C O N T E N T S P a r t I E C O N O M I C S O F P U B L I C E X P E N D I T U R E S Chapter I ECONOMİC SYSTEMS AND PUBLIC ECONOMY3 A. CAPITALISM .4 B. COMMUNISM.6 C. KEYNESIANISM8 D. MONETARISM 10 E. PEOPLE’S CAPITALISM10 F. HISTORY OF MODERN PUBLIC FINANCE.11 Chapter II EFFICIENCY IN RESOURCE ALLOCATION . 14 A. RESOURCE ALLOCATION IN ECONOMIC SYSTEMS .14 B. SOCIAL BALANCE.19 C. ECONOMIC ANALYSIS OF RESOURCE ALLOCATION.19 D. MACROECONOMIC INDICATORS .25 Chapter III FAIRNESS IN INCOME DISTRIBUTION 26 A. INEQUALITY 26 B. FACTORS DETERMINING INCOME DISTRIBUTION27 C. MEASUREMENT OF INCOME DISTRIBUTION 31 D. HOW TO IMPROVE INCOME DISTRIBUTION .35 VIII Chapter IV MACRO ECONOMIC STABILIZATION. 37 A. GROWTH RATE .37 B. PRICE LEVEL STABILITY.40 C. UNEMPLOYMENT 46 E. MONETARY AND FISCAL POLICIES .52 Chapter V THE THEORY OF PUBLIC GOODS AND SERVICES 55 A. ECONOMIC ANALYSIS OF PUBLIC GOODS .55 B. FINANCING PUBLIC GOODS.56 C. PRICE DETERMINATION OF PUBLIC GOODS57 D. CLASSIFICATION OF ECONOMIC GOODS AND SERVICES .60 E. MARGINAL TRANSFORMATION RATES68 F. FINANCING RELIGIOUS SERVICES 69 Chapter VI PUBLIC SECTOR GROWTH 75 A. THEORITICAL ARGUMENTS.75 B. THE SIZE OF THE PUBLIC SECTOR .77 C. IDOLOGIES AFFECTING THE SIZE OF THE STATE 79 Chapter VII GOVERNMENTAL INTERVENTION . 94 A. IMPERFECT MARKET CONDITIONS 94 B. EXTERNALITIES 101 Chapter VIII PUBLIC SERVICES IN TURKEY 108 A. ECONOMICS OF EDUCATION . 108 B. HEALTH ECONOMICS 116 IX C. ECONOMICS OF TRANSPORTATION. 117 D. SOCIAL HOUSING 123 Chapter IX STATE ECONOMIC ENTERPRISES 128 A. REASONS FOR EXISTENCE OF SEEs . 128 B. CLASSIFICATION . 133 C. PRICING POLICIES. 134 Chapter X COST BENEFIT ANALYSIS . 145 A. PLANNING PROGRAMMING BUDGETING SYSTEMS . 145 B. CHARACTERISTICS OF COST AND BENEFIT ANALYSIS . 146 C. BENEFITS AND COSTS OF PUBLIC PROJECTS 148 D. STATEMENT OF SOCIAL COSTS AND BENEFITS OF ALTERNATIVE PROJECTS 148 E. SOME PROBLEMS OF COST BENEFIT ANALYSIS 152 F. RANKINGS OF APPROPRIATE PROJECTS. 154 P a r t II E C O N O M I C S O F T A X A T I O N Chapter XI INTRODUCTION TO TAXATION . 159 A. HISTORICAL DEVELOPMENT OF MODERN TAXATION 159 B. TAXATION TERMS AND PRINCIPLES 160 C. TAX BASE TAX RATE RELATIONSHIP 163 D. TAXATION PRINCIPLES . 165 E. TURKISH TAXATION STRUCTURE. 170 F. INTERNATIONAL COMPARISONS . 173 G. TAX STRUCTURE . 175 X Chapter XII INCOME TAXATION . 179 A. TERMS RELATED TO TAXABLE INCOME. 179 B. ALLOCATIONAL EFFECTS 185 C. DISTRIBUTIONAL EFFECTS . 189 D. STABILIZATION EFFECT. 191 Chapter XIII CORPORATION INCOME TAX 194 A. CHARACTERISTICS OF CORPORATE TAX . 194 B. DEPRECIATION POLICIES . 198 C. DISTRIBUTIONAL EFFECTS 202 D. ALLOCATIONAL EFFECTS 203 E. STABILIZATION EFFECT. 205 Chapter XIV CONSUMPTION TAXES . 206 A. CHARACTERISTICS OF CONSUMPTION TAXES 206 B. CONSUMPTION TAXES IN TURKEY. 208 C. CONSUMPTION TAXES IN EUROPEAN UNION . 210 D. ALLOCATIONAL EFFECTS OF CONSUMPTION TAXES 212 E. EFFECTS ON INCOME DISTRIBUTION . 215 F. EFFECTS ON STABILIZATION . 220 G. PERSONAL EXPENDITURE TAX 221 H. SALES TAXES IN THE USA . 223 Chapter XV THE OTHER TAXES . 225 A. WEALTH TAXES. 225 B. INHERITANCE AND ESTATE (GIFT) TAXES. 228 XI C. THE PROPERTY TAXATION 230 D. PAYROLL OR EMPLOYMENT TAXES . 233 E. PUBLIC ASSISTANCE PROGRAMS. 236 F. NEGATİVE INCOME TAX. 237 Chapter XVI PUBLIC BORROWING . 240 A. CHARACTERISTICS OF PUBLIC DEBT. 240 B. GLOBALIZATION AND PUBLIC DEBT 245 C. INTEREST RATE AND PUBLIC DEBT 246 D. STRUCTURE OF NATIONAL DEBT 248 E. STATISTICAL ANALYSIS OF TURKEYS’ PUBLIC DEBT 252 F. AUSTERITY MEASURES 253 P a r t III E C O N O M I C A N A L Y S I S O F D E M O C R A C Y Chapter XVII POLITICAL DECISION MAKING PROCESS IN DEMOCRACY261 A. PROCESS OF POLITICAL DECISION MAKING 261 B. ALTERNATIVE VOTING RULES . 265 C. ARROW’S IMPOSSIBILITY THEOREM . 270 D. ESTABLISHMENTS OF COALITION GOVERNMENTS. 271 E. COSTS OF POLITICAL DECISION MAKING IN TURKEY. 272 REFERENCES 275 F I G U R E S Figure 1 : The production possibility curve for a society20 Figure 2 : Social Indifference Curves.22 Figure 3 : Optimal inter sectoral allocation24 Figure 4 : Lorenz Curve.33 Figure 5 : Price determination of private goods (on the left) and public goods (on the right) .57 Figure 6 : Classification of economic goods according to their joint consumption (indivisibility) and externality characteristics60 Figure 7 : Efficient resource allocation under perfectly competitive markets.95 Figure 8 : Inefficient Resource Allocation under imperfectly competitive market conditions .96 Figure 9 : Optimum social output under decreasing cost conditions.98 Figure 10 : Optimal output under zero marginal cost condition 100 Figure 11 : Internalization of potential positive externalities 103 Figure 12 : Internalization of negative externalities by means of penalty taxes. 