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The importance of understanding the implications of general equilibrium is by now abundantly clear to researchers analyzing public fi nance issues. What is perhaps less apparent is that this was not always so. The study of public fi nance was radically transformed during the 15 years between 1959 and 1974 by the pioneering efforts of a small number of leading scholars, notably including Peter Mieszkowski. Thanks to their efforts, the analysis of applied problems in public finance moved from partial equilibrium to general equilibrium, providing the methods and insights that characterize modern public economics. The transformation began with the publication of Richard Musgrave’s The Theory of Public Finance (1959), a book that isolated and analyzed the allocation, distribution, and stabilization functions of government in general equilibrium settings. The subsequent analysis of deadweight loss, tax incidence, optimal taxation, effi cient provision of public goods, fiscal federalism, tax competition, behavioral responses to taxation, and a host of other public finance issues grew from the general equilibrium framework that Musgrave pioneered and that were applied and developed by those working on these issues in the 1960s and 1970s.


Posted with permission of the National Tax Association.