CHAPTER VI.

ORDER AND SEQUENCE IN THE PUBLIC ECONOMY.

LITERATURE. Adolph Wagner, Finanzwissenschaft (3. Auflage, 1883), Buch i. Cap. iii., iv. Adolph Wagner, "Die Ordnung der Finanzwirthschaft und der öffentliche Kredit," in Schönberg's Handbuch der politischen Oekonomie (2. Auflage, 1885), Band iii. pp. 477 et seq. A. Schæffle, Zeitschrift für die gesammte Staatswissenschaft, 1883, 1884. Erwin Nasse, Zeitschrift für die gesammte Staatswissenschaft, 1868. Paul Leroy-Beaulieu, Traité de la Science des Finances (1877), 2me partie, livre 1: du budget.

I. CLASSIFICATION OF PUBLIC WANTS.

$153. Some reference has already been made in the introductory portion of this work (vol. i. secs. 187–216) to the logical sequence necessary in all organization of demands or expenditure (Bedarfsgestaltung). Whether the question concerns public or private economy, there is a single ethico-economic norm on which any systematic ordering of demands must be based. This norm consists not simply in the requirement that the aggregate volume of demands must be brought into conformity with the aggregate of available means; it requires further that the order. of precedence as between the different classes of requisitions, must be made to correspond with the order of their relative importance for the life of the individual or of society.

The first half of this general rule imposes on the demands of civilized life-in themselves considered, boundless- certain rational limits, determined by the magnitude of the economic means available for their satisfaction. The second half of the rule defines the proper limits of each particular class of these demands, in that it requires them to justify their claims as against other like demands, in an appeal to the standard estab

lished by a rational gradation from the necessary to the dispen-,

sable.

It may be taken as evident that there lies within the horizon of modern social life in state and commune a countless number of possible undertakings calculated to serve the purposes of a physical or spiritual amelioration; works of some human use, which, in themselves considered-apart from the necessary expenditure involved-are of undeniable legitimacy. Indeed, we are well aware that precisely the public economy of modern civilized states, by the nature of the case, rises above the danger of a growth of expenditure for trivial ends, such as we so frequently have occasion to deprecate in private life, or at least that it is relatively free from such danger. The danger lies much less in the direction of ignoring any growth of a commendable popular demand, than in the over-zealous acceptance of the functions which the new demand may impose.

No one would dispute the fact that in any modern state, within the sphere of the obscurest village and of the highest departments of the general government alike, there is present an endless array of activities waiting to be undertaken, for the furtherance of health and comfort, of schools and charities, of science and art,-tasks which remain unfulfilled for no other reason than because of the excessive sacrifices which they would require.

But if we accept this truth in its general form, it appears that its application to practical affairs is conditioned by the fact that the alternative presented is not a simple negative, but consists of counter claims of a positive character. Hence the necessity of a more detailed analysis.

§ 154. What is it, precisely, that we mean when we say that sacrifices demanded by any public undertaking are excessive? There is, of course, an extreme limit, where this phrase would hold true literally. But this uttermost limit is never seriously As a matter of fact, the discussion concerns only those burdens whose exorbitancy (in case experiments could be made in political affairs) would very speedily be disproven in

under discussion.

case the required sacrifices were increased by the exigencies of a disastrous war. The question therefore practically concerns only the greater or less degree of pressure, of sacrifice, which would be involved in meeting the necessary expenditure. And how would this pressure, this sacrifice, show itself? Plainly in this way, that certain demands would intrude on ground already fully occupied by other demands, whose disallowance would be felt as a privation because their claim to satisfaction seems so much more pressing.

This is the important point. The question is as to the order and sequence of all classes of demands; not only as to the particular demand which is to be satisfied by means of the public contrivances in question, but also as to that class of demands which is met by private business. Within the sphere of this aggregate of organized demand, some decision will have to be reached as to what place in the scale should be assigned to each particular demand.

Just as every prudent housekeeper' is wont to calculate whether his income will allow him to afford a pleasure journey, a purchase of paintings, or to indulge the gratification of any other like want of the second or third rank, and to consider whether the gratification of this new want will not unduly stint

case.

