The theory of taxation for developing countries. Edited by David Newbery and Nicholas Stern Oxford University Press, 1987, 694
| Date | 01 April 1990 |
| DOI | http://doi.org/10.1002/pad.4230100214 |
| Author | David Collard |
| Published date | 01 April 1990 |
244
Book
reviews
The first volume consists of nine case studies covering the Washington Public Power
Supply System, the State Distilleries
of
Ghana, the Indian Hindustan Machine
Tools
Company, the Finnish OUTOKUMPU Company, the Western Samoan Development
Bank, Singapore Airlines, Air Canada, an Intermediate Development Bank
or
Financiera
in
Ecuador and
a
Cereal Enterprise. All these cases illustrate well the complexity and changing
priorities facing managers, Singapore Airlines being a record
of
success and the Washington
Public Power Supply System
of
failure. The development of Hindustan Machine Tools is
especially revealing
in
terms
of
the impact
of
changes, politically with the election of the
Janata majority, and in human terms with a change
of
able managers. The Ghana case
reveals the impact
of
corrupt political interference starkly, and the Outokumpu case, the
problems posed by political issues entirely outside the terms of reference let alone control
of
the enterprise.
The second volume, though consisting
of
four case studies only, illustrates the value
of
the
collaboration
of
heads
of
enterprises to formulate views,
to
challenge central prejudices, and
to resist central interference. The United States experience is concerned with informing
Federal agencies
of
control and co-ordination leading towards
the
formation
of
a Federal
Enterprises Council. In Ireland the Consultative Group
of
Chief Executives is concerned
with exchanging information, ideas and experience and holding a dialogue with ministers
and other interested parties to ensure informed decisions. Both these studies are interesting
but in the context of improving management. The cases
of
India’s standing Conference of
Public Enterprise and
of
the United Kingdom’s Nationalized Industries Chairman’s Group
examine organizations created in the face
of
strong central pressure, the former registering
considerable success
in
neutralizing government hostility. The combination
of
studies is well
balanced and focused.
A failure
of
some recent collections
of
studies on public enterprise is that they read as
collections circumstantially brought together. The editors have avoided this by effective
grouping, a sound format, and perceptive introductions. These books are an essential
addition
to
a Public Enterprise Bibliography.
MALCOLM W. NORRIS
University
of
Birmingham
THE THEORY OF TAXATION FOR DEVELOPING COUNTRIES
Edited
by
David Newbery and
Nicholas
Stern
Oxford University Press, 1987, 694
This Rolls-Royce of a book is a ‘state of the art’ account of the theory of optimal taxation
with
special reference to developing countries. The theory is relatively new as theories go
and is technically complex, the key articles (Mirrlees,
Review
of
Economic
Studies
and
Diamond and Mirrlees,
American Economic Review,
both 1971) being rather formidable.
It
is very much associated with the ‘new’ public finance about which both practioners and
economists from an older tradition continue to be sceptical.
The underlying ideas
of
the theory are quite straightforward and may easily be described.
The ‘policy’maker’ is assumed to wish to maximize social welfare subject to a revenue
constraint
so,
at this stage
of
the analysis, one does not need to ask questions about public
expenditure. Social welfare, in turn, is some sort of aggregate of individual welfares which
takes into account considerations
of
both efficiency and equity. Practioners
of
the approach
often make use
of
Atkinson’s coefficient of ‘inequality aversion’,
Journal
of
Economic
Theory
1970, because it is capable
of
capturing a wide range
of
planners’ preferences, from a
Rawlsian concentration on the least well-off to a total lack of concern for inequality. Armed
with a social welfare function
of
this type and with a great deal
of
other information the
planner is,
in
principle, able to calculate a set
of
‘optimal’ taxes. These informational
requirements are very severe, however, particularly
in
the case of developing countries. For
example, the planners need to know how both labour supply decisions and savings decisions
will be affected by taxes
(so
as to calculate the efficiency effects). According to Newbery
(chapter 7) ‘the key question to ask in adapting modern tax theory for application
in
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