Empirical Public Economics
Edited by Attiat F. Ott and Richard J. Cebula
Chapter 1: Public Finance and the Three Branch Model
1 Public ﬁnance and the three branch model Richard A. Musgrave Professor Ott has invited me to join her in this volume and I am happy to contribute this note. I will take this opportunity to reopen that treasure box of ideas that have shaped the development of ‘public ﬁnance’ and my vision of what the ﬁeld should be about. Seen against this background, I then take a retrospective look at my three branch model and some of the problems that it poses, problems also related to the theme of this volume. 1 Unpacking the treasure chest My fascination with public ﬁnance dates back to 1930, my ﬁrst year of university study at Munich. This was followed by two years at Heidelberg, where, to my good fortune, Alfred Weber’s Institut für Sozialwissenschaft was engaged in a lively debate over how the ﬁeld of public ﬁnance should be structured and how its role should be deﬁned. On one side, there was the tradition of Wagner and Stein, leaders of Germany’s Historical School in the 1880s and 1890s, with central focus on the role of the state as chooser and provider of public goods – a framework distinct from that of market economics. On the other, there was the Austrian School of that period, linking the efﬁcient provision of public goods to consumer preference. A ﬁrst step was thus taken to join public and market economics in a common framework. But as Wicksell (1886) soon noted, this left a major...
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