The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Public Finance

  • Richard A. Musgrave
Reference work entry


Public finance may well be the oldest branch of economics. It concerns not only the effects of fiscal operations on the market but also principles of public sector economics, which address a distinct set of issues and are linked closely to the perspectives of political and social science. This article covers (a) expenditure on public goods and transfers, including its macroeconomic effects as analysed by the classical and the Keynesian schools, and (b) taxation, including issues of tax equity and tax efficiency, definitions of income, consumption and expenditure, and tax shifting and incidence.


Ability to pay tax Ad valorem taxation Aggregate demand Bentham, J. Bequests Budgetary policy Capital budgeting Capital gains taxation Capital measurement Consumption base Consumption taxation Cost–benefit analysis Cournot, A. Deadweight loss Depreciation Edgeworth, F. Y. Elasticity of substitution Entitlement Equal absolute sacrifice theory of tax equity Equal marginal sacrifice theory of tax equity Equal proportional sacrifice theory of tax equity Equality Excess burden of taxation Exchange Expenditure base Expenditure tax Externalities Factor mobility Factor pricing Fairness Fiscal location Free rider problem Hobbes, T. Horizontal and vertical equity Human capital Hume, D. Income base Income effect of taxation Income subsidies Inflation Intergenerational equity International capital flows Interpersonal utility comparisons Interpersonal utility interdependence Justice Keynesianism Land tax Leisure Lindahl, E. R. Local public finance Marginal rates of substitution Marginal utility of income schedules Market failure Merit goods Mill, J. S. Musgrave, R. A. Neoclassical growth models Neoclassical synthesis Net income Opportunity cost Optimal commodity taxation Optimal taxation Paternalism Payroll tax Physiocracy Pigou, A. C. Preference revelation Primary distribution Progressive and regressive taxation Propensity to save Property tax Public choice Public expenditure Public finance Public goods Public policy failure Quasi-rent Rawls, J. Rent Retail sales tax Ricardo, D. Samuelson, P. A. Scandinavian model Shadow pricing Smith, A. Social discount rate Social welfare function Subsistence hypothesis Substitution effect of taxation Tax avoidance Tax base definition Tax burden Tax efficiency Tax equity Tax expenditures Tax incidence Tax prices Tax shifting Taxation of corporate profits Taxation of income Tiebout hypothesis Transfers Utilitarianism Value-added tax Voting rules Wagner’s law Wicksell, K. 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Barone, E. 1899. Di alcuni teoremi fondamentali per la teoria matematica dall’ imposta. Giornale degli Economisti, Second series 60. Trans. as ‘About fundamental theorems on the mathematical theory of taxation’ in Musgrave and Shoup (1959).Google Scholar
  2. Bentham, J. 1802. Principles of the civil code. In The theory of legislation, ed. C. Ogden. London: Kegan, 1931.Google Scholar
  3. Buchanan, J., and G. Tullock. 1962. The calculus of consent. Ann Arbor: University of Michigan Press.CrossRefGoogle Scholar
  4. Colm, C., and H. Tarasov. 1940. Who pays the taxes? Washington, DC: Temporary National Economic Committee.Google Scholar
  5. Cournot, A. 1838. Recherches sur les principes mathématiques de la théorie des richesses. Paris: Hachette.Google Scholar
  6. Diamond, P., and J. Mirrlees. 1971. Taxation and public production I: Production and efficiency; and II: Tax rules. American Economic Review 61(Pt I), March: 8–27; (Pt II), June: 261–278.Google Scholar
  7. Dupuit, J. 1844. De la mésure de l’utilité des travaux publics. Annales des Ponts et chausées, Second series, vol. 8. Reprinted in International Economic Papers No. 2 (1952): 83–110. London: Macmillan.Google Scholar
  8. Edgeworth, F.Y. 1897. The pure theory of taxation. Economic Journal 7(Pt I), March: 46–70; (Pt II), June: 226–238; (Pt III), December: 550–571.Google Scholar
