USH4GOVTF11

USH4GOVTF11 - How Big is Big Government? According to the...

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How Big is Big Government? According to the Bureau of Economic Analysis…in 1951, government spending was 20.1% of GDP. It remained above 20% from 1951 until 1978 (under Jimmy Carter); reaching a peak of 23.9% in 1953 (under Dwight Eisenhower). Government spending also was above 20% from 1980 to 1992 (reaching a peak of 21.3% in 1986 – under Ronald Reagan). From 1993 to 2007, government spending was less than 20% (reaching a minimum of 17.4% from 1998 to 2000 – under Bill Clinton). In 2010, government spending was 20.5%. That is the same as the average of 20.5% we have seen since 1951. Since 1951, real GDP per capita has grown from $15,375 to $46,371 (according to EH.Net). In sum, government spending seen since 1951 has – in percentage terms – has not been growing.
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What does government do in a market based economy? We have seen how the standard of living has improved tremendously over time. This is primarily due to rapid technological change and innovation, and that is at least partially due to the system of capitalism. Capitalism is an economic system where the market is used to allocate goods and services. So what is there left for the government to do? Five Basic Roles (from David Colander) Set the Rules Provide for Public Goods Promote Competition Correct for Externalities and Market Failures Promote Economic Growth and Stability
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The Roles of Government: 1. Setting the rules This is essentially the oldest role of government. In a hunter-gatherer society – where communities are
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This note was uploaded on 09/21/2011 for the course ECON 33974 taught by Professor Barbaraross during the Spring '09 term at Hawaii.

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USH4GOVTF11 - How Big is Big Government? According to the...

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