undefined | Better HN

0 pointscjlars9y ago0 comments

The US would count as a small state by most OECD averages, so assuming by quality of life you mean, 'high GDP and standards of living', Texas would be a fairly good counter-example of a successful small state. I don't think there are many people in the libertarian mainstream who would suggest shrinking government revenue to below ~15-20% of GDP (US average is currently ~27%, Gary Johnson only recommended a 3% reduction in his presidential run [0]), so if you're only interested in refuting the lunatic fringe, then you can probably stop reading now.

To answer your question more scientifically, a preponderance of the evidence does suggest that countries with smaller governments as a percent of GDP do experience higher growth in standard of living [1]. So if your goal is to maximize long term standards of living, you would tend to support a relatively smaller government than is common among rich countries today.

[0] https://www.theatlantic.com/business/archive/2016/10/no-not-... [1] https://taxfoundation.org/what-evidence-taxes-and-growth

0 comments

2 comments · 1 top-level

jernfrost9y ago· 1 in thread

Doesn't fit with studies I've read. E.g nordic countries had similar tax levels to the US but started increasing taxes substantially in the 1960s without experiencing any lower economic growth. In Europe as a whole nordic countries tend to have the highest taxes but best performing among most economic metrics, growth, uemployment, competiveness, innovation etc.

I suspect these studies are massively skewed by low tax asian countries which have had high growth due to the catchup effect, and very high savings rate. Also cultural peculiarities means e.g. Countried like Japan doesn't need as much welfare system. You already got lifelong employment and companies trying to keep employees in downturns.

cjlarsOP9y ago

By all means, do your own research -- I've personally had a hard time finding a strong body of evidence supporting the idea that high taxes (over ~25% of GDP) are supportive of economic growth (please share if you have something!).

If you're worried about sampling bias with respect to Asian countries specifically, here's a time series analysis supporting the same conclusions [0]. Another angle that you may find interesting is that low tax US states tend to outgrow high tax US states [1].

One other way to look at is expert opinion. You'll note that under the CBO dynamic scoring methods, they assume higher economic growth under low taxes -- this is controversial politically, but the majority of economic forecasters appear to use an inverse relationship between taxes and growth -- presumably this should be worth something. Also note that, although there is not a hard, climate-style consensus, there are substantially more professional economists who believe that taxes slow growth than not as it relates to the current US system [2].

A lot of people like to point to some anecdotal evidence of good results in Sweden, but then ignore poor results in Denmark -- I think broad based statistical evidence is needed for these sorts of things since many other factors, such as debt, immigration policy, trade policy, and so forth can easily confound your results. The key is to look at the same problem from a wide variety of angles and see if a conclusion starts to emerge given that some studies will point in one direction and some will point in others. If 90% of the research is saying one thing, 8% is saying there's no effect, and 2% is pointing the other direction, what should you believe?

[0] http://www.nber.org/papers/w13264 [1] http://www.laffercenter.com/wp-content/uploads/2012/09/2012-... [2] http://www.igmchicago.org/surveys/laffer-curvehttp://www.igm...

j / k navigate · click thread line to collapse