Public Finance, 3rd Edition

Many-Person Economies: Fixed Producer Prices

Social Welfare Maximization versus Loss Minimization

Before 1970, public sector economists chose to analyze second-best tax theory almost exclusively within the context of one-consumer economies to highlight the efficiency aspects of that theory. The results derived in Chapters 13 and 14 provide a representative sampling of the received theory in the professional journals up to 1970. During the 1970s, however, a number of the leading public sector theorists—Boadway, Diamond, Feldstein, Green, Hartwick, and Mirrlees, to name just a few (Boadway, 1976; Diamond, 1975; Feldstein, 1972; Green, 1975; Hartwick, 1978; Mirrlees, 1975)—reworked second-best tax theory within the more realistic context of many-person ...