statistically in the increased demands made by the state and the subordinate political units."1

We have here described what is a part of a still larger movement, namely, the socialization of production and the socialization of consumption. It is, however, the socialization of consumption which especially confronts us in public expenditures. To an increasing extent what is consumed by the family is produced outside the family. There has been going forward a great process of socialization, and this finds expression in part in public expenditures. An increasing proportion of the needs of the family are satisfied, not by the private economy, but by the public economy, and satisfied also, as Professor Wagner points out, not in accordance with the principles of private economy, which is service for service, but in accordance with the principles of the public economy, which is a general return for that which is received.

We have to do with what we may also call socialization of supply. We do not protect ourselves against physical violence, but are protected by the state. We do not educate our own children; they are educated by public agency. The public expenditures are also made to promote art and all the higher interests of life. The services which the federal government renders us in the post office find expression in public expenditures. Public expenditures are giving us more beautiful and more healthful cities, and are satisfying the needs which arise out of the extensive growth of the country, in its expansion geographically and in the size of the population, and also the needs which arise from an intensive growth.

The significance is partly in increased activity of the state and partly in the incidence of the cost of the services under consideration. The poor, who could not themselves have pleasure grounds, enjoy public parks, and these are maintained at public expense. So we may take up one service after another and find that wealth, produced in accordance with the principles of the private economy, is consumed in accordance with the principles of the public econ

1 Wagner, Allgemeine Volkswirthschaftslehre, Erster Theil, Grundlegung, Kap. 4,3 Hauptabsch., S. 310, Bd. I, 2te A.

omy, and that is very largely in accordance to needs and capacity for use. The whole public educational system, from the country district school to the modern state university, culminating in research and investigation, admirably illustrates this principle.

The Principle of Economy versus Parsimony in Public Expenditures. - After a definition of economy in Webster's International Dictionary, we find the following: "Economy, Frugality, Parsimony. Economy avoids all waste and extravagance, and applies money to the best advantage; frugality cuts off indulgences, and proceeds on a system of saving. The latter conveys the idea of not using or spending superfluously, and is opposed to lavishness or profusion. Frugality is usually applied to matters of consumption, and commonly points to simplicity of manners. Parsimony is frugality carried to an extreme, involving meanness of spirit and a sordid mode of living. Economy is a virtue and parsimony a vice."

We must have clear ideas as to which course of the three we shall follow, for it is scarcely to be taken for granted that we shall follow the course of extravagance. There is, however, danger of indifference as to the size of public expenditures, and extravagance may result therefrom. While scarcely any one now would deliberately advocate extravagance so far as the general principle is concerned, extravagance in detail might be advocated; and, in fact, in practice we find both indifference and extravagance. Sometimes the idea that extravagance brings money into circulation has found favor, and especially has been used for the justfication of large expenditures by royal courts. The same idea has been used as a justification for luxury. It can, however, find no support in economics. There is danger of extravagance because each one concerned with governmental expenditures feels that what he spends is a relatively small matter, and indeed it is. It is sometimes thoughtlessly overlooked that when many are spending, "small waste" becomes significant, and may be even ruinous. This is a problem which concerns every large business, and it requires strict and wise administration to avoids the two extremes: wasteful extravagance and red tape.

Sectionalism also results in extravagance, and this shows itself

badly in the United States at times. Whatever any state can secure from the federal Treasury is often looked upon as so much clear gain. This was clearly brought out in the discussions concerning the repayment, a few years ago, of the direct tax that has been paid by the states to the federal government. This tax has now been repaid, but many states gave agents large and extravagant sums to work for the refund. Sometimes sectionalism manifests itself even in cities. In one section of the city there may be vigorous efforts to secure money for itself without due regard for the general interest.

The peculiar condition of our federal financiering (which is found in the fact that the taxes are laid very largely for other than revenue purposes, and that there is no careful balancing over and against one another of probable revenues and probable expenditures) results frequently in a large surplus in the federal Treasury. There is danger of extravagance wherever revenues outrun felt needs. There never has been a time when it would not have been possible to have expended wisely the entire revenues of the federal government; e.g., the telegraph might have been purchased, and educational expenditures might have been increased. But there was no demand for these expenditures strong enough to prevail, and the outlet was found along the lines of least resistance, or, perhaps it ought rather to be said, along the lines of greatest "pull." We may then lay it down as a general law that there is danger of extravagance whenever public revenues outrun felt needs.

