UST 893 PUBLIC FINANCE SEMINAR

UST 893 PUBLIC FINANCE SEMINAR - FALL 1998

PRELIMINARY DRAFT OF SYLLABUS

(Please note that this syllabus is subject to change prior to the beginning of the course)

Professor Michael Spicer-UB 110
Telephone: 687-2106
892-9640 (Weekdays before 6pm)
Office Hours:
Wednesday 4.30- 6p.m.
Thursday 4- 6 p.m.
or by appointment
mike@urban.csuohio.edu

OBJECTIVES

1. To provide a broad understanding of concepts, issues and topics relevant to the study of public finance and budgeting.
2. To provide an exposure to important literature in public finance and budgeting.
3. To provide a critical view of the way in which public finance scholars view the world and the nature of knowledge.
4. To provide insight into the nature of the activity of research in public finance.

READINGS

1. Texts
a. Baker, Samuel and Catherine Elliot. Readings in Public Sector Economics.(Heath, 1990). (B&B). This text provides direct access to the writings of many prominent authors in the field and enables readers to see first hand the arguments in public finance made by their advocates. The articles also provide a good basis for discussion.
b. Buchanan, James M. What should Economists Do? (Liberty Press, 1979). In this book, Buchanan, a leading writer in public finance and one of the founders of public choice economics, reflects on methodological and philosophical issues in economics, public finance, and public choice. The book is included as a means of raising questions about the role that economics as a discipline should play in social problem-solving and its limits as a social science.
c. Hayek, Friedrich A. The Essence of Hayek. Edited by Chiaki Nishiyama and Kurt R. Leuve. (Hoover Institution, 1984). Hayek provides an unorthodox and controversial view of public policy, economics and knowledge. The book is included as a means of raising important questions about how economists and other social scientists view issues of public finance, and demonstrating the value of entertaining alternative frameworks for viewing reality.
d. Hyde, Albert. Government Eudgeting. (Wadsworth, 1992). This text provides direct access to a number of classic and also recent articles in the area of public budgeting and finance written by economists, political scientist, and public administrationists. This book is included to provide alternative perspectives on public finance and budgeting issues and provides a good basis for discussion.
2. Library Reserve Readings
a. Friedman, Milton.Essays in Positive Economics.(University of Chicago Press, 1966 [1953])
b. Hayek, Friedrich A. Individualism and Economic Order. (University of Chicago Press, 1948).
c. Packet of Assorted Articles

GRADING

Grades for the course will be on an A-B-C-F scale. Pluses or minuses will be listed on grades assignments for advisory purposes only.

ASSIGNMENTS

1. Participants are asked to write two short essays (each 5 to 8 pages typed double-spaced, not including references). The essays should be in response to two of the questions listed at the back of the syllabus; one from section A and the second from section B. Essays should be typed, concise and to the point. Participants at the doctoral level should cite, where relevant, authors and articles or books associated with particular arguments. The first essay is due on October 14, at latest. The second essay is due on December 16. At this time or earlier, a revised draft of the first essay may also be submitted at the participant~s discretion (Each essay counts for 25% of your grade at the masters level and 15% of your grade at the doctoral level)

2. Participants are also asked to write a review on a book which I shall assign. Books assigned can be obtained through the University or Cleveland public libraries. the review should summarize the major points addressed in the book and provide an assessment of its strengths and limitations. The review should selectively cite quotations from the author to support the points made. Participants should be prepared to make a 15 to 20 minute oral presentation of the review on the session assigned. The written review should run from ten to twelve pages (double-spaced) and is due December 9. Participants should also write a one page (single-spaced) summary of their reviews and make 10 copies for distribution to their colleagues (This assignment will count for 40% of your grade at the masters level and 20% of your grade at the doctoral level).

3. Participants at the doctoral level are asked to write a research paper on a research topic or question of interest to them. This paper should draw extensively on the readings in economics and public finance to develop a theoretical argument relevant to their topic and should review empirical evidence relevant to the argument. This exercise may be used to develop a literature review and theoretical framework for your dissertation prospectus.

