Sunday, January 15, 2012

Is Government an Inferior Good?

There seems to be a assumption by most Democrats and indeed a tacit assumption by most economists that government is a normal good in the formal economic sense (i.e. the share of income we spend on government should be constant as we get richer) when they say that right now taxes are too low because the percent of GDP devoted to taxes has been decreasing.

But a perfectly reasonable alternative assumption that most economists might agree to is that if government is primarily to provide for the necessities in life, and not the luxuries, then government should be an "inferior good" in that the share of income we spend on government should be decreasing as we get richer.
Post a Comment

Amazon Contextual Product Ads