Public Finance

Bastable, Charles F.
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London: Macmillan and Co., Limited
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3rd edition




§ 1. In any society that has passed beyond the lowest stage of social development, some form of governmental organisation is found to be an essential feature. The various activities or functions of this controlling body furnish the material for what are known as the 'Political Sciences' (Staatswissenschaften). Every governing body or 'State' requires for the due discharge of its functions repeated supplies of commodities and personal services, which it has to apply to the accomplishment of whatever ends it may regard as desirable. The processes involved in obtaining and using these supplies naturally vary much in the several stages of social advance: they are comparatively simple and direct in a primitive community, while in a modern industrial society they present a high degree of complication, and are carried out by elaborate regulations. For all States, however—whether rude or highly developed—some provisions of the kind are necessary, and therefore the supply and application of state resources constitute the subject-matter of a study which is best entitled in English, Public Finance.*1


The importance of the subject hardly requires much insistence. The collection of funds for state purposes and the use of the resources so obtained are such vital parts of the political organisation, that they are almost certain to receive attention from all who are interested in political and social inquiries. But, if demanded, abundant evidence is at hand. The citizen of any civilised country need only reflect for a few minutes in order to satisfy himself of the number and importance of the actions of the state on its financial side. His letters are carried by a state agency which claims a monopoly, and in some instances realises a large profit for the general revenue. The commodities that supply his table are in many cases taxed to create a fund for the payment of public services. Either his income or property or some of their elements is sure to be subjected to a charge of greater or less amount, and several of the most ordinary avocations are only open to him on obtaining a costly licence for permission to engage in them. Nor do the claims of the State cease here. In addition to the central body, the local authorities have to be considered. If the person of our supposition be the inhabitant of a town, his house may be lighted by public agency, while it is highly probable that for one of the first necessaries of life—water—he is dependent on his municipality. There is little need for further working out of details. The way in which the purely financial agencies of the State—and still more those which have some connexion with finance—affect the members of the society in their everyday existence, is being ever illustrated afresh by the ordinary course of social life.


The importance of a subject is of itself a strong plea for its scientific study, but in the present case more special arguments may be urged. There is in finance, as in all matters depending in some degree on human will, the possibility of choosing between different courses, some of which are likely to prove better than others; and for the formation of a correct judgment as to the relative merits of the lines of action open to the State, careful examination of the conditions affecting the phenomena is indispensable. Such examination is, however, only possible by scientific study, or rather it is that study. More particularly is this true at present in consequence of the great expansion of the functions of the State, which is partly due to—and which in turn increases—the complicated structure of modern societies. The effects of state action in a primitive community are far more easily followed; the forms both of revenue and expenditure are reducible to a few simple kinds, directed by rude or partially developed agencies. The modern State, even when it allows an amount of individual liberty unknown in any former period, is obliged to employ complicated machinery for the regulation and management of its outlay and receipts. The results, moreover, are not so readily perceived; numerous interests and classes are affected by any change in the course of public expenditure or by readjustments of taxation. The many indirect results of financial processes must be considered before we can either understand their operation or fairly judge their merits; but to trace the action of economic forces in their effects on the highly developed systems of modern industrial societies is a task of considerable difficulty, not to be accomplished without the aid of general principles and careful reference to former experience. The case for a scientific study of finance is so strong that it does not require much vindication, and the value of critical investigations has been already proved by the results obtained.


§ 2. The scope of our subject has now been indicated in a general way, but for clearness of thought and in consequence of the differing views of many writers of authority we must determine it more precisely. State expenditure and state revenue at once occur to the mind as the two great heads of inquiry, standing opposed to each other as Production and Consumption, or Supply and Demand do in economic science. Closer examination shows that this simple grouping does not exhaust the field of investigation. Problems of revenue and of expenditure are, indeed, the most important. Adam Smith, who was, at least for England, the founder of the scientific study of public finance, as of political economy in general, devoted separate chapters of his Fifth Book to 'The Expenses of the Sovereign' and 'The Revenues of the Sovereign'; but by the nature of the subject he found himself forced to add a third section, in which the relation between expenditure and receipts is examined. He knew that many ancient and mediæval sovereigns had accumulated treasures; it was apparent that most modern governments had heaped up debts—a process that has been carried much further since his day; and it followed that an inquiry into the balance between state incomings and outgoings was an essential, as well as difficult, part of public finance.


Nor is this the only addition. The phenomena to be dealt with do not admit of being conveniently grouped under Adam Smith's three heads. This difficulty is at once felt on calling to mind that the expenditure and revenue under consideration are state expenditure and state revenue. We must examine, not merely the processes, but also the mechanism by which those processes are carried on. For the collection and application of wealth by the State legislative and administrative action is needed. The right of voting supplies and supervising expenditure—'the power of the purse'—is one of the leading privileges of a representative body; it is also the most effectual safeguard of constitutional rights. Methods of administrative control seriously affect the working of the national finances, and are deserving of attentive study. No financial treatise can be complete unless it considers the problems of 'the budget' and 'financial administration' (Finanzverwaltung), and such has in late years been the almost invariable practice.*2


In one respect the scope of public finance has been curtailed by some of its ablest expounders. French writers, more especially M. P. Leroy-Beaulieu, have refused to regard the problems of public expenditure as a part of their subject. The reason for this limitation is said to be the difficulty of scientifically determining the proper amount of state outlay, as that must depend on the functions assigned to the State. 'This kind of inquiry,' says M. Leroy-Beaulieu, 'does not in my opinion belong to the science of finance..... A State has wants: it does not belong to us at present to know what they are, and what they ought to be, but how it is possible to satisfy them in the amplest manner with the least loss and sacrifice to individuals. If you engage a builder to build you a house, it is not his business to inquire if the building is too large for your income or your social position; what does concern him is to build the house in question with the utmost possible solidity, convenience and beauty, at the lowest cost to the owner. In like manner, a writer on finance can sincerely lament that States spend too much; but his real task lies in showing how a State can obtain supplies, while treating the interests of individuals with due tenderness and respecting justice.'*3 English writers have gone further in this direction, and, by disregarding all forms of State revenue except that derived from taxation, have replaced the broader treatment of Adam Smith and the Germans by treatises on 'Taxation' and 'Public Debts.'*4


It nevertheless seems clear that the question of expenditure is just as much a financial problem as that of revenue. Neither in theory nor in practice is it advisable to separate them completely. The greatest finance ministers have made their reputations as much by judicious control of outlay as by wise reforms in respect to revenue,*5 while for theoretical discussion the principles and facts of expenditure are of considerable interest. M. Leroy-Beaulieu's suggested parallel of the builder is not in point, since the practical statesman is the only person to whom the illustration would apply, and he evidently does not act in conformity with it; the scientific student is only limited in his inquiries by the nature of the material that he is investigating. One admission may indeed be made. Questions of expenditure do not allow of quite as precise treatment as those referring to taxation, some parts of the latter subject permitting the use of lengthened deductions. This test of fitness for exact investigation would, however, exclude other large parts of the subject—e.g. 'the public domain'—which are nevertheless discussed by all recent writers, M. Leroy-Beaulieu included. For a complete inquiry into the theory of finance some consideration of the conditions governing State outlay is indispensable—e.g. the increase of military expenditure in European States, its causes and limits, cannot be left wholly unnoticed by any thorough student of public finance. Such an inquiry is more especially needed owing to the fact that expenditure and revenue are connected. Public outlay is not something unchangeable and determined, to be met 'with the least loss and sacrifice to individuals.' Expenditure that would be legitimate in a lightly taxed State would be blameworthy in one that is heavily taxed. The aim of the statesman is not simply to distribute loss and reduce it to a minimum; it is rather to procure the maximum of advantage to the community, and to so balance expenditure and revenue as to attain that result.


