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Autocratic, Democratic, and Optimal Government

Fiscal Choices and Economic Outcomes

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.
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Chapter 4: Autocratic, Democratic, and Optimal Government

William A. Niskanen


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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