In Praise of Frank Ramsey's Contribution to the Theory of Taxation

Stiglitz, Joseph E.

Frank Ramsey's brilliant 1927 paper, modestly entitled, ‘A contribution to the theory of taxation’, is a landmark in the economics of public finance. Nearly a half century later, through the work of Diamond and Mirrlees (1971) and Mirrlees (1971), his paper can be thought of as launching the field of optimal taxation and revolutionising public finance.1 In this short celebratory article, I briefly describe Ramsey's basic insights (Section 1), and the early history of the development of the ideas based on Ramsey's paper (Section 2). While several of these crucial developments showed that Ramsey's conclusions held under more general conditions than he had assumed, later analyses showed crucial qualifications, so that the policy relevance of Ramsey's analysis may be limited.


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Economic Journal

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April 15, 2019


Also published as NBER Working Paper 20530, October, 2014