Abstract
Analysis of the pure theory of public expenditures reveals a pathological case of market failure. That is, goods with the “double polar” characteristics of joint supply and the impossibility of exclusion are such that their production will occur only under public organization (collective supply). Yet, in itself, the pure theory of public finance constitutes neither an economic rationale for the state nor an adequate economic theory of government expenditure. An economic theory of the state, consistent with the traditions of individualistic economics, may be developed around the assumption that the state aims to maximize societal economic welfare defined in terms of conformance with individual preferences.1 If market-determined prices are presumed to be the primary way in which preferences are manifest, such a theory requires a thoroughgoing description of all sources of failure of decentralized markets coupled with an analysis of the potentialities of various government policies to deal with these failures. The analogous economic theory of public expenditure must elucidate the specific role of government budgetary outlays as one among various state actions intended to deal with market failure. Further, it must distinguish public expenditures whose purpose is to subsidize households and private market organizations from those government expenditures for goods and services which then are either provided through collective organization and supply or are sold by the state.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References for Chapters 2, 3, and 4
Arrow, Kenneth. Social Choice and Individual Values. New York: Wiley, 1963.
Arrow, Kenneth. “The Organization of Economic Activity: Issues Pertinent to the Choice of Market versus Nonmarket Allocation,” in J. Margolis and R. H. Haveman, eds. Public Expenditures and Policy Analysis. Chicago: Markham, 1970, pp. 59–73.
Barone, Enrico. “The Ministry of Production in a Socialist State,” in Friedrich A. von Hayek, ed. Collectivist Economic Planning. London: Routledge and Sons, 1935, pp. 245–290.
Bator, Francis M. “The Simple Analytics of Welfare Maximization.” American Economic Review March 1957, pp. 22–59.
Bator, Francis M. “The Anatomy of Market Failure.” Quarterly Journal of Economics August 1958, pp. 351–79.
Baumol, William. Economic Dynamics. 2d ed. New York: MacMillan, 1959.
Baumol, William. Economic Theory and Operations Analysis. 2d ed. Englewood Cliffs: Prentice- Hall, 1965.
Baumol, William. Welfare Economics and The Theory of The State. 2d ed. Cambridge: Harvard University Press, 1965a.
Bergson, Abram. Essays in Normative Economics. Cambridge: Harvard University Press, 1966.
Bowen, Howard R. Toward Social Economy. New York: Rinehart & Company, Inc., 1948.
Breton, Albert. “A Theory of the Demand for Public Goods.” Canadian Journal of Economics and Political Science, November 1966, pp. 455–67.
Buchanan, James M. “Joint Supply, Externality, and Optimality.” Journal of Political Economy, November 1966, pp. 404–15.
Buchanan, James M. “Public Goods in Theory and Practice: A Note on the Minasian-Samuelson Discussion.” Journal of Law and Economics 1967, pp. 193–97.
Buchanan, James M. The Supply and Demand for Public Goods. Chicago: Rand McNally, 1968.
Buchanan, James M., and William Craig Stubblebine. “Externality.” Economica November 1962, pp. 371–84.
Buchanan, James M., and Gordon Tullock. The Calculus of Consent. Ann Arbor: University of Michigan Press, 1962.
Campa, Giuseppe. “On the Pure Theory of Public Goods.” Public Finance, No. 4, 1967, pp. 401–16.
Chamberlain, Edward. The Theory of Monopolistic Competition. Cambridge: Harvard University Press, 1935.
Coase, Ronald. “The Problem of Social Cost.” Journal of Law and Economics October 1960, pp. 1–44.
Colm, Gerhard. Essays in Public Finance and Fiscal Policy. New York: Oxford University Press, 1955.
Dolbear, F. Trenery Jr. “On the Theory of Optimum Externality.” American Economic Review, March 1967, pp. 90–103.
Escarraz, Donald R. The Price Theory of Value in Public Finance. Gainesville: University of Florida Press, 1966.
Friedman, Milton. Price Theory. Chicago: Aldine • Atherton, 1962.
Forte, Francesco. “Should ‘Public Goods’ Be Public.” Papers on Non-Market Decision-Making, Fall 1967, pp. 39–46.
Head, John G. “Public Goods and Public Policy.” Public Finance, no. 3, 1962, pp. 197–221.
Head, John G. “Lindahl’s Theory of the Budget.” Finanzarchiv October 1964, pp. 421–54.
Head, John G. “The Welfare Foundations of Public Finance Theory.” Revista di Diulto Finanziario e Scienza delta Finanze May 1965, pp. 379–428.
Head, John G. “On Merit Goods.” Finanzarchiv March 1966, pp. 1–29.
Head, John G. “Merit Goods Revisited.” Finanzarchiv March 1969, pp. 214–25.
Johansen, Lief. “Some Notes on the Lindahl Theory of Determination of Public Expenditures.” International Economic Review September 1963, pp. 346–58.
Johansen, Lief. Public Economics, Chicago: Rand McNally, 1965.
Johnson, Harry G. The Two Sector Model of General Equilibrium. London: Allen and Unwin, 1971.
Lancaster, Kelvin. “Change and Innovation in the Technology of Consumption.” American Economic Review May 1966, pp. 14–23.
Lange, Oskar. “On the Economic Theory of Socialism,” in O. Lange and F. M. Taylor, On the Economic Theory of Socialism. New York: McGraw-Hill, 1964.
