Answer questions 1, 5, 6, 7 on pages 260-261 of the Economics of the Public Sector text.ECONOMICS OF THE PUBLIC SECTOR
FOURTH EDITION
ECONOMICS
OF THE
PUBLIC SECTOR
FOURTH EDITION
JOSEPH E. STIGLITZ | JAY K. ROSENGARD
n
W. W. NORTON & COMPANY, INC.
NEW YORK • LONDON
W. W. Norton & Company has been independent since its founding in 1923, when William Warder
Norton and Mary D. Herter Norton f irst published lectures delivered at the People’s Institute, the
adult education division of New York City’s Cooper Union. The f irm soon expanded its program
beyond the Institute, publishing books by celebrated academics from America and abroad. By
midcentury, the two major pillars of Norton’s publishing program—trade books and college texts—
were f irmly established. In the 1950s, the Norton family transferred control of the company to its
employees, and today—with a staf f of four hundred and a comparable number of trade, college,
and professional titles published each year—W. W. Norton & Company stands as the largest and
oldest publishing house owned wholly by its employees.
Copyright © 2015 by W. W. Norton Company, Inc.
Copyright © 2000, 1988, 1986 by Joseph E. Stiglitz, the Trustee of Edward Hannaway Stiglitz
Trust, the Trustee of Julia Hannaway Stiglitz Trust, and the Trustee of the Trust for the Benef it
of Joseph E. Stiglitz’s Children
All r ights reserved
Printed in the United States of America
Editor: Jack Repcheck
Editorial Assistant: Theresia Kowara
Project Editor: Sujin Hong
Managing Editor, College Digital Media: Kim Yi
Production Manager: Vanessa Nuttry
Marketing Manager, Economics: Janise Turso
Design Director: Jil l ian Burr
Permissions Manager: Megan Jackson
Composition: Cenveo® Publisher Services
Manufacturing: Quad/Graphics—Taunton
Library of Congress Cataloging-in-Publication Data.
Stiglitz, Joseph E.
Economics of the public sector / Joseph E. Stiglitz, Jay K. Rosengard.—Fourth edition.
pages cm
Includes bibliographical references and index.
ISBN 978-0-393-92522-7 (pbk.)
1. Finance, Public—United States. 2. Fiscal policy—United States. I. Rosengard, Jay K. II. Title.
HJ257.2.S84 2015
336.73—dc23 2014048383
W. W. Norton & Company, Inc., 500 Fif th Avenue, New York, NY 10110-0017
ww nor ton.com
W. W. Norton & Company Ltd., Castle House, 75/76 Wells Street, London W1T 3QT
1 2 3 4 5 6 7 8 9 0
To our f irst teachers,
Nat and Charlotte
Jordan and Betty
vii
BRIEF CONTENTS
Preface xxvii
PART 1 ROLE AND SIZE OF THE
PUBLIC SECTOR 1
1 DEFINING PUBLIC SECTOR
RESPONSIBILITIES 3
2 MEASURING PUBLIC SECTOR SIZE 26
PART 2 FUNDAMENTALS OF WELFARE
ECONOMICS 59
3 MARKET EFFICIENCY 61
4 MARKET FAILURE 81
5 PUBLIC GOODS AND PUBLICLY PROVIDED
PRIVATE GOODS 101
6 EXTERNALITIES AND THE ENVIRONMENT 129
7 EFFICIENCY AND EQUITY 163
PART 3 PUBLIC EXPENDITURE THEORY 197
8 PUBLIC PRODUCTION OF GOODS
AND SERVICES 199
9 PUBLIC CHOICE 230
viii BRIEF CONTENTS
PART 4 PUBLIC EXPENDITURE IN PRACTICE 267
10 FRAMEWORK FOR ANALYSIS OF
EXPENDITURE POLICY 269
11
