Economics is not what you think: A defense of the economic approach to taxation

This text was written by Marc Fleurbay, Princeton University, who holds the Chaire entitled « Welfare Economics and Social Justice » at the Collège d’études mondiales.

In The Myth of Ownership - Taxes and Justice, Liam Murphy and Thomas Nagel (2002) launch an attack against a straw man, the economist who believes that taxation should minimally interfere with property rights and should seek to preserve the market distribution of wealth and income. Instead they propose an approach that focuses on the consequences of any form of public intervention for the distribution of welfare, without any particular ethical concern for the values emerging from the market. In fact, such an approach has been long developed by Mirrlees (1971), whose approach has been dominating the economics of taxation for the last forty years. But more recently the fairness approach to taxation goes beyond welfare consequentialism and attributes some value to market allocations, in line with the theories of justice proposed by Rawls and Dworkin.