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Assume the Positional: Comment on Robert Frank

  • Andrew Kashdan
  • Daniel B. Klein

We examine Robert Frank’s arguments for taxation to mitigate positional externalities. The scarcity that characterizes positional goods is real, but various mechanisms reduce the potential waste, and Frank overstates the case for a governmental solution. The plausibility of Frank’s arguments for extensive market failure requires various assumptions, including the usefulness of happiness comparisons over time, the widespread existence of winner-take-all markets, the failure of voluntary evolution to internalize externalities, and that both “leisure†and governmental activities are significantly less positional than the full-range of activities Frank proposes to tax. Each assumption is shaky. Frank’s policy solutions overlook standard public choice arguments against government expansion and shrug off the Smithian burden of proof incumbent on those proposing coercion.

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Article provided by Econ Journal Watch in its journal Econ Journal Watch.

Volume (Year): 3 (2006)
Issue (Month): 3 (September)
Pages: 412-434

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Handle: RePEc:ejw:journl:v:3:y:2006:i:3:p:412-434
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  1. Mark Aguiar & Erik Hurst, 2006. "Measuring Trends in Leisure: The Allocation of Time Over Five Decades," NBER Working Papers 12082, National Bureau of Economic Research, Inc.
  2. Davis, Steven J. & Henrekson, Magnus, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," SSE/EFI Working Paper Series in Economics and Finance 560, Stockholm School of Economics.
  3. Spence, A. Michael, 2001. "Signaling in Retrospect and the Informational Structure of Markets," Nobel Prize in Economics documents 2001-6, Nobel Prize Committee.
  4. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
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