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Public Finance remains the premier textbook on the normative theory of government policy, with the third edition propelling into the twenty-first century its examination of what government ought to be doing instead of what it is doing.

The welfare aspects of public economics receive extensively renewed examination in this third edition. With four new chapters and other significant revisions, it presents detailed and comprehensive coverage of theoretical literature, empirical work, environmental issues, social insurance, behavioral economics, and international tax issues. With increased emphasis on the European Union, it is rigid enough for use by PhDs while being accessible to students less well trained in math.

Moves skillfully from explaining normative theory to applying it in mathematically compact and precise terms
Adds new chapters on social insurance, medical care, social security pensions, behavioral public economics, and international public finance
Includes new pedagogical supplements, including end-of-chapter questions and answers
Emphasizes European examples

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Part I: Introduction: The Content and Methodology of Public Sector Theory 1. Introduction to Normative Public Sector Theory 2. A General Equilibrium Model for Public Sector Analysis 3. First-Best and Second-Best Analysis and the Political Economy of Public Sector Economics

Part II: The Theory of Public Expenditures and Taxation-First-Best Analysis 4. The Social Welfare Function in Policy Analysis 5. The Problem of Externalities--An Overview 6. Consumption Externalities 7. Production Externalities 8. Global Warming: An Application of Externality Theory 9. The Theory of Decreasing Cost Production 10. The First-Best Theory of Taxation 11. Applying First-Best Principles of Taxation-What to Tax and How

Part III: The Theory of Public Expenditures and Taxation: Second-Best Analysis 12. Introduction to Second-Best Analysis 13. The Second-Best Theory of Taxation in One-Consumer Economies with Linear Production Technology 14. The Second-Best Theory of Taxation with General Production Technologies and Many Consumers 15. Taxation Under Asymmetric Information 16. The Theory and Measurement of Tax Incidence 17. Expenditure Incidence and Economy-Wide Incidence Studies 18. The Second-Best Theory of Public Expenditures: Overview 19. Transfer Payments and Private Information 20. Social Insurance: Medical Care 21. Social Insurance: Social Security 22. Externalities in a Second-Best Environment 23. Decreasing Costs and the Theory of the Second-Best-The Boiteux Problem 24. General Production Rules in a Second-Best Environment 25. Behavioral Public Sector Economics

Part IV: Fiscal Federalism and International Public Finance 26. Optimal Federalism: Sorting the Functions of Government Within the Fiscal Hierarchy 27. Optimal Federalism: The Sorting of People within the Fiscal Hierarchy 28. The Role of Grants-in-Aid in a Federalist System of Governments 29. International Public Finance

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