Last week, I interviewed prominent US economist and commentator Dan Mitchell regarding government spending and economic growth for the latest episode of my Economics Explained podcast. Dan is co-founder of the Center for Freedom and Prosperity, and he is a former Senior Fellow at the Cato Institute. He regularly appears in the media, including on programs on Fox, CNBC, and other channels. Here’s a link to Dan’s excellent International Liberty blog.
In the interview, we discussed the long-run impact of government spending on growth, rather than the debate over short-run multiplier impacts, and we considered recent OECD research as well as Adam Smith’s timeless wisdom from the eighteenth century.
Use these timestamps to jump right to the highlights:
- 1:40 – Gene mentions the Optimal size of government in Australia paper co-authored by Griffith University Professor Tony Makin and Economic Society of Australia (QLD) President Julian Pearce
- 3:00 – Dan notes empirical literature suggests optimal size of government around 20% of GDP
- 10:20 – discussion of OECD research on government spending and growth (see this OECD working paper and Dan’s blog plot)
- 17:10 – Dan notes the 1930s and 1960s were the two periods where the size of government really stepped up
- 20:05 – how a value-added tax (VAT) promotes growth of government
- 30:55 – discussion of Adam Smith’s dictum “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and tolerable administration of justice…” (see this Online Library of Liberty post)
- 32:45 – using foreign judges to import the rule of law
Thanks to Darren Brady Nelson for helping to arrange my conversation with Dan.