Jürgen G. Backhaus

Fiscal Sociology: What For?

In discussing the question: fiscal sociology: what for, I shall first give a short sketch of the history of thought of the field. Secondly, main issues are identified. First in discussing the concept of the tax state, we emphasize issues in constitutional public finance. Secondly, one of the fields in which fiscal sociology has been most important is the issue of taxation, and notably income taxation. Thirdly, in citing applications and issues, an entire alphabet of fiscal sociological issues is being identified. The third paragraph deals with the future of the field in both instruction and research.

Defending organized crime? A note

The objective of this note.is to discuss optimal enforcement strategies vis-a-vis organized and unorganized crime. Taking an earlier contribution by Buchanan as a starting point of the analysis, it is argued that his proposal to monopolize crime in order to reduce the general level of criminal activity is a questionable strategy to curb crime. Syndicated crime is likely to benefit from economies of scale in the provision of non-governmental enforcement of agreements and contracts. The consequent reduction in costs is likely to increase the general level of criminal activity. Nevertheless, the price-theoretic argument is seen as an interesting starting point for the design of new strategies to combat crime.

The Pareto Principle

Abstract The purpose of the paper is a discussion of the meaning and relevance of the Pareto principle in economics. To begin with, the principle is briefly retraced in Pareto’s own writings. Its contemporary meaning was, however, developed in the context of the “New Welfare Economics”. While Pareto technically employed the principle in order to describe an equilibrium situation, Kaldor and Hicks developed it somewhat differently as a yardstick for economic policy formulation. Sometimes, the principle is also discussed as a decision rule, and in this context some critics - though not the present author - believe it to have a conservative bias. Finally, recent discussions center around the incompatibility of the Pareto principle and “liberal” values. This conflict might be of limited relevance, only, due to a misconstrued formalism.

Methodenstreit in der nationalökonomie

Methodenstreit in Economics. This essay offers an account of the Methodenstreit in economics between first Menger and Schmoller and later Max Weber and again Schmoller. It is argued that, for Schmoller, two issues were central; to use economics (widely conceived) as an instrument for economic policy and notably social policy: and to base the science empirically with all the modern methods available. In contrast, the Austrian position had a different view of economics as a science, seeing it more as a system of ideas, which implies a radically different use of empirical evidence.

The University as an Economic Institution: The Political Economy of the Althoff System

Friedrich Althoff (1839-1908), who created the “Althoff system”, has had a singularly important influence on shaping academic institutions in Germany for almost a generation. As a close collaborator of leading German scholars his influence lasted almost throughout the second empire (1882-1907). He has been described as brilliant by some and disastrous by others. Recent advances in the new institutional economics and the economic analysis of the organization of inquiry, as well as better access to the archival materials, have created the possibility of arriving at a clearer picture of the Althoff system. Is a first attempt at an economic analysis of the Althoff system; therefore should be viewed as an exploratory essay. In particular, addresses three questions: What precisely was the Althoff system? How can we go about analysing the system? How did the system function and perform? The essay has five substantive parts: first, offers a brief introduction to science research as it is currently practised in economics; second, introduces the historical record and the main criticism levelled against the system and offers a stylized description of the Althoff system in terms of emphasizing key features; third, subjects the stylized features of the system to economic analysis, relying heavily on the property rights theory of the firm and treating the university as an economic institution; fourth, takes a slightly different approach by applying Gordon Tullocks analysis of the organization of inquiry to the Althoff system; fifth, offers a summary of the findings and an economic definition of the Althoff system.

Corporate governance and mass privatisation: A theoretical investigation of transformations in legal and economic relationships

After the precipitated decline of the Soviet Empire and its satellite states, a system change seemed to be called for, and many countries embarked on social and political reforms focussing on property structures in the economy. This raised the issue of governance in the institutions that would constitute the structures in which production would have to take place. In particular, some Central European countries opted for mass privatisations of the means of production, on the face of it so as to have the people participate in the wealth of the nation. In fact, the wealth of the nation depends on the structures in which it is constituted. Dissipation of property rights will reduce the value of the nations productive capital, whereas an intelligent structure that creates good governance structures at the same time, increases the value of the producing capital. This relatively simple insight lies at the heart of our understanding of how to analyse different processes of mass privatisation. This essay develops a theoretical framework by which different governance structures can be analysed. The framework consists of a blend of the economic theory of property rights, new institutional economics and Austrian economic theory.

