The Rahn Curve and the growth-maximising level of government


As Arthur Seldon used to argue: we should take more risks of under-government!It is also worth noting what George Osborne pointed out in his recent emergency budget: Our [UK] government budget problem is not that taxation has been too low: it is that government spending has been too high.

I think the problem goes much deeper than government spending. The labour market is not up to standard and so many people are used to better lifestyle than they earn. The fact is people will have less than they did before they borrowed money and that is a huge transition.

The Rahn Curve is a distorted, ideologically driven theory.Less well-off societies tend to grow faster because they are catching up with the leaders and can use their technology. Better off societies, which tend to care more about individual welfare, health and the environment etc. and so have high public spending. They also tend to be slower growing because they are at the technological forefront and have already taken advantage of most of the more easily available advances.Just look at the levels of human wellbeing in countries like Denmark, The Netherlands and Luxembourg and tell me they are suffering from too high a level of government spending. The Rahn Curve is simply rubbish!

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