Early life Musgrave was born in
Königstein im Taunus, Germany, into the family of a writer and translator Curt Abel Musgrave, a chemist by profession. His paternal grandfather (professor of linguistics at the Berlin Humboldt Institute
Carl Abel) and maternal grandmother were
Jewish but converted to Christianity. He turned from the field of literature, with an interest in becoming a stage director, to philosophy and economics at the
Ludwig-Maximilians-Universität München and
Heidelberg University (Diplom-Volkswirt, 1933), then at
Harvard University (Ph.D., 1937). After that, he spent four years as a research economist at the
Federal Reserve and taught at several American
universities, including the
University of Michigan where he worked on his treatise from 1951 to 1959. He served as an advisor to the US government and returned to Harvard in 1965 as H.H. Burbank professor of Political Economy in the faculty of Arts and Sciences and the Law School. He was also editor of the
Quarterly Journal of Economics. His book
The Theory of Public Finance (1959) remains a leading theoretical work.
Public Finance in Theory and Practice (1973), co-authored with his wife,
Peggy Brewer Musgrave, was a leading textbook for many years.
Career in economics Martin Feldstein is quoted in the
New York Times obituary (Jan 20, 2007) "Richard Musgrave transformed economics in the 1950s and 1960s from a descriptive and institutional subject to one that used the tools of Microeconomics and Keynesian Macroeconomics to understand the effect of taxes." Musgrave published his seminal paper, "Voluntary Exchange Theory of Public Economy" in the
Quarterly Journal of Economics in 1939.
Paul Samuelson would later convert this from a
positive theory to a
normative theory. It is from the 1939 paper "Voluntary Exchange Theory of Public Economy" that 'The Musgrave Three-Function Framework' originates. This framework is the suggestion that government activity should be separated into three functions or "branches," macroeconomic stabilization,
income redistribution and resource allocation. The stabilization branch is to assure the achievement of high employment and price stability, the distribution branch is to achieve an equitable distribution of income, and the allocation branch is to see that resources are used efficiently. This conceptual division of the responsibilities of government allows us to narrow the scope of inquiry into tax assignment, by indicating which of the three functions are most appropriately assigned to various levels of government. The remainder of this section focuses on the implications of the three-branch framework for the assignment of revenue sources among levels of government, especially the assignment between the central government and second-tier governments. In his paper, "A Multiple Theory of Budget Determination," published in
FinanzArchiv 1957, Musgrave introduced the economic concept of
merit good (and later,
de-merit good). The concept has been extensively discussed elsewhere and been quite controversial in economic theory. His background in the
German,
Austrian, Italian and Swedish schools of
political economy, and the German contribution of Finanzwissenschaft-fiscal sociology, gave him a position to make a contribution to postwar government finance theory. ==Accolades==