4 - FOURTH LECTURE: The Calculus of Consent and Limits on Government Expenditure Growth

Summary

Introduction

In this lecture I propose to illustrate my thesis with reference to the perennial question of how to place limits on the growth of the public sector. In contemporary language employed by public choice theorists we are concerned with the problem of “the taming of Leviathan”.

I shall avoid evaluating normative systems which are commonly used to confer a badge of legitimacy on particular kinds of policy measures or constitutional arrangements employed by Leviathan tamers. I shall however consider the normative origins of such measures or arrangements, if only because these are of particular significance to those public choice theorists concerned about the Leviathan problem. To be more specific, public choice theorists who have placed particular emphasis on allying their normative prescriptions with Paretian type welfare economics derive their policy recommendations from the fulfilment of voters’ choices in which voters have as complete information as possible about the consequences of their decisions. Two major lines of constitutional change are recommended by them. The first is to rid the political system of what may be termed “the tyranny of the median voter” and to maximise the degree of consent to budgetary changes, subject to the constraints imposed by transaction costs. The second is to reduce the prevalence of “fiscal illusion” which enables governments to distort the information available to taxpayers/voters about the consequences of their decisions.