The principal difficulty in the scientific examination of public expenditure is found when attempting to limit the mode of treatment. Some writers enter into discussions as to the legitimacy of certain state functions, and their relative urgency. Others simply state the forms and facts of public outlay, leaving further inquiry to the political theorist. In the present work, in accordance with the precedent set by Adam Smith, the several items of expenditure will be treated on a positive basis, and at the same time the considerations naturally arising from their existence, and the financial questions that they suggest will be noticed, though no complete examination of state functions will be attempted. Whatever theoretical questions may be raised, such seems to be the course that convenience suggests, and is one to which the subject naturally lends itself. Our object is to elucidate the principles of public finance; and the admission or exclusion of any special topic, as well as the extent of treatment in each case, must be determined solely by reference to that end.*6


§ 3. Theoretical writers on finance, especially in Germany, have very fully considered the relations of their subject to cognate branches of knowledge, i.e. to the various social and political sciences, and have in particular laid stress on the ties that bind it to economics.*7 In its origin financial science was a product of economic study. It appears either as a special section, or as the main subject of the older treatises of Political Economy, 'when considered as a branch of the science of a statesman or legislator,' to quote Adam Smith's phrase. In another aspect it may be regarded as belonging to administration, and as such formed a large part of the 'Chamber Science' (Cameralwissenschaft) which was in Germany the precursor of scientific economics. The undue limitation of the scope of finance by English writers has led to its inclusion under the title of 'taxation' in the various systematic expositions of political economy,*8 and the more enlarged view taken by German writers has not prevented a similar result in that country, for since the time of K. H. Rau, political economy has been regarded as comprising, in addition to the general theory, the economics of special industries, economic legislation and administration, as well as public finance.*9 This apparent absorption of finance in economics is really the result of a peculiar conception. If the latter science be limited, in the manner usual in England and France, to an investigation of the laws governing the phenomena of wealth, it is beyond dispute that public finance cannot form a part of it, as political and fiscal conditions have to be recognised to an extent impossible in a pure science of wealth. Moreover, practical considerations have to be weighed in every department of finance. That political economy in the most extended use of the term may fitly include finance is indeed true, but then it would appear that this wider political economy is nothing more than a common name for the various social and political sciences; it is in fact a rudimentary Sociology and Art of Politics combined.*10


Though the problems of finance are really suited for treatment in a separate form, it does not follow that their relation to economics should be disregarded. On the contrary there is a close connexion, or rather series of connexions, between the two studies. State outlay is a part of the consumption of the society of which the State is the regulating organ, and for a knowledge of the conditions that govern it we must have a theory of the consumption of wealth in general. Unhappily, questions relating to consumption have been too much neglected by economists, and thus there is no complete theory available for application to financial problems. Still, the leading truths on the matter are suggested in modern economic theories, and may be developed by their aid. The management of state property, again, requires a reference to various economic doctrines, and more especially the industrial enterprises carried on under a public monopoly illustrate and are explained by the general theory of monopolies. It is, however, when we reach taxation that the aid of economics becomes most valuable. The merits of the general system of taxation, as also those of each special tax, have to be tested by the aid of economic principles. The important problem of justice in taxation is indeed an ethical one, but until its economic effects are known it is impossible to say whether any given form of taxation is just or the reverse. All the intricate points respecting the incidence of taxation can be handled successfully only by applying a sound theory of the distribution of wealth, and the effect of taxation on accumulation makes it necessary to constantly bear in mind the conditions of effective production. In another department of finance, the nature and effect of public loans can be best explained by the economic theory of credit, and such is the course usually adopted. An acquaintance with economic science is, it may be said, an indispensable part of the equipment of the student of finance.


§ 4. Close as is the relation between economics and finance, it is by no means exclusively to the former science that we have to look for aid when developing the latter. In a subject so inseparable from the State, it is in many cases necessary to recognise the action of political and administrative conditions. Financial problems are often the occasions on which constitutional issues are raised, and, as noticed above, they may make a line of conduct desirable, that from the purely economic point of view would be very objectionable. The same statement holds good of administration.*11 The whole system of finance must be kept in conformity with the general mode of managing the affairs of the State. This is, in fact, involved in the position that public finance belongs to the domain of political science.


The science of finance has another important auxiliary in history, which illustrates, verifies, and in some instances affords data for its principles. The material of financial study is not confined to that afforded by modern societies, and even for a true knowledge of actual conditions it is often necessary to be acquainted with their growth. No pure a priori system of finance can be successfully established. Each country has special features arising from its previous history and the sentiments of its people—in great part the product of historical forces. The most violent revolution cannot really break this connexion with the past.*12 As a consequence, a system admirably suited for one country, may be quite unfitted for another. A comparison of the systems of the United Kingdom and of India shows at a glance extraordinary differences, and yet in each case the attainment of solid results. These obvious truths, however, suggest the need of a caution. The necessary varieties of financial practice do not show that general principles are unattainable, though they tend to render their application more difficult. The conclusions of financial theory ought to underlie all the special systems and regulations, but they require to be applied with most careful regard to the circumstances of time and place, and, above all, to the sentiments and habits of the people. Any form of expenditure or taxation that is peculiarly obnoxious has, by that fact alone, a strong presumption raised against it, to be rebutted only by very weighty reasons on the other side.


As history throws light on the evolution of finance, and enables us to confirm or to limit our general propositions by the evidence derived from previous times, so does statistics give us a firmer position in dealing with the present. Without correct information as to state revenue and expenditure, financial policy is little better than guesswork. In order to comprehend the effects of taxation it is indispensable to have full statistics as to the distribution of wealth among classes and among localities. Such materials as those collected by census agencies and statistical departments are necessary elements in any financial calculations, and their absence, of itself, suffices to explain the late origin of financial science. In no respect is modern administration so superior to that of ancient and mediæval times, as in the improved data on which it bases its estimates and makes its practical suggestions.


§ 5. From an examination of the various sciences that may assist the study of finance, we pass by a natural transition to the proper method of inquiry. In regard to all the social sciences, and notably to economics, this question has been vigorously discussed, even to the neglect of the positive matter of research. The principles of scientific inquiry and the appropriate method of investigation belong in reality rather to logic than to the special sciences; though the processes employed in discovery can only be adequately appreciated by those who are conversant with the particular branch in which they are used. At all events, it is clear that the disputes as to method have in many cases arisen from misapprehension as to the exact position of each of the contending parties. Protracted controversy has, however, finally led, if not to complete agreement, at least to a recognition of the common ground occupied by the disputants, and also, it may be said, to a belief that the whole question is, as has often been remarked, one of 'emphasis.' A difference in view is, in many cases, the result of personal tastes; one writer places much weight on a particular method, another on a different and apparently opposed one, though both, if interrogated, would probably allow that each form of inquiry was valid within limits, the exact fixing of which would be the only point in dispute.*13


The principal ground of debate was for a long period as to the claims of the 'inductive' and the 'deductive' methods to be regarded as the sole legitimate process of investigation. To that question it may be confidently replied that both are in particular cases valid and indeed indispensable. Without 'induction' in the wider sense of the term*14 no materials for study would be available: mere observation without arrangement and generalisation is evidently worthless for scientific use. The particular form of induction which proceeds by comparison is frequently serviceable. The simple juxtaposition of two financial systems will sometimes throw a great deal of light on the conditions governing each. In this process history, as we saw in the preceding section, plays a great part, and it is thus quite correct to maintain that the science of finance is in one of its aspects 'inductive,' 'comparative,' and 'historical.'


