New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

ECO 370: Economics of Public Finance Week 1-2

by: Natalie Chevalier

ECO 370: Economics of Public Finance Week 1-2 ECO 370

Marketplace > Pace University - New York > ECO 370 > ECO 370 Economics of Public Finance Week 1 2
Natalie Chevalier

GPA 3.5
View Full Document for 0 Karma

View Full Document


Unlock These Notes for FREE

Enter your email below and we will instantly email you these Notes for Economics of Public Finance

(Limited time offer)

Unlock Notes

Already have a StudySoup account? Login here

Unlock FREE Class Notes

Enter your email below to receive Economics of Public Finance notes

Everyone needs better class notes. Enter your email and we will send you notes for this class for free.

Unlock FREE notes

About this Document

These notes cover the first two weeks of class including class discussions and questions.
Economics of Public Finance
Dr. Joseph Morreale
Class Notes




Popular in Economics of Public Finance

Popular in Department

This 6 page Class Notes was uploaded by Natalie Chevalier on Tuesday September 20, 2016. The Class Notes belongs to ECO 370 at Pace University - New York taught by Dr. Joseph Morreale in Fall 2016. Since its upload, it has received 15 views.


Reviews for ECO 370: Economics of Public Finance Week 1-2


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 09/20/16
Eco 370: Economics of Public Finance  Week 1: 9/8/16  Introduction to Public Policy (Dye) Public Policy— whatever governments choose to do or not to do. They can choose to  regulate conflict within society, organize society to carry on conflict with other societies,  extract money from the economy often in the forms of taxes. Pubic Policy regulates  behavior, organizes bureaucracy, distributes benefits and determines taxation codes.  Public policy is designed to help ameliorate a public issue not totally solve it.  Law of Increasing Cost— principle that states that once factors of production are at  maximum output and efficiency producing more will cost more than average. As  production increases opportunity cost does as well.  Non­Discretionary—Money from the federal budget that must be spent.  i.e. Social  Security.  Discretionary— Money that Congress can decide to allocate where they think best. Policy Expansion and Growth  A public policy is designed to alleviate personal discomfort or societal unease.  Over the years, as society relies more on the government to solve their problems,  public policy has expanded to encompass every aspect of American life.   Not everything is solved by public policy. Things like healthcare, medicare, and  education are part of regulatory activity, which is not reflected in government  budgets.  Why study Public Policy?  Political Science is more than just studying the various government institutions,  powers, and duties. It is also the study of “who gets what, when, and how?”  Public policy is the description and explanation of the causes and consequences  of government activity. This focus involves a description of the content of public policy; an analysis of the impact of social, economic, and political forces on the  content of public policy.  What can we learn from it?  We can learn about the policies themselves and what they do.   We can also better understand the causes that determine public policy.   Consequences and effects of public policy on society.  Difference between public analysis & public advocacy Public Advocacy— is saying what governments should do to change things versus public analysis, which aims to explain why governments do what they do. Week 2: 9/13/16 Introduction to Public Finance (R&G) “Public finance is a discussion about the relationship between the individual and the  state.” Public Finance— focuses on the microeconomics of government; the way government  affects the allocation of resources and the distribution of income. Also called Public  Sector Economics or Public Economics.  Organic view of Government o Society is a natural organism o Individuals are parts or the organism that have significance only as part of  the community.                                                                                             Role of Federal Government  Fiscal Policy: taxes + spending, during inflation taxes go up and spending goes  down which leads to a surplus. In a recession it is vice versa which leads to a  deficit.  o Automatic stabilizer policy: Welfare o Action policy   National Security/ Defense  Providing necessary but unprofitable goods and services  Postal service  Transportation   Regulation of Private enterprise: to stop monopolies, to maintain competition,   quality control   Justice system  Inequality: welfare, health care, progressive taxation Tools of Positive Analysis (R&G Ch. 2) “Numbers live. Numbers take on vitality.”  Economist and policymakers are constantly debating the various consequences of various government actions.  The Role of Theory Consider this: The labor of supply posits that the work decision is based on the rational  allocation of time. Rogers has only a certain amount of hours in the day: how many hours should he devote to work and how many hours to leisure. Rogers derives utility from  leisure. His problem is finding the combination of income and leisure that maximizes  utility. Imagine he has found his utility maximizing combo based on his wage rate of $10. Now the government imposes a tax on earnings of 20%. Now his after­tax wage is $8.  What does he do, work more, work less, or nothing?  Theory alone cannot predict the impact of an earnings tax on an individual’s willingness  to work. Analysis based on observation as opposed to theory can really tell us the effects  of such policies on the labor force.  Substitution Effect— The tendency of an individual to consume more of one good and  less of another because of a decrease in the price of the former relative to the latter.  Normal Good— A good for which demand increases as income increases and demand  decreases as income decreases, all else equal.  Income Effect— The effect of a price change on the quantity demanded exclusively to  the fact that the consumer’s income has changed.  The purpose of Economic Theory is to make us aware of the areas of our ignorance.  Difference Between Causation and Correlation In order for us to infer that government action X causes societal effect Y, three conditions must hold: 1. X must precede Y 2. The cause and effect must be correlated. The relationship can either be negative or positive but if Y does not change when X changes than X cannot cause Y. 3. Other explanations for correlation must be eliminated. In other words any other  influences on Y which are call factors Z must be ruled out before attributing X as  the cause. Consider this: Unemployment insurance, a program under which the government makes  payments to people who are out of work. A question that arises is whether increasing the  payments leads to higher and longer spells of unemployment. Suppose you collect data  on UI benefits from groups, some of which received high benefits and low benefits. We  refer to those who received high benefits as the Treatment Group because they received the treatment being evaluated. The low benefit group is called the Control Group. Biased Estimate– An estimate that conflates the true casual impact with the impact of  outside factors. In order to eliminate bias and rule out other factors the counterfactual  must be looked at. Econometrics— The statistical tools used to analyze economic data. Tools of Normative Analysis (R&G Ch.3) Welfare Economics— The branch of economic that evaluates the social desirability of  alternative economic states.  Edgeworth Box— A device used to depict the distribution of goods in a two good­two  person world. Pareto Efficient— an allocation of resources that cannot make one person better off  without making someone else worse off. Pareto Improvement— an allocation of resources that makes one person better off  without making another person worse off. 


Buy Material

Are you sure you want to buy this material for

0 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Kyle Maynard Purdue

"When you're taking detailed notes and trying to help everyone else out in the class, it really helps you learn and understand the I made $280 on my first study guide!"

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.