Public Finance, 3rd Edition

A Normative Theory

Public Finance, 3rd Edition,Richard Tresch,ISBN9780124158344


Academic Press




276 X 216

Delivers a unique perspective on public finance easily applied to the changing relationships between governments and markets

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Key Features

  • 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


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.


Advanced undergraduate and graduate students studying public finance and public economics, and more broadly welfare economics.

Richard Tresch

Professor Richard W. Tresch earned a bachelor's degree from Williams College in 1965 and a doctorate in economics in 1973 from Massachusetts Institute of Technology, where he was a teaching assistant prior to his arrival at Boston College. He joined the Boston College faculty in 1969 and throughout his 43-year career has served as Chairman of the Department of Economics, Director of Graduate Studies, and Director of Undergraduate Studies. In 1996, chosen as Massachusetts Professor of the Year by the Carnegie Foundation for the Advancement of Teaching. He was one of 585 national entrants in the foundation's US Professors of the Year Program, which salutes outstanding undergraduate instructors; its award is recognized as one of the most prestigious honors bestowed upon professors. "I am quite humbled by the award, and extremely grateful to the Carnegie Foundation," Tresch said. "The greatest honor, however, is to have been nominated by Boston College. There are so many good teachers here and to be chosen to represent them in the program is something I truly value." A member of the American Economic Association, Tresch served on the board of editors for the American Economic Review, and has contributed to New England Journal of Business and Economics and Public Finance. He is the editor of a four-volume major reference work on public sector economics. The third edition on his textbook, Public Finance: A Normative Theory publishes in November, 2014.

Affiliations and Expertise

Boston College, Massachusetts, U.S.A.

Public Finance, 3rd Edition

Part I: Introduction: The Content and Methodology of Public Sector Theory

Chapter 1: Introduction to Normative Public Sector Theory

Chapter 2: A General Equilibrium Model for Public Sector Analysis

Chapter 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

Chapter 4: The Social Welfare Function in Policy Analysis

Chapter 5: The Problem of Externalities--An Overview

Chapter 6: Consumption Externalities

Chapter 7: Production Externalities

Chapter 8: Global Warming: An Application of Externality Theory

Chapter 9: The Theory of Decreasing Cost Production

Chapter 10: The First-Best Theory of Taxation

Chapter 11: Applying First-Best Principles of Taxation-What to Tax and How

Part III: The Theory of Public Expenditures and Taxation: Second-Best Analysis

Chapter 12: Introduction to Second-Best Analysis

Chapter 13: The Second-Best Theory of Taxation in One-Consumer Economies
with Linear Production Technology

Chapter 14: The Second-Best Theory of Taxation with General Production
Technologies and Many Consumers

Chapter 15: Taxation Under Asymmetric Information

Chapter 16: The Theory and Measurement of Tax Incidence

Chapter 17: Expenditure Incidence and Economy-Wide Incidence Studies

Chapter 18: The Second-Best Theory of Public Expenditures: Overview

Chapter 19: Transfer Payments and Private Information

Chapter 20: Social Insurance: Medical Care

Chapter 21: Social Insurance: Social Security

Chapter 22: Externalities in a Second-Best Environment

Chapter 23: Decreasing Costs and the Theory of the Second-Best-The Boiteux

Chapter 24: General Production Rules in a Second-Best Environment

Chapter 25: Behavioral Public Sector Economics

Part IV: Fiscal Federalism and International Public Finance

Chapter 26: Optimal Federalism: Sorting the Functions of Government Within
the Fiscal Hierarchy

Chapter 27: Optimal Federalism: The Sorting of People within the Fiscal

Chapter 28: The Role of Grants-in-Aid in a Federalist System of Governments

Chapter 29: International Public Finance

Quotes and reviews

"Richard Tresch’s graduate textbook, Public Finance, A Normative Theory, has become the standard reference for graduate courses in public economics.  He has now updated the textbook, with the same clear, informative, and illuminating writing, while maintaining the high level of rigor of the previous editions.  The revised textbook contains many new and useful insights.  I look forward to my continued use of his textbook in my own graduate classes."  --James Alm, Tulane University

"Richard Tresch provides a wonderful graduate textbook that is difficult to top in terms of clarity and accessibility. It combines neat mathematical presentation with lots of intuition."  --Alfons Weichenrieder, Goethe University Frankfurt

"The ideal graduate treatment of public economic theory.  Tresch introduces a general equilibrium model and uses it to solve the classic problems.  He then devotes the majority of the book to theoretically examining problems in the second best context, which is the training that students really need to apply theory to real world policy questions."  --Stephen Ross, University of Connecticut

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