“Justly acquired endowment”??? Taxing as punishment or as a way to raise money

Tall political scientist David Park and tall economist Robin Hansen point to this paper by Mankiw and Weinzierl on the idea of taxing tall people. I have no problem with the paper–it’s wacky, but intentionally wacky, one might say, using height as an example of a variable that is correlated with income in the general population. Height isn’t actually correlated very much with income (together, height and sex predict earnings with an R-squared of only 9% (see, for example, page 63 of our book), so in some way it’s not a great example, but maybe that’s part of their point too.

Anyway, David and Robin both quote a news article that states that Mankiw and Weinzierl “say that height is a ‘justly acquired endowment’: it is not unfairly wrested from anyone else, so the state has no right to seize its fruits.”


I think there’s something I’m missing here, but . . . who ever said that you can only tax something that was “unjustly wrestled from someone else”? Haven’t they ever heard of the sales tax? Even a society with no unjust wrestling at all would still need taxes. Setting redistribution aside entirely, there are reasons for higher taxes on the rich (they can more easily afford it) and reasons for not taxing the rich (depending on your mathematical model for the efficiency of the economy), but I don’t really see how something being “justly endowed” means that it can’t be taxed. The tax money needs to come from somewhere.

Why taxes?

The same article also says, “By the same logic, they imply … the government has no right to force someone with the ‘justly acquired endowment” of entrepreneurial genius to pay a higher tax rate.” This also confuses me since I hadn’t heard that anyone was proposing a tax on “entrepreneurial genius.”

Maybe this is a difference between how economists and political scientists view the world. Mankiw and Weinzierl seem to view taxes as a way to punish people, whereas I see taxes as a way to raise money?

13 thoughts on ““Justly acquired endowment”??? Taxing as punishment or as a way to raise money

  1. I think the point of the paper might have been a little lost in translation or maybe it wasn't presented too well. The basic premise as I understood it was the following:
    1. Suppose you have a natural ability to do some things better than others, for instance statistics.
    2. Suppose further that your income was correlated with your ability.
    3. Should those with better statistical ability be taxed at a higher rate than those with a lower ability and the money then be redistributed to those with lower ability?

    I think height is just a metaphor they are using to make a point about "endowment" — it could have been anything else (like statistical ability) but I think they wanted to make a point by using something that sounded a little whacky if I can use that word. In the end it depends on whether there is some kind of natural ability that is embodied within us that gets us further ahead than others (measured in income).

  2. Other good reasons for taxing the rich, is the assumption that they are benefitting more from infrastructure so should be expected to put more back. A not so good reason is the right skewness of incomes means there are less of them, so you get more money while annoying fewer people. The global economy has made this less attractive, they just move their money elsewhere.

    The aim of academic economists seems to be making everything more complex than it really is, at the same time ignoring things like the growth of debt and the eventual instabilities that will result.

  3. Bcc,

    I understand what you're saying, but I still don't see how M&W can claim that the state has no right to seize the fruits of a "justly acquired endowment." How do they propose to collect taxes? Would they send someone around to investigate everybody's "endowment" to see if it's truly "justly acquired"? And if they don't find enough to pay the tax bill, what would they do? Just ask the Treasury Department to print more money???

    I'm sure I'm missing something here but I'm not sure what.

  4. M&W do nothing more than ask: in a stylized ideal world if all we wanted to redistribute income can we do this by taxing the higher ability and giving it to lower ability if we can't observe ability. It's a typical academic approach to a question which dispenses away with the realities of requiring taxes to pay for expenditures. In their paper, the only use for the taxes collected is to give it away again.

    In their paper, they assume that we cannot investigate endowment/ability but we can observe something else that may be correlated — height. This is an interesting twist to an old question in that they bring some numbers using height to their paper instead of just dealing with theorems and the such.

    In the paper I can't actually find the phrase: height is a 'justly acquired endowment': it is not unfairly wrested from anyone else, so the state has no right to seize its fruits.

    I do find the following: Libertarians are skeptical of the redistribution of income or wealth because they believe that individuals
    are entitled to the returns on their justly-acquired endowments. Is height a "justly-acquired endowment?" On the one hand, height may seem to be an ideal example, given that it is assigned by nature. Thus, if individuals are entitled to the returns to their endowments, a height premium is a just source of inequality and the government ought not try to o¤set it with redistribution. It might be argued, however, that height is acquired in a more complicated way that is less obviously just.

  5. Andrew,

    This paper has nothing to do with taxes used to finance government purchases, such as the sales tax you mentioned. Instead, it concerns the redistribution of income. Here's how to think about it.

    Suppose you want to create a more egalitarian society. Then it seems natural take from those with high incomes and give to those with low incomes. Bill Gates would be only marginally worse off with 59 rather than 60 billion dollars. Giving this money to the truly destitute would increase the overall well-being of society, the argument goes. This is the standard utilitarian calculus combined with diminishing marginal utility of wealth.

    But this is too simple a prescription. A high income is a function of both ability and effort in varying degrees across individuals. If our tax alters incentives to supply effort too strongly, we won't collect much revenue to redistribute! This leads us to the conclusion that we should identify those wealthy individuals who earn more holding effort fixed. That is, we'd like to find an exogenous predictor of ability, and hence income. Height is a perfect example. It doesn't explain much of the variation in income but it's most certainly exogenous. If you tax being tall, tall people can't supply less tallness. The tallness earnings premium is unrelated to effort.

