and the other based on public choice theory, the latter having gained popularity only in the past decade. Popular public finance textbooks written based on welfare economics include Musgrave's Public Finance Principles (1959), Tricker's Public Finance Theory (1981),'s Public Economics (1979), Stiglitz's Public Sector Economics (1986), and Rosen's Public Finance (revised multiple times since 1985). Public finance textbooks written based on public choice theory mainly include Jackson's Public Economics (1990), Holcombe's Public Economics (1979), and Currie et al.'s Public Finance and Public Choice (1998). This book still primarily follows the method of welfare economics, using public choice theory to explain specific issues when necessary.
Second, this book follows the sequence of expenditure → revenue → balance → policy. After Musgrave's Public Finance Principles was published and until the early 1970s, fiscal policy occupied a significant portion of public finance textbooks. However, due to the development of macroeconomics, to avoid repetition with macroeconomic content, fiscal policy was rarely discussed in subsequent textbooks. This book also touches on major issues of fiscal policy, but only from the perspective that fiscal imbalances are a common phenomenon → fiscal imbalances are often manifested as fiscal deficits → the existence of fiscal deficits is often the result of governments intentionally implementing fiscal policies. As for fiscal management, since there are specialized courses on budgets, fiscal management, or tax management, and it also falls outside the scope of public finance as an economics course, the content on management is relatively limited.
Third, this book focuses on economic analysis with supplementary descriptive content, avoiding prescriptive or advisory analysis. In our view, as a textbook, it is best to discuss universal,, and long-term concepts, primarily explaining what and why, leaving the solutions to real-world problems to policymakers rather than general textbooks.
Fourth, as a foundational course in public finance, the emphasis is on introducing and analyzing fundamental knowledge, theories, and methods. Therefore, this book strictly adheres to these requirements, leaving some basic skills, operational methods, and institutional descriptions to be covered in related courses.
Fifth, this book strives to integrate new data, new methods, new perspectives, and new developments in its writing.
Sixth, in each chapter's review questions, some are for reviewing the chapter content, while others require students to analyze and reflect on real-world issues and their solutions based on the chapter material.
Seventh, the book includes statistical tables and a large number of references at the end, for readers interested in further research to consult the original sources and conduct further analysis based on the provided data.