Employees are already beset by red tape if they try to improve their working conditions. Now the UK government wants to increase the regulatory burden on them further, by proposing that employee organisations need a majority of all their members to vote for strike action before a strike becomes legal, even though those voting against strike action can still free ride on their colleagues by going to work during any strike and benefiting from any improvement in conditions obtained. Shouldn’t we instead be going back to a free market where employees are able to collectively withhold their labour as they wish?
I doubt if you have ever read a paragraph that applies language in this way. Yet why should laws that apply to employers be regarded as a regulatory burden, but laws that apply to employees are not? Labour markets, alongside financial markets, are areas where the concept of a ‘free’ market uncluttered by regulations is a myth. Here, as elsewhere, language has been distorted to suit a neoliberal agenda.
Is this also true with terminology used in academic economics? That is the argument put forward by Charles Manski in this Vox piece in the context of economists’ discussion of taxation and lump-sum taxes. He writes:
“Students of economics learn that the formal usage of the concepts 'inefficiency', 'deadweight loss', and 'distortion' in normative public finance refer to a theoretical setting where a private economy is in competitive equilibrium and a government can use lump-sum taxes to modify the endowments of individuals. In this setting, classical theorems of welfare economics show that any Pareto efficient social outcome can be achieved by having the government use lump-sum taxes to redistribute endowments and otherwise not intervene in the economy. Income taxes and other commonly used taxes logically cannot yield better social outcomes than optimal lump sum taxes but they may do worse. Deadweight loss measures the degree to which they do worse.”
The big problem with this terminology and associated research agenda, he argues, is that it presumes lump sum taxes are a feasible option, whereas in reality they are not.
“The research aims to measure the social cost of the income tax relative to the utterly implausible alternative of a lump-sum tax. It focuses attention entirely on the social cost of financing government spending, with no regard to the potential social benefits.”
Indeed, lump sum taxes (a.k.a. a poll tax) are not a feasible option precisely because they achieve non-distortion at the cost of being unfair, and in the real world taxation is as much about fairness as allocative efficiency.
The counterargument is that the idea of a lump sum tax is just a useful analytical device, which allows research to focus on the taxation side of the balance sheet, without having to worry about what taxes are spent on. It would be equally possible to look at the benefits of different types of government spending, all of which were financed by a lump sum tax. Equally the competitive equilibrium against which real world taxes are distortionary is an imaginary but analytically useful reference point - everyone knows the real world is not like this competitive equilibrium.
It is not our fault, the counter argument would go, that non-academics abuse these analytical devices. No serious economist would talk about the costs and benefits of a policy to cut a particular tax in isolation, when that cut has been financed using a lump sum tax. Governments that do that have clear ulterior motives. Equally no serious economist would talk about the benefits of reducing a tax designed in part as Pigouvian (i.e. a tax designed to offset some market externality), within the context of a model that ignores that externality. (For a recent example where the UK Treasury published a study that managed to do both of these things, see here.)
I think the key here is to clearly differentiate analysis from policy advice. I have used lump sum taxes in my research, and I often talk about taxes being distortionary. I think both general and partial equilibrium analysis is useful, and devices that allow abstraction are invaluable in economics. (I have less sympathy for the concept of Pareto optimality, for reasons discussed here. See also the excellent series of discussions by Steve Randy Waldman.) However these devices can often allow those with an agenda (including the occasional economist) to mislead, which is why economists need to be very careful when presenting their analysis to policy makers, and why they also need to have the means to alert the public when this kind of deception happens.