Government expenditure and quality of life

Most of the empirical work on the optimal size of the fiscal state has link ed the level of taxation to economic growth. In this paper the level of gov ernment consumption expenditure that yields the maximum physical quality of life is found, along with those expenditures that cause equality between m arginal benefit and marginal government expenditure out of GNP. Careful att ention is paid to the measurement of the physical quality of life, the weig hing of the attributes in the construction of an aggregate index of quality of life, and in the functional (parametric) form of the nonlinear equation s utilized to calculate marginal benefit. The conclusion of the paper is th at government consumption expenditure is considerably higher than is necess ary to maximize the physical quality of life, and that a reduction in gover nment consumption expenditure would not lower quality of life.