What’s the relationship between the Rahn Curve and the Laffer Curve?
For the uninitiated, the Rahn Curve is the common-sense
notion that some government is helpful for prosperous markets but too much government is harmful to economic performance.
Even libertarians, for instance, will acknowledge that spending on core “public goods” such as police protection and courts (assuming, of course, low levels of corruption) can enable the smooth functioning of markets.
Some even argue that government spending on human capital and physical capital can facilitate economic activity. For what it’s worth, I think that the government’s track record in those areas leaves a lot to be desired, so I’d prefer to give the private sector a greater role in areas such as education and highways.
The big problem, though, is that most government spending is for programs that are often categorized as “transfers” and “consumption.” And these are outlays…
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