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Two Systems of Public Finance: Entrepreneurial and Parasitical

39 Pages Posted: 19 Jul 2012  

Steve H. Hanke

Johns Hopkins University - Department of Economics

Richard E. Wagner

George Mason University - Department of Economics

Date Written: July 19, 2012

Abstract

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.

Keywords: political entrepreneurship, parasitical political pricing, city-states, nation states, imperialism and public finance, public goods

JEL Classification: D020, D230, H110, H410

Suggested Citation

Hanke, Steve H. and Wagner, Richard E., Two Systems of Public Finance: Entrepreneurial and Parasitical (July 19, 2012). GMU Working Paper in Economics No. 12-35. Available at SSRN: https://ssrn.com/abstract=2113779 or http://dx.doi.org/10.2139/ssrn.2113779

Steve H. Hanke

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States
410-516-7183 (Phone)
410-516-8996 (Fax)

Richard E. Wagner (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
334 Enterprise Hall
Fairfax, VA 22030
United States
(703) 993-1132 (Phone)

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