Trust and the Growth of Government

CATO JOURNAL 35.3 (2015): 549-580

Abstract: the simultaneous growth in government and deterioration in trust in government presents something of a paradox: How does a mistrusted institution grow and become so large? This article develops a framework to understand this paradox as well as related issues. A basic outcome from our modeling is the mutual dependence of the public’s mistrust in government and the extent of political/rent seeking activity fostered by government.It seems straightforward that trust in government is a declining function of government actions that generate rent seeking and reward special interests—and indeed this is an aspect of our model. However, a less apparent implication is the feedback mechanism that generates greater rent seeking as the degree of mistrustfulness grows; essentially, the returns to rent seeking are relatively higher in a mistrustful environment. It is this feedback effect that leads to a situation where government growth and mistrust might perpetuate one another. Thus, an initial small change in government policy that encourages rent seeking can produce mistrust and multiply itself, leading to further growth in government activity and mounting mistrust. This may help provide an explanation of the historical comovement of government size and mistrust in government.