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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 9: Culture and Institutions

William A. Niskanen


This book has focused primarily on the fiscal choices and economic outcomes of the several major types of political regimes. For the same physical, human, and institutional conditions, as summarized in Chapter 4, a nation ruled by an optimal government produces about twice as much output per potential worker and over three times as much average net income as a nation ruled by an autocratic government. The variance of economic output among countries, however, is much higher than can be explained by the structure of the relevant regimes. Almost all the rich nations are now ruled by democratic governments; the only exceptions to this pattern are Hong Kong and Singapore, islands with only limited democracy but blessed with the common law, and those nations with substantial oil wealth. But that is not a sufficient basis to determine whether democracy leads to economic prosperity or that prosperity leads to democracy. Moreover, there is a wide variance in economic output per capita among the democracies and a wider variance among all nations than can be explained by the structure of the relevant regime. Gross domestic product per capita in the United States, for example, is about 15 times that in the poorest democracies such as India and nearly 60 times that in the poorest nations, such as Ethiopia, ruled by autocratic governments. A small part of the variance in output per capita is explained by the number of potential workers per capita. Only about 50 percent of the population in the...

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