Dangling at the Abyss: How Deadweight Costs and Political Attitudes May Prevent (or Induce) Collapse

Posted: 13 Mar 2016

See all articles by J. R. Clark

J. R. Clark

The University of Tennessee at Chattanooga

John E. Garen

University of Kentucky - Gatton College of Business and Economics

Date Written: February 11, 2016

Abstract

Analysts have considered what might check the 20th century growth in government, thereby avoiding Leviathan and economic collapse. We develop a model where political economy equilibrium pushes the economy to the brink of collapse, but rising marginal welfare costs may prevent collapse. For small reductions in welfare from government, rational ignorance enables special interests to gain. When deadweight costs become large, taxpayers provide political opposition that prevents collapse. Optimistic views of government may alter this conclusion and induce collapse. However, if favorable attitudes toward government are revised downward in light of poor economic performance, this concern is lessened.

Keywords: economic collapse, political equilibrium, welfare costs

JEL Classification: D72, P16, O43

Suggested Citation

Clark, Jeff R. and Garen, John E., Dangling at the Abyss: How Deadweight Costs and Political Attitudes May Prevent (or Induce) Collapse (February 11, 2016). Available at SSRN: https://ssrn.com/abstract=2746022

Jeff R. Clark (Contact Author)

The University of Tennessee at Chattanooga ( email )

Department of Economics
Suite 313 Fletcher Hall
Chattanooga, TN 37403-2598
United States

John E. Garen

University of Kentucky - Gatton College of Business and Economics ( email )

Department of Economics
Lexington, KY 40506
United States
859-257-3581 (Phone)
859-323-1920 (Fax)

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