Core Concepts of Institutionalist Public Finance: Problem Solving, Institutional Analysis, Strategic Choice, and Stakeholder Engagement

Abstract

Citizens and policymakers in many nations are becoming increasingly concerned about large budget deficits and mounting long-term fiscal policy challenges. At the same time, slow economic growth in the United States and Europe is causing some people to demand more government spending (and lower taxes) and others to question the efficacy of fiscal policy. Against that backdrop, institutional economists are exhibiting renewed interest in the field of public finance. This article responds by outlining four core concepts of institutionalist public finance: problem solving, institutional analysis, strategic choice, and stakeholder engagement. What distinguishes the perspective of institutionalism from that of neoclassical economics, today's dominant economic paradigm, is described in the course of the discussion. The core concepts of institutionalist public finance offer a coherent approach to the study of fiscal policy questions. Those concepts were first fashioned decades ago, but remain relevant: institutionalism continues to provide a solid basis for constructive analyses of fiscal challenges.