Publication

This paper outlines the basic assumptions of economic theory using fiscal instruments to promote socially desirable economic objectives, such as stabilization, income redistribution and an efficient allocation of resources. It assesses how applicable such instruments are to what is happening in practice. The paper takes the example of Italy, in particular, and finds major differences between the theory and the observed reality. The paper further discusses whether the European Commission should expand its role to include the promotion of institutions that economists have argued would improve the pursuit of fiscal policy in member countries and whether the existing deficit concept used should be simplified.