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Abstract
On the basis of F.B.W. Hermann's Staatswirthschaftliche Untersuchungen and of major German, Austrian and Swedish contributions to public economics, two specific claims with regard to the Germanic influence in the development of public expenditure theory are put forward in this paper. It is contended that the German achievements concerning the conceptual clarification of public goods are: (i) important as conceptual ingredients of the modern ‘micro-based’ theory of the public sector: (ii) less closely linked to some historical and intellectual German Sonderweg (culminating in historism, a collectivistic view of social entities and a mystical glorification of the State) than is often suggested.
It is argued that these achievements rather were to a large extent inspired by the more cosmopolitan tendencies in German thought. An important influence is Kantian liberalism. Kant construed a kind of foundational interdependence between the public and the private sector. This prepares the ground for a framework of complementary institutions instead of explaining public institutions in terms of a market failure-perspective based on non-excludability: the view developed in German Idealism gives non-rivalry the pivotal role: the explanation of public institutions systematically hinges upon the existence of goods, the benefits of which are necessarily universal and hence are necessarily made available in a non-rival mode.
Notes
* Revised version of a paper given at the Public Economic Theory 2004 World Conference in Beijing. The paper benefited from critical comments by Gilbert Faccarello, Domenicantonio Fausto and two anonymous referees.
1 The concept of productive forces was later also used by von Soden's friend Friedrich List. Von Soden (Citation1815) makes use of the non-rivalry as well as partial excludability of technological knowledge in a passage on patents: ‘I do not dare to defend the kind of temporary monopolies, i.e. patents for new inventions, which are so numerous in England and recently also in France and have been granted with not always reasonable easiness . … while it seems just and even economically efficient, to recompense the genius as well as efforts of industry, it is dubious whether the economically appropriate way consists in disabling the rest of the economy by depriving it, be it only temporarily, of a new … improvement of industrial production’ (von Soden Citation1815: 88, my translation.) In the following, von Soden suggests a tax-financed public reward mechanism for innovation to cope with these problems and, amongst other things, points out that in the case of innovations, which are trade secrets (excludable knowledge), there is an alternative mechanism of compensation.
2 John Stuart Mill made the public good-properties of science-based knowledge explicit (cf. Sturn Citation1998: 233 – 5).
3 For an overview of public input-modelling relevant for industrial organization, see Groves and Ledyard (Citation1987).
4 Cf. for example Marx (Citation1953: 74).
5 This has a parallel with developments in ‘general’ economics. Erich Streissler (Citation1990) has demonstrated that in important respects Carl Menger and his school can be considered as a specific development within the German tradition. The intellectual links between nineteenth century German economics and the Austrian School of Menger, von Wieser and Böhm-Bawerk are documented in some detail in Brandt (Citation1993) and Priddat (Citation1995), both of whom include issues of public economics.
6 Musgrave's Theory of Public Finance (1959) contains specific references and evidence of the way he makes use of all the early modern public economists as well as their German ancestors. Apart from specific issues, he emphasizes their encompassing framework: ‘Indeed’, writes Musgrave (Citation1959: vi), ‘I have been hesitant to refer to this book as a study of public finance. The problems, to a large degree, are not those of finance. They are problems of resource use and income distribution … Thus, it might have been better to describe this as an examination of the theory of public economy, following the useful German concept of Staatswirtschaft. If the more conventional title was used, it is only to avoid what the consumer might find an unfamiliar label’ (italics by Musgrave). German-born Musgrave was a student of Alfred Weber in Heidelberg and moved to the United States in 1933.
7 For an overview, see Groves and Ledyard (Citation1987).
8 Ken Binmore (Citation1998: 506) credits Hume with anticipating game-theoretic equilibrium concepts relevant for the analysis of public goods-provision problems and the basic ideas underlying other relevant methodological tools.
9 The basis of such postulates is typically related to the assertion that the scope of feasible exclusion sufficient as a starting point for market exchange is much greater than imagined prima facie. This is often true, but (in addition to suitable exclusion technologies) presupposes a certain web of norms and institutions dealing with public good-problems of higher order.
10 Musgrave (Citation1959: 68) makes similar observations that culminate in the reference to David Ricardo, quoted as an introduction to the present section. But, using a less thoroughly edited version of Ricardo's Principles than Ricardo (Citation1951), Musgrave tells only half of the story. In an editor's footnote (Ricardo Citation1951: 242) referring to the passage invoking ‘M. Say's golden maxim’ we read: ‘Ed. 1 from here to the end of the chapter, reads: “a minister is disposed to conclude that the country is arrived at the maximum of taxation, because by increasing the rate, he cannot increase the amount of any one of these taxes. But in this conclusion he will not be always correct, for it is very possible that such a country could bear a very great addition to its burdens without infringing on the integrity of its capital”. This passage was altered [emphasizing Say's maxim, R.S.] because in McCullochs's opinion it held out “an apology to ministers for taxation”’.
11 For insights concerning methodological controversies between neo-Kantian positions and thinkers of the mainstream of the Historical School, see Max Weber's Roscher und Knies und die logischen Probleme der historischen Nationalökonomie (1968: 1 – 145).
12 For such a comparison see Schneewind (Citation1998) and (focusing on problems discussed in the present paper) Wolfgang Kersting (Citation1997: esp. 41 – 74).
