Resource title

A Simple Coase-Like Mechanism that Transfers Control of Government Spending Levels from Politicians to Voters

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Resource description

Elected representatives have little incentive to pursue the interests of those electing them once they are elected. This well-known principle-agent problem leads, in a variety of theories of government, to nonoptimally large levels of government expenditure. An implication is that budgetary rules are seen as necessary to constrain politicians? tax and spending behavior. Popular among such constraints are various Balanced Budget Amendment proposals. These approaches, however, are shown here to have serious limitations, including failure to address the central concern of spending level. An alternative approach is advanced here that relies on a Coase-like mechanism that transfers control of government spending to the voter. Prisoner's dilemma incentives and political competition are seen to be critical to the superiority of the present mechanism to approaches requiring budget balance.

Resource author

Philip E. Graves

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/17935

Resource license

Adapt according to the presented license agreement and reference the original author.