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The Great Schism in the Theory of Public Finance. A Treatise in the Theory of Economic Thought

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  • Blankart, Charles B:

Abstract

In 1870 Menger, Jevons and Walras succeeded in explaining prices in a market economy. While most economists welcomed their achievement, economists of the theory of public finance split in a Great Schism. The dissent is on the two Gossen Laws on which the neoclassical revolution relies. Continental Europeans insist in the relevance of choice and therefore adopt both Gossen laws, meaning that of declining marginal utility and that of utility equalization at the margin. The Anglo-Saxons adopt only declining marginal utility because they found that individual choice does not work for public goods. The former became choice individualists, the latter utilitarians. The Schism was revitalized with the Mirrlees Review of 2010/2011, a monumental work by 63 renowned economists over 1880 pages on what a good tax system ought to be. The author argues that without choice, nothing can be said on a good tax system. Therefore the Mirrlees Review is rejected in favour of a choice alternative which is developed in this paper.

Suggested Citation

  • Blankart, Charles B:, 2014. "The Great Schism in the Theory of Public Finance. A Treatise in the Theory of Economic Thought," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100461, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc14:100461
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    References listed on IDEAS

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    1. Blankart, Charles B, 1998. "Was Knut Wicksell a Conservative or a Radical? A Note on an Early Monograph by Knut Wicksell," Public Choice, Springer, vol. 94(3-4), pages 355-365, March.
    2. Brueckner, Jan K., 1982. "A test for allocative efficiency in the local public sector," Journal of Public Economics, Elsevier, vol. 19(3), pages 311-331, December.
    3. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
    4. Becker, Gary S & Mulligan, Casey B, 2003. "Deadweight Costs and the Size of Government," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 293-340, October.
    5. Vanberg, Viktor J., 2005. "Market and state: the perspective of constitutional political economy," Journal of Institutional Economics, Cambridge University Press, vol. 1(01), pages 23-49, June.
    6. Anthony B. Atkinson, 2012. "The Mirrlees Review and the State of Public Economics," Journal of Economic Literature, American Economic Association, vol. 50(3), pages 770-780, September.
    7. (IFS), Institute for Fiscal Studies (ed.), 2010. "Dimensions of Tax Design: The Mirrlees Review," OUP Catalogue, Oxford University Press, number 9780199553754.
    8. Juergen Backhaus & Richard Wagner, 1987. "The cameralists: A public choice perspective," Public Choice, Springer, vol. 53(1), pages 3-20, January.
    9. Jevons, William Stanley, 1871. "The Theory of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number jevons1871.
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    More about this item

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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