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The Elgar Companion to Public Economics

Empirical Public Economics

Edited by Attiat F. Ott and Richard J. Cebula

Attiat Ott and Richard Cebula have recognised the need to present, in an accessible and straightforward way, the voluminous literature in the public economics arena. Advances in econometric techniques and the spillover of knowledge from other disciplines made it difficult, not only for students but also for lecturers, to accurately find the information they need.
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Chapter 3: Wagner’s Law of Increasing Expansion of Public Activities

Alan Peacock


Alan Peacock Introduction Adolph Wagner (1835–1917) was one of the most influential German economists of his time. His professional work embraced the study of human motivation, emphasizing altruism as a potent force in economic decisions, the close analysis of industrial development and the endeavour to improve empirical studies by collection and assimilation of statistical information, particularly regarding the place of the state in the economy (cf. the excellent short survey of German fiscal thought in Musgrave, 2000). All these preoccupations are evident in his enunciation of a Law of Increasing State Activities, which is now regarded as his important contribution to the history of economic ideas. There are passing references to his Law throughout Wagner’s public finance writings. The first modern translations covering it are taken from his Finanzwissenschaft (1883) (see Musgrave and Peacock, 1958). However, the most complete statement of the Law is to be found in Wagner’s final formulation, which was written for a standard German encyclopaedia on public economics (see Wagner, 1911). It is this version which is quoted below in English translation by the contributor. (There is now a full translation available prepared by Dieter Biehl. See Biehl (1998)). Wagner’s ‘Law’ Wagner states quite categorically that his ‘law’ is an ‘empirically observed uniformity’ by which, as the national economy grows, the public sector will grow at a faster rate than the private sector (Wagner, 1911, p.734). However, interesting though such an observation might be, two practical questions immediately arise. The first concerns the statistical...

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