Fiscal Choices and Economic Outcomes
Chapter 4: Autocratic, Democratic, and Optimal Government
The models of government developed in Chapter 2 and the model parameters estimated in Chapter 3 now provide a basis for quantitative answers to some of the questions posed at the beginning of this book. This chapter presents a summary comparison of the ﬁscal choices and economic outcomes for each of the major types of political regimes. The reference case in this comparison is a broad franchise democracy with majority rule and a long-term ﬁscal horizon. And the quantitative estimates for each type of regime presented in Table 4.1 are based on the implicit economic parameters presented in Table 3.3 (Chapter 3) in order to replicate the major ﬁscal choices by government in the United States in 1996. AUTOCRATIC GOVERNMENT Autocratic governments yield great beneﬁts to the autocracy and, possibly, masterworks and monuments valued by posterity, but they are a disaster for the general population. The autocracy may capture nearly one-third of total output, leaving less than one-half of total output for the general population. A large share of output captured by the autocracy is the only plausible explanation of the extraordinary expenditures for the palaces, pyramids, and perquisites of the autocracy in ancient cultures in which the average output was a tiny fraction of that in contemporary economies. As expressed by the classics scholar Edith Hamilton: 40 Autocratic, Democratic, and Optimal Government 41 Table 4.1 Summary comparison: ﬁscal choices and economic outcomes Autocracy Y F G P T Net income Average Median 642.8 80.8 (0.126) 78.8 (0.124) 203.2...
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