Monday, August 29, 2011

Big Government (in absolute terms)

Executive Summary: Some of my friends think that absolute budget size, not budget/GDP ratio, is what determines "size of government", and that the problem with big government is graft.  I think this is wrong, and has bad consequences.

So last night I had a very interesting (overall... there were some boring stretches) chat about the nature of government.  One of the things that came up was the idea that the absolute size of the budget mattered more than the ratio of government spending to GDP or whatever.  I thought this idea was interesting, but wrong, and I guess I kind of want to think about why someone might reasonably believe that the absolute size of the government makes a big difference irrespective of the relative size of government.  I point this out because in previous discussions I've had about size of government the relevant factor cited has been share of GDP, not absolute spending.

It seems like the primary argument being presented was that the absolute dollar amount of the federal government, not the share of GDP, was the principle factor determining the ease of graft.  I think this is probably correct.  Slight reductions in very large numbers are just harder to detect than same size reductions in smaller numbers.  We know about this problem, it's called least noticeable difference, and in many cases the growth function is logarithmic, so proportionally larger changes are less detectable in larger datasets.  That would be a huge problem if we didn't have piles of technologies like "calculators" and "logarithmic graphs" and "accounting" in order to oversee these things.  As is, I just have trouble caring.  The government's finances are public knowledge.  If we want to check this stuff we can, and if it doesn't check out we can complain.

The other problem with this idea is that just by virtue of having a big country, we aren't allowed to have nice things.  If we just cared about share of government spending as a proportion of GDP, implementing single payer healthcare would be a no brainer.  Well, if you looked at the evidence it would be.  But, if you want to keep total government expenses beneath a certain dollar number, the possibility of any large scale program is greatly reduced.  That seems to me to be stupid and cruel.  We can't help our citizens as much as another country because we have more of them, even though we also have more money?  Color me unimpressed.

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