Difference between revisions of "Deadweight Losses"
From Critiques Of Libertarianism
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| − | {{DES | des = Libertarians love to complain about deadweight losses due to taxation, and frequently exaggerate their size visually. But plenty of market activities also cause deadweight losses. And deadweight losses can be offset many times over by the actions government can take with tax money. | show=}} | + | {{DES | des = Libertarians love to complain about deadweight losses due to taxation, and frequently exaggerate their size visually by drawing large [http://en.wikipedia.org/wiki/Deadweight_loss#Harberger.27s_triangle Harberger's triangles]. But plenty of market activities also cause deadweight losses. And deadweight losses can be offset many times over by the actions government can take with tax money. | show=}} |
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| + | Some market causes of deadweight losses: | ||
| + | * holdout problems (some estimates as high as 10% GDP) | ||
| + | * unemployment | ||
| + | * market power due to monopoly or oligopoly | ||
| + | * mark-up pricing (aka fixpricing) | ||
| + | * financial sector profits | ||
| + | * interchange fees for credit cards | ||
| + | * externalities | ||
| + | * positional goods | ||
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| + | There are also good reasons to doubt the premises of deadweight losses, which are rooted in the premises of [[neoclassical economics]] ([[Economics 101]].) Like the stories that [[Minimum Wage|minimum wages]] should greatly reduce employment, stories about deadweight losses are seldom backed by actual data. | ||
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