Syllabus for Public Finance & Fiscal Policy (ECON4540)

Offered at California State University, Stanislaus through the Economics Dept., Spring 2007, for 3 units.  Class meets Tuesdays and Thursdays 9:40-11:07  C114.



Elaine Peterson

Office hours:

M, T, W, R 11:15-12:15 am


101 D Classroom Building

W 5:00-5:40 pm

Office Phone:



and by appointment

Home Phone:

529-3804  (Please, no calls after 8:00pm)







Course Description: Principles, problems, and policies of federal taxation, expenditures, debt, budgeting, and fiscal policy.  Examines potential role of government fiscal policy in a market economy. Includes some review of economic theory, benefit-cost analysis, revenues, expenditures, fiscal federalism and the impact of implementing fiscal policy.  (Prerequisites: ECON 2500 and 2510 or consent of instructor.)

Course Objectives: Introduce students to the basic tools and theories of public finance economics. Develop student understanding of how economic theory can be used to study the relationship between government policy and the economy. Learn how economic theory can be used to analyze government programs and to predict the consequences of government activity and inactivity. Be able to analyze government expenditure and tax programs. Learn how to set up a benefit cost analysis that is appropriate for public program analysis.

Text: Rosen, Harvey S., Public Finance, 7th edition, Irwin/McGraw-Hill, Boston MA, 2005. (R)

Selected readings:
Fisher, Ronald, State and Local Public Finance, 2nd edition, Irwin, 1996. (F)

Tresch, Richard, "Common Pitfalls in Cost-Benefit Analysis", Public Finance, a normative theory, Business Publications, Inc. Plano, Texas, 1981. (T)

Articles drawn from professional journals and news publications such as: American Economic Review, Wall Street Journal, The Economist

Information obtainable from the Internet such as: 

Economic Report of the President, 2007 (ERP)

Economic Report of the President, past editions

Resources for Economists on the Internet
The National Budget Simulation

Other links found at

Grading: Grading is intended to reflect evidence of student knowledge and understanding. You will have opportunities to provide such evidence through class participation and short assignments, problem sets, exams, and a paper. The weights used in your final grade for these activities are as follows:


Grading Weight

Attendance and Class participation


Short assignments 


First Exam


Final Exam


Class participation: Regular attendance is expected. Reading should be done prior to class to enable participation.  If you must miss a class please contact me in advance or as soon as practical.  In some cases you may have an opportunity to make up work. Attendance will affect the class participation portion of the grade. Short assignments may be announced in class or via email and some will be done in class. WASC accreditation standards indicate for every hour in class students should be studying 2 to 3 hours.  This class meets 3 hours per week, so you should be studying 6 to 9 hours outside of class.  Please plan your time accordingly and try to use it efficiently.  If you do not understand something, make a note of it and bring it up in class as soon as possible.  The chapters relating to the material we will be discussing are indicated in the schedule below. In class think about the topic at hand, respectfully listen to your colleagues’ comments and questions, and offer your thoughtful comments and questions. Also please turn off beepers and cell phones

Email: Email is a relatively efficient way to distribute information and is part of our current economic environment.  All students should join the email discussion list for this class as another way to participate and increase their learning experience.  Please submit your email address to the professor in writing or by sending an email message with your email address, your name, and the name of the class to the professor at EPETERSON@CSUSTAN.EDU.  If you do not yet have an email account, you are entitled to one as a student at CSU Stanislaus.  To get one you may go to the OIT office in room 130 in the Library Building.  In all email messages please try to remember to indicate your full name, the name of the class, and a subject heading.  Including this basic identifying information helps people know if they want to read your message.  There are a lot of junk emails, viruses, and worms going around so you should not be surprised if your message is missing such information to learn that it was deleted without being read. 


Blackboard access: You can go to the web page and use your student id as your login and your pin as your password to get into a set of web pages restricted to students in the class.  Under “course information” are some PowerPoint slide presentations I will use in class if you are interested.  If you decide to access these, I strongly recommend that you DO NOT just hit print.  Some of the PowerPoint slide presentations are quite long.  It would be smarter to download them to look them over.  Then if you would like a printed copy consider going into PowerPoint and under print, choose the slides you want based on the page numbers and under “Print what” choose “handouts”, and under “slides per page” choose “6”.  This will kill fewer trees.


