Abstract
In one sense the public choice revolution of the 20th century ocurred because economic and political analysis now routinely takes into account the incentives of political decision-makers, and recognizes that political decision-making can result in inefficiencies. In another sense, this public choice revolution is seriously incomplete, because while it has succeeded in producing a theory of government failure, it has not taken the next step to develop a framework for optimal public policy in light of the characteristics of collective decision-making. This chapter takes a step in that direction by sketching out optimal policies for taxation, production and redistribution, taking into account that these public policies are products of the political system. Public choice might be thought of as applying the tools of economics to analyze political decision-making. This chapter uses the results of public choice to redevelop the theory of public finance.
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Holcombe, R.G. (2005). Taxation, Production, and Redistribution. In: Backhaus, J.G., Wagner, R.E. (eds) Handbook of Public Finance. Springer, Boston, MA. https://doi.org/10.1007/1-4020-7864-1_6
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