The oft-repeated statement that, unlike the private individual, the state adapts its receipts to its expenditures, recurs again in the writings of one of the latest French economists, Charles Gide (Principes d'Économie politique, 2me édition, 1889, p. 593). This statement holds true only so far as concerns the superficial, juridical aspect of the After the national requirements have been fixed at a certain amount, the state proceeds to demand such an amount from its subjects in the form of taxes. The private individual, who is not clothed with such sovereign power, is of course obliged to inquire into the extent of his income before determining what his expenditure is to be. But viewed from the economic standpoint this contrast disappears; inasmuch as the determination of the public requirement rests upon an elastic basis in just the same way as is the case in private life. In order to a rational solution of the problem, regard must be had to the available means, and, just as in a case of private expenditure, a balance must constantly be maintained between the urgency of each particular item of expenditure and the pressure which its defrayment throws upon other needs of the economic unit in question. And so far as it holds true in the economic sense that income is affected by expenditure, it is true alike of private and of public economy. If the burden of taxation spurs the private individual to greater effort and parsimony, an expenditure of another kind may also serve the same purpose.

certain other wants which are undeniably more important, such as the need of shelter, clothing, food, care of children, provision for the future by the saving of a part of the yearly income,-so likewise does the same question come up when reference is had to that class of the needs of each particular household and of the community which are provided for by state and communal institutions.

The question will now read, is the new demand on behalf of the national defense, for better lodging and victualing of the troops, for the construction of new warships and harbors, for the provision of new ordnance and arms, or more serviceable uniforms, will this new military requirement be warranted as against demands for other purposes? What goes to make up these other demands, however, is not simply the aggregate of services which the commonwealth renders to the aggregate of the citizens, not simply the various public institutions and their requirements, but it consists likewise of all those things which each particular private establishment would regard as its special want, together with that which they contribute in the way of taxes to the support of the state and of the commune. This other demand, accordingly, with which the new military demand is to be compared for measurement, and as against which it will have to justify itself, comprises the need of nourishment, shelter, clothing, education, sociality, benevolence, provision for the future, as well as the requirements of the public administration of justice and police, public encouragement of art and science, poor-relief, etc. And the like is true with respect to every other new demand on part of the commonwealth.

$155. An increase of the means available for meeting this demand, through a favorable turn of circumstances, affords nothing more than an apparent simplification of the problem which the supposed case offers. As a matter of fact, it is practically desirable to be able to contrive new means to meet the new demand, means which need not be withdrawn from their previous disposition. But this is no answer to the question whether this

new need has the first claim to the new resources, and there is nothing to hinder the same thing from repeating itself in the economy of the state and commune which has so often been noticed in private establishments,—namely, that the new abundance is turned to purposes which should have been the very last to have received attention.

The real difficulty still remains in such a case. It lies in the adjustment of the relation of each particular object of expenditure to all the rest. Even within the smaller circle of the household, the solution of the problem is difficult enough, and as a matter of fact, it is only partially effected in most cases. In the public economy, and more particularly in a large commonwealth, the difficulty is very great indeed. Indeed it would be a problem of stupendous difficulty were it not that every new adjustment arrived at in this balancing of proportions has but slight effect, as compared with the crystallized precipitate of a longexistent, gradually developed body of persistent demand. Still the problem is always difficult enough, and shows us, in the everrenewed controversies, the impossibility of a thoroughly satisfactory solution.

The inherent difficulty of a decision as to what particular needs of first, second, third rank may deserve attention, and what may be the degree of urgeney of each particular kind of demand, is augmented by obstacles of a subjective character due to the inadequacy of human insight.

So long as the crude intelligence of the average citizen remains inaccessible to any rational conception of the essential character and of the necessity of a public revenue, so long will there remain, subjectively, the constant consciousness of a burden, even in a case where the tax demanded by state or commune is required to cover a need equally urgent with the need of daily bread. The subjective feeling of annoyance will always remain; for the most frivolous indulgence is paid for with a lighter heart than any tax whatever.

Moreover, so long as the more well-to-do classes of society regard the payment of taxes simply as the price paid for a