There is a tendency, especially wherever public spirit is not highly developed, to favor parsimony, and to regard that as the best administration which spends least, and the smallest tax as the best tax. This idea was encouraged, particularly by those who looked upon government expenditures as external to the life of the people as if they were expenditures for some outside person. This idea, indeed, may be traced back to monarchical government and to a time when royal courts consumed a large part of the public revenue. The smallest expenditure means the accomplishment of the fewest purposes. Parsimony means meanness, and can never be the rule either of public or private financiering. Frugality is the rule when it is a necessity. Economy is the sound

rule; and this means a broad and liberal policy and a husbanding of resources. The wise citizen judges any particular administration either in the nation or the state, not chiefly by the amount of public expenditures, but by the results of public expenditures, appreciating full well that increasing public expenditures are a normal condition in a sound and healthy society.

Development of Expenditures and the Historical Order in which they Appear. It is instructive to consider the historical order in which the objects of public expenditure appear. This order throws a strong light upon the evolution of industrial society, and of civilization in general. This is an almost unworked field of investigation, but it is an extremely interesting and important one. This order can be presented here only in the most general terms, and in these terms it is somewhat as follows: expenditures for (1) external security; (2) security within the community; (3) promotion of material interests; (4) benevolence (transferred in part from the Church at the time of the Reformation; (5) education in its various phases; (6) labor. In a general way the organization of the departments of the federal government corresponds with this order. In 1789, the Treasury, War, and State departments were organized, also the Department of Justice, Supreme Court, and the Navy Department; the Post Office Department was organized as a distinct department in 1829; the Department of the Interior was organized in 1849; the Department of Labor as a separate department (without representation in the Cabinet) in 1889; the Department of Agriculture as a separate department (with representation in the Cabinet) in 1889; the Department of Commerce and Labor (with representation in the Cabinet) in 1903. The modern nation has been spending an increasing proportion of its resources for education. We use nation in the general sense here, including all the subdivisions of the nation. We find a rapidly increasing item in the budget of the modern municipality for public libraries, in which line of expenditure the United States is leading the world. Lately, in the modern budget, we find expenditures which are distinctively for the promotion of the interests of labor.

Most interesting is it to observe, within the last few years, an

expenditure in the national budgets for international agreements and arrangements to promote the interests of labor. In 1900, the International Association for Labor Legislation was formed, and its permanent Bureau was established at Basle, Switzerland, in 1901. As the competition of labor and capital was international, it had, in the opinion of many careful observers, become necessary to safeguard the interests of labor by international agreements. Consequently, we find that this international association receives subsidies from most European governments, and a small one from the United States through our federal Bureau of Labor. And, in 1905, as we have already seen, an international treaty was entered into by Italy and France for the advancement of the interests of labor and for mutual protection of employers. Small indeed are these items, but they are significant as beginnings.

We must, however, analyze the public expenditures of the various departments more carefully to understand fully the order of development in the objects of public expenditures. The whole expenditure of the Department of Agriculture is an expenditure to promote material well-being, and this has become one of the great departments in modern government. The Department of the Interior is also largely concerned with expenditures to promote the general material welfare. We have in the Department of Agriculture such items as forestry, food adulteration, botany, seed tests, pomology, entomology, agricultural soils, irrigation investigations, and road inquiry.

We cannot lay down any hard and fast line between public and private expenditures, because there is a perpetual shifting from the satisfaction of wants privately to the satisfaction of wants publicly, and sometimes even, though less frequently, the reverse process. The railways of Prussia were once private, and their receipts and expenditures had little to do with the Prussian budget. Now the receipts are public receipts, and their expenditures are public expenditures. The addition to the budget, however, means necessarily no additional burden resting on the people. Indeed, if the people are well served and served for a lower price than formerly, with less relative cost of operation, the burdens of the people have been lightened, and this is what is generally