I wish I could link to this article for you guys to see it. I haven’t been able to find a PDF of it and I don’t have the time to type it all out. Maybe I’ll scan my copy. This is a great read though. It’s a Positive Theory of the State
An entire community consists the political enterprise and participates in it:
Is the [political] entrepreneur the community, and must the hedonistic calculation derive from the community itself? The entrepreneur produces coercive force. This force of coercion is applied to the maintenance of the community in certain forms, to the achievement of certain aims and ideals, to the collective satisfaction of certain needs. The form, the aims and the needs of the community are not under discussion. It is certain, however, that if they were identical for all associates, the action of the political entrepreneur would be redundant; coercion would cease and all political organization would disappear. The continued existence of the State means that coercion is necessary in order to make the needs of a majority to prevail. The hedonistic calculation appertains only to part of the community, namely the majority. However, given the hypothesis of general participation of all the members of the community in the political enterprise, coercion assumes a milder form; it takes the form of contribution quotas and not of tax. A further struggle develops with regard to the determination and distribution of the contribution. The individual’s readiness to vote for the expenses of coercion will vary according to the size of the contribution. The expenses of coercion cause collective action always to be more costly than individual or independent associated action. It may nevertheless happen that, despite these expenses, the maximum size of the corporation, which comprises the entire community, proves more economical. But we already know that the greatest total productivity of collective production is neither necessary nor sufficient to determine collective action; the expenses of coercion must also be taken into account*. The whole question lies then in the proportions in which a particular need is felt by the members of the community, and in the possibility of distributing the contributions in unequal fashion[, to decrease the real cost through cost sharing being tied to marginal utility of economic units].
Coercion consists in obliging all the associates in the enterprise to contribute toward a particular purpose, for example, water supply. Let us make the broadest hypothesis and postulate that it is a question of achieving a purpose or of satisfying a need, that is of a general nature. The enterprise levies a contribution from all the members of the community. Let us further suppose that the contribution quota is equal for all members. The objective economic expression of the advantages of collectivizing the production of a good, will be the price at which the consumer can buy a given product. This price, whether it is paid before the service is performed or at the moment of consumption must be lower than the price previously ruling on the market. For example, water previously cost twenty pence per cubic metre and now, with collective production, it costs ten pence per cubic metre. All the associates should agree on this collective production, which proves less costly for all. But this is not a sufficient reason to induce all of them to collectivize production, and indeed we see bitter discussion and opposition against assuming certain types of collective production which are manifestly of a general character and more economical. What are the reasons for this?
In the case of equal contribution by all members, as in the case of prices paid at the moment of consumption, the reasons must be sought in the fact that, at the moment of deciding what needs are to be satisfied collectively, not all the associates can agree on the preference to be accorded to one rather than to another need. The process is as follows. All individuals have before them a more economical way of satisfying their own needs, this being the coercion which will distribute the costs of the whole community. According to the urgency of his own need and the greater or lesser ease with which he can satisfy them in isolation, everyone will try to make that need prevail, the collective satisfaction of which will afford him the greatest advantage. Any collective production which fulfils [sic] the condition of the greatest economy and which yields products of general consumption, could with advantage be accepted by all the associates. But they think in terms not of the isolated differential utility of a single productive act, but of the relative utility of all the possible types of production that could be collectivized. For conflicts to be avoided, the political entrepreneur’s power of coercion would have to be infinite and limitless; but it is certain that this power too is, at every moment, finite in extent and efficacy.
There are other cases when collective production yields the most economical product, the contributions on the part of the individual associates being unequal. Then the political struggle against the sanctioning of collectivization becomes unavoidable and obvious. It may, for example, be said: water is a good of general consumption which can be obtained collectively at a lower cost, but in order to obtain it let us raise existing tax rates proportionally. If the existing system is already unequal, this means that the inequality will be accentuated and that the economic calculation will differ for the various economic units according to whether they are favoured by the tax system or not.
Hence here, too, the calculation of advantages entails not merely a comparison of different total costs or prices, but a more complex comparison of the various associates’ relative utilities.
In conclusion: even when the political entrepreneur represents the entire community, the very fact that the entrepreneur functions means that the community needs a service of coercion in order to distribute the costs. This means that the calculations of economic advantage differ from one associate to another when it comes to determining the needs to be satisfied collectively. The collectivization of the satisfaction of some needs always aims at a participation in the costs by economic units which would not voluntarily have so participated.
—Giovanni Montemartini, The Fundamental Principles of a Pure Theory of Public Finance (Gionale degli economisti, 1900)
