A Pure Theory of Local Expenditures

One of the most important recent developments in the area of "applied economic theory" has been the work of Musgrave and Samuelson in public finance theory. 2 The two writers agree on what is probably the major point under investigation, namely, that no "market type" solution exists to determine the level of expenditures on public goods. Seemingly, we are faced with the problem of having a rather large portion of our national income allocated in a "non-optimal" way when compared with the private sector.