I heart economists
2007-04-17 · Original WordPress address
We have a short economist arguing against a tax on height and a tall economist arguing for it. "Economic agents" maximize their own utility but economists don't.
In any case, Mankiw's paper is pretty interesting. The abstract:
Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This paper shows that the standard utilitarian framework for tax policy analysis answers this question in the affirmative. This result has two possible interpretations. One interpretation is that individual attributes correlated with wages, such as height, should be considered more widely for determining tax liabilities.
Alternatively, if policies such as a tax on height are rejected, then the standard utilitarian framework must in some way fail to capture our intuitive notions of distributive justice.
In a way, the controversy over the Stern report can be seen in the same light. If you believe, due to some ideas of cross-generation distributional justice, that we should do something about global warming but you believe our standard values of the discount rate are correct (i.e. 2%), then there must be something wrong with the standard utility models.
I don't think its good enough to say "yep, the models are wrong... ignore the economists." You have to come up with an alternative framework. Without a good alternative model, there isn't a common ground for discussion. In this way, a model is just a mode of thought that we can use to think through an issue.