Systems of
inspection are found in varying degrees in all the states.
Among the most common are factory inspectors, food in-
spectors, and oil inspectors. Cities often have inspectors
of various sorts to carry out provisions of ordinances, such
as investigating market, light, or street conditions. A
part of their regulatory expenses is met by other political
divisions, as the regulating of utilities companies through
the state commission. This class of expenditure will
doubtless be of growing importance as the public continues
to become more exacting.

41. Many Miscellaneous Expenditures Are Made for
the Common Benefit. Many expenditures are made for
the common benefit by the different political divisions
which will not fall under the previous classifications.
While most of them are rather small, the aggregate would
make no inconsiderable sum. The Federal government
maintains a currency and banking system as well as a
standard system of weights and measures. Commerce is
further aided by maintaining lighthouses, and navigable
rivers and harbors. National parks and reserves are pro-
vided for recreation and experimental purposes. The
amount spent for health and sanitation has increased
rapidly. The states and local divisions also spend funds
for many of the same things. Recreation, health, and sani-
tation hold important places in city expenditures, but
comparatively unimportant places in those of the states.
States often spend funds for conserving natural resources
and for giving exhibitions, such as state fairs for promot-
ing commerce and industry. Many of this class of ex-
penditures are found almost exclusively in municipalities.
Among such are those for street lighting, cleaning, and
sprinkling, and for the maintenance of sewers and public
markets.

A consideration of the number and importance of these



66 OUTLINES OF PUBLIC FINANCE

expenditures, which are made without reference to any
individual benefit, indicates the social aspect of the mod-
ern constitutional government. The needs of the social
group are being recognized by the state, which is contin-
ually assuming responsibilities that were formerly held by
individuals. Through the exercise of its regulatory func-
tions, moreover, the apparent rights of individuals are
often superseded by the demands of social welfare.

42. The Cost of Providing for Dependents, Defectives,
and Delinquents Is Large. Expenditures for individuals,
although treated as if they were for the common benefit,
are not as numerous as the ones for the common benefit.
The most important item in this class is the cost of caring
for dependents, delinquents, and defectives. A glance at
the preceding tables will show its importance. In the
state and Federal expenditures this item is near the top,
while it is comparatively low in cities. This is true be-
cause the other divisions look after the cities' needs in
these matters. The per capita cost for cities, however, is
greater than for the states.

Public Charity. The problem of public charity is im-
portant, not only from the standpoint of the amount
spent, but from the standpoint of how it is spent. Ex-
penditures for charity should be made so as to produce as
few deleterious effects on the recipient as possible. If re-
lief is administered in a haphazard way the evils which
were sought to be corrected will only be magnified. Ex-
penditures should be used, whenever possible, to remove
the cause, so that they will not have to be repeated.
Often only temporary assistance is needed, and if this is
given in the right way future expenditures for these indi-
viduals may not be necessary. Where the cause cannot be
removed, or is regularly recurring, permanent aid must
be resorted to. The most common causes of the need for
permanent charities are the various sorts of bodily infirmi-
ties. The city and county almshouses and poor farms are
widespread evidence of permanent public charities.



CLASSIFICATION OF PUBLIC EXPENDITURES 67

Private Charity. As in the case of education, only a
part of the cost of charity is borne by the public perhaps
the smaller part. Other agencies at work giving the same
service are individuals, religious bodies, fraternal organi-
zations, and various forms of associated charities. There
is a place for the work of each, but their energies should
not be expended independently of each other. Each
should know what the other is doing, so that efforts will
not be duplicated that would defeat the ends in view.

At best, expenditures for charity are discouraging, since
causes never seem to be removed to such an extent that
the need for the expenditure decreases. Some laws and
customs in the past have made it easy for willful vagrants
and paupers to exploit the public. It is needless to sug-
gest that legislation, rather than to foster such conditions,
should make them extremely difficult.

Insurance and Pensions. Some measures are under-
taken by the state which are designed to lessen the need
for charitable expenditures. Chief among these are the
various forms of compulsory insurance. Where workmen
are required to deposit a part of their wages in a fund, to
be returned in case of disability or old age, or where the
employer is required to make some definite provision to
compensate for the accidents or sickness of his employees,
the public burden is often lessened. There has been a
rapid extension of the various forms of social insurance,
and it is possible that this may be a means of lessening
the amounts spent for charity. The provisions for old-
age pensions and mothers' pensions, which are gradually
being extended, will likewise tend to lessen the item of
expenditures for charity.

