Public economics is the study of the role of government in the economy. This study includes nearly all aspects of public expenditure and finance and government economic policies. By convention it does not include macroeconomic management which is generally treated as a separate subject. Thus public economics may also be described as the study of the role of government in economic efficiency and distribution.

In the language of economics, the study is both positive and normative. The positive part is the study of how government actually affects the economy. The normative part is the study of how government ought to affect the economy. This inevitably involves elements of moral philosophy and political science.

In the preface to his influential book, The Economics of Welfare, Pigou observed nearly 100 years ago that: 'The complicated analyses which economists endeavour to carry through are not mere gymnastic. They are instruments for the betterment of life.' This view motivates many of us who work in the field of public economics. Our fundamental goal in studying public economics is to understand both how the arrangement of economic affairs in a country, whether by markets or by government, affects the welfare of individuals that make up society and how these arrangements can be improved. This study has been a central part of the study of economics and political economies at least since the publication of Adam Smith’s famous book, The Wealth of Nations, in 1776. Indeed it is hard to think of a more important and topical field of study in the social sciences.

Content of Public Economics: Principles and Practice

In this book I attempt to provide an understanding of the whole field of public economics. This includes the study of the role of markets and of government in the economy, methods of economic evaluation and their applications to public policy, the political economy of government policy making, the principles and practice of public expenditure, policies for social assistance and income redistribution, taxation principles and practice, and multilevel systems of government.

As is customary in public economics, the discussion is based strongly on microeconomic principles. The content of public economics is determined more by its subject matter than by the introduction of new economic methods of analysis. A theme of the book is that basic economic principles apply to government as they do to markets, although not always in quite the same way.

I also try to convey both the rigorous and consistent principles that underlie the economic approach to public economics and how these principles can be applied to practical issues. The principles and the practice are complementary. Without the principles, public policies would be poorly based. Without the practical applications, the principles would be of little interest or use.

I hope that this book will help readers understand and appreciate how good economic policies can enhance the welfare of the communities in which we live.

Readers of Public Economics: Principles and Practice

The book is written as an introduction to public economics. I assume that most readers will have studied one or two years of economics before undertaking a study of public economics or public finance. However, I have tried to produce a book that will also be accessible in the most part to readers with less knowledge of economics and interesting to those with more knowledge of economics. Readers either of these categories may find selected parts of the book of interest.

The book will doubtless be of most interest to Australian readers, or Australian-based students, because I give mainly Australian examples. However, I also provide international comparisons where these are relevant and readily available.

For teachers of public economics who use this text, presentation materials and answers to the discussion questions are also available.

Peter Abelson