The Institute of Public Economics I developed from one of the eldest chairs of the Faculty of Economics in Muenster, namely the Scheduled Ordinariate for Economics that was established in 1938 and occupied by Prof. Dr. Alfred Müller-Armack (1901 – 1978) in 1939. Müller-Armack stayed in Muenster until 1950, when he went to Cologne.

As his successor Prof. Dr. Horst Jecht (1901 – 1965) accepted a professorship in Munich in 1959, Prof. Dr. Dr. h.c. Herbert Timm (1911 – 1987) was invited to take his place. He conditioned his acceptance on the foundation of an Institute for Public Economics. When this happened on 01.04.1960, Timm became the first director of this newly founded Institute.

In 1971, the Institute was split in two: The chair of Prof. Timm was renamed Chair for Public Economics I, while a new Chair for Public Economics II with a second director was founded. Both chairholders are equal directors of the Institute for Public Economics to the present day. The Chair for Public Economics II was occupied by Prof. Dr. Ingolf Metze from the Institute for Public Economics of the University Kiel, who was a former student of Prof. Dr. Willi Albers.

After the retirement of Prof. Timm in 1977, Prof. Dr. Heinz Grossekettler from the Institute for Public Economics of the University Mainz became chairholder for Public Economics I and director of the Institute in 1979. Prof. Dr. Heinz Grossekettler was a former student of Prof. Dr. Otto Gandenberger.

In 2000, after the retirement of Prof. Metze, Prof. Dr. Aloys Prinz became his successor. From then on, he was both the chair holder for Public Economics II and head of the Institute. Before, Prof. Prinz had worked for the Chair for Economics and special economic Policy of the University Mainz.

After the retirement of Prof. Grossekettler, Prof. Dr. Johannes Becker became chairholder for Public Economics I and director of the Institute in 2010.