This section of the book is from the "Introduction To Public Finance" book, by Carl Copping Plehn.
Expenditures of class four are part of the gross expenditure only. When a State spends money in wages and in the purchase of a plant and raw materials for the production of porcelain and the like, it expects to get it all back again from the sale of the commodities.
The same is true of a city maintaining a gas plant, of a State railroad, etc. Originally, the State made use of public lands, forests, mines, etc., as a source of income, but now there are a great many industries and enterprises which the State conducts more for a public purpose than for the gain to the public treasury. A city does not operate its street railways primarily as a source of income, but to guarantee the citizen good and cheap service. Hence the gross expenditure for this purpose is a very important item. It is growing to be more and more so as time goes on.
Some of the more important industries that the State carries on are for the purpose of supplying itself with certain commodities, as arms, ammunition, war-ships, and the like, Such industries are carried on from the highest branches of the government down to the lowest. We find, for example, many American towns supplying a part of the support of the inmates of its public institutions by cultivating the lands of the poor farms.
Some of the most striking instances of such industrial expenditure are connected with communication and transport, and with those industries the management of which, on account of the tendency to monopoly, is frequently put into public hands. Examples of this are numerous among those already mentioned. Many industries have been at different times and places so managed as to cost more than they brought in. That is, they have resulted in a net deficit, not a net profit. They thus pass into class three.
A rather significant list of enterprises has in modern times been entered upon by the State, which might be, but are not, managed so as to yield a revenue that offsets their cost. These are museums, libraries, parks, baths, and the like. They belong under class one.