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The Inevitable Growth of Government?

The Inevitable Growth of Government?. Sam Peltzman University of Chicago Booth School of Business. “ The Tide is Turning”. The failure of Western governments to achieve their proclaimed objectives has produced a widespread reaction against big government. . . .

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The Inevitable Growth of Government?

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  1. The Inevitable Growth of Government? Sam Peltzman University of Chicago Booth School of Business

  2. “The Tide is Turning” The failure of Western governments to achieve their proclaimed objectives has produced a widespread reaction against big government. . . . [W]e are waking up. We are again recognizing the dangers of an overgoverned society, coming to understand that good objectives can be perverted by bad means, that reliance on the freedom of people to control their own lives in accordance with their own values is the surest way to achieve the full potential of a great society. . . . [W]e are still free to choose. . . –to continue on the road …to ever bigger government, or to call a halt and change direction -Milton & Rose Friedman, Free to Choose, 1980

  3. Government Spending in the Great Recession(Total Expenditures as % of GDP)

  4. Overview • Some history • Have we traveled “the road to ever bigger government”? • Any basis for Friedman’s optimism? • Why did we get to this point? • Where might we be going • Facts – mainly about government budgets/GDP

  5. Government Spending as Percent of GDP1950-2007

  6. Government Spending as Percent of GDP1950-2007

  7. Government Expenditures as % of GDPIsrael and USA. 1960-1980Non Defense Expenditures

  8. Government Expenditures as % of GDPIsrael and USA. 1980-2010Non Defense Expenditures

  9. The Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth…. But it has done so in an atmosphere of great human sacrifice – even loss of life – and political repression. Is such a frightful human toll worth the economic gains? This is one of the most profound dilemmas of human society. Although the Soviet model is firmly established in the U.S.S.R…. - Paul A. Samuelson and William Nordhaus, Economics, 12th ed., 1985 [emphasis added]

  10. Government Share of Spending for Health Care1950-2008 Average across 20 high income OECD countries. Source:OECD Health Data and author’s calculations

  11. Share of Population Over 65. OECD Countries1950-2020 As much growth in the next decade as in the preceding 4. Average for 20 OECD countries: AU, AT, BE, CA,DK,FI,FR,DE, IR, IT, JP,NL,NZ,NO,PT,SP, SE,CH,UK,US. Data beyond 2010 are OECD projections

  12. A Summary – But No Conclusion • Government has grown in last few years • And over a much longer time span • But it also stopped growing for a long time c1980-2007 • Two forces helped stop the growth • Ideology: a loss of belief in benefits of intervention • Interest: growing numbers who lose on balance • Where will we be in 2050? • ??? • But you will probably know more much sooner

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