Wrong on the Evidence; Wrong on the Theory | Jared Bernstein | On the Economy

Microeconomics predicts two responses to higher taxes on the work effort of people.  Response A is that they work less, because the “price,” or opportunity cost, of non-work, just went down…you lose less if, once your after-tax wage has gone down, you work less.

But the other response (B) is that you work more to make up for the lost income.* And there’s no reason, a priori, to think response A dominates response B.  If anything, the literature, which tends to show small responses to tax changes, suggests the two responses offset each other.

In other words, we would be wholly (holy?) justified to argue that we need to raise taxes on upper income people so that they’ll work harder!

via Wrong on the Evidence; Wrong on the Theory | Jared Bernstein | On the Economy.

Great argument: scientific rigidism or absolutism sucks because it often argues one against the other. Theory should allow the space for both. Cite this one for my book

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