Care of Defectives. The costs for caring for defectives
and delinquents have shown a continued and rapid in-
crease. This is due not only to the increasing numbers
for which provision must be made, but to the better
services which are being given. The most important in-
stitutions for the defective class are those for the insane,



68 OUTLINES OF PUBLIC FINANCE

blind, feeble-minded, and deaf and dumb. The heaviest
burdens in the care of these classes fall upon the state
governments. The greatest cost is for the insane. The
figures are almost startling. In 1918, out of a total cost
to the states for charities, hospitals, and corrections, of
$118,084,000, the amount which went to institutions for
the insane was $49,950,000. In some states the expendi-
ture for the insane is larger than the sum total of the ex-
penditures for education a fact which is worthy of con-
sideration by serious-minded students. There seems to be
little prospect for decreasing the expense for these classes.
In fact, as expert medical treatment is extended to replace
the old treatment by force, costs may be expected to
increase.

Corrective Institutions. Corrective institutions are of
various classes. They are maintained for adults and
minors, and vary from Federal prisons to the village and
county jails. Expenses for these institutions have in-
creased, partly because of increased numbers of inmates,
and partly because of attempts to make them corrective
rather than mere institutions for punishment. The possi-
bilities for reducing expenditures here, however, do not
seem so remote as in the cases of other institutions. In-
mates can be engaged to a greater extent than formerly in
productive labor, and as society becomes more advanced
the conditions for producing and propagating a criminal
class may be partially removed.

43. Governments Often Give Pensions and Bounties to
Individuals. Some form of the pension system is found
in nearly every country. The granting of pensions is
generally undertaken on the grounds that a service has
been given which has not been properly rewarded, or for
the reason that disability has resulted because of services
rendered to the government which handicaps the present
capacity of the individual for production. Under the
first case a pension should be regarded as a payment for
value received, rather than as a gratuity. England, in a



CLASSIFICATION OF PUBLIC EXPENDITURES 69

large measure, has regarded her pension system in this
light, and has allocated the costs to the various govern-
mental departments under which the recipients have given
services. In the United States the idea of reward for dis-
ability has been the chief ground for granting pensions.
If this were legitimately followed, no objections could be
offered to our pension system. The surplus of funds in
the United States in the 'eighties led to such fraud in the
granting of pensions, however, as to bring the system into
disrepute. While it has been purged of its grosser evils,
the chance for politics to play too dominant a role still
remains. The rather large item for pensions in state ex-
penditures is accounted for by the pensioning of Confed-
erate soldiers by the Southern states.

In late years the pension system has been extended to
include others than those who have rendered some special
service to the government. The old-age pensions which
have been inaugurated in England are an example of this
situation. Every person over seventy years old, who is a
British subject, who has resided in the country a certain
number of years, and who does not have an income ex-
ceeding a certain amount, is entitled to a pension. The
size of the pension varies according to the income of the
individual. A number of commonwealths of the United
States have provided for mothers' pensions. These are
given on the ground that a better citizen will be produced
if a child grows up under a mother's care than if it is
reared in a public institution.

Bounties and Tariffs. Government bounties may take
various forms. Industries which a government may
think desirable may not be able to exist because of foreign
competition or for other reasons. The most common
form of the use of a bounty is for the government to pay
to the managers of such industries a sum sufficient to
enable them to exist. Some of the bounties given by
European states to stimulate the production of sugar are
good examples. Minor political units have often given



70 OUTLINES OF PUBLIC FINANCE

bounties to stimulate the eradication of undesirable fac-
tors, such as destructive animals.

In the United States the promotion of industry has
taken another form than the straight bounty, though in
the end the results are much the same. These ends have
been secured through the use of the protective tariff.
Students of economics are familiar with the arguments
advanced for protection and with the method of its work-
ing. If it is used to enable industry to live, it must reim-
burse the manager in some way. It does this by keeping
out competitors and allowing the price of products to rise.
In this case the consumer pays directly to the producer,
while if the payment were made by government bounty
the collection would be made from individuals by the
government. In the latter case the burden would be more
widely diffused, since the collection by the government
would not likely be confined to the users of the product.

