The Pure Theory of Public Expenditure: General Equilibrium

Abstract

The preceding chapter has shown how the characteristic features of pure public goods, joint supply and the inability to exclude, can be encompassed by partial equilibrium analysis. An important conclusion of the partial analysis of public goods is that while the properties of a normative, competitive-like equilibrium solution can be known, no reasonable assumptions about motives of, and interactions among, individuals ensures that it will be reached. Nonetheless, the nature of the partial equilibrium analysis and the issues that arise in the determination of a solution are significant because they indicate the fundamental similarities and differences between public and private goods. But, as has been demonstrated in so many other areas of economic analysis, partial equilibrium takes as given many of the factors which are in fact variables in an overall system. A comprehensive pure theory of public finance must, therefore, be cast in general rather than partial equilibrium terms.