  9. Feldstein, M. 1974. Social security, induced retirement, and aggregate capital accumulation. Journal of Political Economy 82: 905–926.CrossRefGoogle Scholar
  10. Harberger, A.C. 1974. Taxation and welfare. Boston: Little, Brown.Google Scholar
  11. Hicks, J. 1939. Value and capital. Oxford: Oxford University Press.Google Scholar
  12. Hicks, U. 1947. Public finance. New York: Pitman.Google Scholar
  13. Hobbes, T. 1651. Leviathan. Harmondsworth: Penguin Books, 1968.Google Scholar
  14. Hume, D. 1739. A treatise of human nature, ed. L. Selby-Bigge. Oxford: Oxford University Press, 1975.Google Scholar
  15. Jenkin, F. 1871. On the principles which regulate the incidence of taxes. Proceedings of the Royal Society of Edinburgh. Reprinted in Musgrave and Shoup (1959).Google Scholar
  16. Kaldor, N. 1955. An expenditure tax. London: Allen & Unwin.Google Scholar
  17. Kay, J. 1987. Indirect taxes. In The new palgrave: A dictionary of economics, ed. J. Eatwell, M. Milgate, and P. Newman, vol. 2. London: Macmillan.Google Scholar
  18. Krzyzaniak, M. 1967. The long-run burden of a general tax on profits in a neoclassical world. Public Finance 22: 472–491.Google Scholar
  19. Lindahl, E. 1919. Die Gerechtigkeit der Besteuerung. Lund: Gleerup.Google Scholar
  20. Marshall, A. 1890. Principles of economics, 8th ed. London: Macmillan, 1920.Google Scholar
  21. Mazzola, U. 1890. I dati scientifici della finanza pubblica. Rome: E. Loescher & Co.Google Scholar
  22. Mill, J.S. 1848. Principles of political economy, ed. W. Ashley. London: Longmans, 1921.Google Scholar
  23. Musgrave, R.A. 1939. The voluntary exchange theory of taxation. Quarterly Journal of Economics 53: 213–237.CrossRefGoogle Scholar
  24. Musgrave, R.A. 1959. The theory of public finance. New York: McGraw-Hill.Google Scholar
  25. Musgrave, R.A., and M. Krzyzaniak. 1963. The shifting of the corporation tax. Baltimore: Johns Hopkins Press.Google Scholar
  26. Musgrave, R.A., and C.S. Shoup, eds. 1959. Readings in the economics of taxation. Homewood: Irwin.Google Scholar
  27. Pechman, J., and B. Okner. 1974. Who bears the tax burden? Washington, DC: Brookings Institution.Google Scholar
  28. Pigou, A. 1920. The economics of welfare. London: Macmillan.Google Scholar
  29. Pigou, A. 1928. A study in public finance. London: Macmillan.Google Scholar
  30. Ramsey, F.P. 1927. A contribution to the theory of taxation. Economic Journal 37: 47–61.CrossRefGoogle Scholar
  31. Ricardo, D. 1817. The principles of political economy and taxation, ed. P. Sraffa. Cambridge: Cambridge University Press, 1951.Google Scholar
  32. Samuelson, P.A. 1954. The pure theory of public expenditure. Review of Economics and Statistics 36: 387–389.CrossRefGoogle Scholar
  33. Sax, E. 1887. Grundlegung der theoretischen Staatswirtschaft. Vienna: Holder.Google Scholar
  34. Schanz, G. 1896. Der Einkommensbegriff und die Einkommenssteuergesetze. Finanzarchiv 13: 1–87.Google Scholar
  35. Shoven, J., and J. Whalley. 1984. Applied general-equilibrium models of taxation and international trade. Journal of Economic Literature 22: 1007–1051.Google Scholar
  36. Simons, H. 1938. Personal income taxation. Chicago: University of Chicago Press.Google Scholar
  37. Smith, A. 1776. An inquiry into the nature and causes of the wealth of nations, ed. E. Cannan. New York: Putnam, 1904.Google Scholar
  38. Solow, R. 1956. A contribution to the theory of economic growth. Quarterly Journal of Economics 70: 65–94.CrossRefGoogle Scholar
  39. Tiebout, C.M. 1956. A pure theory of local expenditures. Journal of Political Economy 64: 416–424.CrossRefGoogle Scholar
  40. Wagner, A. 1883. Lehr und Handbuch der Politischen Oekonomie, Vierte Hauptabeilung: Finanzwissenschaft, 3rd ed. Leipzig: Winter.Google Scholar
  41. Walras, L. 1874–7. Elements of pure economics. Trans. W. Jaffé. Homewood: Irwin, 1954.Google Scholar
  42. Wicksell, K. 1896. Finanztheoretische Untersuchungen nebst Darstellung und Kritik des Steuerwesens Schwedens. Jena: Fischer.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Richard A. Musgrave
    • 1
  1. 1.