Positional consumption and progressive consumption taxes

David R. Henderson criticizes Robert H. Frank’s proposal for a progressive consumption tax as a means to internalize the negative externality related to positional consumption by the rich in Robert Frank’s Strange Case for Taxing “The Rich” .

Part on Henderson’s critique focuses on the importance of social comparisons on driving consumption choices and suggests Frank may have overstated it. In the article Social Comparison Affects Reward-Related Brain Activity in the Human Ventral Striatum, in Science, 23 November 2007, Fliessbach et al “provide neurophysiological evidence for the importance of social comparison on reward processing in the human brain.” Here is the abstract . See also the Washington Post review article on the Fliessback’s et al Science paper.

Pointer by Greg Mankiw.

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