The Theory of Fiscal Economics

Earl R. Rolph

• Publisher: University of California Press
• Year: 2023
• Print ISBN: 9780520337466
• eBook ISBN: 9780520337473
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

The Theory of Fiscal Economics, by Earl R. Rolph, develops a comprehensive framework for understanding how government financial activity influences the private economy. Rolph argues that all such activity can be categorized as either market operations—purchases and sales of goods, services, or claims—or transfer payments, both positive and negative. Subsidies and interest on debt provide cash inflows to private groups, while taxes extract it. These mechanisms do more than alter monetary balances; they shape incentives through eligibility rules, tax bases, and rate structures, thereby affecting how resources are employed. Central to the book is the claim that, despite their legal variety, taxes are fundamentally similar in that they reduce private money incomes by the amount of revenue raised. In this view, so-called indirect taxation is not a unique burden on consumers in a monetary, price-rationed economy. Excises and import duties, often treated separately from other levies, are tested as cases where a consistent theory can replace fragmented traditions of thought. If a single explanation can clarify their incidence, Rolph contends, it can extend to income and other taxes as well.

In pursuing this framework, Rolph emphasizes method as much as substance. He advocates the “clarification” of hidden premises, noting that many disputes arise from unexamined assumptions, such as believing an itemized tax line on a receipt proves who bears the burden. He employs simplified models—two-good economies or competitive pricing—to derive core results before gradually relaxing assumptions, always warning against oversimplifications that erase monetary and fiscal realities. Against theorists who insist taxes must always be paired with expenditures, Rolph holds that tax effects can be studied in isolation, since governments finance spending through multiple channels, including borrowing and asset sales. The book is not prescriptive but evaluative, highlighting where fiscal policies rest on faulty or ambiguous theories. By offering a logically consistent approach across tax types and grounding incidence analysis in monetary economies, The Theory of Fiscal Economics provides a durable template for analyzing government finance and its role in shaping economic behavior.

This title is part of UC Press's Voices Revived program, which commemorates University of California Press’s mission to seek out and cultivate the brightest minds and give them voice, reach, and impact. Drawing on a backlist dating to 1893, Voices Revived makes high-quality, peer-reviewed scholarship accessible once again using print-on-demand technology. This title was originally published in 1954.

Table of contents

• Cover
• Title
• Copyright
• Contents
• I Introduction
• 2 Government Ends versus Private Ends
• 3 Social Costs of Government
• 4 Government and Social Accounting
• 5 Monetary Basis of Fiscal Theory
• 6 Excise Taxes and Subsidies: Competitive Pricing
• 7 Excise Taxes and Subsidies: Noncompetitive Pricing
• 8 Import Duties: Self-adjusting Exchanges
• 9 Import Duties: Fixed Exchange Rates
• 10 Taxes and the Incentive to Work
• CONCLUSIONS
• 11 Effects of Taxes on Investment and Capital Values
• 12 Uncertainty, Taxes, and Investment
• Index