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Consideration of keys to solving problems in long-term fiscal policy through laboratory research

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  • Toshiaki Hiromitsu

    (Policy Research Institute, Ministry of Finance)

Abstract

People tend to think only about their immediate benefits, as well as to be extremely optimistic. Coupled with changes of generations due to limited lifespan, this becomes a source of problems in long-term fiscal policy. The hypothesis of “silver democracy”, based on the rational voter hypothesis, argues that elderly voters prevent sustainable policy choices. It is therefore urgent to discuss how to design a policy decision framework which ensures that sustainable policies can be socially selected. In a democracy, as well as voting, the role of deliberation is emphasized. Assessing the effectiveness of deliberation in promoting sustainable policy decisions, which is called the hypothesis of “deliberative democracy”, is necessary. Through the use of questionnaires on the selection of hypothetical fiscal policies, the validity of hypotheses and keys to designing a decision framework to solve the problems are considered. Options of hypothetical fiscal policy are discussed among participants. The relationship between participants’ personal attributes and selection is examined. The role of an imaginary future generation (IFG) (Saijo in Future design: Incorporating preferences of future generations for sustainability, Springer, New York, 2018), a virtual representative of a future generation, is randomly assigned to some of the participants, and the nature of collective decision making is elucidated. There are several findings. Public judgment based on altruism works together with personal interests in the selection of policy. As the age of the participants increases, support for sustainable policies is weakened. However the older generation make their choices more on the basis of public judgement than personal interests. Hence the simple hypothesis of “silver democracy” seems exaggerated. Furthermore, providing information on the personal burdens imposed by policies to the participants reduces support for sustainable policies through “privatization” of policies. Moreover, attitudes toward uncertainty; prospects of the future economy and values of future generations, affect choices. The effect of introducing an IFG toward sustainable choice is confirmed; however the results also suggest that the evidence for promoting sustainable decision by deliberation is not necessarily certain. A randomly allocated role of IFG would not be able to complete the role of representing voices of the future. Finally, based on these findings, some keys to solving problems in long-term fiscal policy are presented.

Suggested Citation

  • Toshiaki Hiromitsu, 2019. "Consideration of keys to solving problems in long-term fiscal policy through laboratory research," International Journal of Economic Policy Studies, Springer, vol. 13(1), pages 147-172, January.
    • Handle: RePEc:spr:ijoeps:v:13:y:2019:i:1:d:10.1007_s42495-018-0005-4
    DOI: 10.1007/s42495-018-0005-4
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    References listed on IDEAS

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    Cited by:

    1. Tatsuyoshi Saijo, 2020. "Future Design: Bequeathing Sustainable Natural Environments and Sustainable Societies to Future Generations," Sustainability, MDPI, vol. 12(16), pages 1-21, August.
    2. Toshiaki Hiromitsu & Yoko Kitakaji & Keishiro Hara & Tatsuyoshi Saijo, 2021. "What Do People Say When They Become “Future People”?―Positioning Imaginary Future Generations (IFGs) in General Rules for Good Decision-Making," Sustainability, MDPI, vol. 13(12), pages 1-27, June.

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    More about this item

    Keywords

    “Silver democracy”; Public judgment; Deliberative democracy; Imaginary future generation; Ricardian equivalence;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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