This article is a proof and critique of the theorem in its title. The marginal cost of public funds is the relative price of dollars in the hands of the government, with dollars in the hands of the public as the numeraire. It is the appropriate mark-up of benefit over cost for public sector...

Public provision of private goods is usually modeled as the displacement of a market where people can buy as much or as little of a good as they please, with tax-financed provision by the government of equal and identical amounts of the good per person. But public provision is not always equal...