Erik Lindahl
Encyclopedia
Erik Robert Lindahl was a Swedish
economist
and a member of the Stockholm school
.
In 1919, Lindahl proposed a method of financing public good
s that was close to a free market
solution and is today known as benefit pricing. This methods leads to a so called Lindahl equilibrium
. The prices determined in equilibrium are called Lindahl prices.
The major detriment of Lindahl's device is that it is not incentive compatible: It imposes a free rider problem
.
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
and a member of the Stockholm school
Stockholm school (economics)
The Stockholm school, or Stockholmsskolan, is a school of economic thought whose antithesis is the gold standard centered Austrian School of Economics. It refers to a loosely organized group of Swedish economists that worked together, in Stockholm, Sweden primarily in the 1930s...
.
In 1919, Lindahl proposed a method of financing public good
Public good
In economics, a public good is a good that is non-rival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability means that no one can be effectively excluded from using the good...
s that was close to a free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
solution and is today known as benefit pricing. This methods leads to a so called Lindahl equilibrium
Lindahl equilibrium
A Lindahl tax is a form of taxation in which individuals pay for the provision of a public good according to their marginal benefits. So each individual pays according to his/her marginal benefit derived from the public good. eg...
. The prices determined in equilibrium are called Lindahl prices.
The major detriment of Lindahl's device is that it is not incentive compatible: It imposes a free rider problem
Free rider problem
In economics, collective bargaining, psychology, and political science, a free rider is someone who consumes a resource without paying for it, or pays less than the full cost. The free rider problem is the question of how to limit free riding...
.
Works (small selection)
- 1939: Studies in the Theory of Money and Capital
- 1919: Die Gerechtigkeit der Besteuerung (GermanGerman languageGerman is a West Germanic language, related to and classified alongside English and Dutch. With an estimated 90 – 98 million native speakers, German is one of the world's major languages and is the most widely-spoken first language in the European Union....
, translated as Just Taxation: A positive solution, 1958)