In his general introduction to the science of political economy Nassau W. Senior (1790-1864) applies the principle of the division of labor to the functions of government and concludes that it behaves very differently from other exchanges in the market in that it extorts much more than the fair value of the service it provides:
It is obvious, however, that the division of labour on which government is founded, is subject to peculiar evils. Those who are to afford protection must necessarily be intrusted with power; and those who rely on others for protection lose, in a great measure, the means and the will to protect themselves. Under such circumstances, the bargain, if it can be called one, between the government and its subjects, is not conducted on the principles which regulate ordinary exchanges. The government generally endeavours to extort from its subjects, not merely a fair compensation for its services, but all that force or terror can wring from them without injuring their powers of further production. In fact, it does in general extort much more: for if we look through the world we shall find few governments whose oppression does not materially injure the prosperity of their people.
About this Quotation:
Buried in his general discussion of the division of labor is Nassau Senior’s theory of the origin of the state. He sees it emerging from a society in which everybody provided for their own security, until one enterprising individual “offered protection in exchange for submission” by others. But he observes that, unlike all other trades and exchanges between individuals, the benefits of the division of labor which government offers is “subject to peculiar evils”, most notably the ability to “extort” more from their customers than the value of the protection they offer. This means that the government typically takes by means of taxation “all that force or terror can wring from them (the taxpayers) without injuring their powers of further production.” As a loyal Victorian, Senior was confident that the government of Britain had now attained a level of near “perfection” in the way it carried out its duties, where a mere 15,000 soldiers could defend a country with a population of 17 million people. Nevertheless, the way he phrased his arguments suggests that he still had moments of doubt that “the bargain, if it can be called one, between the government and its subjects, is not conducted on the principles which regulate ordinary exchanges.”