Short assignments: Short assignments may be announced in class or via email or sometimes done in class.  These will involve problems and applications.  Students should feel free to work together on assignments, but be careful to use your own words in the work you hand in.  If you wish to quote a colleague please cite them, but be careful.  Many people do not like being misquoted and over use of quotes may be a sign that you do not understand the material.  In working on a mathematical problem please show your work.  Try to proofread your work before you hand it in.  I will grade you based on what you wrote rather than what I hope you meant to write.  Over the course of the semester each student should also bring in at least 2 different articles on current events relating to public finance that they will briefly summarize and discuss with the class.


Exams: Students are encouraged to work together in studying, but not during exams. Cheating will result in a failing grade. Exams will involve essays. Essays should be well organized and thorough to indicate understanding and thought regarding the material covered. Practice essay questions and old exams can be found at  Please note the dates of the exams in the schedule below and avoid scheduling conflicting activities.  In the event of an emergency remember my doctorate is in economics, not medicine.  After receiving appropriate medical treatment, as soon practical please get in touch with me by phone or email.  When leaving phone messages please remember to leave your full name, class, and phone number.  Please say your phone number slowly.

 Public Finance & Fiscal Policy (ECON4540) Spring 2007 Schedule






Introduction & Overview;
Review some of basic Economic theory; Why do we have government? Difficulties of Measuring government impact;  Why do we need economics to analyze public policy? What isn’t a public finance question? Look at recent fiscal policy, Is Bush a Keynesian?

Federal Deficits, the Federal Debt, and the Macroeconomy

Review principles text (e.g. McConnell & Brue Ch. 1-4, Ch. 21-23)

 R Appendix (Note: starts with some basic principles but also includes indifference curves, income and substitution effects, & consumer & producer surplus which you may not have learned about before)

R Ch. 1

“Economic Odd Couple”, WSJ 8/27/01 and



Positive & Normative Economics,
Welfare Economics, Indifference Curves, Contract Curves, 
Consumer & Producer Surplus

To regulate or not to regulate?

including corporate governance?

Review your principles of consumer theory, R Appendix

R Ch. 2 & 3
Look at the Table of Contents for the ERP 2007 vs. 2001

ERP 2004 Ch. 7 and Ch. 8


27 - Mar.1

Public Goods ; Externalities ;

Political Economy of democracies in brief ; Do we have government progress in meeting society’s goals or a leviathan in need of control?

R Ch. 4 & 5, ERP 2004 Ch. 9, Press ReleaseSpecial Survey On Californians And The Environment: Not In My Driveway: Air Pollution Top Concern, But State Residents Don't See Themselves As Part Of Problem”,

Mar. 6 -8

Equity and Social Policy
Income redistribution and poverty programs, How do we value different distributions?

Tales of progress and Frustration

R Ch. 7 & 8, Children’s Defense Fund Press Release, “The State of America's Children 2004: A Continuing Portrait of Inequality Fifty Years After Brown v. Board of Education Greenbook_2005.pdf?docID=1741

Mar. 13 -15

Social Insurance 

R Ch. 9 & 10, ERP 2007 Ch. 4,

Stiglitz, Joseph, “Securing Social Security for the Future”, The Economists’ Voice, Volume 2, Issue 1, 2005, Article 5

Mar. 20 -22

Cost Benefit Analysis

R Ch. 11,

T p. 556-562

Mar.  27



Mar. 29

First Exam


April 3-5

Tax Incidence Theory
Partial Equilibrium Models
General Equilibrium Models

R Ch. 12

ERP 2004 Ch. 4 , ERP2005 Ch.3


Spring Break April  9 -13

April 17-19

Conflicting goals in tax design; True incidence; Efficiency Losses

R Ch. 13 & 14

Continue ERP 2004 Ch. 4, ERP2005 Ch.3

Apr 24-26

US Personal & Corporate Taxes

R Ch. 15, 16, & 17, ERP 2007 Ch. 3

May 1-3

Other Sources of Revenue: Debt, Property tax, Consumption tax

R Ch. 18 & 19

May 8-10

Fiscal Federalism

R Ch. 20, F Ch. 9

May 15-17

Major State Finance areas

Glimpses Ahead

Excerpts from Fisher, 

Tuesday May 29 8:30-10:30  FINAL EXAM   (Comprehensive)