ABSTRACT
We can now turn to consider the other component of the Third Way program, its program of public finance. In his classic text on the theory of public finance, Musgrave (1959) distinguishes three distinct purposes of public finance: allocation, distribution, and stabilization. Allocation policy is concerned with securing necessary adjustments in the market’s allocation of resources between public and private wants. Distribution policy addresses the distribution of resources within the economy. Stabilization policy is concerned with achieving and maintaining full employment, price stability, and economic growth. It is in the context of this last purpose that this chapter reviews the issue of public finance.
