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Is it Time to Bury Dead-Weight Loss?

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  • David George

Abstract

The conventional argument to explain how taxes distort points out that the relative mix of private goods is altered by taxes. This argument breaks down, however, when it is recognized that a lump-sum alters the relative mix of goods as long as goods differ their income elasticities. This paper argues that claims of tax distortion rest on the assumption that collective decisions to alter consumption do not alter marginal benefits while private decisions to alter consumption do, and that this assumption is problematic. The view of government as an external, nondemocratic force is best understood as an outcome of the pre-democratic roots of economic thinking as well as the skeptical public-choice view of government as comprising self-interested actors.

Suggested Citation

  • David George, 2012. "Is it Time to Bury Dead-Weight Loss?," Review of Political Economy, Taylor & Francis Journals, vol. 24(1), pages 1-13, January.
    • Handle: RePEc:taf:revpoe:v:24:y:2012:i:1:p:1-13
    DOI: 10.1080/09538259.2011.636595
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    References listed on IDEAS

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    1. Bryan Caplan, 2007. "Introduction to The Myth of the Rational Voter: Why Democracies Choose Bad Policies," Introductory Chapters, in: The Myth of the Rational Voter: Why Democracies Choose Bad Policies, Princeton University Press.
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