This paper analyzes the nature of individual demands for local public goods in a model developed by Negishi. It is shown that under certain circumstances ("full equilibrium") a household's demand is determined by marginal benefit and tax-price as orthodox theory would suggest; under other circumstances, however, households will support "fiscally profitable" (property-value-enhancing) expenditure proposals. Thus on occasion -but not always- the fiscal profitability rule is politically viable. It is also shown that in full equilibrium, if Negishi's condition on preferences is satisfied, marginal benefit and tax-price are equated for every household and a Lindahl solution obtains.

David E. Wildasin / dew@davidwildasin.us