Fiscal Theory

Fiscal Theory, in the context of Public Choice Theory, examines how government decisions on spending and taxation impact the economy and individual behaviors. It suggests that people respond not just to current taxes and spending, but also to expectations about future government policies. When voters perceive that current fiscal policies imply future taxes or benefits, it influences their choices today. Essentially, it explores how political decision-making affects economic outcomes, emphasizing the role of incentives and the motivations of both voters and politicians in shaping fiscal policies.