The Independent Review’s Spring 2025 issue features a symposium on a kind of action economists know well: the “ratchet effect.” This phenomenon is described masterfully by Retired Senior Fellow Robert Higgs in his classic work, Crisis and Leviathan: Critical Episodes in the Growth of American Government. Put simply, the “ratchet effect” refers to how prices, wages, and government spending rise easily, especially during crises (real or created), and rarely go back down, just as a ratchet permits movement only in one direction. Time and again, government has exploited fear to expand its spending and powers…which expansion is almost never reversed.
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