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January 28, 2008


Maynard Handley

Of course since growth is a means to an end, not (for normal human beings) an end in itself, the point is all rather irrelevant, isn't it?

How about you get back to us when you have determined whether large government is good or bad for human happiness?


5% in 10 years is BIG? What does a recession cost? (Which makes me wonder how robust the results are).


reason asks the right question here, IMO.


It seems to me however, that the actual methodology would be very difficult to do properly.

Think about government pension schemes and private pension schemes for instance. (Same with health insurance). Mostly they do the same thing, so moving them to or from the public sector has almost nothing to do with the real structure of the economy (but on the other may have a lot to do with the intertemporal sense of security of residents).

I agree it is clear that some government spending (defence, badly designed social security etc) has clearly a dead weight loss, and excessive government debt in particular crowds out private investment. But the question is hard to test well. The great variety of systems that have over the long term in per capita terms performed remarkly similarly (with scientific advances mostly being the limiting factor) suggests that the effect is not that great.


Are you going to post this one on Liberal Conspiracy?
They haven't quite got the message...

Mark Wadsworth

Your last para, totally agreed, that's just commonsense. VAT is by far the worst tax on business/enterprise/employment...


chris strange

Shame that excise duties and VAT are controlled by the EU and therefore either have to be above the EU required minimum rates or are completely outside the UK governments control.

Mark Wadsworth

CS, all the more reason for leaving the EU, then. Which would also enable us to replace entire welfare system with a Citizen's Basic Income.


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Big government is bad for economic growth. The GDP cuts growth by 0.13 percentage points a year. if sustained take half a point off GDP growth, making us more than 5% worse off in 10 years' time than we would have been had spending stayed at 2000's levels. So this is very bad for economic growth.

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