But this, though the truth, is not the whole truth. The generalisations of economics and the permanent facts of human nature enable us to draw important conclusions as to the effects of certain forces in their bearing on finance. The whole theory of the shifting and incidence of taxation is and must be 'deductive,' i.e. it must be developed from simple conditions by logical trains of reasoning. Deduction, too, is needed in order to ascertain the effects of public indebtedness as well as to trace the ultimate results of public expenditure. It must be remembered that in all these cases verification by appeal to facts is required, but the process of verification is admittedly one of the component parts of the deductive method. On the whole, the study of finance will force on us the conclusion that 'induction' and 'deduction' are not so much opposed, as complementary, methods, each remedying and making good the weakness of the other.


The preceding argument holds, to some extent, of even the most extreme forms of the two methods. Thus, some—as Macaulay—have maintained that experiment is the really fruitful form of social inquiry. Now, though it is evident that, strictly speaking, experiment is impossible in respect to any part of social life, since we cannot bring about that isolation of a particular phenomenon without which no experiment can be conclusive, it yet seems true that a modified form of experiment may give a probable result that will, in some cases, prove of great practical use. Thus in finance, each change of taxation may be regarded as an experiment in the popular sense; if, to take an instance, it appeared that a reduction in the rates of taxation on commodities so stimulated consumption that the loss in revenue through the reduction was made up by the increase in the quantities used, it might fairly be said that the policy of reducing duties was experimentally justified, notwithstanding that the logical conditions for experiment were absent. We must, however, notice that a result of this kind cannot safely be extended to fresh cases unless it is supported by more general considerations.*15


The advocates of the mathematical method stand at the other extreme. There is, at first sight, something absurd in suggesting so exact a mode of inquiry in a subject where very many complications exist, and where each fact is dependent on a number of circumstances, but in those parts of finance in which deduction is the best instrument of research it may prove convenient to arrange the steps of reasoning in a mathematical form; the problem will perhaps be thereby more easily solved, or its exposition more readily followed.*16 Where the conditions can be sufficiently simplified, and where it is important to develop the quantitative results, this procedure is probably advisable.*17 It is, however, at best confined to a very limited area, and needs to have its conclusions tested by the best statistical results available. The more concrete problems of finance are entirely unamenable to this rigid and precise method of treatment.


§ 6. Having thus briefly considered the questions preliminary to the study of public finance, it only remains to give an outline of the course of our further inquiries. After a very concise account of the historical development of financial science (Introduction, Chapter II.) we shall take up the subject of public expenditure and its principal problems (Book I.). Next in order of treatment will come the public revenues, and first what may be described as the economic and industrial receipts of the State and their subdivisions (Book II.). The examination of these more primitive forms of revenue will lead up to the discussion of taxation. Owing to the great extent and complexity of this topic it will be expedient to devote a separate book to the general problems of taxation (Book III.), reserving the study of the several taxes for distinct treatment in Book IV. The questions relating to revenue having been thus disposed of, Book V. will deal with the balance of expenditure and receipts, or, in other words, with public treasures and public debts; while the mechanism, administration, and control of the financial system will form the subject of a final book (Book VI.).


In order to emphasise the close connexion that exists between general and local finance, the matter usually collected under the latter head has been distributed among the different divisions of the work. Thus local expenditure is examined in Book I., local economic revenue in Book II., the principles of local taxation in Book III., and in like manner the tax forms, the indebtedness, and the financial mechanism of subordinate political bodies are discussed in the books dealing with those parts of public finance.

Notes for this chapter

For the various meanings of the term 'Finance,' see Roscher, § 1, also Garnier, 1-3. The original idea is that of paying a fine (finare). Unfortunately, in England the word has been used with a wider meaning, as including all monetary and even industrial facts. Thus we have Jevons's Investigations in Currency and Finance, Mr. Patterson's Science of Finance, and Sir R. Giffen's Essays in Finance, all dealing mainly with those wider questions. An English writer is therefore compelled, in order to avoid misapprehension, to limit the word as in the text, when he is treating of what the Germans can without inconvenience call Finanzwissenschaft, or the French Science des Finances. In French there is a convenient distinction between the singular and plural, the former being used in the general sense, as in La haute finance, while the latter is reserved for 'public finance.' Prof. Adams has recently employed the term 'Science of Finance' to describe 'an investigation of public expenditures and public revenues.' Profs. Plehn and Daniels have followed in the titles of their manuals the example of this work.
That is, with Continental writers. In England these topics are generally relegated to works on 'Constitutional Law' and 'Parliamentary Usage.' Recent American works on Public Finance give considerable space to 'Financial Administration and the Budget.' See Adams, Finance, 103-218; Daniels, 315-324, 344-373; Plehn, 325-353. [Note from Econlib Editor: The footnote reference in the text was missing and has been inserted after the phrase "invariable practice."]
Leroy-Beaulieu, i. 2, 3.
Cf. the title to J. R. McCulloch's well-known work, Taxation and the Funding System. So strong is the disposition in England and America to limit the subject of finance to taxation, that in the American translation of Cossa's useful Scienza delle Finanze, the title is changed into Taxation: its Principles and Methods.
The statement of Turgot's policy in his Letter to the King (ii. 165): Point de banqueroute, point d'augmentation d'impóts, point d'emprunts, is a striking example. Also cp. Gladstone's remark, 'Good finance consists more in the spending than in the collecting of revenue,' West, Recollections of Mr. Gladstone, ii. 309.
The omission of public expenditure as a topic in 'finance,' in the case of English writers, was perhaps in part caused by neglect of the economic theory of the 'Consumption of Wealth' with which it would naturally be connected.
E.g. Umpfenbach, 1-22; Roscher, § 5; Cohn, §§ 4-7; Wagner, i, 16-20.
The works of J. S. Mill, Fawcett, and Shadwell may be given as examples.
The treatises of Rau, Roscher, Wagner, and Cohn on Finance are all in name sections of works on 'Political Economy.' The collection of monographs on financial questions in the Schönberg Handbuch is another instance.
Examination of the works referred to in the preceding note will support the statement in the text. The financial sections of the treatises there mentioned are in fact independent, and may be studied quite apart from the other sections.
The determination of the comparative advantages of raising supplies by loans or by fresh taxation, the choice between different methods of levying taxes, and the need in certain cases of resorting to issues of inconvertible paper are instances.
French financial history affords the best possible illustration. M. Stourm in his valuable work, Les Finances de l'ancien Régime et de la Révolution, has shown conclusively that the modern French system is developed from that existing before the Revolution. Stourm, passim, and especially ii. 501-2.
On this subject see Wagner, iii. 199, and his article in Conrad's Jahrbücher, 1886, i. 197 sq.; Dunbar in Quarterly Journal of Economics, i. 1 sq.; Marshall, Principles of Economics, Bk. i. ch. 5; also J. N. Keynes, Method and Scope of Political Economy.
Cairnes's Logical Method (2nd ed.), 60 sq. The varying use of the term 'induction' by logicians has helped to increase the confusion as to the real relation of the inductive and deductive methods. Cf. J. S. Mill, Logic, Bk. ii. ch. 4, § 5; and Bk. iii. ch. 2, which contains his controversy with Whewell on this point.
For this loose use of experiment, cf. Jevons's 'Experimental Legislation' in Methods of Social Reform, 253 sq.; also Newmarch, Address to British Association (section F), 1861.
It is interesting to notice that one of the earliest attempts to apply mathematical methods to social questions was in regard to the theory of taxation by Canard in his Principes d Économie Politique, Paris, 1802.
See for good examples of the method, Cournot's inquiries in his Recherches Mathématiques; Auspitz und Lieben, Untersuchungen über die Theorie des Preises; M. Pantaleoni, Teoria della traslazione dei tributi; and Fleeming Jenkin, 'The Incidence of Taxes,' Collected Papers, ii. 107-121. Prof. Edgeworth's brilliant researches on 'The Pure Theory of Taxation,' Economic Journal, vii. 46-70, 226-228, 550-571, may be specially noticed.

