Austrian Approach to the 3rd Duty of the Sovereign in the Wealth of Nations

Valentin Petkatchin
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Valentin Petkatchin: CERGAM-CAE, Aix-Marseille Université

No 21, CAE Working Papers from Aix-Marseille Université, CERGAM

Abstract: Economists seem quasi unanimous about the fact that Adam Smith would have had the intuition of the existence of public goods and market failures. Musgrave-1985, among others, perfectly summarizes this widely held position in modern economic thought. In a normative sense, Smith would have entrusted their production to the government and their supply would constitute precisely the 3rd duty of the sovereign in the Wealth of Nations. However, Smith – as Austrian economists since Menger – was mainly interested in the role of institutions in the economy. An institutional approach to the 3rd duty of the sovereign – consisting in the establishment of property rights on public works and in the incorporation of joint stock companies – allows us to reconcile Smith thought with the laissez-faire tradition.

Keywords: Adam Smith; public goods; externalities; institutions; laissez-faire (search for similar items in EconPapers)
JEL-codes: B12 H1 H41 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2004
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