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

Charles Blankart

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

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.

JEL-codes: A20 B50 H20 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-hpe, nep-pbe and nep-upt
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