Richard Musgrave

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Richard Musgrave
Born	December 14, 1910(1910-12-14) Königstein im Taunus, Germany
Died	January 15, 2007 (aged 96) Santa Cruz, California
Nationality	American
Fields	Economics
Alma mater	Harvard University

Richard Abel Musgrave (December 14, 1910 – January 15, 2007) was an American economist of German heritage. Born in Königstein im Taunus, Germany, he studied in Munich and Heidelberg. In 1937 he graduated from Harvard. 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 also 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 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 instutional 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.

[edit] Sources

Buchanan, James M., and Richard Abel Musgrave. Public Finance and Public Choice : Two Contrasting Visions of the State. Cambridge, Mass.: MIT Press, 1999.