‘Public goods’ before Samuelson: interwar<i>Finanzwissenschaft</i>and Musgrave's synthesis

Abstract

Abstract This paper is concerned with the foundations of modern Public Economics, in particular of concepts related to the justification of public activities and the properties of public economy mechanisms. As a first approximation, Public Economics à la Musgrave can be understood as a synthesis of Pigovian Public Finance and the Wicksell–Lindahl tradition. Musgrave's intellectual background includes a more encompassing and differentiated spectrum of influences, including elements from German communal traditions, fiscal sociology, Austrian marginal utility theory, and Italian Public Finance. German language Finanzwissenschaft in the interwar period was a fertile environment for new combinations. German-educated US economists Richard Musgrave and Gerhard Colm transformed seeds from this environment into lasting achievements. Their acquaintance with the broad range of approaches characteristic of interwar Finanzwissenschaft was a necessary condition for the role they played in the development of modern Public Economics. Moreover, Musgrave's influence on modern Public Economics is an example of how the dissemination of innovations is enhanced by a suitable expository framework. By contrast, the conceptual gap between Anglo-Saxon Public Economics and Gerhard Colm's version of a synthesis (even though the latter influenced or paralleled the Musgravian synthesis in important respects) prevented its swift absorption.