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Ural Curriculum Materials and
Publication in Public Finance and Management |
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Project Director, Professor
Yelena Sazonova,
Pro-rector for International Relations, Ural |
During the period
May 2003-June 2004, two faculty members of the PURPOSE This course surveys the goals and mechanisms of the public management of government financial resources with a specific focus on the goals of international development. The traditional study of public finance is concerned primarily with national government revenue and expenditure. However, recent trends in globalization have increased the necessity for adaptation to international standards of policy and practice. This course is public finance and international development extends conventional theories of public finance to the context of international development in the period of globalization. The course covers theories of public goods, public choice, public budgeting, expenditure management, accountability, transparency, evaluation, and innovation. This course applies the general principles of public finance through the comparative analysis of the theory and practice of public finance in the developed and developing world alike. CURRICULUM STRUCTURE AND COURSE ADMINISTRATION The basic texts for this course is: “Public Finance and Management” by Bruce Perlman and Gregory Gleason (manuscript) and Wiley GAAP for Governments Field Guide 2003 by Warren Ruppel. The reading material covers a wide spectrum, ranging from scholarly analysis drawn from the world of academia and research think tanks to coverage of contemporary events drawn from international organization project documents. The reading materials include policy analysis produced by governments, international organizations, and non-governmental organizations. COURSE TOPICS Market Failure and Government Intervention Public Organizations, Public Goods and the Coase Theorem Government Failure and Public Choice, Fiscal Accountability, Fiscal Equivalence, Cost-recovery Government Revenue and Principles of Taxation Government Expenditure and the Logic of the Budget Process Government Accountability, Transparency, and GAAP Participatory Budgeting, Anti-Corruption Subsidiarity, Local Control, Federalism, and International Organizations Program Evaluation Special Topics: Coase Theorem The Coase Theorem. Ronald Coase (1960) asserted that the initial allocation of legal entitlements does not matter from an efficiency perspective so long as they can be exchanged in a perfectly competitive market. Coase refers to the case of a railroad that passes through wheat fields. The passing trains let off sparks which can burn the wheat. If the legal rights are on the side of the farmers, then they could require the trains to buy and install spark catchers to eliminate these fires. However, if that is expensive (i.e. more than the value of the burned wheat), the train owners may just pay the farmers for the damage done to the crops. If the legal rights are with the trains, the farmers may just put up with burned crops or (if that is expensive) they could pay the trains to put on spark catchers. Either way, the socially efficient outcome (install spark catchers or burn crops) is what happens and the legal rights efficiently determine who has to pay. Special Topics: Subsidiarity The
boundaries of the authority of any particular level of government should be
decided with respect to the contributors and beneficiaries of a good and
service. Three principles guide the definition of these two groups. The first is the principle of fiscal accountability. This principle states that only those who
pay for a good should benefit from it and only those who benefit should be
required to pay. In other words, this
principle is a statement that free riding is unacceptable. This principle is often relaxed in favor of
redistributive policies, but it is only suspended in order to achieve
outcomes that are consistent with it. Another way of putting this is that
benefits should be proportional to payments.
Compare the communist principle (from The Manifesto: "from each according to abilities, to each
according to need;" and the socialist principle (Article 14 of the 1977
Soviet Constitution): "from each according to his ability, to each
according to his work." The
second principle is fiscal equivalence.
This principle maintains that there is a need for a governmental institution
(agency, body, committee, commission, collective, boss, and so on) for every
collective good with a unique boundary, so that there can be a match between
those who receive the benefits of a collective good and those who pay for it. (Olson,
Mancur. (1969)
"The Principle of "Fiscal Equivalence": The Division of
Responsibilities Among Different Levels of Government." American Economic Review Vol. 59, No.
2, pp. 479‑487). The
third principle is subsidiarity. Subsidiarity
states that functions which local organizations perform more effectively
belong more properly to them than to a dominant central organization. In financial terms, subsidiarity
implies “each public service should be provided by the jurisdiction having
control over the minimum geographic area that would internalize benefits and
costs from such provision.” (Oates, Wallace.
(1972) Fiscal Federalism Special Topics: Dutch Disease The “Dutch Disease”. An oil-exporting economy has certain structural consequences for long-term development. Perhaps the best understood of these is the so-called “Dutch disease,” a situation in which the real exchange rate appreciates in such a way that non-oil sector exports are gradually priced out of the market. The result is a loss of competitiveness and, eventually, retarded development in non-oil sector commodities, industries and services. Special Topics: Bright Pricing “Bright Pricing”. In many transitional countries the market for public goods is distorted by the absence of comparable prices. Many public officials block the delivery of public services in order to charge a rent for access to excludable public goods. "Bright pricing" policies that reduce the ability of local officials to conceal the prices that are officially established for public services will contribute to citizen satisfaction and will reduce distortions. Increasing public access to knowledge of prices of public services could have significant effects on increasing public understanding of the payment-for-services and cost-recovery principles in local government finance. Increasing understanding of the payment-for-services and cost-recovery principles will reduce the potential for corruption of local officials. This curriculum development and research project is support with the
assistance of the Network of Institutes and Schools of Public Administration
in Central and Contact Yelena Sazonova ysazonova@hotmail.com Contact Bruce Perlman bperlman@unm.edu Click to return to the Public Finance Consortium |
