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Austrian Approach to the 3rd Duty of the Sovereign in the Wealth of Nations

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  • Valentin Petkantchin

    (CERGAM-CAE, Aix-Marseille Université)

Abstract

Economists seem quasi unanimous about the fact that Adam Smith would have had the intuition of the existence of public goods and market failures. Musgrave-1985, among others, perfectly summarizes this widely held position in modern economic thought. In a normative sense, Smith would have entrusted their production to the government and their supply would constitute precisely the 3rd duty of the sovereign in the Wealth of Nations. However, Smith – as Austrian economists since Menger – was mainly interested in the role of institutions in the economy. An institutional approach to the 3rd duty of the sovereign – consisting in the establishment of property rights on public works and in the incorporation of joint stock companies – allows us to reconcile Smith thought with the laissez-faire tradition.

Suggested Citation

  • Valentin Petkantchin, 2004. "Austrian Approach to the 3rd Duty of the Sovereign in the Wealth of Nations," CAE Working Papers 21, Aix-Marseille Université, CERGAM.
    • Handle: RePEc:cgm:wpaper:21
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    File URL: http://junon.u-3mrs.fr/afa10w21/RePEc/cgm/wpaper/DR_21_0405_petkanchin.pdf
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    References listed on IDEAS

    as
    1. Murray N. Rothbard, 1995. "Economic Thought Before Adam Smith," Books, Edward Elgar Publishing, number 377.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Coase, R H, 1977. "The Wealth of Nations," Economic Inquiry, Western Economic Association International, vol. 15(3), pages 309-325, July.
    4. Musgrave, R.A., 1985. "A brief history of fiscal doctrine," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 1, pages 1-59, Elsevier.
    5. Wolfram Elsner, 1989. "Adam Smith’s Model of the Origins and Emergence of Institutions: The Modern Findings of the Classical Approach," Journal of Economic Issues, Taylor & Francis Journals, vol. 23(1), pages 189-213, March.
    6. James A. Gherity, 1993. "An Early Publication by Adam Smith," History of Political Economy, Duke University Press, vol. 25(2), pages 241-282, Summer.
    7. Coase, R H, 1974. "The Lighthouse in Economics," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 357-376, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Adam Smith; public goods; externalities; institutions; laissez-faire;
    All these keywords.

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • H1 - Public Economics - - Structure and Scope of Government
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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