"Optimal policy rules--including those regarding income taxation, commodity taxation, public goods, and externalities--are typically derived in models with homogeneous preferences. This article reconsiders many central results for the case in which preferences for commodities, public goods, and...

Specialized theoretical and empirical research should in principle be embedded in a unified framework that identifies the relevant interactions among different phenomena, enables an appropriate matching of policy instruments to objectives, and grounds normative analysis in individuals' utilities...