Paternalism and the Public Household: On the Domestic Origins of Public Economics

The ancient Greek conception of oikonomia is often dismissed as irrelevant for making sense of the contemporary economic world. In this paper, I emphasize a thread that runs through the history of economic thought connecting the oikos to modern public economics. By conceptualizing the public economy as a public household, Richard A. Musgrave (1910–2007) set foot in a long tradition of analogy between the practically oriented household and the state.

Despite continuous references to the domestic model by major economists throughout the centuries, the analogy has clashed with liberal values associated with the public sphere since the eighteenth century. Musgrave’s conceptualization of public expenditures represents one episode of this continuing tension. His defense of merit goods, in particular, was rejected by many American economists in the 1960s because it was perceived as a paternalistic intervention by the state. I suggest that the accusation of paternalism should not come as a surprise once the “domestic” elements in Musgrave’s conceptualization of the public sector are highlighted. I develop three points of the analogy in Musgrave’s public household which echo recurring patterns of thought about the state.