Collective purposes and public institutions

The overall objective of an association of people is social welfare maximization. The structuring of collective bodies takes place in accordance with the preferences of the individuals.

Collectivism expresses its influence by integrating the individual in the whole feeling and the whole will in regard to common living. Because of this motivation individuals as members of the association realize concrete purposes in their rela­tive importance for common life, with the clear consciousness or the dark feeling that everyone shares it, and they yield to the necessity of withdrawing essential goods from individual purposes... The consent of will is expressed by common decision [usually by organs of the community]. (Sax, 1924, p. 218)

We have to distinguish two categories of state activities. First, there is the regulating administration (‘regelnde Verwaltung^,) setting incentives for indi­viduals; it is justified by the necessity of coordination purposes as well as by decisions of the majority to enforce certain aims. Second, there is the acting administration (‘selbstthatige Verwaltung^r) through which the state supple­ments or replaces activities by individuals; it is justified in cases when favourable individual actions are missed, impossible or detrimental, as in cases of market failure or merit goods (Sax, 1887, p. 65).

Public enterprises and institutes serve to fulfil the tasks of government. Public enterprises provide private goods, like railways. The ‘prices’ they demand (‘Taxpreise^r) are similar to the prices that would be demanded by private firms, but deviations might appear because of political considerations and long-term calculations of the state. Public supply is justified by decreas­ing average costs. The state will not demand monopoly prices because, owing to its long-term perspective, it will rather aim at the advantages of mass production.

Public institutes (‘offentliche Anstalten') provide merit goods, for instance education. There is a stronger element of collective purposes in the goods supplied by public institutes, and they are financed by fees (‘GebuhreE). The rates paid by consumers may be created differently: they may consider indi­vidual ability to pay and mirror political decisions about the burdening of social groups, but they have also to take into account considerations of efficiency, they must be sufficiently simple to avoid unnecessary transaction costs (ibid., p. 475). Sax acknowledges different degrees of ‘publicness’: the difference between collected fees and costs of the good provided is the measure of ‘collective content’. However, the supply of goods free of charge should be an exceptional case: ‘Even the “wrong communism” of the com­plete abolition of a fee may sometimes take place, but the collectivistic egoism of the community directed towards single individuals is generally strong enough to balance such endeavours, and often it drives the decision to the opposite direction’ (ibid., p. 477). Acquainted with the development of modern interventionist states, we will have to add that this assumption was rather optimistic.