Keith Hudson wrote, > The Wall Street article you've posted is a wonderful example of the Law of > Unintended Consequences isn't it? ... > There's no solution except flat-rate taxation...
Let's assume that progressive taxation has triggered the "law of unintended consequences." No... wait a minute... let's FIRST assume that there IS a law of unintended consequences and THEN assume that progressive taxation has triggered it. It doesn't follow that there is ANY solution, let alone one obvious solution. In fact, according to the hypothetical law, it is precisely the well-meaning and seemingly obvious solutions that we should be most wary of. Perhaps there is a difference between the lower cases law (which would have to be consistent) and an Upper Case "Law", which having the characteristic of dictum could be arbitrary and have a proper regard for aristocratic privileges. There is no law of unintended consequences. Nor is there a Law of Unintended Consequences. Well-intended, seemingly obvious policies can have adverse consequences. How that occurs is a matter for case-by-case examination. What Keith probably doesn't realize is that Pierre Boisguillbert, the earliest modern proponent of progressive taxation was the fellow who coined the term "laissez faire". Laissez faire, in Boisguillbert's conception, was founded on the productive energies that would be unleashed by a system of progressive taxation. Boisguillbert worked this out in rebuttal to the prevailing mercantilist views in 17th century France. One can trace a direct influence from Boisguillbert to the Physiocrats and from the Physiocrats to Adam Smith. One could say, in effect, that the theory of economic liberalism is founded on the principal of progressive taxation. As for what would happen with a flat tax, consider the situation in pre-revolutionary France. The tax structure was inherently regressive but was made even more so by the vagaries of the farming out of tax collection. Lesson: rich people may try to avoid paying taxes even if they are taxed at a lower rate than poor people. They've done it before. But back to the law of unintended consequences for a moment. One could do worse than to closely examine the passage by Adam Smith in the Theory of Moral Sentiments in which he mentions both unintended consequences and an invisible hand. It is a philosophically complex argument that could be read several different ways depending on where one chooses to place the emphasis. Smith starts out with a vignette illustrating the vanity of the desire for wealth. Essentially his point is that people desire wealth for the apparent ease it offers then they sacrifice their ease in striving to obtain that wealth. It is a dog in the manger story. But then Smith throws in a curve -- the vanity of the pursuit of wealth is redeemed socially by how it adds to the general industry and prosperity of a nation. That is the "unintended consequences" twist. The two put together -- vain striving for ease and unintended consequences -- give us the invisible hand. It's a lovely tale but it seems rather disingenuous to pick and choose which parts of it to elevate to the status of Upper Case Law and which parts to conveniently ignore. The trail of the reception of Smith's images suggest to me a perhaps truly inexorable law: the Law of Unintended Quotation. Say something notable and it will quoted in ways and in contexts that have nothing to do with what the author intended.
