Banking on the king: The evolution of the Tax Farm System in early modern France.

摘要

Tax Farming was used extensively by French Kings to collect indirect tax revenue. The manner in which Tax Farm contracts were written and enforced, however, changed dramatically during the early-modern period. Beginning in the 1660's they were gradually transformed from small, competitively auctioned, units into a large monopsony known as the Company of General Farms (CGF). Surprisingly, this transformation was accompanied by a dramatic increase in lease prices. In the first essay I argue that Tax Farming was originally introduced to minimize the transaction costs faced by the King in monitoring his tax collectors. As the Crown increasingly used Tax Farmers as financial intermediaries during the seventeenth century, however, breaches of Tax Farm contracts increased and lease prices declined reflecting the increased probability of Royal predation. The monopsonization of the Farms reduced the costs faced by the Tax Farmers of colluding to punish the King for defaults. The result was a decrease in Royal predation during the eighteenth century and a corresponding increase in lease prices.;In the second essay I show that the CGF developed in the eighteenth century as a quasi-private organization responsible for collecting about one-half of French Tax Revenues. It was also one of the largest lenders to the Crown. It is argued that the relationship between the Crown and the CGF resembled modern models of Sovereign Debt as a "Contingent Claim". In order to sustain positive lending in these models the Sovereign must face a high opportunity cost for reneging on the Lender and raising funds through alternative sources. During the eighteenth century the CGF raised the cost faced by the Crown for reneging by protecting its monopsony over the collection of Tax Farm revenues, and the lending activities that went along with that collection. It developed a highly specialized and hierarchical organization in order to reduce the transaction costs of enforcing its monopsony. The result was a carceral system which severely complicated fiscal reform as the Revolution approached.