Richard Musgrave
Encyclopedia
Richard Abel Musgrave was an American economist
of German heritage. His most cited work is The Theory of Public Finance (1959), described as "the first English-language treatise
in the field."
, Germany. He studied in Munich
and Heidelberg
. graduated from Harvard
in 1937. After that he spent four years as a research economist at the Federal Reserve, taught at several American universities
and served as an advisor to the US government, before returning to Harvard in 1965 as H. H. Burbank professor of Political Economy in the faculty of Arts and Sciences and the Law School. He was also editor of the Quarterly Journal of Economics
. His book The Theory of Public Finance (1959) remains a leading theoretical work. Public Finance in Theory and Practice (1973), co-authored with his wife, Peggy Brewer Musgrave, became a leading textbook for many years.
He was elected a Fellow in American Academy of Arts and Sciences, a distinguished Fellow of the American Economic Asscocation, honorary member of the National Tax Association, and honorary President of the Institute of Public Finance(1978). Awarded the Frank E Seidman award in Political Economy (1981), honorary doctorates from Alleghany college, University of Heidelberg, University of Milan, University of Michigan, and the University of Munich, he was a professor emeritus
at Harvard until his death, and an adjunct Professor at the University of California at Santa Cruz.
Martin Feldstein is quoted in the New York Times obituary (Jan 20, 2007) "Richard Musgrave transformed economics in the 1950s and 1960s from a descriptive and institutional subject to one that used the tools of Microeconomics and Keynesian Macroeconomics to understand the effect of taxes." Musgrave published his seminal paper, "Voluntary Exchange Theory of Public Finance" in the Quarterly Journal of Economics in 1939. Paul Samuelson
would later convert this from a positive theory
to a normative theory
.
It is from the 1959 paper "Voluntary Exchange Theory of Public Finance" that 'The Musgrave Three-Function Framework' originates. This framework is the suggestion that government activity should be separated into three functions or "branches," macroeconomic stabilization, income redistribution, and resource allocation.
The stabilization branch is to assure the achievement of high employment and price stability, the distribution branch is to achieve an equitable distribution of income, and the allocation branch is to see that resources are used efficiently.
This conceptual division of the responsibilities of government allows us to narrow the scope of inquiry into tax assignment, by indicating which of the three functions are most appropriately assigned to various levels of government. The remainder of this section focuses on the implications of the three-branch framework for the assignment of revenue sources among levels of government, especially the assignment between the central government and second-tier governments.
In his paper, "A Multiple Theory of Budget Determination," published in Finanzarchiv
1957, Musgrave introduced the economic concept of merit good
(and later, de-merit good). The concept has been extensively discussed elsewhere and been quite controversial in economic theory.
His background in the German, Austrian, Italian and Swedish schools of political economy
plus the uniquely German contribution of Finanzwissenschaft, or fiscal sociology, left him in a unique position to make a contribution to postwar government finance theory. He died on January 15, 2007 in Santa Cruz, California
.
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
of German heritage. His most cited work is The Theory of Public Finance (1959), described as "the first English-language treatise
Treatise
A treatise is a formal and systematic written discourse on some subject, generally longer and treating it in greater depth than an essay, and more concerned with investigating or exposing the principles of the subject.-Noteworthy treatises:...
in the field."
Life
Musgrave was born in Königstein im TaunusKönigstein im Taunus
Königstein im Taunus is a climatic spa and lies on the thickly wooded slopes of the Taunus in Hesse, Germany. Owing to its advantageous location for both scenery and transport on the edge of the Frankfurt Rhine Main Region, Königstein is a favourite residential town...
, Germany. He studied in Munich
Munich
Munich The city's motto is "" . Before 2006, it was "Weltstadt mit Herz" . Its native name, , is derived from the Old High German Munichen, meaning "by the monks' place". The city's name derives from the monks of the Benedictine order who founded the city; hence the monk depicted on the city's coat...
and Heidelberg
Heidelberg
-Early history:Between 600,000 and 200,000 years ago, "Heidelberg Man" died at nearby Mauer. His jaw bone was discovered in 1907; with scientific dating, his remains were determined to be the earliest evidence of human life in Europe. In the 5th century BC, a Celtic fortress of refuge and place of...
