Key Features

• Current Research: The authors continue to introduce readers to the latest research. The approach is modern, theoretical, and empirical, and shared by most active economists.
• Use of Econometric Models: the results of econometric models are used to help the student understand how expenditure and tax policies affect individual behavior and how the government itself sets policies.
• Theory and Analysis Integrated: The authors integrate the analysis of government spending and taxing closely with economic theory. The goal is to interweave institutional, theoretical, and empirical material to provide students with a clear and coherent view of government spending and taxing.
• Discussion of Controversies: Methodological and substantive controversies are discussed at length. The author subscribes to "full disclosure" not only in the securities market but in the idea market as well.
• The relevant institutional and legal settings are described in detail, and the links between economic analysis and current political issues are emphasized.

New Features

• Discussion of cutting edge empirical tools in chapter 2. This material is integrated throughout the book when discussing empirical evidence of the effects of government programs and taxation.
• Expanded coverage of social insurance, including: the economics of insurance markets, the pros and cons of government provision of insurance, an additional chapter on health markets, and more material on economics of Social Security system and reform. The Social Security material carefully explains the pros and cons of "privatization."
• New partial text boxes that allow elaboration without sending a signal that it is separate from the rest of the text. Text boxes are labeled either Empirical Evidence or Policy Perspective.
• New chapter on education and expanded material on applications of externalities to environmental policy.
• Key term definitions are now included in the text margins.