哈维罗森财政学全英笔记Chapter1.docx

哈维罗森财政学全英笔记Chapter1.docx

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ChapterOneIntroduction

Thisbookisaboutthetaxingandspendingactivitiesofgovernment,asubjectusuallycalledpublicfinance.

Thistermissomethingofamisnomer,becausethefundamentalissuesarenotfinancial（thatis,relatingtomoney）.Rather,thekeyproblemsrelatetotheuseofrealresources.Forthisreason,someauthorspreferthelabelpublicsectoreconomicsorsimplypubliceconomics.

Wefocusonthemicroeconomicfunctionofgovernment-thewaygovernmentaffectstheallocationofresourcesandthedistributionofincome.

Thisbookfollowstraditionbyfocusingongovernmentalspendingandrevenue-raisingactivities.

PublicFinanceandIdeology

Opinionsonhowgovernmentshouldfunctionintheeconomicsphereareinfluencedbyideologicalviewsconcerningtherelationshipbetweentheindividualandthestate.Politicalphilosophershavedistinguishedtwomajorapproaches.

1.OrganicViewofGovernment

Societyisconceivedofasanaturalorganism.Eachindividualisapartofthisorganism,andthegovernmentcanbethoughtofasitsheart.Theindividualhassignificanceonlyaspartofthecommunity,andthegoodoftheindividualisdefinedwithrespecttothegoodofthewhole.Thus,thecommunityisstressedabovetheindividual.

Thegoalsofthesocietyaresetbythestate,whichattemptstoleadsocietytowardtheirrealization.Thechoiceofgoalsdiffersconsiderably.

Becausesocietalgoalscandiffer,acrucialquestionishowtheyaretobeselected.Proponentsoftheorganicviewusuallyarguethatcertaingoalsarenaturalforthesocietalorganism.

2.MechanisticViewofGovernment

Governmentisnotanorganicpartofsociety.Rather,itisacontrivancecreatedbyindividualstobetterachievetheirindividualgoals.

Virtuallyeveryoneagreesthatitisgoodforindividualswhengovernmentprotectsthemfromviolence.Todosogovernmentmusthaveamonopolyoncoercivepower.

Opinionswithinthemechanistictraditiondiverge.Libertarians,whobelieveinaverylimitedgovernment,argueagainstanyfurthereconomicroleforthegovernment.Libertariansareextremelyskepticalabouttheabilityofgovernmentstoimprovesocialwelfare.

Socialdemocratsbelievethatsubstantialgovernmentinterventionisrequiredforthegoodofindividuals.

3.ViewpointofThisBook

ThemechanisticviewofgovernmenthascometodominateAnglo-Americanpoliticalthought.Notsurprisingly,Anglo-Americaneconomicthoughthasalsodevelopedalongindividuallines.Withintheindividualistictraditionthereismuchcontroversywithrespecttohowactivegovernmentshouldbe.

Economicpolicyisnotbasedoneconomicanalysisalone.Thedesirabilityofagivencourseofgovernmentactioninevitablydependsinpartonethicalandpoliticaljudgments.

GovernmentataGlance

1.TheLegalFramework

2.TheSizeofGovernment

Amoresensible（andcommon）approachistomeasurethesizeofgovernmentbythevolumeofitsannualexpenditures,ofwhichtherearebasicallythreetypes:

（1）Purchaseofgoodsandservices.

（2）Transfersofincometopeople,businesses,orothergovernments.

（3）Interestpayments.

Thefederalgovernmentitemizesitsexpendituresinadocumentreferredtoaastheunifiedbudget.However,somegovernmentactivitieshavesubstantialeffectsonresourceallocationeventhoughtheyinvolveminimalexplicitoutlays.Forexample,issuingregulationsperseisnotveryexpensive,butcompliancewiththerulescanbeverycostly.Somehavesuggestedthatthecostsimposedontheeconomybygovernmentregulationsbepublishedinanannualregulatorybudget.Unfortunately,computingsuchcostsisexceedinglydifficultsoitisunlikelytherewilleverbeanofficialregulatorybudget.

Thefigureisamisleadingindicatorofthegrowthofgovernmentforseveralreasons:

（1）Becauseofinflation,thedollarsdecreasedinvalueovertime.

（2）Thepopulationhasalsogrownovertime.Anincreasingpopulationbyitselfcreatesdemandsforalargerpublicsector.

（3）Itissometimesusefultoexaminegovernmentexpenditurecomparedtothesizeoftheeconomy.Ifgovernmentdoublesinsizebutatthesametimetheeconomytriples,thengovernmenthasrelativelyshrunk.

Governmentexpenditureshaveincreasedinbothnominalandrealabsoluteterms,inpercapitaterms,andasapercentageofGDP.

3.Expenditures

NationaldefenseandSocialSecurityarethelargestspendingitemsinthefederalbudget.

Muchofthegovernmentbudgetconsistsofso-calledentitlementprograms-programsdeterminedbythenumberofpeoplewhoqualifywhichareoutofhandsofthecurrentgovernment.Thefast-growingareassuchasSocialSecurityandinterestpaymentsarerelativelyfixedinthesensethattheyaredeterminedbythepreviousdecisions.

Theshareofnationaldefensespendinginfederalexpenditurehasfallenovertime,whileSocialSecurity,publicwelfare,andpaymentsonoutstandingdebthaveincreasedinimportance.Thecombinationofentitlementprogramsandinterestpaymentsreducesyearlycontroloverthelevelofexpenditures.About34ofthefederalbudgetisrelativelyuncontrollable.

Itisusefultobreakdowntotalexpendituresbylevelofgovernment.Stateandlocalgovernmentsareclearlyimportantplayers.

4.Revenues

Atthefederallevel,personalincometaxationiscurrentlythesinglemostimportantsourceofrevenue,accountingforabout45%ofthetaxcollections.SocialInsuranceaccountingfor13offederalrevenuecollections,whicharepayrolltaxcollectionsusedtofinanceSocialSecurityandMedicare.Thefederalcorporateincometaxdecreases.Inthestateandlocalsector,thepropertytaxdecreasesandindividualincometaxesincrease.

ChangesintheRealValueofDebtWhenthegovernmentisadebtorandpricesincrease,changesintherealvalueofthedebtmaybeanimportantsourceofrevenue.