Hayekian Escape from Circular Argument

by Chidem Kurdas

Gene Callahan’s incisive post and the absorbing discussion that it generated here on ThinkMarkets can be taken as support for a Hayekian rather than a Hobbesian framework, not the least because by starting with Hayek, you can get to a substantive answer to Hobbes.

Gene, with his usual razor-sharp logic, points out that “if Hobbes is right, and without Leviathan we are in the ‘Warre of all against all,’ then the sovereign is justified in doing whatever is necessary to keep us out of that state.” Ergo, to argue that taxes are an unjust coercion, you have to show “that the State is not a necessary element of social order.”

After 82 comments and counting, there is no resolution. This all-or-nothing way of  looking at government coercion always leads to a dead end. Of course most people fear a short, nasty, brutish etc. life, so they settle for Leviathan with all the trimmings. Put that way, there is no argument against the tax collector. Continue reading

A Little Pigou Is A Dangerous Thing, Part 2

by Mario Rizzo 

Recently, some economists have proposed a new application of the Pigovian tax idea. This is to correct the newly-discovered problem of internalities. An internality is a side-effect on the future selves of a given individual. So, for example, if an individual eats too much now his future self, perhaps a decade or two hence, will experience costs (damages) – not certainly, but with some probability. Internalities are generated by lack of willpower, myopia or other decisionmaking deficiencies on the part of present agents. 

Now let us consider some of the problems in estimating the correct internality tax.   Continue reading

A Little Pigou Is A Dangerous Thing, Part 1

by Mario Rizzo  

A little Learning is a dang’rous Thing;
Drink deep, or taste not the Pierian Spring:
There shallow Draughts intoxicate the Brain,
And drinking largely sobers us again.  

Alexander Pope 

Sometimes in the course of scientific development an idea gets introduced with various qualifications and limitations that are “forgotten” in an effort to simplify or make ideas textbook-ready. In other cases the innovators may look to how their ideas are being used and, after some time, seek to caution practitioners.  

I recently came across an article by Arthur Cecil Pigou in a 1954 issue of the journal Diogenes that seems to illustrate the second phenomenon mentioned above. Continue reading