. graduated from Harvard
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
in 1937. After that he spent four years as a research economist at the Federal Reserve, taught at several American universities
University
A university is an institution of higher education and research, which grants academic degrees in a variety of subjects. A university is an organisation that provides both undergraduate education and postgraduate education...
and served as an advisor to the US government, before returning to Harvard in 1965 as H. H. Burbank professor of Political Economy in the faculty of Arts and Sciences and the Law School. He was also editor of the Quarterly Journal of Economics
Quarterly Journal of Economics
The Quarterly Journal of Economics, or QJE, is a peer-reviewed academic journal published by the Oxford University Press and edited at Harvard University's Department of Economics. Its current editors are Robert J. Barro, Elhanan Helpman and Lawrence F. Katz...
. His book The Theory of Public Finance (1959) remains a leading theoretical work. Public Finance in Theory and Practice (1973), co-authored with his wife, Peggy Brewer Musgrave, became a leading textbook for many years.
He was elected a Fellow in American Academy of Arts and Sciences, a distinguished Fellow of the American Economic Asscocation, honorary member of the National Tax Association, and honorary President of the Institute of Public Finance(1978). Awarded the Frank E Seidman award in Political Economy (1981), honorary doctorates from Alleghany college, University of Heidelberg, University of Milan, University of Michigan, and the University of Munich, he was a professor emeritus
Emeritus
Emeritus is a post-positive adjective that is used to designate a retired professor, bishop, or other professional or as a title. The female equivalent emerita is also sometimes used.-History:...
at Harvard until his death, and an adjunct Professor at the University of California at Santa Cruz.
Martin Feldstein is quoted in the New York Times obituary (Jan 20, 2007) "Richard Musgrave transformed economics in the 1950s and 1960s from a descriptive and institutional subject to one that used the tools of Microeconomics and Keynesian Macroeconomics to understand the effect of taxes." Musgrave published his seminal paper, "Voluntary Exchange Theory of Public Finance" in the Quarterly Journal of Economics in 1939. Paul Samuelson
Paul Samuelson
Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize, that he "has done more than any other contemporary economist to raise the level of scientific analysis in...
would later convert this from a positive theory
Positive science
In the humanities and social sciences, the term positive is used in at least two ways.The most common usage refers to analysis or theories which only attempt to describe how things 'are', as opposed to how they 'should' be. Positive means also 'value free'. In this sense, the opposite of positive...
to a normative theory
Normative economics
Normative economics is that part of economics that expresses value judgments about economic fairness or what the economy ought to be like or what goals of public policy ought to be....
.
It is from the 1959 paper "Voluntary Exchange Theory of Public Finance" that 'The Musgrave Three-Function Framework' originates. This framework is the suggestion that government activity should be separated into three functions or "branches," macroeconomic stabilization, income redistribution, and resource allocation.
The stabilization branch is to assure the achievement of high employment and price stability, the distribution branch is to achieve an equitable distribution of income, and the allocation branch is to see that resources are used efficiently.
This conceptual division of the responsibilities of government allows us to narrow the scope of inquiry into tax assignment, by indicating which of the three functions are most appropriately assigned to various levels of government. The remainder of this section focuses on the implications of the three-branch framework for the assignment of revenue sources among levels of government, especially the assignment between the central government and second-tier governments.
In his paper, "A Multiple Theory of Budget Determination," published in Finanzarchiv
Finanzarchiv
FinanzArchiv is an international academic journal of economics published quarterly by Mohr Siebeck, Tübingen, Germany....
1957, Musgrave introduced the economic concept of merit good
Merit good
The concept of a merit good introduced in economics by Richard Musgrave is a commodity which is judged that an individual or society should have on the basis of some concept of need, rather than ability and willingness to pay...
(and later, de-merit good). The concept has been extensively discussed elsewhere and been quite controversial in economic theory.
His background in the German, Austrian, Italian and Swedish schools of political economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
plus the uniquely German contribution of Finanzwissenschaft, or fiscal sociology, left him in a unique position to make a contribution to postwar government finance theory. He died on January 15, 2007 in Santa Cruz, California
Santa Cruz, California
Santa Cruz is the county seat and largest city of Santa Cruz County, California in the US. As of the 2010 U.S. Census, Santa Cruz had a total population of 59,946...
.