ABSTRACT
The context of the pure theory of public expenditures at one and the same time consists of a highly abstract exercise in normative economic analysis and a discussion of the most realistic problems of preference revelation under extreme economic interdependence. A comprehensive pure theory of public finance must be cast in general rather than partial equilibrium terms. General equilibrium analysis has tended to be conducted largely by formal mathematical techniques for the obvious reason that since mathematics provides the best means for generalization of analysis, it is ideally suited for the study of general equilibrium. The chapter considers the normative or welfare aspects of the general equilibrium solution. The social welfare function approach to general equilibrium in a setting that includes public goods remains the conventional one of mutual determination of that output mix and its distribution which maximizes social welfare. McGuire and Aaron assume an arrangement for public sector decisions in which there are independent distribution and allocation branches.
