What does the cost disease imply about the public sector?

Tyler Cowen:

Matt Yglesias has a good post on the recent Steven Pearlstein column. Here is Matt:

...people need to start paying much more attention to questions of tax efficiency. It's overwhelmingly likely that we're going to want the public sector to be a larger share of the economy in 10, 20, 30, 40 years than it is today and we need to find relatively growth-friendly ways to make that happen.

Here is Pearlstein:

From a political perspective, Baumol's most important insight is that government spending must grow as a percentage of the economy. Most of the services that are provided by, or financed by government -- health care, education, criminal justice, national security, diplomacy, industry regulation, scientific research -- are those that suffer most acutely from Baumol's disease. That's not because of incompetence or self-interest on the part of public servants or even the socialist instincts of Democratic politicians -- it's in the nature of those activities.

Posted by Jim Zellmer at October 11, 2012 2:23 AM
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