The Rationale of Reward

Book II

Rewards Applied to Offices

Chapter XI


The capacity of the individuals to discharge the duties required of them having been ascertained, and the most intimate connexion between their interest and the discharge of these duties having been established, the only desirable circumstance remaining is to reduce the amount of the emoluments to be paid for the discharge of these duties to the lowest term. Suppose the amount expended in the purchase of a given service to be a certain sum, and that an individual equally capable of rendering this service, should offer to render it at less expense: is there any good reason for refusing such an offer? I can discover none. The acceptance of such a proposition is the acceptance of a contract: the service thus agreed to be performed, is said to be contracted for, or let to farm. To this method, the mode of obtaining services by employing commissioners and managers, is opposed.

General reasonings upon this subject are insufficient to determine which of these two opposite systems will be most advantageous in any particular department: the nature of the service must be ascertained, before the question can be decided.

If we confine ourselves to general principles, contracts must be preferred to commissions. Under the system of contracts, the interests about which the individual is employed are his own; whilst, under the system of commissions, the interests about which he is employed remain the interests of the state; that is, the interests of another. In the first case, the sub-functionaries employed are the servants of an individual; in the other, they are the servants of the public---fellow-servants of those who are to watch over them. ``But the servants of the most negligent master'', says Adam Smith, ``are better superintended than the servants of the most vigilant sovereign.'' If this cannot be admitted as an infallible rule, it is at least more frequently true than otherwise.

Public opinion is, however, but little favourable to the system of contracts. The savings which result to the state are forgotten, whilst the profits reaped by the farmers are recollected and exaggerated. Upon this subject, the ignorant and the philosopher---those who judge without thought, and those who pretend to have examined the subject---are nearly agreed. The objections which they bring forward against contractors (for they relate to individuals rather than to the system) are sufficiently specious.

I. The contractors are rich. If they are so, this is not the fault of the system, but of the conditions of the bargain made with them.

II. The contractors are ostentatious and vain. And if they burst with vanity, what then? Such inappreciable, or rather imaginary evils, cannot be brought into political calculations. Their vanity will find a sufficient counterpoise and punishment in the vanity of those whom they incommode, whilst their ostentation will distribute their wealth among those whom it employs.

III. The contractors excite envy. This is the fault of those who are envious, and not of the contractors: it is another imaginary evil, in opposition to which may be placed the pleasure of detraction. Besides, if the contracts are open to all, unless improvident bargains are made through favour, corruption, or ignorance, rapid fortunes will not often be accumulated by contractors: should they still become rich, it will be because they have deserved it.

IV. Contractors never find the laws too severe to insure the collection of the taxes for which they have contracted. They will procure severe and sanguinary laws to be enacted. If the laws are severe and sanguinary, the legislature is in fault, and not the contractors. Whether the taxes are managed by contractors or commissioners, it is equally proper that the most efficacious system of laws for their collection should be established; and certainly severe and sanguinary laws are not the most efficacious. Contractors, therefore, are not likely to seek the enactment of the most severe laws: there are many reasons for supposing the contrary will be the case. The better the law is executed, that is to say, the more certainly punishment follows the transgression of the law, the less severe need it be. But under the inspection of the contractor, who has so strong an interest in its execution, the law has a better chance of being put in execution, than when under the inspection of a commissioner who has so little, if any, interest in the matter. Upon this point it is impossible to imagine by what means two interests can be more intimately connected, than those of the contractor and the state. It is the interest of the contractor that all who illegally evade the payment of the taxes should be punished: this also is the interest of the state. But it can never be the interest of the contractor to punish the innocent: this would tend to excite the whole people against him. Of every species of injustice, this is one which is least likely to meet with tranquil and acquiescent spectators.

Adam Smith, who has adopted all these objections, little calculated as they seem to me to appear in such a work as his, also contends that ``the best and most frugal way of levying a tax, can never be by farm.'' [1] If this were true, it would be a conclusive reason against ever letting taxes to farm, and it would be useless to seek for others. When a fact is proved, it is useless to trouble one's-self with prejudices and probabilities.

It is true, that without the hope of gain, no contractor would undertake to collect the produce of a tax, and to make the advances required. But whence ought the profit of the farmer to rise? This is what Adam Smith has not examined. He supposes that the state would make the same profit, by establishing an administration under its own inspection. The truth of this supposition is altogether doubtful. The personal interest of a minister is to have as many individuals, that is to say, as many dependants, employed under him as possible---that their salaries should be as large as possible; and he will lose nothing by their negligence. The interest of the farmer, or contractor, is to have as few individuals employed under him as possible, and to pay each one no more than he deserves; and be will lose by every instance of their negligence. In these circumstances, though no greater amount should be received from the people than would have been collected by the state, a contractor might reasonably hope to find a source of profit.

Adam Smith has attacked, with as much force as reason, the popular prejudices against the dealers in corn, so odious and so much suspected under the name of forestallers. He has shown that the interest of the public is most intimately connected with the natural, almost necessary, interests of this suspected class of merchants. He might with equal justice have extended his protection to farmers of the public revenue, a class of men nearly as little beloved.

In every branch of politics, and especially in so wide a field as his subject embraced, it was nearly impossible that be should examine everything with his own eyes: it was almost of necessity that he was sometimes guided by general opinion. This seems to me to have happened upon this occasion. He forgot in this instance to apply the principle already cited, and of which he had elsewhere made such beautiful applications. I had myself once written an essay against farmers of the revenue; I have thrown it into the fire, for which alone it was fit. I know not how long I should have retained the opinions it advocated, had I not been better instructed by Adam Smith. {Note}

[RR, Book II, Chapter X] [RR, Book II, Chapter XII]