I examine choice of size of government by a planner who has partial knowledge of population preferences and the productivity of public spending. Focusing on income tax-financed spending for infrastructure, I examine scenarios where the planner observes the outcome of a status quo policy and uses various decision criteria to choose policy. The analysis shows that the planner can reasonably choose a wide range of spending levels - thus, a society can rationalise having a small or large government. I conclude that to achieve credible conclusions about the desirable size of government, we need to improve current knowledge of preferences and the productivity of spending vastly.
ASJC Scopus subject areas
- Economics and Econometrics