Data hounds will by delighted by Vito Tanzi’s new book Government Versus Markets: The Changing Economic Role of the State, says Richard Rahn, who notes that the book also makes a very good case for lower taxes and smaller government:
Some advocates of higher taxes argue that tax rates on labor do not have much impact on the willingness to work, but Mr. Tanzi gives us a very clear chart plotting the tax rate on labor versus the number of hours worked per year in many countries. It shows that there is a strong inverse relationship between tax rates on labor and hours worked. Such facts are inconvenient for the big-government, high-tax crowd. Mr. Tanzi is far from being anti-government, but the facts and data he presents show how most governments have grown far beyond the optimum point, and he is a bit pessimistic about the ability of democracies to rein in excessive and destructive government.
Near the end of the book, Mr. Tanzi observes: “Once the population of a country (or, more often, groups within it) come to see the government as a potential cow that can be milked, there is no longer a limit to the demands for more public spending. There are literally infinite ‘needs’ of the population, and infinite groups capable of organizing politically, to press for more government spending or other government actions that would benefit them.”
But despite Mr. Tanzi’s pessimism, he documents how two countries, Sweden and Canada, have changed course and reduced the size of government because the body politic came to understand that the cow was being over-milked and soon would go dry or die.
Posted on 09/02/11 01:25 PM by Alex Adrianson | Blog Archive