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Jean-Baptiste Say argues that there is a world of difference between private consumption and public consumption; an increase in the latter does nothing to increase public wealth (1803)

Jean-Baptiste Say (1767-1832) in his influential Treatise on Political Economy (1803) drew a distinction between private and public consumption, viewing an increase in the latter as no way to increase public wealth:

What, then, are we to think of the principles laid down by those writers, who have laboured to draw an essential distinction between public and private wealth; to show, that economy is the way to increase private fortune, but, on the contrary, that public wealth increases with the increase of public consumption: inferring thence this false and dangerous conclusion, that the rules of conduct in the management of private fortune and of public treasure, are not only different, but in direct opposition?

There has been long a prevalent notion, that the values, paid by the community for the public service, return to it again in some shape or other; in the vulgar phrase, that what government and its agents receive, is refunded again by their expenditure. This is a gross fallacy; but one that has been productive of infinite mischief, inasmuch as it has been the pretext for a great deal of shameless waste and dilapidation. The value paid to government by the tax-payer is given without equivalent or return: it is expended by the government in the purchase of personal service, of objects of consumption; in one word, of products of equivalent value, which are actually transferred. Purchase or exchange is a very different thing from restitution.

Turn it which way you will, this operation, though often very complex in the execution, must always be reducible by analysis to this plain statement. A product consumed must always be a product lost, be the consumer who he may; lost without return, whenever no value or advantage is received in return; but, to the tax-payer, the advantage derived from the services of the public functionary, or from the consumption effected in the prosecution of public objects, is a positive return.

If, then, public and private expenditure affect social wealth in the same manner, the principles of economy, by which it should be regulated, must be the same in both cases. There are not two kinds of economy, any more than two kinds of honesty, or of morality. If a government or an individual consume in such a way, as to give birth to a product larger than that consumed, a successful effort of productive industry will be made. If no product result from the act of consumption, there is a loss of value, whether to the state or to the individual; yet, probably, that loss of value may have been productive of all the good anticipated. Military stores and supplies, and the time and labour of civil and military functionaries, engaged in the effectual defence of the state, are well bestowed, though consumed and annihilated; it is the same with them, as with the commodities and personal service, that have been consumed in a private establishment. The sole benefit resulting in the latter case is, the satisfaction of a want; if the want had no existence, the expense or consumption is a positive mischief, incurred without an object. So likewise of the public consumption; consumption for the mere purpose of consumption, systematic profusion, the creation of an office for the sole purpose of giving a salary, the destruction of an article for the mere pleasure of paying for it, are acts of extravagance either in a government or an individual, in a small state or a large one, a republic or a monarchy. Nay, there is more criminality in public, than in private extravagance and profusion; inasmuch as the individual squanders only what belongs to him; but the government has nothing of its own to squander, being, in fact, a mere trustee of the public treasure.

What, then, are we to think of the principles laid down by those writers, who have laboured to draw an essential distinction between public and private wealth; to show, that economy is the way to increase private fortune, but, on the contrary, that public wealth increases with the increase of public consumption: inferring thence this false and dangerous conclusion, that the rules of conduct in the management of private fortune and of public treasure, are not only different, but in direct opposition?

If such principles were to be found only in books, and had never crept into practice, one might suffer them without care or regret to swell the monstrous heap of printed absurdity; but it must excite our compassion and indignation to hear them professed by men of eminent rank, talents, and intelligence; and still more to see them reduced into practice by the agents of public authority, who can enforce error and absurdity at the point of the bayonet or mouth of the cannon.

About this Quotation:

Say returns to an issue which was problematical in his own day (1803) and which continues to haunt us to this very day, namely the commonly held belief that an increase in public consumption will increase public wealth. Say calls this a “gross fallacy” and proceeds to show how public consumption by various office holders and bureaucrats and those favored with government handouts is wasteful, inefficient, acts of extravagance, and even criminal. To add injury to insult, he concludes, “the agents of public authority (can) enforce (this) error and absurdity at the point of the boyonet or mouth of the cannon.”

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