Many attempts have been made to classify public expenditures, and often with good results. The most common are those which follow more or less closely the usual economic analysis of private expenditure, according as the wants satisfied are necessary, desirable, or superfluous. The use of economic terms in this way is to be commended, but as in Economics, sohere, the vagueness and relativity of these terms are very unsatisfactory. Different writers do not agree as to what are necessaries, even for the same State. After all, the assignment of any particular expenditure to one or the other of these categories is merely the expression of the author's individual judgment on the expenditure in question.1 This savours too much of the art of Public Finance for a scientist. Professor Bastable, after pointing out this very difficulty, proceeds to make a classification based on the order of historical rise of the different functions, or perhaps it would more Bastable's nearly reproduce his thought to say classification. that he tries to establish historically a sort of natural evolution or sequence of public expenditures. The difficulties he encounters, in the search for such a sequence, are so great that the results are not particularly clear and not at all convincing. The difficulties arise from the fact that such a process merely substitutes for the author's judgment, on which the older classifications rest, the judgment of the leaders of national policy at different times and in different places on the same questions ; namely, are these expenses necessary or merely expedient ? He certainly gains much by substituting the point of view of past statesmen for that of any present person or persons. But it will be a still greater gain if we can eliminate the personal element entirely and make a classification that does not depend upon the way in which the desirability or undesirability of the different functions is regarded. The important thing in Public Finance is not to ascertain whether or no certain functions are to be approved.

1 Cf. Bastable, p. 43.

Such an analysis as we are in search of has been suggested by Professor Cohn,1 which he has well called the " economic analysis of civic housekeeping." There are according to this suggestion four groups. The first consists of those functions which confer so definite a benefit upon the individual, and are so clearly performed solely for the benefit of the individual, that he would naturally be expected to meet the cost of them. The second group consists of those functions which confer a common benefit upon all members of the State, of such a character that it cannot be parcelled out and each portion definitely assigned to the respective members. This group embraces the prime functions of the fundamental institutions of the State. These are the two extremes. Between them are two more groups. The third consists of those functions which confer a special benefit that might be separately assigned to particular persons, but in which such assignment is wholly or partly waived, because there is also sufficient common benefit to justify making such functions a total or partial charge on the general ability. Finally, a fourth group, which consists of those functions that confer a special benefit on certain individuals more or less unable to assist in bearing the charges, and which are consequently treated as though they conferred a common benefit upon all the members of society.

1 Finanzwissenschaft, p. 117.

Dropping, for the present, all consideration of the ways in which the benefit is measured, which will be fully discussed under the head of revenue, and re-arranging the groups in the order of their importance, we have the following four classes of expenditures :

First, the largest and most important, those which confer a common benefit on all citizens.

Second, those which confer a special benefit on certain classes that is treated as a common benefit, because of the incapacity of these classes.

Third, those which confer both a special benefit on certain persons and a common benefit on all the others.

Fourth, those which confer only a special benefit on individuals.

Under the first of these come the general expenditures for the support of the constitutional agencies of the government. The support of the administrative and legislative departments, in almost all their branches, including the diplomatic corps, and everything necessary thereto, as public buildings, etc. Here, too, belong the support of defence and the maintenance of internal security and quiet. Here belong, according to modern practice, the maintenance of roads, although it was once treated as belonging to class four, and passed through a transition stage in class three. Under this class belong, also, the chief expenses in connection with the maintenance of the money circulation, although a part of this expenditure is in most countries to be assigned to class three.1 The same is to be said of the expenditure for education. Here belong the administrative control and assistance of private industry and commerce.

Under class two belong the care of the poor and the defective. Also the support of the pensioned, unless pensions are such that they may be regarded as unpaid wages, in which case they belong to the first class.

1 The United States once charged a seigniorage of 1/5 per cent.

Under class three come the administration of justice, the provision for religion wherever the State has an established church, the general administration of the postal service (sometimes, however, this is in class four), the administration of special rights, like patent rights, copyrights, corporation privileges, etc.; also, the recording of titles, etc., the laying out and grading of streets, building of sewers, etc.; so, also, the water supply in many cities, although the provision for this is rapidly undergoing a development that will eventually place it in class one.

To class four belong almost all of the great industries carried on by the State or by cities, the monopolies maintained by them for their own benefit, etc.

As will be seen from remarks made above in connection with the assignment of certain of these services to the different classes, there has been, and still continues, a certain process of evolution which may be generally summed up as a tendency for all these expenditures to move from class four to class one. There are many instances where expenditures now regarded as naturally and unchangeably belonging to class one were regarded as belonging to class four. When a government assumes any new industrial function, as, for example, supplying water to the inhabitants of a city, that function is first assigned to class four and treated as though conferring a special benefit only. But it frequently comes about that it is regarded as a function conferring a common benefit at least in part, and passes into class three. There are forces at work which seem likely to place it finally in class one. In the case of highways this transition has been completely made, and, except in the case of city streets, which still belong to class three so far as construction is concerned, but pass into class one as soon as finished, highways are treated as conferring common benefit only.

In the following chapters on expenditure the order indicated above will be followed. The arrangement of the different expenditures under class one will be somewhat according to historical origin and importance.