Public Finance, 2nd Edition

the eVects of distorting taxation in isolation, the implications for externalities

or decreasing cost production are that much more apparent. Chapters 13±17

contain a detailed analysis of the theory of distorting taxes, often without any

consideration of how governments actually spend tax revenues. Chapters 18±

22 then rework selected public expenditure problems from Part II within a

second-best frameworkÐtransfer payments, aggregate externalities, nonex-

clusive goods, decreasing costsÐusing the constraints most commonly

employed in the literature.

REFERENCES

Boiteux, M., ``On the Management of Public Monopolies Subject to Budgetary Constraints,''

Journal of Economic Theory, September 1971 (translation from French, Econometrica,

January 1956).

Diamond, P. A., and Mirrlees, J., ``Optimal Taxation and Public Production'' (2 parts; Part I:

Production EYciency and Part II: Tax Rules), American Economic Review, March, June

1971.

Green, H., ``Two Models of Optimal Pricing and Taxation,'' Oxford Economic Papers, Novem-

ber 1975.

Hammond, P., ``Theoretical Progress in Public Economics: A Provocative Assessment,'' Oxford

Economic Papers, Vol. 42, 1990.

Lancaster, L., and Lipsey, R., ``The General Theory of Second- Best,'' Review of Economic

Studies, Vol. 24 (1), No. 63, 1956±1957.

Stiglitz, J., and Dasgupta, P., ``DiVerential Taxation, Public Goods, and Economic EYciency,''

Review of Economic Studies, April 1971.

398 REFERENCES