Lindahl Equilibrium

Discipline: Economics

Named after Swedish economist Erik Lindahl (1891-1960), Lindahl equilibrium theorizes that the provision of public goods reaches an equilibrium when everyone agrees on the level of goods to be provided, and their prices.

Thus, a set of Lindahl prices comprises individual shares of the collective tax burden of an economy. The sum of Lindahl prices is equal to the cost of supplying public goods.

Also see: compensation principle, marginal cost pricing, scitovsky paradox, social welfare function

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