13 This is the main difference between Kant and historical entitlement theories à la Locke and Nozick. Notice though that this does not imply the Hobbesian position of arbitrariness in determination of property right-patterns. Cf. Kersting (Citation1997: 70).
14 The scope and nature of such constraints is controversial (not only) among Kantians. This is not surprising. Even if there is agreement on basic norms of justice, the appropriateness of constraints on admissible distributions will not be independent of the socio-economic models that are used in order to analyse issues such as economic competition.
15 Cf. also Hegel Citation1821: §235.
16 Cf. Priddat (Citation1990).
17 Priddat (Citation1995: 83) discusses the influence of Hume and Steuart on the views of German economists. He does not provide direct evidence concerning Hume's influence. But it is true that there are similarities. Hume was no advocate of explaining the working of the public sector in terms of private transactions. Hume (Citation1739 – 40, III: ii.2) suggests ‘sympathy with the public interest’ as a specific motivational principle in the public sphere of justice and argues that contractarian reductionism implicitly presupposes what it purports to explain.
18 Wagner (in Musgrave and Peacock Citation1958: 2) expands on this point in a more detailed way.
19 ‘Weitere Voraussetzung ist vielmehr, dass das Kollektivbedürfnis dringlicher ist als die Gesamtsumme der Individualbedürfnisse, deren Befriedigung durch die Befriedigung des Kollektivbedürfnisses abgeschnitten wird’ (Röpke Citation1929: 31, italics by Röpke).
20 Von Wieser's arguments are summarised by Musgrave (Citation1997: 160).
21 There are theorists who explicitly introduced ‘goods which are valued by many individual subjects’, but did not arrive at particularly interesting insights on this basis. Karl Thomas (Citation1879) suggests a four-prong relational characterization of different types of goods according to whether they are used by one or more subject(s) and include one or more objects. This includes the case where one and the same object is jointly used by several/many individual subjects. This relational characterization (one object – many individual subjects of valuation) appears again most clearly in von Ehrenfels (who is discussed in some detail in section 5) and Menger (Citation1923: 8). Thomas taught as Privatdozent at the University of Königsberg and is an example for a very direct ‘application’ of Kantian theory to the conceptual developments discussed here. Brandt (Citation1992: 181) calls Thomas a ‘middleman’ between the Deutsche Gebrauchswertschule and the Austrian School, but there seems to be little evidence concerning direct influence.
22 Hermann counted the social basis of science and religion amongst the immaterial goods.
23 The second posthumously published edition contains a new and much longer foundational part which, according to the editors, is based on manuscripts by Hermann, which they found ready for print.
24 Cf. Hermann (Citation1832: 14 – 6). Taking Hermann's viewpoint as point of reference, it seems incorrect to establish too close a link between the German emphasis on motives such as Gemeinsinn and merit wants (which are defined by Musgrave Citation1959: 13, as failure of consumer sovereignty). Put in modern terminology, Hermann's Gemeinsinn is apt to support norms of cooperation related to public good problems of higher order, facilitating institutional alternatives to (or reduce transaction costs of) State provision of public goods. Hermann certainly does not associate Gemeinsinn naively to collective needs in the sense of a conceptual linkage. Things may be different with regard to other German scholars: ‘In the process, Finanzwissenschaft mistakenly associated the distinction in motivation (self-interest vs. obligation to community) with that between private and public goods’ (Musgrave Citation1997: 186).
25 Key texts by von Stein and Wagner are made available in English in Musgrave and Peacock (Citation1958).
26 Wicksell (Citation1896: 107) ironically refers to the ideological side of von Stein's Hegelianism: ‘Lorenz von Stein, der ja immer bestrebt ist, aus dem Bestehenden eine höhere Vernünftigkeit hervor zu demonstrieren, hat bekanntlich sogar den “Konflikt zwischen Gesetzgebung und Verordnung” auch auf dem Gebiete der Finanzen zum notwendigen Element des modernen Staatslebens erheben wollen, was denn doch des Guten zuviel sein dürfte’.
27 Schäffle (Citation1867: §198) provides a succinct account of his organological approach with regard to the state and the private economy. Notice that Schäffle views the global economic system as the highest organic unit, which encompasses the system of private exchange as well as the public economies of the national states. This has to be kept in mind when we consider his conceptualizations according to which ‘the state is the higher person’ (cf. Musgrave Citation1997: 155).
28 Wicksell and Lindahl, in particular, emphasized the distinction between distribution-motivated and allocation-motivated taxes. Notice that Wagner implicitly used such a distinction by restricting distributive considerations to the taxation side.
29 This sheds some light on the fact that Italians and Austrians were amongst the most important contributors to the debates on socialist planning (von Wieser, Hayek, Mises, Barone) as well as the development of individualist public sector economics. Maffeo Pantaleoni (Citation1883) aimed at integrating public expenditures in a Walrasian system. Unfortunately, it is not possible here to include the background of the Italian tradition and its relations to the German language discussions in a systematic way.
30 Such a framework, of course, must presuppose interpersonally comparable cardinal utilities. Von Ehrenfels (Citation1893 – 4) tends to endorse a kind of preference-satisfaction conception of utility.