What Is Public Economics?

Economics of the Public Sector is also known as government economics and public sector economics.

Public economics

(Public Sector Economics)

Western economics divides all economic entities into two categories: the public sector, the private sector, the former refers to the government and its appendages, and the latter refers to enterprises and households. Both the government and enterprises and families participate in the operation of the national economy in their own ways, affecting the development of the national economy. But they behave differently and with different purposes. Enterprises and residents aim to maximize profits, have strong interest motive, and naturally behave in a way that benefits them. The government is different. It exists mainly for the purpose of society. Of course the economic activity of the government cannot be completely ignored

1. Public economics is a discipline that mainly studies government and its behavior.

Governments and markets also suffer from failures, so scientific research on government behavior is needed. Public economics needs to address such questions: why should governments interfere in economic life? When to intervene? How to intervene? What is the scope, method, approach and effect of the government's economic activities?

2. Public economics is an economic approach to government economic behavior.

People can study the government from many angles, such as from the perspective of sociology, from the perspective of politics. However, economics believes that people complete their own transactions in commodity-money relations through rational egoism and the use of price and competition mechanisms. The government plays a service role, and the government is a service government.

3. Public economics pays more attention to research on practical issues.

Public economics research uses a large number of methods to provide issues such as public goods, government price controls, externalities and government behavior, government policies and economic freedom, and rent-seeking. These methods have played a great role in solving practical problems, such as the use of principal-agent theory, game theory, information theory, public choice theory, and institutional economics theory. The government, as the subject of economic activities, also urgently needs such theories to guide its practice in the actual work, which can not only fulfill the goals of society, but also improve economic benefits.

The mixed economies of Western countries generally show the following characteristics:

1. Under the mixed economic system, social economic activities must not only meet individual economic goals, but also certain public goals;

2. Under the mixed economic system, the economic activities of society depend not only on individual economic decisions, but also on public economic decisions represented by the government;

3. Under the mixed economic system, the way in which society deals with economic issues is an "intermediate method" between the two extreme methods of laissez-faire (free market) and government regulation (centralized planning);

4. Under the mixed economic system, the government and private enterprises, the state and the market establish economic cooperation relations through the division of functions; according to the above characteristics of the mixed economic system, we can give it a definition like this: the mixed economy is a contemporary country An economic system that complements private goals with social goals, individual economic decisions with government economic policies, and market regulation with government regulation. Under this system, the state and the market, the government and enterprises and individuals through the division of functions and cooperation to achieve stable growth of the national economy and maximize social welfare.

There are two basic differences between the government and non-government sectors as the object of public economics research. Who is responsible first? Is it accountable to voters or investors? Generally speaking, in a democratic political system, government intervention is mainly responsible to voters, while non-government departments (enterprises) are mainly responsible to investors. The second issue is about coercive power. The actions of government departments are usually mandatory for their recipients, while the actions of non-government departments are not mandatory for their recipients.

After distinguishing between government and non-government departments, it is necessary to further distinguish between central and local governments. The difference between the central government and local governments is first of all administrative levels. The difference between central and local governments is also reflected in the different functions they perform. From the analysis of the above two aspects, we can see that although the central government and local governments are both part of the state administrative organs and have many consistent goals and behaviors, the distinction between them is still very clear, that is, They are in different positions in the national administrative system, have different powers and jurisdictions, and perform different functions.

Like the private sector, the existence of the government sector (the public sector) also generates a series of similar economic problems. They mainly have the following three aspects.

1. What is produced? This issue first concerns the equilibrium between public and private product production, and secondly it involves the equilibrium between various types of public goods.

2. How is it produced? Whether public goods are produced by the government or by private companies. Many people believe that government-organized production of public goods can reduce the exploitation of consumers by large companies.

3. For whom? This is actually a matter of distribution of benefits for public output. Government decisions on tax and benefit plans will directly affect people's income distribution. Similarly, the government's decision on what public goods to produce also determines which individuals and interest groups can benefit from them.

