Monitoring the State or the Market

Many economists argue that economic analysis should avoid the distributional consequences of policies. In democratic countries, however, the political power of individuals inevitably reflects their wealth and income. You cannot have a democracy when income and wealth distributions are greatly uneven. Monitoring the State or the Market explains that absolute income equality is not consistent with a market economy, yet neither is large inequality. This study provides a broad survey of major social and economic developments over the past two centuries, beginning with the Industrial Revolution and laissez faire and ending with neoliberalism and market fundamentalism. It explains how each of these periods initially brought moderation and accompanying benefits, showing that some countries, such as those in Scandinavia, have demonstrated that it is possible to have low Gini coefficients (low inequality), while preserving economic freedom and prosperity.

Author Biography

Vito Tanzi is Honorary President of the International Institute of Public Finance (IIPF). He was the Undersecretary for Economy and Finance for the Italian government and the Director of the Fiscal Affairs Department at the International Monetary Fund. He is the recipient of five honorary degrees and has authored twenty-five books and hundreds of articles. An economic effect, the ‘Tanzi Effect,’ carries his name.