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Friday, May 22, 2009




Tempting Tax Targets

“Sugar, rum and tobacco are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation.”

— Adam Smith,

“The Wealth of Nations,” 1776

Source: The New York Times

For many years I used to identify myself as pro market. That was until I encountered real free market proponents. Since then I switched to identifying myself simply as not populist. My idea of free markets has never been very stable. However, it always involved a deep mistrust of financial institutions, prejudice against insurance, hedging and other means of trading and distributing risks across wider economy and firm belief in taxation as a god given tool for manipulating markets. My approach was always like: You have a problem? Tax it out of existence.

My dislike of free markets has skyrocketed after I launched my one man propaganda campaign for gas tax on my blog and countless forums from the Economist to just private blogs. It would be enough to say that I am very used to be called socialist. Without sinking into details, I would say that the primary difference between someone like me and those who pass for free market proponents these days is that I don't see free markets as something happening spontaneously in the nature. Contrary to this, I think it's one of the goals of any regulation to make real life markets resembling the textbook definition of free market. In those cases where no natural markets are possible, its is responsibility of the regulators to create them. Cap and trade is actually a very good example of commercializing social and environmental costs. My doubts about its current implementation regarding carbonic emissions are mostly driven by practical considerations. It's not opposition out of principle.

In my view much of passes for free market ideology these days has degenerated since years ago into an ideology of free lunches. Its irrational opposition to taxes of any kind can be explained by anything but the genuine belief in the efficiency of free markets. For me the quote above is an absolute validation of my tax the fucking gas campaign. Here you have a person whose invisible hand is supposedly guiding these very free markets saying just this: It's ok to have taxes and a lot of them, if your taxes make sense.

Of course some would argue that the quote above has still quite a way to go to become an unequivocal endorsement of gas tax. It's indeed open to debate whether Adam Smith would have approved of billing the expenses of foreign policy into the price of carbon fuels through taxes or that he would have been open to the idea of energy independence having its own price to be reflected by taxes. However, I tend to believe that he would. He was a smart enough person to see the point of it.


PS

This post is an update to Making Sense. If you have any comments leave them there.

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Proclaimed un monstruooo muy monstruoso at 12:13 AM