Carl Menger on Roscher’s System der Finanzwissenschaft (1902)

Carl Menger’s review, published on 17 May 1902, assesses Otto Gerlach’s revision of the fifth edition of Wilhelm Roscher’s System der Finanzwissenschaft. Its argument moves from the distinctive merits and limitations of Roscher’s exposition, through Gerlach’s additions and remaining omissions, to a substantive dispute over the classification of state monopoly revenues. Menger’s favorable verdict on the edition is qualified by his resistance to treating monopolies simply as instruments of indirect taxation.

Roscher’s achievement, as Menger describes it, lies in a connected series of learned, accessible studies of selected fiscal problems, informed by a historically cultivated outlook. This intellectual character explains both the book’s appeal and its uneven coverage:

In diesem seinem Grundcharakter liegt die Erklärung der besonderen Vorzüge und des ansehnlichen Erfolges, zugleich aber auch der Hinweis auf den Hauptmangel des Werkes: seine Unvollständigkeit.

English translation: In this its fundamental character lies the explanation of the particular merits and of the considerable success of the work, but at the same time the indication of its chief defect: its incompleteness.

Gerlach’s editorial task was consequently to preserve Roscher’s strengths while filling gaps and incorporating recent legislation, statistics, and scholarship. Menger praises his work on the classification of state assets and revenues, fees, basic tax concepts, taxation principles, double taxation, and the capacity of taxes to develop. The comparative accounts of German, English, French, and Austrian tax systems likewise improve the book’s usefulness. Yet fees, telegraph and telephone services, and transaction taxes remain inadequately treated. The comparative survey neglects several major countries, while expenditure on religious affairs and the promotion of economic activity receives little attention. These criticisms establish practical coverage as one criterion of a successful revision.

The review’s conceptual center concerns a different criterion: whether fiscal categories adequately distinguish the economic sources of public revenue. Gerlach follows a prevailing tendency in German public finance to classify receipts from state monopolies as indirect taxes, particularly expenditure taxes. Menger instead defends Roscher’s intuition that monopolies constitute a distinct revenue category, while acknowledging that Roscher had not sufficiently justified it.

Menger’s reasoning turns on the state’s exclusion of citizens from an entire branch of economic activity. By reserving that activity to itself, the state appropriates the entrepreneurial gains and returns otherwise available to private participants. The resulting sacrifice and income cannot simply be equated with those arising from taxation:

Das wirtschaftliche Opfer, das er hierdurch den Bürgern auferlegt und das Einkommen, das er aus den ihm vorbehaltenen Erwerbszweigen zieht, sind durchaus anderer Natur, als die Opfer und Einnahmen, welche bei Steuern überhaupt und Aufwand-Steuern insbesondere zur Erscheinung gelangen.

English translation: The economic sacrifice which it thereby imposes upon the citizens, and the income which it draws from the branches of business reserved to it, are of an altogether different nature from the sacrifices and revenues which appear in the case of taxes generally and of expenditure taxes in particular.

The decisive distinction is between income obtained through exclusive control of an activity and an additional tax imposed through that control. Menger readily grants the practical connection:

Allerdings bieten gerade Staatsvorbehalte der obigen Art eine besonders günstige Gelegenheit zu Steuerzuschlägen.

English translation: To be sure, it is precisely state reservations of the above kind that offer a particularly favorable opportunity for tax surcharges.

But the opportunity to impose a surcharge does not define the monopoly’s revenue as such: a state reservation could yield substantial receipts without any tax surcharge. Menger thus separates an institution’s underlying economic character from a fiscal use to which it may be put. The inconsistent allocation of monopoly receipts among taxes, fees, and private-economic revenues in contemporary scholarship reinforces his warning against Gerlach’s reclassification.

This disagreement does not overturn the review’s positive assessment:

Es sind die alten großen Vorzüge im wesentlichen ihr erhalten geblieben, manche empfindliche Mängel und Lücken des Werkes dagegen beseitigt worden.

English translation: The old great merits have in essence been preserved in it, while many grievous defects and gaps of the work have been removed.

The review’s significance lies in this combination of editorial judgment and conceptual criticism. Menger welcomes greater completeness and practical utility, but insists that systematic improvement also requires distinctions grounded in the economic processes generating state income.