Why the Need to Justify the Existence of the Sub-Discipline of Public Finance?

Public finance is the sub-discipline of economics that deals with taxes, fiscal policy and government enterprise in general. In order to assess the case in behalf of taxation commonly made in this field, I shall analyze the public finance textbooks of Atkinson and Stiglitz (1980), Due (1963), Musgrave (1959) and Shoup (1969). I have chosen textbooks because they are a distillation of knowledge, methodology and perspective of an entire profession; they are the amalgamation of what is considered correct and important. I have chosen these four because they are a representative sample, and highly respected amongst the practitioners of economic orthodoxy in this domain.

The category of economic study we shall consider is sometimes called government finance, sometimes public economics, and sometimes government economics. But whatever the name, this field is very different from all other sub-disciplines of economics in one important respect. In every other case, whether it is micro or macro, trade or labor, business cycles or money, resources or growth, development or industrial organization, managerial or accounting, the practitioner plunges right into the subject matter.

In public finance, in contrast, and only in public finance, there is first an attempt to justify the very existence of the topic. In every textbook on this theme I have examined, plus the four to be scrutinized here in detail, there is always an introductory chapter, and in some cases two or three, where the author feels compelled to defend against the charge that the whole enterprise rests upon a foundation of sand.

How can we account for this felt need to vindicate the very subject matter, though this can only be speculative, one possibility is that public finance is the only economic field studying activities to which the use of force is intrinsic.

--Thomas J. DiLorenzo and Walter E. Block, An Austro-Libertarian Critique of Public Choice, Economy and Society (New York: Addleton Academic Publishers, 2016), Kindle e-book.

Democracy Assures That Only Dangerous Men Will Rise to the Top of Government Since They Are Adept at Orchestrating the Rent-Seeking Game

In contrast, for the most part, democratic government involves a process of one group of citizens bribing legislators to attenuate the private property rights of others for no other reason than the first group wishes to (legally) steal the others’ property. It is the domain of rent-seeking behavior. The business of modern democracy is to attenuate property rights in order to fuel the special-interest, rent seeking machine. This is very much the opposite of voluntary, consensual, private property markets. Merely repeating over and over that “politics is like markets,” as Stigler, Wittman, and some other Chicago School scholars have done, does not make it so. The attenuation of property rights that is the defining characteristic of democracy weakens incentives to be productive while increasing the rewards of unproductive rent seeking.

One implication of this analysis is that the people who rise to the top in democratic governments are those who are adept at orchestrating the rent-seeking game. Indeed, years of experience at lower levels of office (city council, state legislature) is the usual prerequisite for higher office. As Hans Hermann Hoppe puts it, “democracy virtually assures that only dangerous men will rise to the top of government.” Dangerous, in the sense that they are adept at destroying property by facilitating the plunder of rent seeking. As rent seeking becomes more pervasive in a democracy, more and more people will decide to try to become adept at it rather than becoming genuinely productive citizens. The proportion of parasites will rise relative to producers, which will cause national wealth to be lower than it would otherwise be.

--Thomas J. DiLorenzo and Walter E. Block, An Austro-Libertarian Critique of Public Choice, Economy and Society (New York: Addleton Academic Publishers, 2016), Kindle e-book.

The Most “Successful” Political “Entrepreneurs” Are the Ones Who Are Most Adept at Convincing the Public That They Can Offer Them Something for Nothing

Private property entrepreneurs succeed by discovering ways to reduce costs and prices, improve product or service quality, or by inventing new products that meet the approval of consumers. They succeed, in other words, by catering to consumers. If they fail to please consumers, they lose money or go bankrupt.

In politics, the opposite is often true: “entrepreneurial” politicians “succeed” by avoiding the minor constraints imposed on their behavior by the elections that are held every two or four years. The most “successful” political “entrepreneurs” are the ones who are most adept at convincing a gullible, public-school-educated, rationally ignorant public that they can offer them something for nothing. They are the slickest liars and propagandists. Bill Clinton was arguably the biggest and best liar in American politics over the past half century, and was one of the most successful politicians as well. As discussed above, successful political “entrepreneurs” are good at

• telling official lies about government policy,
• hiding the costs of government with fiscal illusions created by excise taxation and debt finance, 
• creating off-budget government enterprises to further hide the true costs of government from the public,
• and allocating large amounts of taxpayer dollars to nonprofit sector special interest groups which grossly exaggerate the benefits and understate the costs of special-interest legislation.

--Thomas J. DiLorenzo and Walter E. Block, An Austro-Libertarian Critique of Public Choice, Economy and Society (New York: Addleton Academic Publishers, 2016), Kindle e-book.