Public Finance and Public Policy

Eighth Edition

Publication Date: April 24, 2026

E-book ISBN: 9781319615987

A rigorous, evidence-based approach to public finance and policy

Governments today face unprecedented pressure to balance taxation, public spending, and national debt while addressing shifting social priorities. In the new eighth edition of Public Finance and Public Policy, Jonathan Gruber delivers a rigorous, high-level introduction to the economic...

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ISBN: 9781319615987
Public Finance and Public Policy

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PART I Introduction and Background

1 Why Study Public Finance?

2 Theoretical Tools of Public Finance

3 Empirical Tools of Public Finance

4 Budget Analysis and Deficit Financing

PART II Externalities and Public Goods

5 Externalities: Problems and Solutions

6 Externalities in Action: Environmental and Health Externalities

7 Public Goods

8 Cost-Benefit Analysis

9 Political Economy

10 State and Local Government Expenditures

11 Education

PART III Social Insurance and Redistribution

12 Social Insurance: The New Function of Government

13 Social Security

14 Unemployment Insurance, Disability Insurance, and Workers’ Compensation

15 Health Insurance I: Health Economics and Private Health Insurance

16 Health Insurance II: Medicare, Medicaid, and Health Care Reform

17 Income Inequality and Government Transfer Programs

PART IV Taxation in Theory and Practice

18 Taxation: How It Works and What It Means

19 The Equity Implications of Taxation: Tax Incidence

20 Tax Inefficiencies and Their Implications for Optimal Taxation

21 Taxes on Labor Supply

22 Taxes on Savings

23 Taxes on Risk Taking and Wealth

24 Taxation of Business Income

25 Fundamental Tax Reform and Consumption Taxation

Carefully structured to support students to organise concepts in their mind, with quick hint boxes, questions to keep in mind and key terms boldfaced throughout the text for easy definition.
Accessible presentation of statistics using visual graph representations emphasising to students why they should care about policies.
Mathematic appendices allow for a deeper understanding of the mathematics guided by instructor experts without overwhelming students as they learn the concepts.
Passionate pedagogy incorporates empirical evidence into every chapter emphasising the importance of research integrity in dedicated sections.

All statistics, data-related tables and figures, and applications have been updated completely to reflect the most recent available data. In addition, a number of major changes were made throughout, including new examples, updating of existing chapter introductions, revisions to the Application and Empirical Evidence boxed features, and a number of new and thoroughly updated text discussions.

Chapter 1 has been completely revised to reflect the most recent changes from the end of the Biden Administration to the beginning of the second Trump Administration. The Application on vaccinations has been updated to reflect the most recent information about vaccination controversies.
Chapter 3 provides a completely new discussion of bias and the need for randomized controlled trials, focusing on workplace wellness programs.
Chapter 4 features more information on government budgeting and the efforts to control spending while keeping the deficit under control.
Chapter 6 includes an abundance of updated data and information on environmental regulation, climate change, and health.
Chapter 9 features important updates about the state of politics in the United States, including the ever-increasing polarization of the people and government of the United States.
Chapter 15 provides significant updates on health care spending and the quality of health delivered by the U.S. health care system.
Chapter 16 features updated information about the ACA, Medicaid, and Medicare and their costs and benefits.
Chapter 17 focuses considerable attention on updated facts and information about income inequality, transfer policy, and in-kind programs in the United States.
Chapter 21 features updated information throughout the chapter, specifically focusing on taxation and labor supply and recent tax policy proposals.
Chapter 23 discusses nuances in the taxation of risk taking and wealth, as well as efforts to close loopholes.
Chapter 24 features interesting new developments in the area of corporate taxes.

Jonathan Gruber

Dr. Jonathan Gruber is the Chairman and Ford Professor of the Economics Department at the Massachusetts Institute of Technology, where he has taught since 1992. He is also the former Director of the Health Care Program at the National Bureau of Economic Research and the former President of the American Society of Health Economists. He is a member of the Institute of Medicine, the American Academy of Arts and Sciences, the National Academy of Social Insurance, and the Econometric Society. He has published more than 200 research articles, has edited six research volumes, and is the author of Public Finance and Public Policy, a leading undergraduate text, Health Care Reform, a graphic novel, and Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream (with Simon Johnson). In 2006, he received the American Society of Health Economists Inaugural Medal for the best health economist in the nation aged 40 and under.

During the 1997–1998 academic year, Dr. Gruber was on leave as Deputy Assistant Secretary for Economic Policy at the Treasury Department. From 2003–2006, he was a key architect of Massachusetts’ health reform effort, and in 2006 became an inaugural member of the Health Connector Board. During 2009–2010, he served as a technical consultant to the Obama Administration and worked with the Administration and Congress to help craft the Patient Protection and Affordable Care Act. In 2011, he was named “One of the Top 25 Most Innovative and Practical Thinkers of Our Time” by Slate Magazine. In both 2006 and 2012, he was rated as one of the top 100 most powerful people in health care in the United States by Modern Healthcare Magazine. In 2020, he received a Guggenheim Fellowship.