Review of Austrian Economics - The Ludwig von Mises Institute

Higgs: Analysis of the Growth of Government 15
economics. (Maybe economics [in reality] is not always like economics
[in the models] either.) In politics one person can make a difference—
not that very many can or do, but the potential exists when the right
person and the right occasion conjoin. To understand the growth of
government, which is obviously the outcome of a political process, we
may need to attend to the roles played by particular actors at critical
junctures.
Proposition 9
In studying the growth of government, econometric analysis is
superior to historical analysis.
The idea that econometrics trumps history seems quite warranted if
one accepts Proposition 7 (invariant structural model) and Proposition
8 (personalities are irrelevant). I have already criticized those
propositions, but additional objections may be raised.
One problem has to do with the distinction between the creation
of a new government power and its exercise, say, by means of government
spending or employment. In the United States, authorization
must precede the appropriation of public funds. Often certain political
events prompt the creation of new authority, but a long time may
pass before much money is spent under that authority.
Consider, for example, the Social Security system created in 1935.
Clearly the program reflected the unique configuration of socio-economic
and political conditions in the mid-1980s (Weaver 1983). For
the next 20 years it remained a minor element in federal spending;
as late as 1955, only $4.3 billion was spent for Social Security (OASI)
transfers to the aged and to eligible survivors (U.S. Office of Management
and Budget 1989, p. 189). It is estimated that in 1990 these
types of transfers will reach about $218 billion, thereby accounting
for a large share of the increase in federal spending over the past 35
years—a period when OASI payments grew from about 6 percent to
about 16 percent of all federal spending (U.S. Office of Management
and Budget 1989, p. 232; note that these data do not include other
Social Security transfers, authorized later, such as disability payments
or Medicare).
Of course, the increase in OASI transfers during 1955-1990 reflects
the unfolding of political events during those years, as members
of Congress catered to a segment of the electorate by expanding the
scope of eligibility and increasing the allowable amount of payment
per eligible recipient. But one who tracks the yearly pulling and
hauling of events that resulted in changing amounts of aggregate
spending, as the econometrician does in an abstract way, is attending
to only one aspect of the growth of government, and it is a consequen-