    If you believe this argument, you should support a tall tax. But even many people who agree with the general framework presented above feel uncomfortable with a tax on height. Hence the idea of a "justly acquired endowment." It seems wrong to tax people simply because they happen to be tall. Perhaps their wording is somewhat imperfect, but I think Mankiw and Weinzierl's main point still holds. The least you can ask of a system of beliefs is that it be consistent.

  6. Bcc,

    The quotes about "justly acquired," "unfairly wrested," etc., are from the news article (follow the links in the original post) are certainly presented as the statements of M&W.

    Bcc and Frank,

    I think you're picking up on a difference between how political scientists (at least, this political scientist) and economists think. It's the difference between putting yourself in the government's position or putting yourself in the taxpayer's position.

    From the government's position, you have certain goals and you need money from somewhere. I suppose you'd rather tax "unjustly acquired" than "justly acquired" endowments, but that's not really the point. You want to get the money from someone who can afford to pay.

    From the taxpayer's position, you can get annoyed at the government taking the fruits of your justly acquired endowments. If you're paying more taxes than other people, you might view it as a fine or a punishment rather than a tax.

  7. At the risk of sounding like a broken record, here goes. Economists in general believe that taxes are bad but not all taxes. For instance, taxation is required to produce some public good e.g. defense is usually the example, that would not be provided privately. (I think some might debate this as well.) M&W ask the question only in terms of redistribution. If the goal is to redistribute then the money must come from taxes. M&W basically ask how should we tax in order to redistribute if we cannot observe ability. How would a political scientist answer this question? (M&W are very specific about the numbers when height is used.) I think there have been various attempts by economists as well as political scientists to answer this question in the past. Rawls for instance, or even some kind of voting mechanism but I'm interested in hearing what you might suggest.

  8. Bcc,

    I don't see redistribution as the goal. I see the goal as giving important things (for example, food, housing, healthcare, education) to people who can't afford it, or giving these people the resources that would enable them to get these things. This sort of social spending costs money and so people get taxed to pay for it. I understand that the effect of this as redistributive, but I don't see "redistribution," per se, as the goal.

    This is where an economist might disagree with me and say that, functionally, taking money away from the rich and giving money or services to the poor is nothing but redistribution. But I see it as two steps: first, the social goal of poor relief, second, the taxation that pays for it.

    Also, I still think the "justly acquired endowment" thing has nothing to do with anything. Once you accept the desirability of poor relief, it's just one more public good, and you have to find a way to pay for it. Obviously, it makes sense to tax the people who can afford it, not to tax tall people. What if someone is 7 feet tall, poor, and broke? It doesn't make much sense to ask him to pay lots of tax.

    Regarding your question, "how should we tax in order to redistribute if we cannot observe ability." Income and assets seem like reasonable measures of "ability to pay." Not perfect measures, but much better than height!

    As I said in the original blog entry, I realize that M&W are trying to be provocative, but I think they're being provocative in the context of an argument among economists that I don't fully understand. It's sort of an academic version of those all-black paintings in the Museum of Modern Art that can only be understood as responses to earlier paintings (as described, for example, in Tom Wolfe's book, The Painted Word).

  9. Once you accept the desirability of poor relief…Uh! Uh! This is not enough a basis to pursue the discussion on abstract terms as you do.The continued arguments depends strongly on WHY the "desirability of poor relief" has been agreed upon:- Egalitarian ethics OR an utilitarian view that it'll be "cheaper and better overall" not to let the poor fall into destitution.

  10. Jean-Luc,

    There's certainly room for argument over whether poor relief is a good idea, but I see that as a debate about poor relief, not about redistribution per se.

    My impression is that the #1 argument in favor of poor relief is that we don't want people to be starving, or without health care if it would help them, or their kids not getting educated, etc. etc. There are also arguments against poor relief, including economic efficiency arguments and also questions of cost and political will. Political theorists have thought lots more than I have about these issues.

    If you're not going to have poor relief, fine. But if you do, you'll need to pay for it, and I don't see why taxing tall people makes sense. It makes a lot more sense to tax people who can pay. In any case, I don't see the relevance of the M&W paper to the question of how much poor relief there should be. As I said above, I'm sure there's a point to their goofy argument, but it must make sense in the context of some theoretical discussions that I'm not aware of. From a policy point of view, their proposal doesn't make sense.

  11. My impression is that the #1 argument in favor of poor relief is that we don't want people to be starving, or without health care if it would help them, or their kids not getting educated, etc. etc.You are still "doing your best" to ignore the distinction I wanted to emphasize.
    Do you want poor relief because they are "fellow humans" or because they would be a greater nuisance if not relieved (including loss of opportunities for their children who could better contribute to society than their parents, a plainly "utilitarian" concern)?I think those two alternatives does deeply taint all further arguments about fair/unfair taxation.
    If you're not going to have poor relief, fine.Not at all what I am suggesting!(I am not an American, LOL)

  12. "I think you're picking up on a difference between how political scientists (at least, this political scientist) and economists think."

    I think this is the root of a never ending debate.

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