Hans-Hermann Hoppe*

I. THEORY: THE COMPARATIVE ECONOMICS
OF PRIVATE AND PUBLIC GOVERNMENT OWNERSHIP

A government is a territorial monopolist of compulsion — an agency which may engage in continual, institutionalized property rights violations and the exploitation — in the form of expropriation, taxation and regulation — of private property owners. Assuming no more than self-interest on the part of government agents, all governments must be expected to make use of this monopoly and thus exhibiting a tendency toward increased exploitation.1 However, not every form of government can be expected to be equally successful in this endeavor or to go about it in the same way. Rather, in light of elementary economic theory, the conduct of government and the effects of government policy on civil society can be expected to be systematically different, depending on whether the government apparatus is owned privately or publicly.

2
The defining characteristic of private government ownership is that the expropriated resources and the monopoly privilege of future expropriation are individually owned. The appropriated resources are added to the ruler’s private estate and treated as if they were a part of it, and the monopoly privilege of future expropriation is attached as a title to this estate and leads to an instant increase in its present value (‘capitalization’ of monopoly profit). Most importantly, as private owner of the government estate, the ruler is entitled to pass his possessions onto his personal heir; he may sell, rent, or give away part or all of his privileged estate and privately pocket the receipts from the sale or rental; and he may personally employ or dismiss every administrator and employee of his estate.
In contrast, with a publicly owned government the control over the government apparatus lies in the hands of a trustee, or caretaker. The caretaker may use the apparatus to his personal advantage, but he does not own it. He cannot sell government resources and privately pocket the receipts, nor can he pass government possessions onto his personal heir. He owns the current use of government resources, but not their capital value. Moreover, while entrance into the position of a private owner of government is restricted by the owner’s personal discretion, entrance into the position of a caretaker-ruler is open. Anyone, in principle, can become the government’s caretaker.
From these assumptions two central, interrelated predictions can be deduced: (1) A private government owner will tend to have a systematically longer planning horizon, i.e., his degree of time preference will be lower, and accordingly, his degree of economic exploitation will tend to be less than that of a government caretaker; and (2), subject to a higher degree of exploitation, the nongovernmental
public will also be comparatively more presentoriented
under a system of publicly-owned government than under a regime of private government ownership.
(1) A private government owner will predictably try to maximize his total wealth; i.e., the present value of his estate and his current
income. He will not want to increase his current income at the expense of a more than proportional drop in the present value of his assets, and because acts of current income acquisition invariably have repercussions on present asset values (reflecting the value of all future — expected — asset earnings discounted by the rate of time preference), private ownership in and of itself leads to economic calculation and thus promotes farsightedness. In the case of the private ownership of government, this implies a distinct moderation with respect to the ruler’s incentive to exploit his monopoly privilege of expropriation, for acts of expropriation are by their nature parasitic upon prior acts of production on the part of the nongovernmental
public. Where nothing has first been produced, nothing can be expropriated; and where everything is expropriated, all future production will come to a shrieking halt. Accordingly, a private government owner will want to avoid exploiting his subjects so heavily, for instance, as to reduce his future earnings potential to such an extent that the present value of his estate actually falls. Instead, in order to preserve or possibly even enhance the value of his personal property, he will systematically restrain himself in his exploitation policies. For the lower the degree of exploitation, the more productive the subject population will be; and the more productive the population, the higher will be the value of the ruler’s parasitic monopoly of expropriation. He will use his monopolistic privilege, of course. He will not exploit. But as the government’s private owner, it is in his interest to draw parasitically on a growing, increasingly productive and prosperous non-government economy as this would effortlessly also increase his own wealth and prosperity — and the degree of exploitation thus would tend to be low.

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