Public Expenditure and Taxes

Abstract

The models in Chapters 4 and 5 do not consider that in all present day economies – even non-centrally managed ones – governments intervene heavily in the economic sphere. On the one hand governments raise taxes from citizens and firms, while on the other they supply public goods which very often, but not always, are essential to everyday economic activity. By way of example, we can mention the supply of services such as education, public health, justice,1 national defence, and the supply of goods such as infrastructures, from roads to railways to airports, and public utilities, from water to electricity to gas supply.