This fascinating and deeply researched book explores what must be one of the least examined aspects of American history: the way compensation for public officials has changed over time. That might seem like a dry subject, but author Nicholas Parrillo, a professor at Yale Law School, demonstrates that the shift away from our early system of paying public officials in a largely piecemeal fashion (wherein compensation depended largely on industriousness), and toward paying flat salaries, reflected dramatic changes in the relationship between the citizen and government. Today’s mega-state would, Parrillo argues, be impossible without the changes in compensation he documents.

In early America, some public officials were paid a salary, such as the president and members of Congress. But most were compensated through what Parrillo terms “facilitative payments.” That is, citizens would pay officials via fees on such government activities as the issuance of permits and the processing of applications. Those payments were usually not set by law, but even when they were, added gratuities for the official to induce more expeditious service were common.

Was that a bad system? It left the door open to price-gouging by avaricious officials, but on the whole, people seemed content with it. Parrillo writes, “The recipient’s freedom to adjust the price and the official’s freedom to adjust the service opened the way for mutual benefit. In the eyes of many, bargaining between officials and recipients was not only convenient, but necessary to the continued functioning of government as the needs of service recipients evolved.”

When the facilitative payments system was later replaced (first by bounties and later by salaries), the consequences were not altogether favorable. Parrillo observes, “For the recipients themselves, the severing of the reciprocal bond was a profound loss. It psychologically estranged them from the officials they had once viewed as solicitous and friendly.” Today’s Americans, used to the indifference or even surliness of many of the salaried government officials with whom we must deal, will understand that “estrangement.”

A second form of compensation for early American public officials was bounties. Bounties were paid for performing tasks that the affected individual certainly did not want and would not willingly pay for, such as arrest, discovering tax delinquencies, or being compelled to do hard labor in prison. Bounties gave the official a profit motive for doing disagreeable, unpopular work—often too zealously.

Growth of the bounty system / Beginning in the mid-19th century, federal and state politicians, eager to gain more revenue so government could expand its functions, moved toward bounties in a wide range of government operations. The move coincided with an increasingly nationalistic view of the law and citizenship emanating from top politicians and intellectuals. Parrillo captures that philosophy in this 1887 quotation from Republican congressman (and later Speaker of the House) Thomas B. Reed, distinguishing between crimes against a community and crimes against the United States:

The whole community is awake to detect murder and punish theft. But what community ever bestirred itself against frauds on the internal revenue, against moonshine distilleries, against smuggling, against a hundred things which are crimes against the United States?

With that expanding view of the role of government, enforcement by “local notables,” as in the olden days (reflecting community thinking and mostly cooperating with the citizenry), simply would not do. Governments turned increasingly to bounty-driven officials such as “tax ferrets” who would get a cut of additional tax collections if they identified people who had underpaid their taxes, mostly on intangible assets.

An especially interesting example of the shift toward aggressive enforcement by profit-seeking officials that Parrillo discusses is in tariffs and customs duties. In early America, he writes, customs officials “administered the law in a mild and indulgent manner, and merchants, thinking the government’s demands reasonable, complied willingly if loosely.” But with the ascendency of high-tariff Republicans to power, that changed. The Republicans wanted to use high tariffs to squeeze more revenue out of trade for a host of new federal expenses.

Toward that end, they gave customs officials a profit motive to find cases of underpayment or evasion. The more aggressively the officials looked, the more they could earn “moieties” for themselves (shares of the penalties on merchants for tariff violations). Naturally, the result was a sea change in the relationship between merchants and officials. The federal government did obtain an increase in revenues as its “moiety men” hunted for every possible infraction. But that came at the cost of destroying the trust and confidence that had formerly existed and bringing about a “cat and mouse” game of evasion over the importing of goods.

That change required far more government power to look into the affairs of individuals, what Yale political scientist James Scott (whom Parrillo cites) calls “seeing like a state.” The origins of today’s state with its insatiable demands for information about the citizenry can be found in the shift from local law enforcement that was “solicitous and friendly” to distant law enforcement that was much more strict and demanding.

The increasing reliance on bounties to control behavior and extract money led to many problems in society, and Parrillo gives his readers some intriguing examples. In Birmingham, Ala., for instance, policemen were paid in part based on the number of arrests they made. Because of the profit motive, the police arrested many black workers, who spent some of their earnings on illegal pastimes such as gambling. Business owners, however, hated the bounty system because their workers would leave the area in favor of locales where they were less likely to be harassed. Business pressure eventually led to the elimination of the economically counterproductive arrest bounty.

Salaried officials / After several decades of increasing the use of bounties to encourage vigorous law enforcement, government leaders came to understand that the approach was, as Birmingham showed, counterproductive. By the last decades of the 19th century, the trend was strongly away from bounties and toward compensation of government officials by salary.

The principal reason for this change was the psychological insight that the government would elicit more willing obedience to the law if those who enforced it were seen as neutral and objective public servants whose pay was set by law. Parrillo explains,

(T)he very lawmakers who first imposed modern legislative mandates en masse found such a model inadequate, for it ignored the fact that deterrence is rarely sufficient and that laypersons accept law in part because they come to view the officialdom as a legitimate and reasonable body deserving at least a modicum of trust, not as an opponent to be outsmarted.

Paying government officials bounties was understood to interfere with the more important goal of calming opposition to the continuing expansion of state power.

That insight—how rulers seek to make their control over people easier by instilling a sense of legitimacy—is not new. Franz Oppenheimer made that point in his 1943 book The State. Parrillo gives strong support for it with his examples drawn from American history.

Consider the way the profit motive had traditionally been used in naval warfare. During wars, sailors earned prize money (for captured ships) and head money (for killing and capturing enemy sailors). But right after the Spanish-American War, Congress voted to abolish those forms of compensation. Parillo states that following the war, many Americans feared that our new overseas empire would lead to a bigger, more costly navy that would be eager for possible profits through new conflicts. “To allay these anxieties and legitimate the new imperial navy—both for the public and for themselves—the hawks focused on the purity of the navy’s motives,” he writes.

That phrase “purity of motives” sums up the point: by making it appear that government officials were neutral “public servants” who were paid a flat salary for doing work that politicians had decided had to be done, most people would accept—even if unenthusiastically—the state’s increasing predations against their liberty and property.

Profit motive / Parrillo tells this story with little or no judgment on the desirability of the changes he describes. Thus, Against the Profit Motive never goes into the cunning deception involved in convincing people that government officials do not have a profit motive. But of course they do, even when paid a flat salary. Their self-interest is just channeled differently.

Take public prosecutors, for example. At one time they were paid based on convictions, creating a motive for maximizing the number of cases they won. Replacing that method of compensation with a salary did not, however, get rid of the profit motive. These days, public prosecutors try to aggrandize themselves by winning high-profile cases, often through overly aggressive and legally questionable tactics, so as to increase the likelihood that they will get elected to higher office. Their profit motive now takes a different form than it once did, but it hasn’t vanished.

Nor has payment by salary prevented legions of government workers from using their political clout (often through unions) to extract easy working conditions, generous amounts of time off, and exceptionally high pensions from the taxpayers. Their profit-seeking takes place behind the smokescreen of being disinterested public servants—and arguably is more effective for it.

Baudelaire wrote that the Devil’s greatest trick was convincing people that he doesn’t exist. Parrillo’s book prompts a paraphrase: the State’s greatest trick is convincing people that salaried government employees have no private motivations. Supporting the public choice critique of the sociology of the state doesn’t seem to be any part of Parrillo’s goal, but his book nevertheless makes a valuable contribution in that regard.