Introduction, Chapter II

End of Notes



§ 1. Some conception of the gradual formation of the modern theory of finance, and of the steps by which it has assumed its present shape, will enable the student to form clearer ideas as to its relation to other branches of social inquiry, and the real meaning of those parts of earlier systems which at present seem to have little or no justification. It is only by tracing the history of speculative thought on the various problems of public finance that we can fully understand the way in which errors have been gradually eliminated, and incomplete doctrines have been so expanded as to embrace a larger portion of truth.


There is a more special reason for this preliminary historical inquiry in regard to social and political sciences. The particular stage of social development peculiarly affects such studies; their cultivators are not merely like those of all sciences influenced by the knowledge and ideas of their age, but the very phenomena to be interpreted are themselves produced by, and dependent on, the condition of society. It is this feature which alone can fully explain the absence of financial theory at periods of apparently high civilisation and culture.


Our historical inquiry has at present to be limited to what is known as the 'external' history of the science of finance, i.e. to an outline of its general aspect and leading representatives at each stage of its growth. Its 'internal' history, which considers the origin and growth of the separate doctrines of finance, will be more fitly treated in the systematic sections of the work.


§ 2. In classical antiquity, though the need of revenue was often a pressing one, and though at least under the Roman Empire financial administration was elaborately organised,*18 there is no appearance of a scientific treatment of financial problems. The nearest approach to discussion of such questions is found in the little work on the Athenian Revenues, formerly attributed to Xenophon, and modern research has succeeded in collecting stray passages from classical authors that incidentally deal with financial questions.*19 There is no great difficulty in accounting for this neglect. The causes which prevented the development of economics equally hindered that of finance. The whole constitution of the societies of Greece and Rome was based on conceptions directly opposed to those under which our modern doctrines have been formed. With them the State was placed above and before the individual, who was bound to sacrifice himself unreservedly for his country. To persons holding such a belief the question of just taxation would appear to be of trifling importance. That one man was asked for 20 per cent. of his income, while another escaped with a payment of 10 per cent., would not concern those who regarded all revenue as due in case of need to the State. The views of these ancient societies in respect to public expenditure and credit were vitiated by the same notion of State omnipotence.*20 The whole organisation of classical society tended to confirm this belief; both in Greece and Rome, war, and its product slavery, were regarded not simply as permissible, but as praiseworthy. Free industry was consequently placed at a disadvantage, and the retardation of economic development which inevitably resulted did not allow of the existence of those institutions through whose agency public revenue and credit can alone be successfully promoted. It requires some knowledge of economic forces to see that State finances depend ultimately on the production of wealth by individuals, and that without security, and a just division of public burdens, it is impossible to expect the continuous growth of the source from which all income, public and private, comes, viz. the effective application of labour, natural agents, capital and invention to the task of production. The history of the fall of the Roman Empire is but one long illustration of the danger of neglecting a proposition so obvious to any modern.*21


§ 3. The mediæval period shows quite as little trace of financial theory, while the actual organisation of administrative agencies is much inferior to that of the later Roman Empire. On its financial side the so-called feudal system exhibited a surrender of the public claims in favour of the principal lords. Some parts of the Roman arrangements survived, but they were gradually transformed until the sovereign at last had to depend on his own property for support, with whatever supplement might be derived from the fees that he obtained. It necessarily followed that—even were the intellectual conditions favourable—no developed financial theory was possible. The administration of the royal income forced the officials of the feudal State to attend to the details of financial procedure, but of theory or even precise knowledge there is no appearance.*22 The first traces of a revival of method in practical finance are found in the German and Italian cities, which in many respects were free from external control. It is in them, too, that we find the first attempts at theoretic discussion, which, indeed, were the natural outcome of their greater economic activity. Specially noteworthy are the Florentine controversies respecting progressive taxation with their partial anticipation of modern views.*23


§ 4. The dissolution of the Middle Age economy both in state and private life, and its replacement by the modern system, mark the time at which finance as a theoretic study first became possible. The political writings of the preceding period were under theological influence, and even those of the fifteenth and the opening of the sixteenth century, more especially those of Macchiavelli and Sir Thomas More, were limited by their dependence on the ideas of classical writers. But the firmer organisation of the centralised monarchies of France, Spain, and England, the development of money dealings, and the revolution in economic relations produced by the supplies of the precious metals from the New World, presented to reflective minds a series of problems which could not be solved without the aid of wider conceptions; and accordingly we find that the latter part of the sixteenth century exhibits a new development of social and political inquiry. The most prominent representative of this movement is the French writer Bodin (1530-1596), whose Republic appeared in French in 1576 and in a more complete form in Latin in 1586. Apart from its general treatment of political science, the second chapter of the sixth book of the work contains an examination of the various forms of the public revenue; they are grouped under seven heads, the most important being (1) the public domain, (2) import and export duties, and (3) direct taxation. In accordance with the ideas of the mercantile system, Bodin approved of customs both on imports and exports, but he distinguished between 'raw materials,' and 'manufactured articles,' advocating high export dues on the former, and high import ones on the latter. Direct taxes should, he thought, be resorted to only in case of necessity, and then should be proportioned to 'faculty.' Taxes on luxury he regarded with special approval. He condemned the many exemptions from direct taxation which existed in the France of his time, and advised a census to enable charges to be proportioned to property. His influence can be traced in the German financial writers of the next century.*24


§ 5. The predominance of the set of conceptions usually described as 'Mercantilism' is the principal condition affecting the growth of finance in the seventeenth century. Political economy came into existence as a collection of practical rules for the guidance of statesmen.*25 In this aspect it is described by Adam Smith, who states that it 'proposes two distinct objects; first to supply a plentiful revenue or subsistence for the people .... and secondly to supply the State or Commonwealth with a revenue sufficient for the public service.'*26 The latter or financial aim was particularly developed in Germany. Not to dwell on the writers on 'the Treasury' and 'on Taxes' in the seventeenth century, who show some advance on the views of Bodin,*27 there was the 'Chamber Science' of the eighteenth century, which presented its highest form in the works of Justi and Sonnenfels. The former writer discussed financial questions both in his Staatswissenschaft (1755) and his Finanzwesen (1766). He held that taxation should be proportioned to property, and is credited with the creation of a theory of the so-called Regalia, but his real service seems to have been the placing in systematic order the views prevalent in his day on the various parts of public finance, and giving such matters a prominent place in an exposition of political science.*28


