The Principles of Political Economy

Henry Sidgwick

Book III

Chapter VIII


§1 I have deferred to this chapter the discussion of the subject which, in the view of Adam Smith and many of his successors, is the main and almost the sole concern of the Art of Political Economy; viz. the ``provision for the expenses of the Sovereign or the Commonwealth'': or, as it seems convenient to call it, Public Finance. I have adopted this course, because it seemed clear that the general discussion of the principles of governmental interference, for the improvement either of production or of distribution, ought, if introduced at all, to precede the discussion of the principles of Finance: since most known methods of providing for the expenses of the commonwealth involve important effects both on production and on distribution, and our judgment as to the expediency or legitimacy of these effects cannot fail to be influenced by the conclusions adopted on the questions discussed in the preceding chapters of this book. It is true that considerations of this kind cannot always be decisive: the hard necessity of obtaining supplies for the exigencies of Government may compel a financier to adopt measures whose detrimental effects on industry are generally recognised; but none the less is it desirable that he should take account of these effects, in order that, if he is unable to avoid them altogether, he may mitigate or compensate them as far as possible.

Some writers, again, have taken a somewhat narrower view of the subject of the present chapter: confining their attention to what they have designated as the ``theory of taxation''. And no doubt, in any modern civilized community, taxation is the chief mode by which the ordinary pecuniary wants of Government are supplied. But in no community is it the sole mode; and it appears to me that we are likely to get a clearer view of the principles on which a system of taxation ought to be constructed, if we begin by considering other methods of attaining the financier's end. Indeed my doubt is rather whether the scope of this part of our discussion should not be enlarged still further, so as to include the economic principles of governmental expenditure as well as the provision for defraying such expenditure. It is, however, difficult, in treating of the art of economically organizing governmental administration, to get beyond the general principle that we ought to aim at producing the greatest possible result with the least possible cost, without entering into the details of governmental business to an extent which seems unsuitable to the character of this treatise. I do not therefore propose to treat of the art of public expenditure, except so far as it is specially connected with the art of providing for such expenditure.

There are two ways in which this connexion becomes important. In the first place, we have to make the general observation that we cannot properly take governmental expenditure as something of which the amount is fixed prior to the consideration of the methods of supplying it and their effects. Practically, no doubt, the problem of finance is often presented to a statesman in this simplified form: but theoretically we must regard both expenditure and supply as having at least a margin within which the restriction or enlargement of either must partly depend on the effects of the corresponding restriction or enlargement of the other; within which, therefore, the gain secured to the public by an additional increment of expenditure has to be carefully weighed against the sacrifices inevitably entailed by the exaction of an additional increment of supply. This remains true even if the sphere of Government be restricted to the `Individualistic minimum' given at the outset of chap. iii. No doubt it is the worst possible economy not to make adequate provision for the necessary and acknowledged functions of Government; but adequacy in such cases cannot be defined by a sharp line. Most Englishmen are persuaded that they at present enjoy very tolerable protection of person and property against enemies within and without the country; but it would be difficult to argue that our security would not be enhanced by more and better-paid judges and policemen, or more and better-equipped soldiers and sailors. Proposals, in fact, are continually made for increased expenditure in one or other of these directions: and it is obvious that in judging of such proposals a statesman must balance---roughly no doubt, but as well as he can---the advantages of increased governmental efficiency against the difficulties and drawbacks of obtaining increased supply. And it is still more evident that any question as to the extension of what Mill distinguishes as the ``optional'' functions of Government must be decided by a similar balance of considerations.

But again, the theory of expenditure has another special connexion with the theory of supply, so far as particular sources of supply are specially adapted to particular kinds of expenditure.

[Back to:][PPE, Book III, Chapter 7, Section 7]  Economic Distribution.
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