Title: Searching for Leviathan: An Empirical Study.
Abstract: In several papers and a recent book, Geoffrey Brennan and James Buchanan (1977, 1978, 1980) have put forth a striking and controversial view of the public sector. Drawing by analogy on the conventional theory of monopoly in the private sector, they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy. From this perspective, they develop a fiscal constitution whose central purpose is to constrain by limiting in various ways its access to tax and other fiscal instruments. While the Leviathan hypothesis has been the source of lively debate and a wide range of policy proposals, it has not been the subject of much systematic empirical work or testing.' This is a matter of some importance since the policy implications of the Leviathan view are disturbing, to put it mildly. In particular, Brennan and Buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system. If, in fact, the Leviathan view is an inaccurate depiction of the functioning of the public sector, the introduction of their policy proposals is likely to make a sorry mess of the fiscal system. The Leviathan model does, however, have some straightforward implications for observable fiscal behavior. It is the purpose of this paper to examine one of these testable implications. Brennan and Buchanan stress that fiscal decentralization is itself a powerful constraint on Leviathan: competition among governments in the context of the interjurisdictional mobility of persons in pursuit of 'fiscal gains' can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power (1980, p. 184). Such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of Leviathan to channel resources into the public sector. In short, as indicated by the epigraph to this paper, the Leviathan model implies that, other things equal, the size of the public sector should vary inversely with the extent of fiscal decentralization.2
Publication Year: 1985
Publication Date: 1985-01-01
Language: en
Type: article
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Cited By Count: 616
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