Front Page Titles (by Subject) CHAPTER II - Public Finance
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CHAPTER II - Charles F. Bastable, Public Finance 
Public Finance. Third Edition, Revised and Enlarged (London: Macmillan, 1903).
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§ 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,1 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.2 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.3 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.1
§ 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.1 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.2
§ 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.1
§ 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.2 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.’3 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,1 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.2
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,1 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.2 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.1 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.2
§ 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.1 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.2
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.3
§ 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.1 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 wealth2 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,1 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,1 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.2 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,1 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.2 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.1
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.2 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.1 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,2 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.1 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.1
§ 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.1 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.1
§ 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.1
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.
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.
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.