Lindblom, Charles E. “Decision-Making in Taxation and Expenditures,” in Public Finances: Needs, Sources, and Utilization. Princeton: Princeton University Press, 1961, pp. 295–329.
Lipsey, R. G., and Kelvin Lancaster. “The General Theory of Second Best.” Review of Economic Studies no. 63, 1956–57, pp. 11–32.
Little, I. M. D. A Critique of Welfare Economics. London: Oxford University Press, 1950.
Little, I. M. D. “Direct Versus Indirect Taxes,” in Musgrave and Shoup, eds. Readings in The Economics of Taxation. Homewood, Ill.: Richard D. Irwin, Inc., 1959, pp. 123–31.
Margolis, Julius. “A Comment on the Pure Theory of Public Expenditure.” Review of Economics and Statistics, November 1955, pp. 347–49.
Margolis, Julius, and Phillip E. Vincent. External Economic Effects — An Analysis and Survey. Stanford: Institute in Engineering-Economic Systems, 1966.
McGuire, Martin C. and Henry Aaron. “Efficiency and Equity in the Optimal Supply of a Public Good.” Review of Economics and Statistics February 1969, pp. 31–39.
McKean, Roland N. Public Spending. New York: McGraw-Hill, 1968.
McKean, Roland N., and Jora R. Minasian. “On Achieving Pareto Optimality — Regardless of Cost.” Western Economic Journal December 1966, pp. 14–23.
McLure, Charles E, Jr. “Merit Wants: A Normatively Empty Box.” Finanzarchiv June 1968, pp. 474–83.
Meade, J. E. “External Economies and Diseconomies in a Competive Situation.” Economic Journal. March 1952, pp. 54–67.
Mishan, E. J. “Second Thoughts on Second Best.” Oxford Economic Papers, 1962, pp. 206–17.
Mishan, E. J. “The Relationship between Joint Products, Collective Goods, and External Effects.,” Journal of Political Economy, May/June, 1969, pp. 329–48.
Musgrave, Richard A. “The Voluntary Exchange Theory of Public Economy.” Quarterly Journal of Economics, February 1938, pp. 213–37.
Musgrave, Richard A. The Theory of Public Finance. New York: McGraw-Hill, 1959.
Musgrave, Richard A. “Provision for Social Goods,” in J. Margolis and H. Guitton, eds. Public Economics. New York: St. Martin’s Press, 1969, pp. 124–44.
Musgrave, Richard A., and Alan T. Peacock. Classics in the Theory of Public Finance. London: Macmillan, 1958.
Olson, Mancur, Jr. The Logic of Collective Action. Cambridge: Harvard University Press, 1965.
Robbins, Lionel. An Essay on the Nature and Significance of Economic Science. London: Macmillan, 1932.
Rosenstein-Rodan, P. N. “Problems of Industrialization of Eastern and South-Eastern Europe.” Economic Journal September 1943, pp. 202–11.
Rothenberg, Jerome. The Measurement of Social Welfare. Englewood Cliffs: Prentice-Hall, 1961.
Samuelson, Paul A. “The Pure Theory of Public Expenditures.” Review of Economics and Statistics November 1954, pp. 387–89.
Samuelson, Paul A. “Diagramatic Exposition of a Theory of Public Expenditures.” Review of Economics and Statistics November 1955, pp. 350–56.
Samuelson, Paul A. “Public Goods and Subscription TV: Correction of the Record.” Journal of Law and Economics October 1964, pp. 81–84.
Samuelson, Paul A. “Pitfalls in the Analysis of Public Goods.” Journal of Law and Economics October, 1967, pp. 199–204.
Samuelson, Paul A. “Contrast between Welfare Conditions for Joint Supply and for Public Goods.” Review of Economics and Statistics February 1969, pp. 26–30.
Samuelson, Paul A. “Pure Theory of Public Expenditure and Taxation,” in J. Margolis and H. Guitton, eds. Public Economics. New York: St. Martin’s Press, 1969a, pp. 98–123.
Scitovsky, Tibor. “Two Concepts of External Economies.” Journal of Political Economy April, 1954, pp. 143–51.
Scitovsky, Tibor. Welfare and Competition. Homewood, Ill.: Richard D. Irwin, Inc., 1961.
Sharp, Ansel M., and Donald R. Escarraz. “A Reconsideration of the Price or Exchange Theory of Public Finance.” Southern Economic Journal, October 1964, pp. 132–39.
Shoup, Carl. Public Finance. Chicago. Aldine • Atherton, 1969.
Sparks, Gordon R. “Professor Musgrave’s Theory of Public Expenditures.” Canadian Journal of Economics and Political Science November 1964, pp. 591–94.
Turvey, Ralph. “On Divergencies Between Social Cost and Private Cost.” Economica, August, 1963, pp. 309–13.
Wellisz, Stanislaw. “On External Diseconomies and the Government Assisted Invisible Hand.” Economica November 1964, pp. 345–62.
Author information
Authors and Affiliations
Copyright information
© 1971 Jesse Burkhead and Jerry Miner
About this chapter
Cite this chapter
Burkhead, J., Miner, J. (1971). Market Failure, Public Policy, and Public Expenditure. In: Public Expenditure. Aldine Treatises in Modern Economics. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-01372-2_4
Download citation
DOI: https://doi.org/10.1007/978-1-349-01372-2_4
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-01374-6
Online ISBN: 978-1-349-01372-2
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)