Public economics shows that this discipline has formed a relatively complete discipline system. Compared with traditional finance, public economics has added two major areas. One is that the discipline adds content to government decision-making, and the other is economic analysis that increases public sector spending. In the discipline system, traditional finance cannot unite the resource allocation of market mechanism and non-market mechanism to the Pareto state, while in public economics, a consistent theoretical model has been established.

Finance is the starting point of public economics

Mercantilist

Public economic theory starts with Keynes's "General Theory of Employment, Interest, and Currency" published in 1936, and is divided in order of development. There are mainly Keynesian, supply, and public choice schools.

1. Keynesian fiscal theory.

The core of Keynesian economic theory is the theory of effective aggregate demand, which depends on the three basic psychological factors of "marginal consumption propensity", "marginal capital efficiency" and "money flow preference".

2. Fiscal theory of the supply school.

Since the 1970s, market economy countries have experienced "stagflation", and the Keynesian demand management policy has been seriously challenged. The Keynesian demand management policy ignored the supply factors of labor, savings, investment, and production, which led to a reduction in economic growth. The economic theory represented by the supply school came into being at the historic moment. They believed that to cure the "stagflation" economic stubbornness, it is necessary to reaffirm Say's Law, attach importance to supply management policies, reduce tax rates to stimulate economic growth, reduce state intervention in the economy, Efficiency of the private economy. In terms of taxation, it is necessary to emphasize the neutral principle of taxation, that is, the taxation results should not affect the behavior of taxpayers in terms of production, investment, and consumption. The Supply School opposes deficit fiscal policy, advocates austerity fiscal policy, and restores budget balance. In terms of specific policies and measures, advocate tax reduction policies to encourage people's enthusiasm for work, stimulate investment and increase supply. They proposed the "Laffer curve" to describe the relationship between taxation and production.

3. The financial view of the monetary school.

The currency school is represented by Milton Friedman, which emerged in the 1950s and 1960s. They opposed Keynes's theories and policies, and advocated a single monetary policy to regulate the economy. The currency school believes that the implementation of Keynesian fiscal expansion policy has caused an increase in the money supply, which has led to continued inflation. Therefore, they oppose deficit fiscal policies and advocate austerity fiscal and monetary policies to control inflation. In terms of taxation, the Monetary School has proposed a comprehensive reduction of the basic tax rate of personal income tax, a reduction of investment income tax, land development tax and corporate profit tax, and the concept of "negative income tax".

4. Other views.

In addition to the financial ideas and perspectives of some of the major schools mentioned above, in contemporary western public finance theory, there are also notable the financial doctrines of Musgrave and the public doctrine of public choice.

Musgrave, in the book "Financial Theory and Practice," proposes six principles of taxation :

(1) The distribution of tax burden should be fair and everyone should pay a reasonable share.

(2) Taxes should be selected without interfering with effective market decisions, that is, to minimize the "extra burden" of taxation.

(3) If the tax policy is used to achieve other objectives such as stimulating investment, it must minimize interference with the fairness of the tax system.

(4) The tax structure should contribute to the realization of fiscal policies aimed at stable economic growth.

(5) The taxation system should be clear without administrative disputes, and it should be easy for taxpayers to understand.

(6) Tax management and collection fees should be minimized taking into account other objectives.

In short, as the times and environment change, people are required to study the government's economic activities from a wider range and at a deeper level. Advances in research methods have further promoted the birth of public economics based on finance. In order to follow the development of finance in history, people often call finance the old public economics, and the enlarged finance is called public economics.

Public Economics and Microeconomics

Microeconomics is the study of a single economic unit. It studies the economic behavior of a single economic unit and the determination of the corresponding economic variables. Such as the economic behavior of a single consumer, a single family, a single manufacturer, a single product market and other economic phenomena. Microeconomics believes that what it wants to study and solve is the three economic issues of what to produce, how to produce, and for whom.

Public economics is closely related to microeconomics. Microeconomics studies the price mechanism, producer behavior, and consumer behavior. Public economics regards the government as an economic activity subject. Production and consumption. Therefore, the research objective of optimizing resource allocation in microeconomics is also applicable to public economics. For example, public economics regards taxation as the cost and price of the government. Through the study of fiscal revenue and expenditure, it is clarified whether each taxpayer's tax is maximized and whether each government's expenditure is maximized.

