Gruber4e Ch01
Public Finance and Public Policy Jonathan
CopyrightGruber
© 2012 Fourth
WorthEdition
Publishers
Copyright © 2012 Worth Publishers
1 of 32
Why Study Public Finance?
1
1.1 The Four Questions of Public Finance
1.2 Why Study Public Finance? Facts on Government in the United States and Around the World
1.3 Why Study Public Finance Now? Policy Debates over
Social Security, Health Care, and Education
1.4 Conclusion
PR E PAR E D BY
Dan Sacks
Public Finance and Public Policy Jonathan Gruber Fourth Edition Copyright © 2012 Worth Publishers
2 of 32
1.1
C HAPT E R 1 ■ W HY ST U DY PU B LI C E C O N O M I C S ?
The Four Questions of Public Finance
• Public finance: The study of the role of the government in the economy.
Four questions of public finance:
1. When should the government intervene in the economy? 2. How might the government intervene?
3. What is the effect of those interventions on economic outcomes? 4. Why do governments choose to intervene in the way that they do?
Public Finance and Public Policy Jonathan Gruber Fourth Edition Copyright © 2012 Worth Publishers
3 of 32
1.1
C HAPT E R 1 ■ W HY ST U DY PU B LI C E C O N O M I C S ?
When Should the Government Intervene in the
Economy?
• Economics generally presumes that markets deliver efficient outcomes, so why should government do anything? • Primary motive for government intervention is therefore market failure.
• Market failure: Problem that causes the market economy to deliver an outcome that does not maximize efficiency.
Public Finance and Public Policy Jonathan Gruber Fourth Edition Copyright © 2012 Worth Publishers
4 of 32
1.1
C HAPT E R 1 ■ W HY ST U DY PU B LI C E C O N O M I C S ?
APPLICATION: The Measles Epidemic of 1989−1991
• Measles vaccine introduced in 1963, and measles cases had become relatively rare in the United States by the 1980s.
• 1989−1991: Huge resurgence in measles.
• This outbreak resulted from very low immunization rates among disadvantaged inner-city youths.
•
CopyrightGruber
© 2012 Fourth
WorthEdition
Publishers
Copyright © 2012 Worth Publishers
1 of 32
Why Study Public Finance?
1
1.1 The Four Questions of Public Finance
1.2 Why Study Public Finance? Facts on Government in the United States and Around the World
1.3 Why Study Public Finance Now? Policy Debates over
Social Security, Health Care, and Education
1.4 Conclusion
PR E PAR E D BY
Dan Sacks
Public Finance and Public Policy Jonathan Gruber Fourth Edition Copyright © 2012 Worth Publishers
2 of 32
1.1
C HAPT E R 1 ■ W HY ST U DY PU B LI C E C O N O M I C S ?
The Four Questions of Public Finance
• Public finance: The study of the role of the government in the economy.
Four questions of public finance:
1. When should the government intervene in the economy? 2. How might the government intervene?
3. What is the effect of those interventions on economic outcomes? 4. Why do governments choose to intervene in the way that they do?
Public Finance and Public Policy Jonathan Gruber Fourth Edition Copyright © 2012 Worth Publishers
3 of 32
1.1
C HAPT E R 1 ■ W HY ST U DY PU B LI C E C O N O M I C S ?
When Should the Government Intervene in the
Economy?
• Economics generally presumes that markets deliver efficient outcomes, so why should government do anything? • Primary motive for government intervention is therefore market failure.
• Market failure: Problem that causes the market economy to deliver an outcome that does not maximize efficiency.
Public Finance and Public Policy Jonathan Gruber Fourth Edition Copyright © 2012 Worth Publishers
4 of 32
1.1
C HAPT E R 1 ■ W HY ST U DY PU B LI C E C O N O M I C S ?
APPLICATION: The Measles Epidemic of 1989−1991
• Measles vaccine introduced in 1963, and measles cases had become relatively rare in the United States by the 1980s.
• 1989−1991: Huge resurgence in measles.
• This outbreak resulted from very low immunization rates among disadvantaged inner-city youths.
•