How Governments Fund Themselves — The Wealth of Nations

Smith asks where governments get money after listing what they must spend. Revenue can come from property the crown already owns, or from taxes on private incomes. The oldest sovereign wealth is herds: a Tartar chief lives on milk and increase from his own flocks without taxing anyone. Small republics like Hamburg sometimes run wine cellars or banks, and the post office succeeds because it is simple carriage business with clear returns.

Large trading companies held by the crown usually fail. Agents spend public stock as if it were their own, and the East India Company shows how servants grow rich while the public account loses. Crown lands in Britain yield far less than private estates because no one improves them with the same care. By Smith's day most kings had sold or mortgaged royal assets, so taxation on rent, profit, and wages had become the real source of revenue. The post office remains the rare case where public management works because the business is simple and returns are immediate.