Assume the Positional: Comment on Robert Frank
We examine Robert Frankâ€™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 Frankâ€™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 â€œleisureâ€ and governmental activities are significantly less positional than the full-range of activities Frank proposes to tax. Each assumption is shaky. Frankâ€™s policy solutions overlook standard public choice arguments against government expansion and shrug off the Smithian burden of proof incumbent on those proposing coercion.
Volume (Year): 3 (2006)
Issue (Month): 3 (September)
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- Steven J. Davis & Magnus Henrekson, 2004.
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NBER Working Papers
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