106 Figure 13 : Monopoly Pricing Policy 135 Figure 14: Marginal Cost Pricing. 136 Figure 15: Average cost pricing 138 Figure 16: Peak load pricing . 141 Figure 17 : Taxation structure in European Union. 176 Figure 18 : Income effect and substitution effect of the income tax. 187 Figure 19 : Statuary and effective income tax rates 189 Figure 20 : Shifting of corporation tax under imperfectly competitive market conditions 203 Figure 21 : Allocational Effect of the corporation income tax 204 XIII Figure 22 : Effect of sumptuary tax on public bads . 213 Figure 23 : Excess burden of consumption tax . 214 Figure 24 : Forward shifting of corporation tax 216 Figure 25 : Backward shifting of the consumption tax 217 Figure 26 : Partial shifting of the consumption tax 219 Figure 27 : Shifting of payroll tax, under Inelastic labor supply . 235 Figure 28 : Shifting of payroll tax under partially elastic labor supply . 235 Figure 29 : Negative Income Taxation: According to Friedman Plan 238 Figure 30 : Political Decision Making Cost . 272 XIV T A B L E S Table 1 : The relation between the state of income distribution and political systems, (based on UN reports in 1980s).30 Table 2 : Income Distribution by Quintales in Turkey32 Table 3 : Gini Coefficients for selected countries Source: Eurostat .34 Table 4 : Growth rates in selected countries in 2017.39 Table 5 : Growth Rate of Gross National Product (% ) 39 Table 6 : GNP in terms of nominal, dollars and real values in Turkey .40 Table 7 : Growth rates year by year in Turkey .40 Table 8 : Inflation (consumer price index, %) in selected countries .43 Table 9 : Inflation rates in Turkey year by year. .43 Table 10 : Unemployment rate (%) in selected countries .47 Table 11 : Unemployment rates year by year in Turkey 49 Table 12 : Foreign Trade Account balance in selected countries .51 Table 13 : Exports and imports of Turkey (billion dollars) 52 Table 14 : The size of the governments in various countries Sources: OECD Economic Outlook; OECD Historical Statistics; IMF. 78 Table 15 : GDP, public expenditures, public revenues and their shares Source: Ministry Finance statistics:79 Table 16 : Pisa scores of Turkish students in science, reading and math 116 Table 17 : Length of Rail Transport in selected countries (000 km). 122 Table 18 : Tangible, intangible and pecuniary benefits of an agricultural project 151 Table 19 : Tangible, intangible and pecuniary costs of an agricultural project. 151 Table 20 : Choosing the most efficient project 154 Table 21 : Shares of the direct and indirect taxes to total tax revenues in Turkey, in 2015. . 171 Table 22 : Amounts of general tax revenues and public expenditures 172 Table 23 : Breakdown of Turkish Tax revenues and expenditures 173 XV Table 24 : The share of the tax revenues to GDP in various countries. 174 Table 25 : The ratio of tax revenues to GDP in Turkey 174 Table 26 : Corporation, Income (top marginal tax rate) and consumption tax rates in some EU countries. 175 Table 27 : Comparison of Turkish and European taxation structures . 177 Table 28 : Income slices and their corresponding tax rates 182 Table 29 : Discrimination principles as applied in Turkey 190 Table 30 : Differentiated tax rates distorting vertical and horizontal equity in Turkish income taxation 191 Table 31 : Present values of alternative depreciations rules. 201 Table 32 : Sales and local state taxes in the USA 224 Table 33 : Inheritance and property tax rates in Turkey 229 Table 34 : Public expenditures, public revenues and budget deficits in selected EU countries in 1980s and 2010s. 249 Table 35 : Ratios of public debt to GNP in selected EC countries in 2000 and in 2012 . 249 Table 36 : Turkey’s public, central bank, private and total debt and its ratio to GDP. . 251 Table 37 : Breakdown of Turkish public debt in dollars (million dollars) 252 Table 38 : External and internal debt of Turkey 253 Table 39 : Plurality voting: x is the winner. . 269 Table 40 : Establishment of Coalition Governments 271 R E F E R E N C E S. 215
