November 21, 1891|
|Died||January 6, 1960
|Influenced||Duncan K. Foley|
In 1919, Lindahl proposed a method, which is now known as Lindahl tax, of financing public goods in accordance with individual benefits. In the Lindahl equilibrium, the quantity of the public good satisfies the requirement that the aggregate marginal benefit equals the marginal cost of providing the good. Lindahl prices are individualized for each consumer (or consumer group) and set according to the consumer's marginal benefit, evaluated at the Lindahl quantity. Consumers are then taxed an amount equal to their Lindahl price times the quantity of the public good. Lindahl referred to this as "just taxation" because it satisfied the principles of horizontal equity (equal treatment of equals) and Aristotle's distributional equity (taxes for public goods being set according to benefits).
Later economists have focused on the information problem that may arise in determining marginal benefits inasmuch as simply asking consumers to reveal their preferences is not incentive compatible, i.e. that voluntary financing does not solve the free rider problem.
Works (small selection) 
- 1939: Studies in the Theory of Money and Capital
- 1919: Die Gerechtigkeit der Besteuerung (German, translated as Just Taxation: A positive solution, 1958)
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