I explained last year that there is an inverse relationship between government efficiency and the size of government.
And Mark Steyn made the same point, using humor, back in 2012.
Interestingly, we have some unexpected allies.
In a recently released study, two economists for the World Bank decided to investigate the effectiveness of government spending.
Governments of developing countries typically spend resources equivalent to between 15 and 30 percent of GDP. Hence, small changes in the efficiency of public spending could have a significant impact on GDP and on the attainment of the government’s objectives. The first challenge faced by stakeholders is measuring efficiency. This paper attempts such quantification and verifies empirical regularities in the cross country-variation in the efficiency scores.
So they calculated how much different governments were spending and the results that were being achieved.
Using two different methodologies, here’s what they found for health spending and life expectancy.
The goal, of course, is to get good results (to be higher on the vertical axis) without having to spend a lot of money (in other words, try to be farther left on the horizontal axis).
And here are the numbers for education quality and education spending.
The economist then crunched all the numbers to determine the relationship between spending and outcomes.
The results may surprise some people.
Government expenditure (GOVEXP) is negatively associated with efficiency scores in education (Tables 14 a and b). This result is robust to changes in the output indicator selected. In the output efficiency case, the impact is ambiguous specially when the PISA Math and Science scores are the output indicators (Table 14 b). In health (Tables 15 a and b), the negative association is present in both input and output efficiency. In infrastructure, the expenditure variables (GOVEXP and PUBGFC10PC) are negative in the six output indicators that are used (Table 16a).23 There is a robust trade-off between size of expenditure and efficiency. …The share of public financing within the total (sum of public and private) is robustly associated with lower efficiency scores.
But here’s another surprise.
These World Bank results are not an outlier.
The European Central Bank has two separate studies (here and here) that conclude smaller government is more effective.
And the International Monetary Fund found that decentralized government is more efficient.
P.S. Don’t forget that this competency argument for small government is augmented by the economic argument for small government.
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To me this is common sense. Larger organizations are always less efficient. Government run programs are less efficient than private enterprises. But, you’ll never get the bureaucrats to admit to this fact.
I read we just spent 523 billion on debt service… there is no way to cut back on the size and scope of government as long as we allow the political elites a blank check… the politicians will continue to grow government… buy votes… and grease the palms of their cronies… as long as the money flows… one way or another we have to impose a spending cap on theses sweet smelling dandies… … add term limits… and the dynamic will be dramatically changed in favor the American people… and personal freedom…
So true. Here in the Bahamas we have bloated government with about 40,000 mostly unproductive employees, not counting employees in government public corporations, for a country with a population of about 450,000. I wonder if you have any information of how the Bahamas compares with other similar sized economies? Thank you.