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Date: | Tue Sep 2 20:59:59 2008 |
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When I started teaching economics in 1952, the concept of deadweight loss was so obvious and commonplace that I find it hard to understand how those little triangles got Harberger's name attached. How, however, I think I understand better. The triangles are SO small that they serve to trivialize the matter, and make excise taxes seem nearly harmless. This in turn is an artifact of the methodology, and misrepresents reality. It was congenial to those who favored the trend of the times, to raise sales taxes and lower land taxes.
A better way, I now realize, is to treat excise and most taxes as being shifted into land rents, i.e. taken out of land rents. George anticipates this in a brief passage on p.433 of Progress and Poverty. "With all the burdens removed which now oppress industry and hamper exchange, the production of wealth would go on with a rapidity now undreamed of. This, in its turn, would lead to an increase in the value of land - a new surplus which society might take for general purposes."
"To abolish these taxes (i.e. on production and exchange) would be to lift the whole enormous weight of taxation from productive industry". - p.435.
So, I think that instead of Harberger's itty-bitty triangles, to remove bad taxes would result in QUANTUM LEAPS of land from lower to higher uses. I've published this here and there, if anyone is interested.
Mason Gaffney
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