Research in the History of Economic Thought and Methodology

Including a Symposium on Public Finance in the History of Economic Thought

Luca Fiorito, Scott Scheall, Carlos Eduardo Suprinyak, Luca Fiorito, Scott Scheall, Carlos Eduardo Suprinyak

• Publisher: Emerald Publishing Limited
• Year: 2020
• Print ISBN: 9781838677008
• eBook ISBN: 9781838677015
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Research in the History of Economic Thought and Methodology Volume 38A features a symposium on public finance in the history of economic thought co-edited by guest editors Claire Silvant and Javier San Julián Arrupe, as well as general-research essays from Cosma Orsi and John Henry, and a heartfelt obituary by Mattheus Assaf of his friend, Gabriel Oliva, winner of RHETM's first Warren Samuels Prize for Interdisciplinary Research in the History of Economic Thought and Methodology. 

Including chapters on British public debt in the 19th century, French financial controversies in the mid-1800s, and a thoughtful reflection on the USA's New Deal, this volume is a global exploration of public finance history. For any researcher or student interested in the history of economics, this is an essential read containing the most up-to-date research.

PART I

A SYMPOSIUM ON PUBLIC FINANCE IN THE HISTORY OF ECONOMIC THOUGHT

Guest Edited By Claire Silvant and Javier San Julián Arrupe

CHAPTER 1

INTRODUCTION: PUBLIC FINANCE IN THE HISTORY OF ECONOMICS: A FIELD ON ITS OWN

Claire Silvant and Javier San Julián Arrupe

The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare – all this and more is written in its fiscal history, stripped of all phrases. He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else.

(J. A. Schumpeter (1991 [1918]), p. 101)

PRELIMINARY REMARKS

Political changes, even moderate ones, and economic progress occur pari passu with shifts in public finance, sometimes with reciprocal effects. Vices in public finance systems may be the cause of major or minor political breaks; conversely, changes in political regimes often come with financial reforms (tax reforms, increase or decrease in public expenditures, use of public debt, or monetary financing). Similarly, interest in these topics in the history of economic ideas has endured irregularities and jumps that simple narratives cannot capture. Debates on public finance have not followed a steady path, and public finance issues have been alternately in the background or the spotlight, according to their prominence in political debate. Throughout the nineteenth century, public finance was an increasingly discussed topic as the role of the state expanded in many countries in Western Europe and the United States in their liberal age (as presented in Bonney, 1995; Cardoso & Lains, 2010; Dincecco, 2011; Yun-Casalilla & O’Brien, 2012) and as the concern for its financing became more imperative. The advance of political modernity was accompanied by a widespread revival of debates and writings on public finance.

PUBLIC FINANCE ISSUES AT THE ACADEMIC CROSSROADS

Since the eighteenth century, economists, philosophers, and practitioners have frequently investigated issues in public economics as well as in public finance. Many contributions of prominent economists can be associated with new developments in public economics. Through his economic calculations, Vauban tried to rationalize public expenditure as well as public revenue. Smith and Say aimed to formulate general principles regarding taxation, while J.S. Mill developed original thoughts about the legitimacy of state expenditures. Bentham inquired into the philosophical foundations of property rights and their consequences for public intervention. In this respect, public economics would be “one of the oldest fields in economics” and public finance “the oldest branch of economics,” respectively, according to Kolm (1987) and Musgrave (2008).

Public finance is viewed as a branch of public economics. If public economics can be described as “an interdisciplinary multi-level subject with a strong disciplinary core” (Sturn, 2016, p. 480), public finance would be a complex strand of it. Public finance issues require normative as well as descriptive approaches incorporating contrasting materials: historical studies, normative treatises, specialized or general handbooks, monographs, and mathematically formalized essays. Usually, the studies on public finance present two sides: that of public resources (works on tax incidence, optimal taxation, fiscal policies, public debt management, its monetary side, etc.) and that of government expenditures (focusing on publicly provided goods and the scope of national government spending).

The chapters included in this symposium principally focus their analyses on the first side, that is, on the – in most cases competing – ways to finance public expenditures, from the perspective of the history of economic thought. The reverse question – that is, the analyses of legitimate public expenditure and its economic effects – is pushed into the background. In a way, we adopt a more restrictive definition than the economists from different national traditions that we study, who included in the public finance discipline many more issues: the scope of state intervention, the historical description of fiscal systems, etc.

From a historical perspective, two features characterize the constitution of the field of public finance in the academic and intellectual landscape: its progressive specialization and its late internationalization.

Before the nineteenth century, views and analyses on public finance were often included in general writings on economics; there were few specialized authors and few works exclusively and extensively dedicated to public finance issues, in the sense that we described above. The process of specialization predominantly occurred in the last third of the nineteenth century. In France, several liberal economists developed a special interest in public finance topics and contributed to the creation of a new academic field endowed with courses, chaires and textbooks (Le Van-Lemesle, 2004). The German-speaking Finanzwissenschaft arose in universities (Holtfrerich, 2013). The Italian fiscal tradition made important contributions to the modern theory of public finance (Fausto, 2010), and Spanish policymakers tried to modernize the tax system in the last quarter of the century (Martorell Linares, 2000).

