The Theory of Public Finance transformed the study of public finance to a discipline in which questions are analyzed in general equilibrium terms, where changes in tax policy take into account the resulting changes in the economy. Musgrave’s many intellectual contributions included studies on tax incidence, tax progressivity, public goods, fiscal federalism, the effects of taxation on risk taking, and the role of fiscal policy in stabilizing the economy.
The market mechanism is well suited for the provision of private goods. It is based on exchange, and exchange can occur only where there is an exclusive title to the property which is to be exchanged. In fact, the market system may be viewed as a giant auction where consumers bid for products and producers sell to the highest bidders.
Richard A. Musgrave
Richard Abel Musgrave (1910-2007) was a leading 20th-century economist whose work transformed the field of public finance. He was considered a candidate for the Nobel Prize. Musgrave's seminal work, The Theory of Public Finance (1959), theorized the economic role of government in partnership with the private sector in democratic societies. Musgrave conceptualized the public sector budget as having three branches concerned with the allocation of resources, the distribution of income, and stabilization of the economy. Musgrave also introduced the new concept of “merit wants.” His work further revolutionized public finance by applying microeconomic analysis, Keynesian macroeconomics and consideration of equity to theories of taxation. Renowned for its accessible style, the book is still considered a major theoretical work in the field of public finance. The Musgraves' co-authored 1973 work Public Finance in Theory and Practice also remains an important textbook. Musgrave served as an advisor on tax reform to a number of governments, including postwar Germany, Colombia, Bolivia, Puerto Rico, Indonesia, South Korea, and Taiwan. In addition, he served as editor of the Quarterly Journal of Economics and was founder and President of the International Seminar in Public Economics. He was a Fellow of both the American Academy of Arts and Sciences and the National Academy of Science, and was a Distinguished Fellow of the American Economic Association and the National Tax Association as well as Honorary President of the International Institute of Public Finance. He was awarded the Frank E. Seidman Award in Political Economy in 1981.
Peggy B. Musgrave
Peggy B. Musgrave (1924) – Professor of Economics, Norteastern University, co-author and contributor in the majority of her husband’s works - Richard Abel Musgrave. She is a pioneer in the economics of international taxation.