Rise of Big Government in the 20th Century

 

Opinions and Evidence - The phenomenal growth in the scope and scale of government activities during the 20th century can best be understood as a result of the interaction of supply and demand. The underlying incentives explain why, with government, we "can't always get what we want."

Outline

1. Statistics verify the hypothesis that "big government" in the United States is a twentieth century phenomenon
   1. The history of government expenditure as a percentage of GNP

   2. The history of government employment levels

   3. The history of federal deficits and debt

   4. Non-quantitative measures of government's impact

2. Demand and supply factors as tools of explanation
   1. Faster economic growth in the early 20th century resulted in more demand for government activities
      1. A quicker pace of "creative destruction" meant more individuals suffered losses and petitioned for relief
      2. Growth brought an increase in negative externalities
      3. Urbanization increased the demand for municipal services
      4. Increased migration broke down the traditional, extended family, social-welfare net
      5. Growth produced both interdependence and uncertainty about employment, which changed people's ideological preferences about the role of government
      6. Beginning with W.W.I and increasing during W.W.II there developed an alliance between big government and big business
      7. Citizens' information about government is asymmetrical, leading them to focus more on benefits they receive than on the costs they bear

   2. The costs of "supplying" government changed in the twentieth century
      1. The crises of the 20th century allowed government to get bigger at lower cost and with less resistance
      2. Because of self-selection to Committees the Congressional committee system predisposes government to undertake an increasing number of responsibilities
      3. Beginning with the New Deal, the Supreme Court has loosened the constraints on executive and legislative activities
      4. The "rational ignorance" of citizens means that politicians are freed to act in their own self-interest and in the interest of the special interest groups that have the greatest potential impact on elections

   3. The combination of supply and demand factors explains why, even as government continues to grow, citizens seldom feel that they get what they want

Connections to Economics

Rules of the Game - How did the increased pace of technological innovation and economic growth in the twentieth century change people's perceptions about appropriate roles for government? What social and cultural changes accompanied faster economic growth?

Trade-offs - What are the advantages and disadvantages to economic growth? What do citizens give up by demanding a more active government?

Incentives - Why does government seem to respond more often to special interest groups rather than to the wishes of the majority of the people? Why isn't the American public more effective in getting government to respond to its desires?

The Economic Way of Thinking - The nature of the system of incentives within the electoral process is such that, as government grows, it becomes increasingly responsive to the demands of special interest groups, often at the expense of the general public.

Economic Concepts that support the historical analysis:

• GNP
• interdependence
• public choice theory
• supply and demand
• "rational ignorance"
• fiscal policy
• resource allocation
• externalities
• economic growth
• incentives