Unformatted text preview: Theorem would have the company pay other companies in the area to reduce their pollution or buy a company in the area that is polluting and shut it down. Both parties get benefits from the outcome. Richard Musgrave – the three budget system 1. Allocative budget – Benefit principle of taxation, pay in proportion to the benefits that you receive. Ex. Gasoline tax, people must pay the Coast Guard if they are rescued, (sum of total revenue from the payments = sum to total spending) 2. Distributive – The distribution of benefits goes to those who use the things that taxes pay for so that no person is receiving extra welfare more than others. Sum of taxes = sum of welfare 3. Stabilizing – Run a balanced budget, except in times of recession. Definition of welfare Your benefits Your taxes----------------------is greater than --------------------Sum of benefits Sum of taxes...
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- Spring '09
- Public Good, Market failure, Externality, Law and economics, Negative Externalities Pareto