In addition, public economics widely uses the economic analysis tools of microeconomics, such as volume analysis, volume-cost-benefit analysis, equilibrium analysis, marginal utility theory, and supply and demand theory.

Public Economics and Macroeconomics

Macroeconomics takes the entire national economic activity as the object of study, and studies the decisions and changes of the total amount in the economy. Macroeconomics is relative to microeconomics, and they together constitute contemporary western economic theory. The central topic of macroeconomics is to analyze the economic aggregate of national income, to study economic issues such as the national aggregate and the general price level. Macroeconomics mainly studies three major economic issues: whether a country's resources are fully utilized, whether the purchasing power of money and savings changes, and whether the ability to produce goods grows.

Government functions are more closely linked to macroeconomics. Economic development is a transition from disequilibrium to equilibrium, and qualitative and quantitative improvements are achieved in the process of transition. The market mechanism plays an important role in the microeconomic field, and prices regulate production and consumption. Especially in perfectly competitive markets, prices can achieve optimal allocation of resources. However, the prerequisites for a completely competitive market are harsh. Market mechanisms are effective in the microeconomic area and may fail in the macroeconomic area. In the entire society and economy, the role of price regulation is relatively limited, and the role of government regulation is very necessary. Objectively, there is a collective that interferes with the entire national economy and represents the will of the entire people. This collective is the state and the government.

Public Economics and

Public Economics-Master of Public Administration (MPA) textbook series

Book Author: Mo Tong

Publisher: Shanghai Jiaotong University Press

ISBN: 7313039034

Publication time: 2005-4 1st edition

Printing time: 2005-4 first printing

Folio: 16

Price (yuan): 25

Executive summary

Starting from the core concepts and basic analysis tools of modern economics, this book analyzes the relationship between fairness and efficiency in a market economy, the relationship between government and the market, and discusses the economic activities of the public sector itself and the government's public economic policies that affect the real economy . The book also encourages readers to continue deep thinking through "columns" and reflection questions.

This book is a textbook specially written for undergraduates, graduate students, MPA and MBA. It is also suitable for cadre training. It is also useful for other readers who are interested in understanding the government's public economic activities.

table of Contents

Introduction

Chapter One: Competitive Market System and Equilibrium Analysis

Section I Basic Concepts and Tools

Consumer and manufacturer choices

Section III Market Equilibrium

Chapter 2 Mixed Economic System and Public Economics

Section 1 The Great Depression-The Destruction of the Classical Myth

Section 2 Basic Concepts of Macroeconomics

Section 3 Keynesianism and the Divergence of Classics

Section 4 Development of the Public Sector and the Rise of the Public Economy

The second public economic theory

Chapter III Welfare Economics

Section 1 Measurement of Welfare

Section II Efficiency and Fairness

Section III Social Welfare Function

Chapter IV Market Failure

Section 1 Externalities

Section 2 Information

Section 3 Other Market Failures

Chapter V Government Failure

Section 1 Basic manifestations of government failure

Section 2 Reasons for the Government

Conditions for Government Efficiency

Chapter III Public Economic Issues

Chapter VI Demand and Supply of Public Goods

Section 1 Private Supply of Public Goods and "Free Hitchhiking"

Section 2 Supply of Public Goods

Chapter VII Public Revenue and Expenditure

Section 1 Public Revenue

Section 2 Public Expenditure

Chapter VIII Government Budget

Overview of the budget system

Section 2 Budget System Reform and Public Economic Efficiency

Chapter IX Social Security

Section 1 Social Security is the Infrastructure of a Market Economy

Section 2 Overview of Social Security System

Section 3 Reform of China's Social Security System

Chapter 4 Public Economic Policy

Chapter X Economics of Government Regulation

Section 1 Blindness of Market Behavior and Necessity of Government Regulation

The second section "visible hand" what to correct market failure

Chapter XI Macroeconomic Policies and Tools

Section 1 Government's Means of Managing Economy

Objectives of Economic Policy

Section III Macroeconomic Policies and Tools

references

postscript