In lieu of the research paper, participants may write a paper on the ideas of a major philosopher or economic or political writer and their potential relevance to some important aspect or aspects of public finance or budgeting. This paper again my be useful in developing a foundation for your dissertation prospectus. Possible writers might include Adam Smith, Alexander Hamilton, James Madison, John Locke, David Hume, Jean-Jacques Rousseau, Michael Oakeshott, Hegel, August Comte, Adam Ferguson, Herbert Spencer. For an attempt of my own to do this in respect to Hayek, see "On Hayek and Taxation: in the March 1995 issue of the National Tax Journal.

Whichever option is selected, the paper should run from fifteen to twenty double-spaced typewritten pages. Participants should let me know in writing of their topic by September 23 and should be prepared to make an oral presentation of their paper and to distribute 10 copies of a one-page abstract on December 9 when the paper is also due (40% of your grade). Masters students may elect if they wish to write a research paper.

4. Participants will be called upon each session and should be prepared to discuss questions on particular readings assigned. the quality of your responses will count for 10% of your grade.

TEACHING APPROACH

This is a doctoral level course. As such, it provides an opportunity for you to engage in a structured program of reading and to participate in a discussion of ideas. It is important that you independently seek a grasp on these ideas and, therefore, you must take the time to read and think about the readings assigned. My lectures will be relatively few and will tend to focus on further applications of some of the ideas raised in the readings, taken from my own research. I will also discuss how I put together this research. In this way, I hope you may gain a better understanding the nature of the research process from at least one particular perspective and help you in your own research endeavors.

SESSIONS

Readings are to be completed prior to the session for which they are assigned.

Session 1:

Introduction.Review of economic concepts.
Text Readings: B & E, Introduction: Students feeling rusty may wish to acquire and review a standard introductory text in economics.
Outside Readings: Richard A. Musgrave and Peggy B. Musgrave. Public Finance in Theory and Practice. Fifth Edition (McGraw Hill, 1989), Chapter 1.

Session 2:

Epistemology of economics and social science: ways of knowing.
Text readings: B & E 1 (Alec Cairncross), ; Buchanan 2, 3, 5; Hayek, 12.
Outside Readings: Milton Friedman. "Methodology in Positive Economics," in Milton
Friedman, Essays in Positive Economics, (University of Chicago Press, 1953).
Friedrich A. Hayek. "Facts of the Social Sciences," in Friedrich
Hayek, Individualism and Economic Order (University of Chicago Press, 1948).

Session 3:

The nature of the economic problem. The role of markets in resource allocation. The importance of worldviews
Text readings: B & E 4 (Karl Brunner and William Meckling); Buchanan 1, 4; Hayek 7, 11, 13.
Book Presentation: Thomas Sowell. A Conflict in Visions. (Morrow, 1987)

Session 4:

Public Goods
Book Presentation: Douglass North. Institutions, Institutional Change and Economic Performance. Cambridge University Press. 1990.
Text Readings: B & E, 2 (Kenneth Arrow), 13 (John Head), 21 (Foley); Buchanan, 11, 12; Hayek, 17.

Session 5:

Externalities
Text Readings: B & E 8 (Hardin), 9 (Ronald Coase), 10 (Turvey), 12(Farrell)
Outside Readings: Ernest Sternberg. "Justifying Public Intervention without Externalities." Public Administration Review, Vol. 53. 1993: 100-109.

Session 6:

Equity₁the Distribution of Income and Redistributional Policies.
Book Presentation: Richard Rorty. Contingency, Irony, and Solidarity. Cambridge University Press. 1989
Text Readings: B & E, 19 (Kenneth Arrow), 20 (John Rawis), 32 (Ellwood and Summers); Buchanan, 13; Hayek, 5, 18.
Outside Readings: Musgrave and Musgrave.Public Finance in Theory and Practice. Chapter 6.

