Austrian Approach to the 3rd Duty of the Sovereign in the Wealth of Nations
Economists seem quasi unanimous about the fact that Adam Smith would have had the intuition of the existence of public goods and market failures. Musgrave-1985, among others, perfectly summarizes this widely held position in modern economic thought. In a normative sense, Smith would have entrusted their production to the government and their supply would constitute precisely the 3rd duty of the sovereign in the Wealth of Nations. However, Smith – as Austrian economists since Menger – was mainly interested in the role of institutions in the economy. An institutional approach to the 3rd duty of the sovereign – consisting in the establishment of property rights on public works and in the incorporation of joint stock companies – allows us to reconcile Smith thought with the laissez-faire tradition.
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- Coase, R H, 1977. "The Wealth of Nations," Economic Inquiry, Western Economic Association International, vol. 15(3), pages 309-25, July.
- Coase, R H, 1974. "The Lighthouse in Economics," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 357-76, October.
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