Autocratic, Democratic, and Optimal Government

Autocratic, Democratic, and Optimal Government

Fiscal Choices and Economic Outcomes

The Locke Institute series

William A. Niskanen

This book presents simple models of the major alternative types of political regimes, estimates of the parameters of these models, and quantitative estimates of the fiscal choices and economic outcomes of these regimes. William Niskanen provides valuable analysis of the effects of the voting rule, the progressivity of the tax structure, and the length of the fiscal horizon in democratic governments and interesting insights of the effects of alternative regimes on policies, such as war and immigration, that affect the number of people subject to the regime.

Chapter 5: Variations on the Democratic Model

William A. Niskanen

Subjects: economics and finance, public choice theory, politics and public policy, public choice


What would be the effects on the fiscal choices and economic outcomes of a democratic government by varying the model parameters from those presented in Chapter 3, varying the level of fixed costs from that in the standard case presented in Chapter 4, or the difference between a short- and long-run fiscal horizon? These are the questions addressed in this chapter. THE ECONOMIC PARAMETERS An understanding of the effects of varying the economic parameters b and c is important for three reasons: these parameters cannot be estimated precisely, they may differ over time in the same country, and they almost surely differ among countries. The effects of varying each of these economic parameters are specific to the standard model of a democracy with transfer payments, a broad franchise and majority rule, and a longterm fiscal horizon, holding constant the other parameters in this model. As it turns out, side calculations (not reported here) indicate that the relative outcomes of autocratic, democratic, and optimal government are changed only a little by varying these economic parameters. Increasing the parameter b increases the positive marginal effect on total output of a given level of expenditures for general government services. This parameter may be changed by changing the allocation or efficiency of general government expenditures, but it is more likely to reflect changes in the 48 Variations on the Democratic Model 49 economy. An increase in the demand for education or some damage to...

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