Masahisa Hayashi, Waseda University

Objectives of the Course
Modern economies are called mixed economies and the share of public sector accounts for a large part of the economy. There are diversified public policy instruments used to control the economy. As the expression “From cradle to grave” suggests, modern welfare states are affecting all aspects of human life, and understanding of the public policies is essential to enhance the welfare of people. Public policies cannot be implemented without financial support. The science of public finance is the study of public expenditures and public revenues particularly tax revenues.
The course aims to give the students the opportunities to seriously think of the role of the government or the public sector in relation to the market mechanism of the private sector in order to maximize human welfare. Many principles and theories are common to different economies of the world, but there are different options for actual practices. Lively discussions are expected in the applications of theories to different countries from where the students come. As a point of departure, the practices and experiences in Japan will be shown with the description of institutions and the provision of. relevant data. For the sake of international comparison, the data on OECD countries will be used as well.
To give the students a unified reading material and the basis for the discussion in class, an international bestseller text book by the Nobel laureate, Joseph E. Stiglitz, Economics of Public Sector, 3rd Edition, Norton & Company will be used. In the textbook, the students will find many practices and experiences in the United States for comparison.

Further Reading
Another international bestseller textbook by Richard A. Musgrave and Peggy B. Musgrave, Public Finance in Theory and Practice, 5th Edition, McGraw-Hill is recommended for further reading. For public finance subject, this book may be better than the Stiglitz’s textbook mentioned above. The only complaint about the textbook is that the newest edition was published in 1989 and the newer edition has not been published since.

Grading Policy
The final grading will be based on the contributions to the discussion during class (40%) and the result of final written examination(60%). The understanding of rigorous definitions of relevant technical terms is essential and the students are expected to learn the definition of these key technical terms and the significance thereof in the subject of public finance. Then, the students are expected to discuss certain focus questions of public finance clearly and logically using these technical terms and objective data and actual events.

Schedules
The following topics will be covered in lecture and discussion.
Modern mixed economies and the division of labor between the private sector and the public sector
1) Basic problems of economic organization and the market mechanism
2) Market failures and their causes
3) Functions of public finance
4) Allocation function of public finance and the concept of public goods
5) Efficiency in the allocation of resources with private goods and public goods
6) Trade-offs between efficiency and equity
7) Growth and structure of public expenditures
8) Cost-benefit analysis and the improvement of efficiency in the public sector
9) Tax system and good taxes
10) Individual income tax and individual consumption tax
11) Defining taxable income and preferences
12) Corporation income tax
13) Sales taxes
14) Property and wealth taxes
15) Payroll tax and the pension finance
16) Negative income tax and the problem of poverty
17) Fiscal policy and economic stabilization
18) Economics of public debt
19) Fiscal federalism
20) International public finance

Biography
First Degree in Social Science (International Christian University), Master and Doctorate in Economics (Hitotsubashi University). Professor at the Graduate School and Faculty of Social Sciences at Waseda. Former Dean of the Faculty of Economics and Business Administration, Yokohama City University. Member of various Study Committees related to the Governments of Japan, of Metropolitan Tokyo and of Yokohama City. Director of Japan’s Society of Public Finance and of Japan’s Society of Local Government Finance. Books published include On the Taxation of Corporate Income (Dobunkan Publishing Company, 1991) and Local Government Finance, Theory, Institution and Empirical Analysis (Gyosei Publishing Company, 1999). Articles in academic reviews include: “Economy of Scale in Provision of Local Government Services", Economy and Trade Vol. 168, 1999; "Financing of Local Public Corporations: the Case of Local Public Hospitals", Economy and Trade Vol. 172, 1996; "The Role of Public Sector In Human Capital Formation In the Development of Japanese Economy", Yokohama City University Academic Papers, Vol. 47, No. 1, 1996; “Decentralization and the Amalgamation of Local Authorities: Experiences of Japan and the Economy of Scale in Providing Local Services”, Waseda Journal of Asian Studies, Vol. 24, Waseda University.