Mapping the history of public economics in the twentieth century: an introduction to the special issue

Abstract

The papers in this issue deal with the transformation from public finance to public economics at a theoretical and philosophical level in the mid-twentieth century. Our introduction situates these papers within their intellectual context. To do so, we provide a broad outline of the trajectory of the field beginning with the transformation of welfare economics. Acknowledging the structuring role of Richard Musgrave and James Buchanan for the field, the papers highlight the key role also played by Paul Samuelson in the transition to public economics. Moreover, they underscore how ethical issues were formalised into normative economics at this critical juncture.

Keywords:

• Public economics
• public finance
• welfare economics
• Paul A. Samuelson
• John Rawls

JEL CODES:

• B21
• B40
• D63
• H00

Acknowledgment

This special issue has benefited from discussions at a workshop organised by Richard Sturn and Julia Wurzinger at the University of Graz in September 2022. We thank the contributors of the special issue, particularly Raphaël Fèvre and Steven G. Medema who provided feedback on this introduction. We also learned from the comments of referees on the various papers that compose this issue. Roger Backhouse, Pedro Duarte, Claire Silvant and Javier San Julian Arrupe have also given us useful advice at different stages of this paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Hindriks and Myles argue that “public economics has always been one of [economics’] core branches” (2013, 3). Indeed, the field traces its origin to the political arithmetic of William Petty, Adam Smith’s principles of taxation, and the concomitant German Cameralistic sciences (Musgrave 1985; Sturn 2016; Desmarais-Tremblay 2021b). In the US, public finance was one of the earliest fields of specialized economics study and the first to claim scientific status (Johnson 2014b).

2 Nicholas Stern joined the Journal of Public Economics as editor in 1974, but the “key force” remained Atkinson, who edited the journal for 26 years (Stern in Aaberge et al. 2017).

3 In practice, fiscal or political sociology of the state (a further topic not covered in this special issue) can hardly be expected to deliver such knowledge, since the state sector is subject to “laws” and forces not amenable to an analysis based on economic logic and rationality.

4 The two theorems guaranteed that competitive markets would generate Pareto efficient outcomes contingent on a series of basic assumptions; further any Pareto optimal equilibrium can be achieved via exchange, contingent on lumpsum (e.g., nondistortionary) transfers.

5 In the Anglo-American literature, Nancy Ruggles provided a definitive assessment by reconceiving the problem along general equilibrium lines. She explained that most taxes used to fund subsidies would violate some marginal conditions for equilibrium; further, the inevitable redistribution of income via lump-sum or other taxation would necessitate interpersonal utility comparisons unless taxes fell entirely on the consumer surplus of the users—an unlikely outcome. The analysis could only identify potential improvements; any actual improvement required the addition of a distributional judgement (Ruggles 1949).

6 Buchanan’s definitions of positive and normative are not uncontested. Warren J. Samuels makes the argument that Buchanan’s work was also fundamentally normative via its embrace of the status quo as the starting point for analysis and the role assigned to antecedent assumptions, particularly those regarding property rights (Buchanan and Samuels 1975; see also Desmarais-Tremblay 2014).