In France financial topics received a different treatment. The organisation of the absolute monarchy, the wars which accompanied it, and the elaborate and many-sided commercial policy of Colbert's administration (1661-1683) brought about a state of things that effectively marked out the line of thought on such problems. The extraordinary brilliancy and apparent prosperity of the State contrasted so forcibly with the extreme misery of the people as to give reason for believing, either that the distribution of taxation was unjust, or that its amount was excessive. The French people, in fact, suffered from both these evils, and it was in the advocacy of a reformed tax-system that the first efforts of the dissentients from the prevailing mercantile doctrine were made. Vauban's Dîme Royale (1707) presents a melancholy picture of the condition of France, and suggests the reform of taxation by abolishing most of the existing taxes and their replacement by his proposed 'royal tithe'—a single direct tax of 10 per cent. on all classes. Here we notice a complete departure from the more superficial view of the earlier writers, who especially approved of taxes on commodities as encouraging industry, and a clearer appreciation of the real pressure of taxation. Boisguillebert, both in his Détail de la France (1697) and his Factum de la France (1707), maintained somewhat similar views, more particularly as to the superiority of direct taxation. Both may be regarded as precursors of the advocates of the direct single tax in the eighteenth century. In a different part of finance, and at a later time, Montesquieu contributed some additions to the received views. The 13th book of the Spirit of Laws (1748) is devoted to an examination of the political side of taxation and to a criticism of several existing taxes. He is strongly in favour of progressive taxation, influenced probably, as M. Sorel has remarked,*29 by the practice of the Athenians. It is, however, in showing the relation of the financial system to the political constitution of each country that Montesquieu is at his best; his views were evidently formed from his study of the English Constitution, which provided more efficient safeguards for the interests of the subjects than were to be found in any continental State.*30 In other respects the study of financial problems had not claimed much attention in England. The pamphlet literature of the seventeenth century had handled certain special points, but the pressure of taxation was not such as to lead men to look for remedies against its evils. The rise of statistics under the name of 'political arithmetic' gave an impetus to the examination of the facts of finance, especially in the numerous works of Sir W. Petty, who, in company with Locke, considered the question of incidence in taxation. The question of public credit was discussed by Davenant and the proposals of Decker and Vanderlint for the establishment of a single tax are worthy of note as marking the tendency of thought.*31 Two of Hume's Political Essays (1752) are devoted to 'Taxes' and 'Public Credit.' They show traces of the teaching of Montesquieu on the political effects of financial regulations, but also a far greater knowledge of the economical influence of taxation and credit. The Physiocratic doctrine of the incidence of taxation was rejected by Hume, as was also the popular view that national debts were beneficial. A few years later than Hume's Essays appeared the Principles of Political Economy of Sir James Steuart (1767), embodying the teaching of the English mercantilists in a systematic form. The destruction of the system which it advocated prevented the work acquiring any influence or even general reputation, though some of its discussions of finance are interesting and suggestive.*32


§ 6. The changes in the tone of thought on economic questions and the position of society facilitated the establishment of the first scientific school of social philosophy—the famous group or 'sect' of 'Économistes.' Most of their views are to be found in germ in earlier writers, but they have the merit of presenting them in a definite form. It concerns us particularly to notice that one of their cardinal doctrines—the 'impôt unique'—was a financial one, and that financial questions occupied a great deal of their attention. However widely modern writers on finance may differ from the Physiocratic conclusions, they must at least allow that their selection of problems was a good one. With very defective information the 'Économistes' sought to determine the question of justice in taxation—its real as opposed to its apparent incidence, and its effects on the growth of national wealth; their analysis of the sources of revenue and of the extent to which each could contribute to the public requirements, though not correctly worked out, yet indicated a fruitful line of research for later inquirers. The founder of the school—Quesnay—has discussed taxation in his Second Problème Économique, and several of his Maximes refer to finance. The elder Mirabeau, one of his most ardent disciples, published a treatise on 'taxation,' and all the members of the group adopted the belief in the superiority of direct taxation on the net product of land, though admitting the temporary use of other taxes.*33 By far the most illustrious member of the school—though in some particulars he dissented from their doctrines—was the statesman and philosopher Turgot (1727-1781), who in his numerous papers on questions of finance has shown an amount of practical insight combined with theoretic power that his successors have rarely equalled.*34


The influence of the Physiocrats on financial practice was slight, but it appears that the Constituent Assembly (1789-1791), under the guidance of Du Pont de Nemours, sought to realise in part their idea of a tax on the 'net product' from land. Their action on the progress of speculation has been much more powerful; the form of many financial problems in modern times can be traced back to their teaching, and their leading conceptions have affected the Wealth of Nations.*35


§ 7. The great reputation and the permanent merits of Adam Smith's economic and financial work have led to a perhaps undue depreciation of the services rendered by his predecessors, but it is hardly questionable that in finance, as in economics, the Wealth of Nations was far superior to any earlier work, and its superiority in each case was due to the same qualities. The fifth book—which considers 'the expenses and revenue of the Sovereign' shows comprehensiveness of view, felicity of illustration, and thorough understanding of the practical aspects of financial problems, while the looseness of arrangement, which has been so often censured, is less evident here than in the earlier parts of the work. It is quite possible for critics, irritated by the lavish praise bestowed on Adam Smith by the less intelligent of his followers, to show that most of his views have been set forth by others at an earlier time; the Physiocrats may have had a firmer grasp of the narrower premises from which they reasoned; the technical side of finance may have been more exhaustively handled by the trained officials of the German States; but the establishment of any or of all these propositions does not invalidate Adam Smith's claim to be the greatest of theorists on finance.*36 Not only does he stand in the centre of financial development, summing up and co-ordinating the work of the preceding century in its various lines, and determining the future course of scientific thought: he further contributed an important element to the science of finance in his recognition of its close connexion with the theory of economics. It was by bringing out clearly that the solution of such questions as the incidence of taxation depended on the economic theory of the distribution of wealth*37 that he affected the progress of the science. Moreover, it was a renovated political economy which he applied as a solvent for some of the most difficult of financial problems. His assaults on the mercantile system effectually deprived it of any claim to be the accredited economic doctrine of European thought, and replaced it by a more accurate body of principles influenced by far different views. The State appeared as but one among the several claimants on the national revenue, which was the product of individual energy and prudence, not of the paternal wisdom of statesmen. This alteration of aim at once limited and rendered definite the province of finance; instead of the constant regulation and encouragement which Colbert deemed necessary for national prosperity, the problem was narrowed down to maintaining the natural conditions of society, and applying state revenue to that comparatively simple object. Questions of finance came thus to occupy a larger share of attention than could be bestowed on them when industry, art and morals were also subjects for the sovereign's constant watchfulness and care. It may have been, as many German writers have argued,*38 that this doctrine bears the marks of exaggeration usual in all reactions, though their view of the case is not completely established; but when a comparison is made of the work of those who came under Adam Smith's influence with the systems that preceded the appearance of his treatise, we can say that any possible loss through 'radical' or 'doctrinaire dogmatism' is far outweighed by the removal of perplexing fallacies and the establishment in their place of broader and more philosophical principles. Finally, the value of each part of the Wealth of Nations is so bound up with that of the substance it contains that it is only in studying the actual doctrines of finance that we can form a satisfactory judgment on its position.


§ 8. The Wealth of Nations was speedily translated into the leading European languages, and exercised a powerful effect on the development of financial doctrine; but the nature of its influence varied with the condition of the different countries in which it was studied. In England, where its action on practice, at first great, was retarded by the outbreak of the French Revolution and the unreasoning conservatism which the excesses of the Jacobins confirmed in the minds of the ruling classes,*39 the principal stimulus to speculative thought was found in his analysis of the operation of taxation on national wealth. This part of his work was further developed in Ricardo's Principles of Political Economy and Taxation, where it naturally found a place as an application of the revised theory of distribution in a peculiarly rigorous and abstract manner.*40 This tendency to abstraction led to a division of the treatment of financial questions that proved very unfortunate for the progress of the science. Writers on political economy contented themselves with general and rather vague discussions as to the influence of taxes, while the facts of the existing system were criticised or defended in numerous pamphlets of ephemeral interest. Even works of greater merit, such as Parnell's Financial Reform (1830) and Sayer's Income Tax (1833), suffered by the separation. The nearest approach to a combination of the different aspects of finance was made by McCulloch in his work on Taxation and the Funding System (1845, 3rd ed. 1863), in which the defects are more apparent to modern readers than the merits which at the time it undoubtedly possessed.


