Robert Higgs: The Ratchet effect

In my work, the ratchet effect describes the characteristic way in which government under modern ideological conditions grows during a perceived national emergency. The government’s size, scope, and power grow abruptly as the government acts to “do something” to allay the threat. Then, as the threat is eliminated or diminished, the government shrinks, but not all the way to the level it would have reached if the crisis had not occurred. Hence, each crisis shifts the government’s growth trajectory to a higher level of size, scope, and power.

In my formulation, the reasons for the ratchet are several: one is political and legal inertia; another is institutional persistence brought about by those who operate or benefit from crisis-spawned government agencies or authority; and still another — perhaps the most important — is institutional change associated with the public’s becoming accustomed to the exercise of new government powers and with the government’s concurrent efforts to justify its exercise of these powers. Other economists and historians had described a ratchet effect, but most of them confined it to fiscal growth, and none of them developed its ideological aspect in the same detail that I have. The ideological change engendered by seemingly successful passage through a major crisis then predisposes the government to create and the public to accept even greater growth of government when the next crisis occurs.