Subsidiarity and ecologically based taxation: A european constitutional perspective

The principle of subsidiarity through its re-affirmation in the Treaty of Maastricht became an integral and central part of European constitutional law. Its relationship to ecological issues, however, has so far not been explored. Subsidiarity is a general principle of organization. It can apply to all areas of policy: financial, agricultural, technological, education, defense, economic development and, e.g. environmental policy. The principle of subsidiarity is silent about the specific purpose, direction or content of a particular policy.Whatever be the purpose of any such policy, the principle of subsidiarity requires that it be carried out within that context which is the smallest viable one in which the objective can successfully be attained. When a task is too complicated for a small unit such as an office or a firm to be successfully performed, that unit has to be augmanted to the point where the task can be effectively performed. Likewise, if an organization is too large to successfully handle particular problems as its procedure may be too cumbersome or as it lacks sufficient detailed information or experience repeated recurrences of problems it has tried to settle, then a different organizational form must be found, preferably an existing one, which is closer to the problem at hand and able to carry out the policy. With the shift in responsibility will also travel the access to resources with which to carry out the task.Since ecological units rarely co-incide with political units, the principle of subsidiarity poses a specific challenge to politicians and administrators who have to decide on assignments of tasks and responsibilities as well as funding within the different echelons and among the different Member States of the European Union.This essay explores those tasks and, in particular, advances the notion of establishing ecological tax units.

The Emergence of Worker Participation: Evolution and Legislation Compared

Specific forms of labor participation can be efficient responses to changing market environments. Many schemes for labor participation have been derived over the last several hundred years. Robert Owens ill-fated experiment at New Harmony is known to every American economist. Few of these schemes have survived, and some of those that have prove very effective. Introducing any type of labor participation is certainly costly, and typically treacherous. Several European countries have experimented with legislation. In the United States, more or less spontaneous emergence of new institutions prevails. This article addresses these three questions: (1) In what way can a firm with labor participation more effectively cope with its environment? (2) What type of labor participation is necessary? (3) And does it make a difference whether participation comes about through an act of parliament or through social evolution? In what follows, I identify a set of features I consider crucial for effective labor participation. They recur in the different organizational cultures where labor participation can be observed. Other features are culture specific; some may be accidental, irrelevant or even counterproductive to effective decision making. This distinction between es-

Assessing the performance of public enterprises: A public-choice approach

Recent advances in the theory of public enterprises have led to the development of criteria for assessing their performance. The underlying idea is to determine the “best practice” of a particular enterprise and assess other public enterprises in the same industry against that “best practice.” This article is critical of the best-practice-approach and offers an alternative public-choice-based procedure.The objectives assigned to the operation of public enterprises in the best-practice approach do not reflect the specific functions of public enterprises. On the contrary, they are general economic policy objectives derived from a general theory of economic policy based on normative welfare economics. The efficiency of public enterprises is then considered a policy objective. In terms of a public-choice perspective, however, efficiency is almost never in itself a policy objective of a public enterprise. It is unlikely (but not impossible) that we may find a public enterprise with essentially the same production function as an efficiently operated private enterprise. By their very nature, public enterprises are diverse and suited for the most diverse policy objectives. Therefore, performance indicators of a general kind (based on welfare economics) do not reflect the purpose of running a particular public enterprise. The best-practice approach is based on the attribution of policy objectives. A more satisfying analytical approach derives the policy objectives of a particular enterpise by means of a public-choice analysis of its observable behavior. This positive and empirical analysis can then yield those policy objectives against which the performance of the public institution can be assessed.The article has three main sections. The first offers a critical discussion of the existing literature on performance measurements, in particular the best-practice approach. The second suggests an alternative public choice theory of public enterprise behavior, and the third develops a stepwise procedure for assessing the performance of public enterprises in a public-choice analytical framework.

Society, State, and Public Finance: Setting the Analytical Stage

Much of contemporary public finance can be described as being either Wicksellian or Edgeworthian in character. In the former, fiscal phenomena arise through complex processes of exchange; in the latter, they arise through acts of choice by some maximizing agent. This chapter traces these alternative orientations in the history of thought as far back as the Cameralists, compares these writers with Adam Smith, and contrasts the Wicksellian and Edgeworthian orientations toward public finance.