French economists and financial theorists were more impressed by the negative side of Adam Smith's teaching, a tendency that was much strengthened by the works of J. B. Say—Traité d'Économie Politique (1803), and Cours Complet (1828)—who was disposed to undervalue the services of the State even in the discharge of its necessary functions. The very complicated financial system of France has, however, led to its study from the administrative point of view, and special financial questions have received much more attention from French than from English economists. There are numerous treatises on 'Taxation' and 'Public Revenue,' marked by a general disposition to lay stress on the principles of natural right and justice as against economic expediency. Most French writers also exhibit a strong dislike to any financial measures believed to savour of socialism, e.g. progressive taxation, or even an income-tax. With rare exceptions—such as the work of Canard already mentioned, and the remarkable studies of Cournot—they show little taste for deductive reasoning or for the discussion of questions like that of the incidence of taxation which needs its use. On the other hand, they are prolific in historical and statistical works such as those of Vuitry, Clamageran, Stourm, De Parieu, Vignes, Audriffret, and Gomel; the great Dictionnaire des Finances (2 vols., 1894), issued under M. Leon Say's superintendence, is a storehouse of materials on French financial administration. In the convenient work of Garnier, Traité des Finances (4me éd. 1883), and the more brilliant treatise of Leroy-Beaulieu, Science des Finances (6me éd. 1899), they have text-books of a high order, the last-mentioned work in particular being remarkable for fulness of information and lucidity of style. Up to the present the dislike to state action is a distinctive note of French financial work, and in this respect it furnishes a useful corrective to the doctrines prevalent in Germany.


§ 9. The introduction of the doctrines of the Wealth of Nations into a country where the older traditions of the 'Chamber Sciences' were so strong as in Germany, brought about a re-casting rather than an abandonment of the earlier methods. The masses of material which writers in conformity with previous usage continued to bestow on their readers were presented from the new point of view. Financial questions were either examined in special works, or were assigned a separate place in general economic treatises under the title Finanzwissenschaft. Passing over the less important works of the early part of this century,*41 we come to the treatise of K. H. Rau on Economics, the third volume of which, devoted to finance, appeared in 1832 (5th ed. 1864). The merits of Rau's writings lay in the fulness of their information, and in their systematic arrangement, both of which admirably fitted them for use by students, who obtained a general view of the science as accepted at the time. His influence in promoting the study of economics and finance in Germany was great, though often forgotten by his successors.*42 Discussion of his doctrines belongs to the treatment of the science, but we may just note his separation of "fees" (Gebühren) from 'taxes' (Steuern), and his recognition of the influence of administration in finance. The monograph of Nebenius on Public Credit (2nd ed. 1829), is entitled to a place beside Rau's more comprehensive work, as giving a full treatment of one of the most disputed financial topics. Somewhat later in date is Hoffmann's Theory of Taxation (1840), which has been adversely criticised by Roscher and Wagner on account of its unsystematic character, but which nevertheless has had considerable effect on the progress of finance. It appears to aim at giving a scientific justification of the contemporary fiscal policy of the Prussian State. Many other German writers will require attention in connexion with special doctrines, but the older school that was more or less closely limited by the traditions of Adam Smith's teachings in the shape in which they had been arranged by Rau, presents but one more name for consideration at present—Von Hock, who examined in separate works the financial systems of France (1857), and of the United States (1867), and also wrote on Public Revenue and Debts (1863). This work includes in brief compass the leading questions of taxation and indebtedness; it is specially good, as might have been expected from the production of a trained official, in its discussion of administrative points.*43


So far the development of finance in Germany had been carried on in conformity with the conceptions of Adam Smith and his followers, though modified in some degree by the peculiar conditions of the country; but towards the middle of the century, new forces began to act on the social sciences, which had considerable effect on their methods and doctrines. Among the agencies that more particularly influenced financial studies, we can indicate three, viz. (1) the rise of the 'historical' school, (2) the disposition to treat finance as a part of administration (Verwaltung) in the newest sense of that term, and (3) the advocacy of politico-social, as opposed to purely financial, aims in fiscal matters. The historical economists did not contribute much to the substance of financial doctrine, but the importance attached by them to distinctions between the different stages of social life, and their assertion of the impossibility of laying down universal precepts, were evidently applicable with peculiar force to the systems of taxation existing in different countries. The belief that the present could be fully understood only in the light of the past made it desirable to study the history of financial arrangements, and some of the best German work has been in this direction.*44 Some supporters of the school, in particular Schäffle and Schmoller, went further and assailed such cardinal doctrines of received financial theory as that of 'net income being the sole fund on which taxation could fall,' and this questionable position was supported by arguments which led to a closer study of fundamental financial principles.*45 To Stein is due a movement towards regarding finance as a problem of administration. His Finanzwissenschaft (5th ed. 4 vols., 1885-6), much modified and expanded in its later editions, contains, along with a great deal that is disputable and fanciful, a full treatment of financial organisation. The State with its administrative organs is in his view the basis of the financial system, and the history and statistics of the various European countries receive considerable attention. More important, from a practical standpoint, than the influence of Stein, is the tendency to regard the financial system as an agency for redistributing wealth. This position, supported most prominently by Wagner,*46 is not fully accepted by other economists and financial writers, but in several works propositions are set forth which need this politico-social view as their logical basis.


The result of these several influences has been to give a special tone to German financial work, since even where the newer ideas are not accepted, they are present to the writer's mind. This change in attitude towards financial problems is the outcome of beliefs which may briefly be enumerated as follows: (1) Public finance is a matter of national interest; it is not merely a distribution of burdens among the individual citizens, who owe duties to the State which it ought to be their privilege to discharge; (2) Financial administration is largely dependent on national peculiarities; each country has, or needs, a system suited to itself, so that the idea of a single 'rational' system of taxation is absurd; (3) The same conception of relativity applies to the history of finance; earlier systems, e.g. the Roman, have to be judged in relation to the circumstances of the age in which they existed.


Instead of attempting to criticise the opinions and tendencies just described, we have rather to notice the remarkable productiveness which has been the outcome of the study of finance in Germany. Either in respect to general text-books and manuals or to monographs on the most complicated questions she holds the first place. Of the former, in addition to the previously noticed work of Stein, there are: the very extensive treatise of Wagner—still incomplete—in which each aspect of finance is handled at even undue length; the shorter and more lucid work of Cohn, where the evolution of financial systems is brought out by description rather than by brief and precise propositions; the less attractive manual of Roscher, which, however, gives a collection of the various opinions and a mass of interesting historical detail; the compact and conservative work of Umpfenbach, exhibiting some of the best qualities of the older writers; the concise manual of Eheberg (5th ed. 1898); the somewhat abstract and peculiarly arranged introductory book by Vocke (Grundzüge der Finanzwissenschaft, 1894) and lastly the Outlines of the subject by Conrad. Almost reaching the character of general manuals are the more limited treatises of Schäffle, (Grundsätze der Steuerpolitik 1880: Die Steuern, 1895; 1897) Neumann, Sax, and Vocke (Abgaben, &c., 1887). Among special works there is the collection of monographs in the third volume of Schönberg's Handbuch—which had best be regarded in that light—and numerous smaller studies on such questions as 'progressive taxation' (Neumann), 'incidence of taxation' (Falck, Kaizl) 'justice in taxation' (Meyer), 'the exemption of the minimum of subsistence' (Schmidt). When the abundant periodical literature appearing in the journals of Conrad, Schmoller, and Schanz—the last devoted exclusively to finance—is added, we can form some idea of the activity of German workers in this field.


