Henry George theorem Stiglitz made early contributions to a theory of public finance stating that an optimal supply of local public goods can be funded entirely through capture of the land rents generated by those goods (when population distributions are optimal). Stiglitz dubbed this the 'Henry George theorem' in reference to the radical classical economist Henry George who famously advocated for land value tax. The explanation behind Stiglitz's finding is that rivalry for public goods takes place geographically, so competition for access to any beneficial public good will increase land values by at least as much as its outlay cost. Furthermore, Stiglitz shows that a single tax on rents is necessary to provide the optimal supply of local public investment. Stiglitz also shows how the theorem could be used to find the optimal size of a city or firm.Richard J. Arnott & Joseph E. Stiglitz, 1979. "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 471–500.Stiglitz, J.E. (1977) The theory of local public goods. In: Feldstein, M.S. and R.P. Inman (eds.) The Economics of Public Services. MacMillan, London, pp. 274–333.
henry george theorem stiglitz made early contributions to a theory of public finance stating that an optimal supply of local public goods can be funded entirely through capture of the land rents generated by those goods (when population distributions are optimal) stiglitz dubbed this the 'henry george theorem' in reference to the radical classical economist henry george who famously advocated for land value tax the explanation behind stiglitz's finding is that rivalry for public goods takes place geographically so competition for access to any beneficial public good will increase land values by at least as much as its outlay cost furthermore stiglitz shows that a single tax on rents is necessary to provide the optimal supply of local public investment stiglitz also shows how the theorem could be used to find the optimal size of a city or firmrichard j arnott & joseph e stiglitz 1979 "aggregate land rents expenditure on public goods and optimal city size" the quarterly journal of economics oxford university press vol 93(4) pages 471–500stiglitz je (1977) the theory of local public goods in feldstein ms and rp inman (eds) the economics of public services macmillan london pp 274–333