Public Finance and Public Policy

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Authors

Jonathan Gruber

Dr. Jonathan Gruber is the Ford Professor of Economics at the Massachusetts Institute of Technology, where he has taught since 1992. He is also the former Director of the Health Care Program at the National Bureau of Economic Research, and the former President of the American Society of Health Economists. He is a member of the Institute of Medicine, the American Academy of Arts and Sciences, the National Academy of Social Insurance, and the Econometric Society. He has published more than 180 research articles, has edited six research volumes, and is the author of Public Finance and Public Policy, a leading undergraduate text, Health Care Reform, a graphic novel, and Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream (with Simon Johnson). In 2006 he received the American Society of Health Economists Inaugural Medal for the best health economist in the nation aged 40 and under.

During the 1997-1998 academic year, Dr. Gruber was on leave as Deputy Assistant Secretary for Economic Policy at the Treasury Department. From 2003-2006 he was a key architect of Massachusetts’ health reform effort, and in 2006 became an inaugural member of the Health Connector Board. During 2009-2010 he served as a technical consultant to the Obama Administration and worked with the Administration and Congress to help craft the Patient Protection and Affordable Care Act. In 2011 he was named “One of the Top 25 Most Innovative and Practical Thinkers of Our Time” by Slate Magazine. In both 2006 and 2012 he was rated as one of the top 100 most powerful people in health care in the United States by Modern Healthcare Magazine. In 2020 he received a Guggenheim Fellowship.

PART I Introduction and Background
1 Why Study Public Finance?
2 Theoretical Tools of Public Finance
3 Empirical Tools of Public Finance
4 Budget Analysis and Deficit Financing

PART II Externalities and Public Goods
5 Externalities: Problems and Solutions
6 Externalities in Action: Environmental and Health Externalities
7 Public Goods
8 Cost-Benefit Analysis
9 Political Economy
10 State and Local Government Expenditures
11 Education

PART III Social Insurance and Redistribution
12 Social Insurance: The New Function of Government
13 Social Security
14 Unemployment Insurance, Disability Insurance, and Workers’ Compensation
15 Health Insurance I: Health Economics and Private Health Insurance
16 Health Insurance II: Medicare, Medicaid, and Health Care Reform
17 Income Distribution and Welfare Programs

PART IV Taxation in Theory and Practice
18 Taxation: How It Works and What It Means
19 The Equity Implications of Taxation: Tax Incidence
20 Tax Inefficiencies and Their Implications for Optimal Taxation
21 Taxes on Labor Supply
22 Taxes on Savings
23 Taxes on Risk Taking and Wealth
24 Taxation of Business Income
25 Fundamental Tax Reform and Consumption Taxation

Glossary G-1
References R-1
Index I-1

Product Updates

The dynamic public policy environment of the past few years required a thorough updating of most aspects of the book. All statistics, data-related tables and figures, and applications have been updated completely to reflect the most recent available data.In addition, a number of major changes were made throughout, including new examples, updating of existing chapter introductions, revisions to the Application and Empirical Evidence boxed features, and a number of new and thoroughly updated text discussions.

The signal event since the last edition of this textbook was the COVID-19 crisis and government reactions to it. This edition has been extensively revised to reflect this new reality, as well as to incorporate a number of other updates to both public policy and our understanding of the economic and human consequences of such policies. Revisions include:

Chapter 1 has a new introduction tied to COVID-19, highlighting the array of decisions that the government had to make and the controversies they engendered. Section 1.3 was also edited to highlight how the policy issues arising from COVID-19 are front and center to public finance debates

Chapter 4 discusses the role of debt in the wake of COVID-19 and includes a richer discussion of the “secular stagnation” view of public debt burdens

Chapter 5 introduces a new example of positive production externalities, research and development with a corresponding new empirical application, as well as a new application on vaccine development under Operation Warp Speed

Chapter 9 includes a new introduction on political expediencies and politician positioning on energy policy, as well as a significantly updated discussion of political polarization

Chapter 10 starts with a new introduction focused on the fiscal stress placed on states and localities by COVID-19

Chapter 14 begins with a new introduction about the role of Unemployment Insurance during the COVID-19 crisis, and includes a new application on modernizing the UI system in the wake of COVID-19

Chapter 16 features a number of updates to the discussion of the ACA and the future of the U.S. health care system

Chapter 17 features an updated discussion of Universal Basic Income (UBI) in the context of the robust discussion that took place during the 2020 election

Chapter 19 includes a new introduction about corporate tax incidence in the context of the 2017 corporate tax cuts

Chapter 21 starts with a new introduction that focuses on the impact of recent tax reforms on labor supply

Chapter 22 begins with a revised introduction focused on candidate Biden’s plan to limit the tax benefits associated with retirement accounts

Chapter 23 has a new introduction focused on early evidence on the opportunity zones introduced by the 2017 tax reform, as well as a revised discussion of efforts to tax wealth

Chapter 25 incorporates an updated discussion of IRS efforts to combat tax evasion.

Authors

Jonathan Gruber

Dr. Jonathan Gruber is the Ford Professor of Economics at the Massachusetts Institute of Technology, where he has taught since 1992. He is also the former Director of the Health Care Program at the National Bureau of Economic Research, and the former President of the American Society of Health Economists. He is a member of the Institute of Medicine, the American Academy of Arts and Sciences, the National Academy of Social Insurance, and the Econometric Society. He has published more than 180 research articles, has edited six research volumes, and is the author of Public Finance and Public Policy, a leading undergraduate text, Health Care Reform, a graphic novel, and Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream (with Simon Johnson). In 2006 he received the American Society of Health Economists Inaugural Medal for the best health economist in the nation aged 40 and under.

During the 1997-1998 academic year, Dr. Gruber was on leave as Deputy Assistant Secretary for Economic Policy at the Treasury Department. From 2003-2006 he was a key architect of Massachusetts’ health reform effort, and in 2006 became an inaugural member of the Health Connector Board. During 2009-2010 he served as a technical consultant to the Obama Administration and worked with the Administration and Congress to help craft the Patient Protection and Affordable Care Act. In 2011 he was named “One of the Top 25 Most Innovative and Practical Thinkers of Our Time” by Slate Magazine. In both 2006 and 2012 he was rated as one of the top 100 most powerful people in health care in the United States by Modern Healthcare Magazine. In 2020 he received a Guggenheim Fellowship.