Two Systems of Public Finance: Entrepreneurial and Parasitical
Steve H. Hanke
Johns Hopkins University - Department of Economics
Richard E. Wagner
George Mason University - Department of Economics
July 19, 2012
GMU Working Paper in Economics No. 12-35
Expositions of the theory of public finance mostly assume that taxation must be the primary instrument for generating revenue. This assumption is neither historically accurate nor theoretically necessary. Rather, it universalizes an institutional arrangement that is particular to the nation-state, where taxation is the prime instrument of public finance. In contrast to this system of parasitical public finance, we explore a system of entrepreneurial public finance within a setting of city-states where attraction and not compulsion dominates public finance. Cities are corporate bodies which can be organized under diverse institutional arrangements. We use the United Arab Emirates to illustrate our analysis of divergent systems of public finance.
Number of Pages in PDF File: 39
Keywords: political entrepreneurship, parasitical political pricing, city-states, nation states, imperialism and public finance, public goods
JEL Classification: D020, D230, H110, H410
Date posted: July 19, 2012
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