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2020 | OriginalPaper | Buchkapitel

5. Efficiency and Just Deserts: Economists’ Big Trade-Off

verfasst von : Joseph de la Torre Dwyer

Erschienen in: Chance, Merit, and Economic Inequality

Verlag: Springer International Publishing

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Abstract

A popular understanding of the principle of efficiency is one that seems to require a laissez-faire market economy because, supposedly, taxes always reduce aggregate welfare. This chapter argues that the Just Deserts proposal, by imposing a carefully designed endowment tax, may realize a perfectly efficient economy under a broad class of conditions and, under real-world constraints, may surpass our current economy in terms of efficiency and welfare. Bringing the concepts of economic rents and endowment into a theory of desert, the chapter discusses lump-sum endowment taxes and shows that the Just Deserts proposal just is such a tax under a broad set of conditions. Lastly, the chapter provides a concrete demonstration of the flexibility of lump-sum endowment taxes and argues for specific parameters as canonical.

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Vorheriges Kapitel Equal Opportunity and Just Deserts: Better Late than Before

Nächstes Kapitel Liberty and Just Deserts: Slaves, Dynasties, and Moral Agents

Of course, some have argued that “the principle of efficiency and the principles of justice are completely distinct and mutually irreducible.” Sadurski (1985), 111, 267–275.

Rawls (1999 (1971)), 58–62.

Atkinson (2015).

Arneson (2007), 266.

Okun (1975).

Although economists are accustomed to thinking of the “big trade-off” between efficiency and equity, there are of course other social welfare functions. My belief is that very, very few individuals have a desert neutral social welfare function but I hope to convince them below as well.

Marrero and Rodríguez (2013).

Logue and Slemrod (2008), 849; Also, cf. Stern (1982).

For an attempt to philosophically carve out space for payment based upon differential compensation, cf. Dick (1975). Note, however, that the mistaken view of tastes and talents as qualitatively different (rather than seeing both as circumstances of chance upon which labor supply is dependent) lead to a partial theory of desert.

Smith (1976 (1776)), 111.

On labor market as distinct from other markets, cf. Diamond (1982); Solow (1990).

Thus, some scholars argue that education serves as a screening mechanism for employers’ ignorance through the job competition, paper chase, and sheepskin models. Cf. Thurow (1975).

Atkinson (2015), 251.

Kaufman and Hotchkiss (2000), 410–414.

Efficiency requires that production is on the production possibilities frontier and that each individual’s marginal rate of substitution is identical to the marginal rate of transformation for all pairs of commodities.

For justification of an endowment tax, cf. the first president of the American Economic Association as well as more modern treatment. Walker (1888); Bradford (1984).

Lambert (2001), 175, 183.

Atkinson and Stiglitz (1980), 343.

Benshalom and Stead (2010), 1520.

In addition to equity and efficiency, many would add simplicity as a third goal of any system of taxation. I believe Just Deserts is orders of magnitude simpler than our current system. Simon (1977).

That is, 100% of payment for apple production is profit.

Alperovitz and Daly (2008).

Cautiously, given our informational limitations, “there is nothing that can be said about, for example, the [precise] income level that should be attached to being [precisely this] hard-working.” Matravers (2011), 147.

Hobbes (1991 (1651)).

This is Brad Hooker’s “oil fields” critique of “noncomparative desert,” writ large. Arneson (2007), 280; Also, pace Sher (2014), 33.

Fleurbaey (2008), 18.

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Murphy and Nagel (2004), 121–125.

Shaviro (2002), 125.

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For a rejection of Murphy and Nagel’s misplaced distinction between an endowment tax and other taxes on grounds of freedom, cf. Stark (2005); A similar, concise assessment: “By arguing that the endowment tax would enslave the highly endowed, critics of the endowment tax are subjecting it to a moral standard they do not apply to contemporary policies that apply similar standards but are considered politically and morally legitimate.” Benshalom and Stead (2010), 1526.

It is perhaps Mirrlees’ foundational scholarship that suggested “maximum potential earnings” as the correct referendum. Mirrlees’ groundbreaking work suggested that the tax base should be an “[individual]’s income-earning potential” and, unlike endowment tax proponents, that “the most reliable indicator of [their] income-earning potential is [their observed] income.” Mirrlees (1971), 175.

Sugin (2011); Mirrlees (1971).

“The talent slavery objection is aimed at an endowment tax which defines endowment as one’s maximum wage rate multiplied by the maximum number of hours one could work...” Note also that an ex post calculation of endowment, separated from autonomous effort, dismisses David Hasen’s objection that “the system does not produce … [earnings] capacity.” Zelenak (2006).

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Titel: Efficiency and Just Deserts: Economists’ Big Trade-Off
verfasst von: Joseph de la Torre Dwyer
Verlag: Springer International Publishing
Buch: Chance, Merit, and Economic Inequality
Print ISBN: 978-3-030-21125-7

Electronic ISBN: 978-3-030-21126-4

Copyright-Jahr: 2020
DOI: https://doi.org/10.1007/978-3-030-21126-4_5