Government Expenditure and Quality of Life

Most of the empirical work on the optimal size of the fiscalstate has linked the level of taxation to economic growth. Inthis paper the level of government consumption expenditure thatyields the maximum physical quality of life is found, along withthose expenditures that cause equality between marginal benefitand marginal government expenditure out of GNP. Careful attentionis paid to the measurement of the physical quality of life, theweighing of the attributes in the construction of an aggregateindex of quality of life, and in the functional (parametric) formof the nonlinear equations utilized to calculate marginalbenefit. The conclusion of the paper is that governmentconsumption expenditure is considerably higher than is necessaryto maximize the physical quality of life, and that a reductionin government consumption expenditure would not lower quality oflife.