Public Choice III

In the previous chapter we documented how governments have grown around the world – until in Europe; they now generally absorb half the national income or more. What have been the consequences of this growth for the welfare of the citizens of these countries? What have been the consequences for the economic performance of the countries? The first question is, of course, the most relevant one. Since the end of World War II, the United States has spent over $8 trillion on defense. If these expenditures prevented a third world war, led to the collapse of Communism in East Europe and the Soviet Union, and thereby preserved democracy and freedom in the West, most Americans would probably say that the money was well spent. But if the same events would have transpired if the United States had spent only a tenth as much on defense, then more than $7 trillion would have been wasted, and Americans are that much worse off as a result.

The very “nonmarket” nature of many of the goods and services government supplies makes it difficult to measure their effects on welfare.