Socialism and the revenue maximizing Leviathan

Adam Gifford and Roy Kenney

Public Choice, 1984, vol. 42, issue 1, 106 pages

Abstract: The driving force in the government's progress from a capitalistic system, to one with government ownership of capital and relative-wage allocated labor (socialism), to a system involving inframarginal taxation of labor and government ownership of capital (communism) is the government's desire to increase current revenues. This distinction between socialism and communism is from Mill. Each step along the way sacrifices more private resource allocation and replaces it with direct governmental control. The government might well realize that it lacks the knowledge to replicate these lost private functions accurately. With the passage of time, and the appearance of potentially useful technological innovations, any ‘losses’ resulting from this lack of knowledge increase. These losses are an anticipated drain on future income. A decision-maker with a long time horizon and a secure position (a low discount rate) would find these prospective losses weighing heavily in his calculations, and might never take the first step beyond capitalism. A less fortunately placed decision-maker, facing domestic and foreign threats, may find that current revenue requirements (for internal and external defense and for ‘payments’ made to supporters) force him to mortgage the future for increased current revenue. This decision-maker may be tempted by socialism, not for any ethical or political reasons, but merely for the quick revenue returns it offers. Copyright Martinus Nijhoff Publishers 1984

Date: 1984
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DOI: 10.1007/BF00124602

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