Abstract
We introduce ideas about how coercion in public finance can be formally defined, building on recent work in the literature. Our discussion illustrates the connection between selected aspects of this research and earlier seminal work on coercion by Wicksell, Lindahl, and Buchanan and Tullock. We also attempt to contribute modestly towards a fuller understanding of the nature of coercion in a public finance setting. We use a Lindahl solution as the counterfactual social state relative to which coercion inherent in any situation is to be judged in order to evaluate and compare the nature of coercion imposed by a social planner and in an electoral equilibrium.
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Notes
- 1.
This and the next section make use of some ideas from Martinez-Vazquez and Winer, eds. (2014) and WTH (2014). For exploration of the connections between the two fundamental sources of coercion and the implications of this relationship for public finance from differing points of view, see Skaperdas (2014) and Wallis (2014).
- 2.
‘Non-coercive’ does not necessarily mean that same thing as ‘voluntary’. For a discussion of related issues in the definition of coercion, see Congleton (2014).
- 3.
Personal communication from Dan Usher.
- 4.
It may be noted that a median voter is essentially a dictator imposing coercion on everyone else.
- 5.
The issues involved in determining the practicality of Coasian bargaining are well known and will not be enumerated here.
- 6.
We may use the latter to calculate an economy-wide average income tax rate as follows. Funding \( G^{L} \) requires a tax revenue of \( t\sum\nolimits_{i}^{N} {Y_{i} } = G^{L} \) which implies that the notional tax rate is \( t = \bar{\alpha } + \frac{{\sigma_{Y\alpha }^{2} }}{{\bar{Y}}} \). However, this is not the actual rate levied on taxpayers in a Lindahl solution. Each individual pays a personalized tax tailored to their preferences.
- 7.
Buchanan (1964, pp. 229–230): “A more general statement of the necessary condition (for a Lindahl solution—our addition) is as follows: The income elasticity of demand for the public good divided by the price elasticity of demand must be equal to, and opposed in sign to, the income elasticity of the tax-price schedule. Full neutrality is present when this condition is met throughout the range of possible incomes.”
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Tridimas, G., Winer, S.L. (2018). On the Definition and Nature of Fiscal Coercion. In: Wagner, R. (eds) James M. Buchanan. Remaking Economics: Eminent Post-War Economists. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-03080-3_23
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