economists are weird

James Farmelant farmelantj at
Wed Aug 25 03:01:17 PDT 1999

Amazing the mental gymanstics that a neoclassical economist has to go through to support even a modestly progressive public policy position!

Jim Farmelant

On Tue, 24 Aug 1999 20:51:13 -0400 Doug Henwood <dhenwood at> writes:
>"The Uneasy Case for the Flat Tax"
> George Mason University, School of Law
> Indiana University at Bloomington
> Department of Business Economics & Public Policy
>Document: Available from the SSRN Electronic Paper Collection:
> Other Electronic Document Delivery:
> shed/king.pdf
> SSRN only offers technical support for papers
> downloaded from the SSRN Electronic Paper Collection
> location. When URLs wrap, you must copy and paste
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>Paper ID: Indiana University, Business Economics and Public
> Policy Working Paper No. 99.002
> Date: July 13, 1999
> Email: Mailto:erasmuse at
> Postal: Indiana University at Bloomington
> Department of Business Economics & Public Policy
> 1309 East Tenth Street
> Bloomington, IN 47405 USA
> Phone: (812)855-9219
> Fax: (812)855-3354
> Co-Auth: F. H. BUCKLEY
> Email: Mailto:fbuckley at
> Postal: George Mason University, School of Law
> 3401 N. Fairfax Drive
> Arlington, VA 22201 USA
> There is a secret paradox at the heart of social contract
> theories. Such theories assume that, because personal security
> and private property are at risk in a state of nature, subjects
> will agree to grant Leviathan a monopoly of violence. But what
> is to prevent Leviathan from turning on his subjects once they
> have lain down their arms? If Leviathan has the same incentives
> as his subjects in the Hobbesian state of nature, he will
> plunder them more thoroughly than ever they plundered themselves
> in the state of nature. Thus the social contract always leaves
> subjects worse off, unless Leviathan can fetter himself. And how
> can Leviathan bind himself, if he can always impose confiscatory
> taxes or choke off trade through inefficient regulations? This
> Article suggests that schemes of progressive taxation, in which
> marginal tax rates increase with taxable income, may be seen as
> a useful incentive strategy to bribe Leviathan from imposing
> inefficient regulations. Income taxes give Leviathan an equity
> claim in his state's economy, and progressive taxes give him a
> greater residual interest in upside payoffs. Leviathan will then
> demand a higher side payment from interest groups to impose
> value-destroying regulations. Of course, progressive taxation
> imposes its own incentive costs, by reducing the subject's
> private gains. However, these costs must be balanced against the
> gains from correcting Leviathan's misincentives, and it may that
> such gains exceed the costs of progressive taxation.
>JEL Classification: H00, H11, H21, H50, L50, L51, P00

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