Public Finance (Textbook for the 21st Century Curriculum): (Textbook for the 21st Century Curriculum)

Author: Guo Qingwang
Publisher:
Publish Date: 2004-04-01
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 provided an overview of the book's chapter structure and main features. One of the main economic phenomena of the 20th century was the rapid expansion of government departments: in developed economies, government departments became strong economic entities; in developing economies, the share of economic resources mobilized by government departments was increasingly expanding. The economic theory analysis of government functions primarily focuses on four aspects: (1) examining the trend of increasing 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 fiscal and monetary policies to achieve economic stability and growth. The theoretical analysis centered around 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 economy conditions. Part II (Chapters 3 to 7) provides a theoretical framework for analyzing fiscal expenditures, and subsequently explores aspects such as 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 conducting theoretical discussions on tax system development and reforms, particularly addressing institutional issues. Part IV (Chapters 14 to 16) comprehensively examines theoretical issues related to fiscal revenue and expenditure outcomes, including fiscal imbalances, fiscal deficits, public debt, and fiscal policy. Since this book is designed for undergraduate students majoring in public finance, the content selected emphasizes theoretical rigor and cutting-edge perspectives. 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 for Higher Education.
The features of this book are as follows:
First, the 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 become popular only in the past decade. Popular public finance textbooks written based on welfare economics include Public Finance by Musgrave (published in 1959), Fiscal Theory by Truscott (published in 1981), Public Economics by (published in 1979), Public Sector Economics by Stiglitz (published in 1986), and Public Finance by Rosen (revised multiple times since 1985); public finance textbooks written based on public choice theory mainly include Public Economics by Jackson (published in 1990), Public Economics by Holcombe (published in 1979), and Public Finance and Public Choice by Koo et al. (published in 1998). This book still primarily adopts the method of welfare economics, using public choice theory to explain specific issues only occasionally.
Second, the book follows the sequence of expenditure → revenue → balance → policy. After the publication of Musgrave's Public Finance 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 public finance textbooks. This book also addresses some key 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 government consciously implementing fiscal policies. As for fiscal management, since there are specialized courses on budgets, fiscal management, or tax management, and it also exceeds the scope of public finance as an economics course, the content on management is relatively limited.
Third, the book focuses on economic analysis with supplementary descriptive content, avoiding prescriptive or advisory analyses. In our view, as a textbook, it is best to discuss universal, regular, 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 three requirements, leaving some basic skills, operational methods, and institutional descriptions to be covered in related courses.
Fifth, the book strives to integrate new data, new methods, new perspectives, and new developments in its writing.
Sixth, in each chapter's review and discussion questions, some are for reviewing the chapter content, while others require students to analyze and think about 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 to assist readers interested in further research to consult the original sources and conduct additional analyses based on the provided data.