Session 7:

Budgetary Process
Text Readings: Hyde, 1 (Frederick Cleveland), 2 (William Willoughby), 3 (Key), 5 (Aaron Wildavsky), 16 (Bernard Pitsvada);B & E, 28 (Alice Rivlin) ; Hayek, 4

Session 8:

Budgetary Reform
Book Presentation: Aaron Wildavsky. The New Politics of the Budgetary Process (Harper Collins, 1991)
Text Readings: Hyde, 4 (Verne Lewis), 6 (Allen Schick), 9 (Irene Rubin), 31 (Graeme Taylor), 36 (Donald Axeirod), 37 (Allen Schick), 38 (Aaron Wildavsky),
Outside Readings: Dan Cothran, "Entrepreneurial Budgeting: An Emerging Reform?"Public Administration Review, September/October 1993, Vol. 53;445-454.

Session 9:

The Role of Economics Analysis.
Book Presentation: Charles L. Schultze. The Politics and Economics of Public Spending.(Brookings, 1968).
Text Readings: B & E, 25 (Arrow); Hayek, 14, 16.
Outside readings: Steven E. Rhoads. "Do Economists Overemphasize Monetary Benefits."Public Administration Review. November/ December 1985, Vol. 45:815-820
Aaron Wildavsky. "Policy Analysis is What Information Systems are not," and "Between Planning and Politics" in Speaking Truth to Power. (Little Brown, 1979), Chapters 1, 5.
Alan Williams. "Cost-Benefit Analysis: Bastard Science? And/Or Insidious Poison in the Body Politick?" Journal of Public Economics. August, 1972. Vol. 1: 199-226

Session 10:

Public Choice and Fiscal Politics.
Book Presentation: Mancur Olson.The Rise and Decline of Nations (Yale University, 1982)
Text Readings: B & E, 3 (James Buchanan), 14 (Mancur Olson), 22(Steen), 30 (Thomas Borchdering et al.); H, 19 (Anthony Downs), 20(James Buchanan)

Session 11:

Public Choice and Fiscal Politics (cont'd.)
Text readings: B&E, 5 (Steven Kelman); Buchanan 9, 10, 15; Hayek 19, 20, 21

Session 12:

Taxation
Text Readings: B & E, 33 (Gary Burtless and Robert Haveman), 34(Hafer and Trebing), 38 (Goode), 39 (Pechman), 40 (Musgrave); Hyde,25(Alice Rivlin)
Outside Readings: Walter Hettich and Stanley Winer. "Blueprints and Pathways: The Shifting Foundations of Tax Reform." National Tax Journal, December, 1985, Vol. 38: 423-445.

Session 13:

Government Debt
Text Readings; B & E, 37 (Randall Holcombe et al.); Hyde, 14(Stockman), 23 (William Keech) , 26 (Charles Schultze), 27 (Robert Eisner)

Session 13:

Fiscal Federalism
Book Presentation: Vincent Ostrom. The Intellectual Crisis in Public Administration. (University of Alabama Press, 1973).
Text Readings: B & E, 41 (Wallace Oates), 42 (Charles Tiebout) , 43(Charles McClure); Hyde, 17 (Richard Nathan and John Lago), 18(John Shannon and Edwin Kee), 22 (Roy Bahl).
Outside reading: Friedrich Hayek. "Interstate Federalism," in Friedrich Hayek, Individualism and Economic Order, University of Chicago Press, 1948

ESSAY QUESTIONS

SECTION A
1. Discuss the role of theory and facts in investigating questions in economics and public finance. Discuss some of the contributions and limitations of economic theory in general as a way of looking at the world.
2. Explain the economist's view of the appropriate role of government finance in society. Assess the strengths and limitations of this view.
3. Discuss critically both the various meanings and role of social justice or equity as a guide to public polity.
4. What is meant by the term "public choice" in economics. Discuss some of the major propositions of public choice theory and the contributions and limitations of the public choice approach to issues of public finance and public policy.

SECTION B 5. Since the early part of this century, a variety of efforts have been made to introduce a greater degree of rationality and planning into the budgetary process. Describe these efforts briefly and provide a critical assessment of these efforts.
6. Explain briefly the characteristics of cost-benefit analysis. Provide an assessment of its contributions and limitations as a tool for public policy.
7. Discuss the principles which economists use to evaluate tax structures. Provide a critical assessment of the usefulness of these principles.
8. Discuss the economic arguments for centralization and decentralization in the structure of government. Provide a critical assessment of these arguments.