TY  - BOOK
AU  - Manski,Charles F.
ED  - National Bureau of Economic Research.
TI  - Choosing Size of Government Under Ambiguity: Infrastructure Spending and Income Taxation 
T2  - NBER working paper series
PY  - 2012///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - July 2012; Hardcopy version available to institutional subscribers
N2  - Attempting to shed light on the optimal size of government, economists have analyzed planning problems that specify a set of feasible taxation-spending policies and a social welfare function. The analysis characterizes the optimal policy choice of a planner who knows the welfare achieved by each policy. This paper examines choice of size of government by a planner who has partial knowledge of population preferences and the productivity of spending. This is a problem of decision making under ambiguity. Focusing on income-tax financed public spending for infrastructure that aims to enhance productivity, I examine scenarios where the planner observes the outcome of a status quo policy and uses various decision criteria (expected welfare, maximin, Hurwicz, minimax-regret) to choose policy. The analysis shows that the planner can reasonably choose a wide range of spending levels--thus, a society can rationalize having a small or large government. I conclude that to achieve credible conclusions about the desirable size of government, we need to vastly improve current knowledge of population preferences and the productivity of public spending
UR  - https://www.nber.org/papers/w18204
UR  - http://dx.doi.org/10.3386/w18204
ER  -