§ 10. At a comparatively early period questions relating to public revenue and expenditure had attracted attention in Italy. The work of Broggia (1743) has been described as 'the earliest methodical treatise on taxes'; and several of the economists of the latter half of the eighteenth century examined the effects of taxation, and especially of those taxes actually levied in their country. The influence of Adam Smith and J. B. Say was for some time predominant in Italy as elsewhere. The development of financial science in Germany has, however, deeply affected Italian students, who have zealously devoted themselves to the examination of financial subjects, bringing to bear on their selected topics considerable independence of mind, and at the same time a thorough acquaintance with what has been already accomplished.*47 Amongst general works may be noticed the condensed outline by L. Cossa (7ma ed. 1896) a short treatise by Ricca-Salerno, written under the influence of the Austrian theory of value, the larger manual of Flora, and the more important and comprehensive treatise of Graziani (Instituzioni di Scienza delle Finanze, 1897), which may fitly rank with the best text books of other countries. The fundamental principles of finance have been examined by Viti de Marco, Mazzola, and Zorli, in common with the theory of marginal utility. In like manner the difficult problems of shifting and incidence have been investigated by Pantaleoni and Conigliani; and studies on progressive taxation have been made by Mazzola, and Martello, and in a specially elaborate form by Masè, Dari. The problems of 'double taxation' (Garelli), and the tax systems of federal states (Flora) have also been considered. Questions of local taxation have attracted attention and been considered in the monographs of Alessio and Lacava, but more thoroughly in the very complete work of Conigliani (La Riforma delle leggi sui Tributi Locali, 1898). Alessio has also supplied a standard treatise on Italian finance. When the special articles in the Giornale degli Economisti and other journals are added, it may be said that Italy ranks next to Germany in the production of scientific works on finance.*48


§ 11. The increased attention paid to economic and financial study has led to fuller recognition of the work done in other European countries. Thus the contributions of Dutch writers to finance, especially those of Pierson and Cort van der Linden, have been brought into notice. Spain has supplied a meritorious general treatise on finance in the work of Piernas Hurtado (Tratado de Hacienda Pûblica, 1st ed., 1869, 5th ed., 1900-1901), the second volume of which deals with the history and actual conditions of the Spanish finances. The Swedish writer Wicksell has made valuable contributions to the theory of incidence, and the history of Swedish finance. What Maine has aptly called "the unfortunate veil of language" shuts off Russian and other Sclavonic writers on finance, unless where, as by Bésobrasoff and Bloch, French has been used as the medium, or where, as with Kaizl's Finanzwissenschaft (1900-1), a German translation has appeared.* There can be no reasonable doubt that in the future it will be necessary to pay attention to a far wider field of scientific literature, produced in countries so far apart as Holland and Japan, but all serving to advance the development of an adequate financial theory.


§ 12. As noticed above (§ 8) the separation of economic theory from practical questions had a depressing effect on financial studies in English-speaking countries. There was a decided decline of interest in the scientific treatment of financial questions. McCulloch's treatise remained for a long time the sole work of a general character. The English tax system was earliest discussed by Leone Levi (1860), Morton Peto (1863), and Wilson. A series of books by Noble criticised it from the extreme radical and free trade standpoint. More scientific treatment was shown in the Encyclopædia Britannica articles of Thorold Rogers ('Finance') and Professor Nicholson ('Taxation'). Special questions were well discussed by Baxter, Jevons, Leslie and Mr. Palgrave. But, speaking broadly, the question of a scientific finance was unsatisfactory.


The decided revival of economic studies, both theoretical and historical, during the last fifteen years has had its effect on finance. The first sign of improvement was the appearance of important historical works by Hall (A History of the Customs Revenue of England, 1885), Buxton, (Finance and Politics, 2 vols., 1888), and Dowell (History of Taxation and Taxes in England, 4 vols., 1884; 2nd ed., 1888), the last named giving an excellent account of the development of the British financial system. The difficult problems connected with local taxation have been examined by Messrs. Sargent, Moulton, and O'Meara in the interests of the several parties affected. The various aspects of local finance have been scientifically expounded by Mr. Blunden, and 'local rates' have found an inimitable historian in Mr. Cannan, while the effect of assigning imperial taxes in aid of local revenues has been investigated by Mr. Chapman. More general theoretical problems have received attention in the series of articles by Prof. Edgeworth, as also in Sidgwick's works; and within the last year the subject of finance has been comprehensively reviewed in the concluding volume of Prof. Nicholson's Political Economy. In periodical literature, too, financial questions have received more notice, owing probably to the greater pressure caused by the rapid growth of expenditure, which has aroused practical interest and compelled reference to general principles.


Another class of contributions has also of late years increased in importance. England has gained a high reputation for the merits of its 'Parliamentary Papers' and 'Reports.' Some of the most valuable studies in the statistics and theory of finance are embodied in these ponderous volumes. The Report on Import Duties (1840), The Inquiries on the Income Tax (1852-3 and 1861), and the Returns on Public Income and Expenditure (1869), are good examples. But in recent years many additions of special value have been made. The Committee on Town Holdings (1886-92), The Lords' Committee on Betterment (1894), The Report on the National Debt (1891), Sir H. Fowler's Local Taxation Report (1893), and The Royal Commissions on 'Indian Expenditure' (1896-1900), 'Irish Financial Relations' (1895-6). and 'Local Taxation' (1898-1902), have supplied a mass of materials and theories of the highest interest to scientific students. The speeches of finance ministers and the debates on financial measures are buried in the volumes of Hansard and therefore difficult of access, unless, as in the case of Peel, and, partially, of Gladstone, reprinted in a separate form.*49


§ 13. The comparative apathy respecting the study of finance which, as we have seen, existed in England was also to be found in the United States. The burning question of the tariff excepted, there was little in personal problems. Mr. Wells's Reports mark the opening of discussion after the close of the Civil war. The great development of economic science since 1888, however, soon extended to finance, and a valuable body of literature has been produced in the last ten years. Short text-books of a high character have been written by Professor Plehn (1886, 2nd ed., 1900), and Professor Daniels (1897), and a larger treatise of considerable merit by Professor H. C. Adams (The Science of Finance, 1898), whose work on Public Debts (1887) was one of the first indications of the new growth. Professor Seligman has dealt with the more important problems in an admirable series of volumes: (Shifting and Incidence of Taxation, 1892, 2nd ed., 1899) (Progressive Taxation, 1894, Essays on Taxation, 1895), and in special articles. Professor Ely's Taxation in American States and Cities, and Professor Kinley's Independent Treasury are valuable studies in widely different fields. The bulky volume by D. A. Wells represents an older point of view, but is serviceable for its facts. Instructive monographs by Messrs. Rosewater (Special Assessments), Ross (Sinking Funds), West (The Inheritance Tax), and F. Walker (Double Taxation), are specimens of the literature, dealing with the theory and history of finance, which is being steadily increased. Dr. Hollander has edited a volume of Studies in State Taxation (1900), confined to five southern states, and has himself written the Financial History of Baltimore (1899). The Essays on Colonial Finance (1900) is a result of the expansion and imperialist policy of the United States. America, like England, is rich in official reports and statistical returns. Of considerable, though very unequal, value are the Reports of the 'State' Tax Commission. The New York Report (1871), the Ohio Report (1883), and the Massachusetts Report (1897), may be specially mentioned.*50

