Understanding the Ratchet Effect in Government Growth

The ratchet effect is a framework that explains how government expands in both scale and scope during crises, leading to a permanently larger-sized government. Despite temporary reductions post-crisis, government activities do not revert to pre-crisis levels. This expansion is not solely measured by fiscal spending but also by the range of government involvement in various activities. The ratchet effect highlights that crises prompt government growth beyond immediate needs.