PLG 300 Chapter Notes - Chapter reading #6: Revealed Preference, Perfect Competition, Public Choice
25 Oct 2016
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A pure theory of local expenditures storper, michael. Musgrave and samuelson studies whether public goods provision could ever be optimal. They determined that it could, but only if citizens expressed their true preferences when voting: citizens don"t to that, however; they understate their preferences for public goods because they don"t want taxes to rise. His model: local governments produce a package of public goods. Therefore, determining the optimal amount of expenditure on public goods presents an interesting problem. He assumes that there are n local public goods and there are m communities. Each community would go to the national market and bid for appropriate units of each public good. The demand for each public good would then be the sum of demands of all the m communities for each of the n goods. This total demand is the revealed preference of the community.
