Review of Austrian Economics - The Ludwig von Mises Institute

Higgs: Analysis of the Growth of Government 13
happen to get 30 cents of additional government spending every time
their personal incomes rose by a dollar? Very strange indeed. If such
constancy were found to have been the case, wouldn't the analyst be
on firmer ground to interpret it as a coincidence, a parametric
peculiarity, rather than the manifestation of a politico-economic
law? After all, the meaning of 30 cents of additional government
spending—the precise collection of goods and services associated
with it—was dramatically different in 1901 and 1989.
Further, given that people's behavior depends on their ideas
and that people learn from their experiences, it is extremely unlikely
that an aggregative "behavioral" relation between a more or
less inaccurate index of government activity and any of the usual
"explanatory" variables would have remained invariant over
nearly a century of tumultuous experience—wars, depressions,
deflations, labor upheavals, inflations, energy crises, environmental
panics, and so forth (contra Becker [1985, p. 332], who postulates
a similar sort of constancy, and Peltzman [1985], who claims to
have confirmed a related political stability econometrically). Can we
really believe that none of these great events budged people's commitment
to, or acquiescence in, spending 30 cents out of every
additional dollar of personal income on government? Even regarding
much shorter periods, similar doubts may be raised. Can
anyone really believe, for example, that the structure of politicoeconomic
behavioral relations did not change in the United States
between 1929 and 1933?
We might well take seriously the conclusion reached by Assar
Lindbeck (1985, pp. 325-26): "there is no compelling reason to model
a process of an expansion of public spending [or the growth of
government in other dimensions] as a series of static equilibria
positions at different values of a set of exogenous variables, or even
as a dynamic sequence of equilibria." We are dealing with "a disequilibrium
process, the speed of which is determined by characteristics
of political competition."
A final caveat, noted by Johan Myhrman (1985, p. 279), pertains
to the example itself: "we have to avoid the temptation that many
have fallen for and that is to conclude that rising income is the cause
of the growth of government." Temporal association, no matter how
close, does not establish a causal relation in any event.
Proposition 8
Which particular persons compose or influence the government
doesn't matter. Only broad socio-economic changes and the relative
strengths of interest groups need be considered.