Robert Whaples and the Modern Principles

A blog on my teaching with Modern Principles of Economics by Tyler Cowen and Alex Tabarrok

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The Art of Taxation

Posted by Robert Whaples on September 17, 2009

Jean-Baptist Colbert, King Louis XIV’s finance minister famously said that “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.”  Chapter 7 of Cowen and Tabarrok, “Price Floors, Taxes and Subsidies,” has a pretty high feather-to-hiss ratio.

After a conference trip last Friday, I covered this chapter in class on Monday and Wednesday.  Using the chapter required a little bit of gear-shifting on my part, since my previous textbook doesn’t use the tax wedge approach,  I’ve always liked the tax wedge approach, since it is theoretically more consistent than using a supply-plus-tax and/or demand-minus-tax curve.  In practice, however, it turns out that it’s much harder to visually show the tax wedge on a whiteboard in front of class.  Marking off a $1 tax by vertically shifting the supply curve up by $1 is simply easier to see.  In light of this, the approach used in C&T works very well.  They open with the S + T analysis, show that it’s equivalent to D – T and close by showing that both are equivalent to the tax wedge approach. Will students be overwhelmed by three different ways of looking at the same thing?  Will the additional information confuse them?  Based on the quizzes I just finished grading, the answer is “No.”  Their grasp seems as strong as in past semesters.  (Sigh of relief.)

Add to this the extra coverage of subsidies — which too many textbooks virtually ignore — and this chapter has worked very well.

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