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While the importance of a policy cannot be judged solely by the amount of money spent upon it, we should not lose sight of the fact that nearly everything government wants to do has some cost. The most distinctive activities of the contemporary state, its welfare programs, are especially costly commitments. To carry out its policies, twentieth-century government cannot rely upon nineteenth-century philanthropy or upon the medieval practice of cOTw~e, that is, labor given government as a supplement to taxes.

Warring nations. It is Socialist, because government makes major economic decisions that pervasively influence the economy and allocates a large portion of the national product. A variety of compound catchwords have been coined in efforts to describe our contemporary political economy. " 2 The wealth created by the mixed economy has financed the growth of the welfare state. Today, citizenship underwrites an individual's weIl-being from womb to tomb, for public programs guarantee such fundamentals of individual welfare as schools, hospitals, and a pension in old age.

In this chapter, we examine the conditions that could cause the economic inadequacies of government to undermine political authority. The first section explains why it is no longer meaningful to think of separate political and economic systems and why the growing power of political as against market choices has made the authority of government more vulnerable. The second section identifies the limits of political economy and how a government may try to exceed these limits in vain efforts to consume more than it produces.

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