Sec. 4. #The enlarging sphere of the state.# A mere police state would leave to private initiative the provision of every kind of economic agencies not needed for political government.  The state might, for example, even leave the provision of roads and bridges to private individuals or to companies, permitting them to charge tolls to obtain a return on their investment.  Whenever a toll-road is made public and a toll-bridge becomes free, and the state maintains the roads, it is becoming less strictly a mere police state.  Reacting from the ideal of the police state which was most highly praised in the first half of the nineteenth century, the functions of government have been extending in many directions in the last half century.  More and more economic functions are performed through the agency of government.  If we think of an act as done by the government for private citizens, we call it paternalism; but if we think of an act as done by citizens collectively for themselves as the best way to get these things done, we may call it, in a broad sense, socialism.[1]

Government is in one aspect a direct good to its citizens.  In return for its collective cost men collectively get the enjoyment of social organization, markedly in contrast with the uncertain ties and hazards of primitive communities.  But government becomes also a mode of social investment, an indirect agent, a productive enterprise.  Wealth applied through it secures in some cases a greater product than is possible by individual action.

But when the government undertakes these various tasks the expense falls unequally on individuals and affects differently their incomes.  When free schools take the place of private schools, the law compels every one to contribute to education.  To many individuals it is a matter of indifference whether they pay tuition or taxes, but the wealthy bachelor sometimes grumbles when forced to help in educating the day-laborer’s family.  The average result of a certain social policy may be right, but individuals diverge from the average and thus have constantly a motive to attempt to change the limits of governmental action.  Happily the subject is not always viewed with selfish eyes.  The ethical and patriotic thought is not, “How will this affect my interests?” but.  “How will it affect the general interests?” But as the question of value is always involved men are usually found favoring or opposing the industrial and social activity of the state according as it affects their own incomes.  Thus the determination of the sphere of the state is in large part an economic question.

Sec. 5. #Industrial revenues of governments#.  The costs of government at any stage are met in varying degrees in one of three ways:  (1) from industrial sources, (2) by borrowing and thus creating a public debt, (3) from taxation.