What is a Leviathan?
Is There One in Your Backyard? A Leviathan is a sea monster represented as an adversary defeated by Yahweh in various scriptural accounts or as a totalitarian state having a vast bureaucracy.10 In public finance, an apparently simple observation by Brennan and Buchanan that “Total government intrusion into the economy should be smaller, ceteris paribus, the greater the extent to which taxes and expenditures are decentralized . . .” (1980, 185) has become known as the Leviathan hypothesis. According to this hypothesis, monopolization of government activity leads to an ability to extract revenue from citizens. The more decentralized the fiscal relations between levels of government, the less monopoly power can be exerted in tax collection. According to this hypothesis, more-decentralized government structures should be smaller, relative to the size of the economy. The seminal empirical test of the Leviathan hypothesis was that of Wallace Oates (1985) who used both a sample of U.S. state-