44. Some Expenditures Are for Individual as Well as
Common Benefit. The most general governmental service
which takes account of both individual and common bene-
fit is the maintaining of the judicial system. The system
is maintained primarily for the common good, yet the
individual is required to pay for the benefit received when
he avails himself of the service.

Judicial System. Governments very early undertook
the function of settling the disputes of their citizens. At
first the costs were borne by the disputants, but it grad-
ually became recognized that justice was so much of a
public asset that the greater part of the burden of securing
it now rests on the public. It would be unwise to remove
the entire burden from the litigants, however, for it would
mean the congestion of the courts with unimportant cases.

In civil cases the part of the cost to be borne by the
individual is usually placed upon the one found at fault.
This has a beneficial effect in minimizing unimportant
litigation. The proportion of the expense borne by the
state in criminal cases is usually much greater than in



CLASSIFICATION OF PUBLIC EXPENDITURES 71

the civil ones. As a whole, the cost of justice is an impor-
tant item of expense in all countries and all political
divisions. Comparisons are difficult to make because of
the different systems in vogue.

Besides establishing justice, the judicial system pro-
vides many other services. It has become the function
of courts to interpret constitutions, and to pass upon the
constitutionality of legislation. Property rights are estab-
lished, deeds and mortgages recorded, various sorts of
licenses are granted, for all of which the individual who
avails himself of the service must make payment. Usually
it is small, and the real burden of the cost rests with the
government.

Other Individual Payments. Other examples of expend-
itures of this class are in various kinds of public improve-
ment. Paving streets, building roads, and constructing
sewers, are common illustrations. Primarily, the improve-
ment is undertaken for the public benefit, yet obviously
the property near or abutting it receives a benefit. This
is why abutting lot owners are asked to help bear the cost
of paving streets', and farmers owning land along an im-
portant highway are asked to help defray the expenses of
improvements. A number of our postal activities is based
on the same method of expenditure. The cost of provid-
ing this service in the more sparsely settled communities
is much greater than the returns. In the United States
the importance of the service to the individual has been
minimized, since the returns have seldom been more
than costs, but generally have been less. In a number of
European countries the principle of securing a net return
is followed.

45. Some Expenditures Are Primarily for the Indi-
vidual. The costs of those industries which government
units run on a commercial basis cannot be put in any
of the previous classes. No net expenditure is expected
to result, since the produce of the industry is calculated
to equal or more than equal the expense. Examples



72 OUTLINES OF PUBLIC FINANCE

may be found in every political unit where industries
have been undertaken by the state for the purpose of
supplying commodities needed by the government, or
for supplying them to individuals on a commercial basis.
Reference to some of the preceding tables will show the
importance of expenditures for public service enterprises.

Some of the more important materials which govern-
ments undertake to furnish for themselves are military
and naval supplies. Transportation of goods, passengers,
and messages is often supplied for individuals. Gov-
ernments sometimes maintain monopolies, primarily for
the sake of the revenue returns. Such are the tobacco
and salt monopolies of some European states. Because
of the revenue returns from this class of disbursements it
does not occupy an important place in the consideration
of public expenditures.

46. Expenditures Tend to Become More for the Com-
mon Benefit. The number of functions which govern-
ments undertake for the common good increases as civili-
zation advances. In some cases transition from giving a
service on the commercial basis to that of the common
benefit has been rapid; in others it has been slower, while
others are still in the process of change.

The maintenance of public schools and highways is no
longer considered, in this country, in any other light than
for the common benefit. It was not so long ago, however,
that neither of these services was supplied to any extent
except by individuals. Anecdotes relating to the pay of
the public school teacher by the patrons of the district
are common. Investigation of the early laws of our states
will show that numerous charters were granted to turn-
pike and highway companies, with the permission to erect
tcllgates. When the state began to give these services
individual payments were still required for education,
while tollgates were kept on the roads. The charges were
quickly given up in the case of public schools, and more
slowly in the case of highways, until the expenses of both



CLASSIFICATION OF PUBLIC EXPENDITURES 73

are now met from the common fund. The postal system
has changed, in many cases, from the basis of profit to
the basis of service, and any deficit is made up from the
common fund. It is unlikely, of course, that this service
will ever be treated as purely for the common benefit.

Many municipal services are following the same trend.
Such are the supplying of water, gas, and electricity, where
they are furnished by the municipality. While the ex-
penditure for the common benefit at present holds by far
the most important place, its importance will no doubt
be still more marked in the future.