The second characteristic feature of this field is its late internationalization. Faccarello and Sturn (2010) and Sturn (2016) highlight “the nation-specific institutional features embedding public budgetary processes” (Faccarello & Sturn, 2010, p. 539) and other autonomous analytical grounds to explain the “late internationalization of public economics (late compared with general economics)” (Sturn, 2016, p. 484). We agree with that view in that the internationalization of public finance, as a subfield of public economics, happened later since it is much more subject to the “nation-specific institutional features embedding public budgeting processes” (Sturn, 2016, p. 485). This trend also explains the richness and diversity of approaches in public finance that remain at the end of the nineteenth century.

Our research intends to deliver new insights on public finance in the history of economic thought. The history of economic thought’s perspective on public finance issues has links to other fields, without which our understanding of these issues would be incomplete.

First, as Schumpeter stated, public finance is closely connected with the historical and political context; ideas and theories in public finance cannot be understood without considering the historical features in which they are embedded. Analyses and policy proposals on public finance are crucial to understanding the development of political regimes, the objectives of their rulers and the means to attain them. Indeed, recent research has stressed the importance of politics for the institutionalization of political economy and determined schools of economic thought (Augello & Guidi, 2005). However, public finance is also a powerful instrument to configure or change a determined political situation. Cardoso and Lains (2010, p. 1), referencing the liberal regimes of the West in the nineteenth century, assert that “reforms of fiscal and financial systems . . . were crucial for both the establishment of liberal regimes and the development of European economies in the century to 1914.”

The questions that the contributions in this issue address have explicit links to the development of institutions in a period of consolidation of nation-states. Understanding these economic debates reveals the bidirectional influence of economic ideas on politics and politics on public finance in this particular environment. In this respect, the history of economic ideas on public finance cannot avoid its necessary connection to economic and political history. Contemporaneous economic and political debates and facts are an essential complement to draw a complete picture of public finances as they were and the interests that were at stake. Contributors have connected ideas to the environment to avoid anachronistic hypotheses and reasoning deprived of their context. In contrast, this framework provides the basis for transformation, adaptation, and creation of economic thought, at times designed to modify precisely that political and social atmosphere, as evinced in Laskaridis’ chapter, for instance.

Second, public finance issues are enmeshed in controversies on the role of the state, its attributions, not only economic, and its right to interfere in the private lives of individuals. A renewed interest in public finance often intersects with new insight into state intervention, as demonstrated by the chapters of Coste and Silvant, San Julián and Sturn. In this respect, there is a connection with political science. Public finance can also be a topic of inquiry for public law and administrative law. Indeed, in periods such as the eighteenth century, the separation between law and economics was sometimes unclear. In this fashion, the nineteenth century – the period of analysis of most of the chapters in this volume – is particularly fertile. In the central decades of the century in France, the liberal school of economic thought held a vision of the state as a mere insurer of lives and properties, fully deprived of the right to interfere in the private sphere. The majority of economic authors from southwestern European countries – Portugal, Spain, and Italy – accepted this vision, which contrasted with the German tradition, more prone to consider political economics as the science of government. These anti-statist views shifted when the economic and social panorama started to change, yielding more nuanced positions (among them the Liberals’ themselves) that included studying limits on free trade, conferring privileges of money-issuing to a central bank, taxing personal income, and erecting programs of social insurance for workers.

Third, ideas on public finance have a direct connection with the techniques of the “science of finance” that deserves to be researched. As far as the state increases the scope of its interventions, it becomes necessary to develop a series of instruments, institutions, and procedures to intervene in the economy efficiently and successfully. This “technicization” must be associated with the specialization of the field described above. Economists that specialized in applied economics (public finance in all its dimensions) emerged and delivered technical writings, analyzing particular problems, proposing specific solutions and financial techniques, or delivering more generalist treatises. In fact, over time, extensive and comprehensive works emerged in all these countries, some of them reissued several times, such as Leroy-Beaulieu’s Traité de la science des finances (1877), Léon Say’s Dictionnaire des finances (1889–1894), Adolph Wagner’s monumental Finanzwissenschaft (1877–1901), Bastable’s Public Finance (1892), Piernas Hurtado’s Tratado de Hacienda Pública y Examen de la Española (1884–1885), the writings of Seligman in the 1890s, or those by the Italian school of public finance, starting in 1883 with the writings of Pantaleoni. The renewed interest in the practices of public finance regarding public debt management is developed in Bentemessek’s and Demeulemeester’s papers.

In summary, stu...

Table of contents

• Cover
• Title
• Part I. A Symposium on Public Finance in the History of Economic Thought
• Part II. Essays
• Part III. Memorial