The Theory of Multiple Public Budget Determination from the Perspective of History of Economic Analysis

Abstract

From an analitycal historical perspective, this paper deals with the important public finance issue of decentralizing the government’s economic activities and functions into distinct branches, respectively devoted to collecting taxes and to allocating a given budget to different public goods. We start with the so-called Italian tradition in public finance and go on to the crucial contributions from James Pigou, Paul Samuelson and Richard Musgrave, up till the modern second best and optimal taxation approaches. Starting from the Italian tradition is meaningful as this stream of literature has given important pioneristic contributions to this topic, namely by Maffeo Pantaleoni and Enrico Barone. However, it is in developing the relationships of these contributions with the modern second best optimal taxation approach that we may find rigorous solutions to the main emerging problems of the issue.