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Assume the Positional: Comment on Robert Frank

Author

Listed:
  • Andrew Kashdan
  • Daniel B. Klein

Abstract

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.

Suggested Citation

  • Andrew Kashdan & Daniel B. Klein, 2006. "Assume the Positional: Comment on Robert Frank," Econ Journal Watch, Econ Journal Watch, vol. 3(3), pages 412-434, September.
  • Handle: RePEc:ejw:journl:v:3:y:2006:i:3:p:412-434
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    References listed on IDEAS

    as
    1. Michael Spence, 2002. "Signaling in Retrospect and the Informational Structure of Markets," American Economic Review, American Economic Association, vol. 92(3), pages 434-459, June.
    2. Steven J. Davis & Magnus Henrekson, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," NBER Working Papers 10509, National Bureau of Economic Research, Inc.
    3. Mark Aguiar & Erik Hurst, 2007. "Measuring Trends in Leisure: The Allocation of Time Over Five Decades," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 969-1006.
    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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    Citations

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    Cited by:

    1. Gasana, Parfait U., 2009. "Relative status and interdependent effects in consumer behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(1), pages 52-59, January.
    2. João Bernardino & Tanya Araújo, 2013. "On positional consumption and technological innovation: an agent-based model," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 1047-1071, November.
    3. João Bernardino & Tanya Araújo, 2010. "On Positional Consumption and Technological Innovation- an Agent-based Approach," Working Papers Department of Economics 2010/04, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    4. Robert H. Frank, 2006. "Taking Libertarian Concerns Seriously: Reply to Kashdan and Klein," Econ Journal Watch, Econ Journal Watch, vol. 3(3), pages 435-451, September.
    5. Alessandro Balestrino, 2011. "On Economics, Leisure and Much More," Chapters,in: Handbook on the Economics of Leisure, chapter 2 Edward Elgar Publishing.

    More about this item

    Keywords

    Positional goods; positional arms race; leisure; taxation; happiness;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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