Yesterday's Games: Contingency Learning and the Growth of Public Spending

Leonard Dudley and Ulrich Witt

Papers on Economics and Evolution from Philipps University Marburg, Department of Geography

Abstract: Between 1890 and 1938, the public share of total spending rose to unprecedented peacetime levels in many Western countries. This development has been explained by either (i) a shift in the demand for public goods or (ii) a restructuring of the state to transfer income. However, neither explanation has been shown to be compatible with individual incentives. Here, we model the rise of public spending as a contingency-learning phenomenon within Schelling’s Multi- Person Dilemma. Tests of the resulting propositions with national time series reveal no unit root but a break in trend, a result shown to favor explanation (ii) over (i).

Keywords: Government expenditures; public goods; transfer payments; game theory; time series (search for similar items in EconPapers)
JEL-codes: H5 (search for similar items in EconPapers)
Date: 2002-05
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Persistent link: https://EconPapers.repec.org/RePEc:esi:evopap:2002-02

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