Notes for this chapter

The parts of the Theodosian Code dealing with administration are our principal source of information as to the financial system of the later Roman Empire. See, for a lucid exposition of the mechanism of Roman finance, Humbert's Essai sur les Finances et la Comptabilité publique chez les Romains (Paris, 1886, 2 vols.). The standard work on Athenian finance is Boekh, Staatshaushaltung der Athener (3rd ed. by Fränkel, 1887). A considerable amount of information respecting the tax system of Egypt has been obtained, and much more may be expected, through recent investigations. See Wilcken, Griechische Ostraka aus Ægypten und Nubien.
E.g. Tacitus, Ann. 13, 31; Pliny, Pan. 37.
See De Coulanges, La Cité antique, Bk. iii. ch. 18, for a powerful statement of the classical ideas respecting the relations of the individual and the State.
For the causes hindering the rise of economic science, see Ingram, Hist. of Pol. Economy, 7-9; for Roman ignorance of the principles of taxation, cf. Merivale, Romans under the Empire, viii. 356; and for the obstructive effects of the methods employed by the Empire, Guizot, Civilisation in France, Lect. 2; Clamageran, Histoire de l' Impót en France, i. 89 sq.
The Dialogus de Scaccario in Stubbs's Select Charters, 168-248, shows the processes of the English Exchequer. See also H. Hall, Antiquities of the Exchequer.
For one example of mediæval city finance, see Schönberg, Finanzverhält nisse der Stadt Basel im 14. und 15. Jahrhundert. For some features of Florentine finance, see Seligman, Progressive Taxation, 22 sq., 70. The most remarkable Florentine writers were Palmieri, Guetti, and Guicciardini the historian.
The fullest account of Bodin is in Baudrillart's Jean Bodin et son Temps (Paris. 1853). His views on taxation are described by Clamageran, ii. 314-330. For English readers, Hallam, Literature of Europe, Part ii. ch. 4, § 2, may be noticed as giving a convenient summary.
Such was the work of Antoine Montcrétien, Traicté d' Économie Politique (1615), a series of counsels addressed to Louis XIII.
Wealth of Nations, 173.
The most remarkable of these writers are Faust, Conring, and Klock. An attempt has been made by Stein (i. 125, and Finanzarchiv, i. 1 sq.) to prove that the last-named was 'the true founder of the theory of taxation,' but the bulk of his work seems not above the ordinary mercantile position, and his views on taxation are derived from Bodin. He has been further accused of copying from the earlier work of Faust. See also Roscher, Geschichte, 210 sq.
For Justi, see Roscher, Geschichte, 444-465; for his Finance, 461-465; also Cohn, §§ 9, 71; Meyer, 16-17; Wagner, i. 35-6.
Montesquieu, 108.
See the texts of Vauban and Boisguillebert in Les Économistes Financiers du XVIIIme Siècle (ed. Daire). Also Ingram, 57-9. For Montesquieu, cp. Stein, i. 131-2.
On these minor writers, see Ricca-Salerno, Le Dottrine Finanziarie in Inghilterra; also Vocke, Finanzarchiv, vii. 56.
The most important parts of Steuart's Principles, so far as finance is concerned, are—Book iv. part 4 (Public Credit), and Book v. (Taxes). For a good, but too favourable account of Steuart's financial doctrines, see Hasbach, Untersuchungen über Adam Smith, Book ii. ch. 4, 1st section.
See Physiocrates (ed. Daire), 128, or Oncken's Quesnay, 696, for the Second Problème. Of the Maximes, Nos. 5, 27, 28, 29, 30, relate to finance. For the latest views of Quesnay's position, see S. Bauer, 'Zur Entstehung der Physiocratie'; Conrad's Jahrbücher, August 1890; and Quarterly Journal of Economics, v. 100 sq.; also Schelle, Du Pont de Nemours (Paris, 1888). The general doctrines of the Physiocrats are described for English readers by Mr. Higgs, The Physiocrats (1897); their theory of incidence is well explained in Prof. Seligman's Shifting and Incidence of Taxation (2nd ed. 1899), 95-112.
See Œuvres de Turgot (ed. Daire); for finance more especially, i. 389-632; ii. 368-432, but financial questions are often noticed by him when treating of other matters. On his differences from Quesnay, see Schelle, 127 sq.
For the influence of the Physiocrats on the financial system of the Revolution, see Stourm, i. 128-130, ii. 2-11; Schelle 319 sq
Cp. the judgment of Prof. Hasbach, Untersuchungen, 220-98.
Cp. Book i. chap. 6 (22), with Book v. chap. 2, part 2 (347).
Cohn, §§ 11-12; also his Grundlegung, §§ 74-79; Geffcken, in Schönberg, 22; Wagner, i. 40-1; also Ingram, 107-9.
The contrast between the liberal policy pursued by the younger Pitt in the earlier years of his administration and his later measures is very marked. Examples belonging to our subject are the Commercial Treaty with France in 1786 and the consolidation of the Customs Laws.
Ricardo, chaps. 8-18 inclusive. See Wagner, ii. 333, and Cohn, § 248, for recognition of his work in this respect. In another department of finance, R. Hamilton, by his work on The National Debt, developed and added to the arguments of Adam Smith, and was followed by Ricardo. Sir J. Sinclair's History of the Publïc Revenue (1785, 3rd ed. 1803) deserves mention for its careful treatment of facts and the acquaintance shown with foreign literature on the subject.
Among those who may be mentioned are Harl, Krehl, Fulda, and more especially Jacob (Finanzwissenschaft, 1821) and Malchus (Finanzwissenschaft, 1830).
See Roscher, Geschichte, 847 sq.
For fuller examination of the German writers of this period, see Wagner, i. 44-5, ii. 7-9, 11-12; Meyer, §§ 6-9, 13, 17, 18, 19; Vocke, Abgaben, 10-33; Falck, Lehre von der Steuerüberwälzung, 104-144.
Such as the already mentioned work of Schönberg, Finanzverhältnisse der Städt Basel (1879); Schmoller, Die Epochen der preussischen Finanzpolitik; Zeumer, Die deutschen Städtesteuern; Vocke, Geschichte der Steuern der brit Reiche.
Schäffle, Gesammelte Aufsätze, i. 158-183, esp. 167 sq.; Schmoller, 'Die Lehre vom Einkommen' (Zeitschrift für Gesammte Staatswissenschaft, 1863).
Especially i, 48-50, ii. 449.
For further details see Cossa, Introduction to the Study of Political Economy, ch. 15; also his Scienza delle Finanze (Bibliographies); Ricca-Salerno, Storia delle dottrine finanziarie in Italia (2nd ed. 1896).
The text-book of the Hungarian writer Béla Foldes appears to be an important one.
[A footnote reference appears here in the text, but there is no matching footnote.—Econlib Ed.]
Gladstone, Financial Statements, 1853, 1860-64; Goschen, Local Taxation (1872), may be referred to.
Sherman's Speeches and Reports on Finance and Taxation may be referred to as a specimen of the work of American politicians of the better kind.

Book I, Chapter I

End of Notes

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