World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
Is Public Spending Good for You?
Yew-Kwang Ng
World Economics, June 2001

Studies by psychologists, sociologists and economists indicate that increases in incomes beyond about US$4,000 are not related to happiness nor significantly with the objective quality-of-life indicators (which increase with scientific and technological breakthroughs at the global level). Yet everyone wants more money. This may be explained by environmental disruption, relative-income effects, inadequate recognition of adaptation effects, and the materialistic bias due to our accumulation instinct and advertising. These factors cause a bias towards private consumption, making public spending, especially on research and environmental protection (with their long-term and global public-good nature) well below optimal. This is made worse by economists’ emphasis on the excess burden of taxation, ignoring the negative excess burden on the spending side.
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