Graziani, Augusto (1865–1938)

The work of the Italian scholar Augusto Graziani anticipated modern law and economics and institutional theory. To identify laws independent of their natural development, Graziani illustrated the relationship between economic reasoning and legal choices, stressing the economic foundations of the law. His pioneering work, “Il fondamento economico del diritto” (The Economic Foundation of Law) was published in the University of Siena's yearbook in 1894, later reproduced in Teorie e fatti economici (Economic Facts and Theories) in 1912. In later years, he addressed a series of identical considerations in Istituzioni di economia politica (3d ed. 1917, Institutions of Economic Policy).

Graziani suggested that modern democratic states exist for economic reasons. Raising and spending money, Graziani wrote, is the primary chore of representative government. As spending and consolidated debts increase, so does a state's power. Conversely, many states' political weaknesses are economic in nature.

For instance, on electoral politics, Graziani postulated that affluent citizens benefit from less fortunate citizens' votes. Economic disparities ensure that poorer citizens' aspirations are limited to formal equality. Economic efficiency also drives state administration. Activities such as raising a military are more cost-efficient when handled by the state. Therefore, economic factors should determine the scope of state agency centralization.

Graziani viewed crime as the product of economic conditions. He wrote that crimes against property tend to diminish when prices fall and to increase when prices rise. In other words, people steal less when they are increasingly able to meet their personal needs. As for crimes against people, Graziani noted that falling prices could induce subsistence workers to spend impulsively, which, in its turn, might foment crime.

Graziani's examination of civil law looked particularly at family law. He believed that the economic origins of marriage were clear. Traditionally, people believed that a woman was an object for a man to purchase from her father. The custom of dowry payment served to sustain the couple if the husband's labors proved insufficient.

In Graziani's view, commercial law was the ultimate area for the application of economic analysis to explain legal change. He focused on the institution of private property, including its political consequences. He noted that economic development required private ownership of capital, which in turn required state protection. Thus, the state's protection of private property was an effect of the system of production and distribution of wealth.

Graziani's best work involved laws governing inheritance and contract. In “The Economic Nature of Death and Succession” (extract in Studi senesi) and Istituzioni di scienza della finanze (1929, Institutions of the Financial Sciences), he examined succession and inheritance taxes. Graziani justified progressive rates for succession taxes in terms of marginal rates of substitution, noting that the value a taxpayer places on public services increases with his personal wealth. Likewise, a person's marginal cost of paying taxes diminishes as the taxpayer's overall wealth increases by inheritance. The taxpayer's increased utility regarding public services therefore justifies a higher tax. Graziani also examined and justified the practice of applying different tax treatments to different heirs, based on their relationship to the deceased.

Graziani considered the role of estate taxes to supplement the income tax. Specifically, this form of taxation ensured that inherited wealth would not escape taxation. The possibility that the state may tax wealth twice is justified by an estate tax's ability to integrate, [Page 676]compensate, and balance. Ultimately, he saw an economic benefit in promoting wealth distribution and preventing the concentration of wealth in the hands of a few.

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