Theory of public finance: a study in public economy

Public finance, as a branch of economics, has a mixed past. Some of the great economists-notably Ricardo, Wicksell, Edgeworth, and Pigou ventured forth into the theory of taxation and, less frequently, of public expenditures. Yet these were more or less lonely fornys. The main stream of literature in public finance proper proceeded in a historical and institutional context. Primary concern remained with the more practical aspects of fiscal legislation and administration.

These, to be sure, are important matters. The effects of a tax depend upon what it is, not what it is meant to be; and an understanding of the social and historical setting is needed to interpret the determination of fiscal politics. At the same time, the problems of public finance must be dealt with by economic analysis as well. The general body of economic theory, which has been applied so successfully to such special fields as international trade, must be applied with equal rigor to public finance.