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Hayekian welfare states : Explaining the coexistence of economic freedom and big government

Bergh, Andreas LU (2019) In Journal of Institutional Economics
Abstract

To explain the coexistence of economic freedom and big government, this paper distinguishes between big government in the fiscal sense of requiring high taxes, and big government in the Hayekian sense of requiring knowledge that is difficult to acquire from a central authority. The indicators of government size in measures of economic freedom capture the fiscal size but ignore the Hayekian knowledge problem. Thinking about government size in both the fiscal and Hayekian dimensions suggests the possibility of Hayekian welfare states where trust and state capacity facilitate experimentation and learning, resulting in a public sector that is big in a fiscal sense but not necessarily more vulnerable to the Hayekian knowledge problem.... (More)

To explain the coexistence of economic freedom and big government, this paper distinguishes between big government in the fiscal sense of requiring high taxes, and big government in the Hayekian sense of requiring knowledge that is difficult to acquire from a central authority. The indicators of government size in measures of economic freedom capture the fiscal size but ignore the Hayekian knowledge problem. Thinking about government size in both the fiscal and Hayekian dimensions suggests the possibility of Hayekian welfare states where trust and state capacity facilitate experimentation and learning, resulting in a public sector that is big in a fiscal sense but not necessarily more vulnerable to the Hayekian knowledge problem. Pensions in Sweden are used as a case to illustrate the empirical relevance of the argument. The new pension system represents big government in a fiscal sense, but by relying on decentralized choice it requires relatively little central knowledge.

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author
organization
publishing date
type
Contribution to journal
publication status
epub
subject
keywords
economic freedom, economic reforms, Hayek, state capacity, Welfare state
in
Journal of Institutional Economics
publisher
Cambridge University Press
external identifiers
  • scopus:85072185856
ISSN
1744-1374
DOI
10.1017/S1744137419000432
language
English
LU publication?
yes
id
547029fa-b6eb-41cd-9b9f-dea3605bf083
date added to LUP
2019-10-11 14:11:56
date last changed
2020-01-13 02:27:34
@article{547029fa-b6eb-41cd-9b9f-dea3605bf083,
  abstract     = {<p>To explain the coexistence of economic freedom and big government, this paper distinguishes between big government in the fiscal sense of requiring high taxes, and big government in the Hayekian sense of requiring knowledge that is difficult to acquire from a central authority. The indicators of government size in measures of economic freedom capture the fiscal size but ignore the Hayekian knowledge problem. Thinking about government size in both the fiscal and Hayekian dimensions suggests the possibility of Hayekian welfare states where trust and state capacity facilitate experimentation and learning, resulting in a public sector that is big in a fiscal sense but not necessarily more vulnerable to the Hayekian knowledge problem. Pensions in Sweden are used as a case to illustrate the empirical relevance of the argument. The new pension system represents big government in a fiscal sense, but by relying on decentralized choice it requires relatively little central knowledge.</p>},
  author       = {Bergh, Andreas},
  issn         = {1744-1374},
  language     = {eng},
  publisher    = {Cambridge University Press},
  series       = {Journal of Institutional Economics},
  title        = {Hayekian welfare states : Explaining the coexistence of economic freedom and big government},
  url          = {http://dx.doi.org/10.1017/S1744137419000432},
  doi          = {10.1017/S1744137419000432},
  year         = {2019},
}