Public Finance is the branch of economics that studies the taxing and spending activities of government. The term is something of a misnomer, because the fundamental issues are not financial (that is, relating to money). Rather, the key problems relate to the use of real resources. For this reason, some practitioners prefer the label public sector economics or simply public economics. Public finance encompasses both positive and normative analysis. Positive analysis deals with issues of cause and effect, for example, “If the government cuts the tax rate on gasoline, what will be the effect on gasoline consumption?” Normative analysis deals with ethical issues, for example, “Is it fairer to tax income or consumption?”


Public Finance Public Choice Capital Gain Excess Burden Horizontal Equity 
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© Kluwer Academic Publishers 2004

Authors and Affiliations

  • Harvey S. Rosen

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