'Marginalizing' Government: From La Scienza Delle Finanze to Wicksell

Abstract

In spite of the efforts made over the past several decades to bring to the fore the important contributions of the Italian public finance tradition - La Scienza delle finanze - this body of analysis remains relatively unknown outside of Italy. The same cannot be said of the seminal work of Knut Wicksell, whose work in his Finanztheoretische Untersuchungen provided a springboard for modern public choice analysis as developed in the hands of James Buchanan, Gordon Tullock, and others - although even Wicksell's work in the area of public finance was all but ignored within the evolving neoclassical literature on this subject until the 1960s. This paper will show how the Italian approach hinged on the developments of the marginal revolution and how the precision thereby engendered raised critical issues regarding the ability of actual governments to provide public goods and services in accordance with the dictates of optimality. It is suggested that the problematic nature of these claims is resolved by Wicksell, who, through a more explicit incorporation of the political process as linked up with individual voter desires, demonstrated the conditions under which the claims made by the disparate element of the Italian tradition would hold true.

Keywords: Italian School, Wicksell, public goods, optimality

JEL Classification: B1, D7, H00, H40