John Cullis

Why people pay taxes: From a conventional economic model to a model of social convention

Abstract This paper compares ‘chauvinistic’ models of tax (non)compliance derived from mainstream neo-classical economics with the ‘softy’ approach of some psychologists, sociologists and other interested parties. A ‘third way’ is developed which takes preferences over conformity to social conventions into account, is more process orientated and less deterministic than traditional economic models yet maintains their characteristic deductive stance.

Some hypotheses and evidence on tax knowledge and preferences

Abstract The article comments on a national quota sample of 900 adults in the UK. Questions were asked concerning beliefs as to the sources of government revenue to pay for services; whether taxes should he increased to improve services; and whether any extra tax levied should go on incomes or the goods people buy. The overall results showed widespread ignorance of government sources of revenue. The majority preferred to keep the level of taxation and expenditure at present levels, but if taxes had to he increased these should he levied on goods rather than incomes. Predictions of the overall and disaggregated results from economic theory and past survey research met with varying success, the implications of which are discussed.

Key Parameters in Policy Design: The Case of Intrinsic Motivation

An important consideration when designing social policy is the expected response of individuals to new taxes and expenditures. Response is predictable when individuals are assumed to optimise instrumentally. However, the extent to which instrumental behaviour can be deemed ‘representative’ has been questioned. Behavioural experiments reveal that individuals rely more heavily on low-cost signals and heuristics than on an optimising calculus. When costs and benefits are not easy to discern the consequences of action are difficult to estimate and perceptions of the intrinsic value of action assume greater relevance. Such considerations are particularly apposite when social policy affects altruism. In this paper the proposition is that policy signals impact on motivation systematically. Policy can have a greater (or lesser) impact than anticipated by instrumental response to the sum of its parts. Two examples prove illustrative. The first considers institutional reform and the supply of ‘merit wants’. The second focuses on recent proposals to nurture the voluntary charitable sector. In both cases, policy expectations based only on instrumental response prove misleading; the impact of policy signals on perceptions of the intrinsic value of action cannot be ignored.

Fiscal Illusion and "Excessive" Budgets: Some Indirect Evidence

The Leviathan literature has, as one of its themes, the manipulation of tax structures to minimize voter perceptions of their tax shares and hence predicts excessive public budgets. Existing confirmatory tests of this proposition, including those published in this journal, have been indirect and concentrated on the tax side of the budget in isolation. Questionnaire evidence on U.K. fiscal knowledge of both expenditure and taxation suggests no overall bias toward pessimistic or optimistic tax illusions but rather general ignorance.

Ethical investments: Preferences and morality

An economist and a social psychologist/sociologist discuss ethical investing (i.e., investing in socially desirable/attractive goods/services). An economic psychology model is outlined that allows for concerned investing. Four processes are identified: on the supply-side is the notion of innovative (value shift) marketing strategies; on the demand-side are consumer altruism, the influence of liberal elites, and the changing characteristics of consumers/investors (vintage preferences). This economic psychology model attaches weight to economic processes, not just consequences; to causal explanations beyond economic determinism; and to an interest in individual cognition (thinking, choices, attitudes, and preferences). (PsycINFO Database Record (c) 2007 APA, all rights reserved).

Public choice and public policy: The vulnerability of economic advice to the interpretation of politicians*

The confidence with which politicians defend their policies is in marked contrast to the qualifications which academic researchers attach to their results. The difference is indicative of a failure of the political market, whereby politicians have an incentive to select policies for electoral and ideological reasons and to minimise any uncertainty associated with policy effectiveness. In this scenario dissension between economists is of value if it alerts individuals to the sensitivity of policy ‘answers’ to the framework in which they are derived. Moreover, with government failure, public choice analysts are faced with the problem of how best to amend policy advice in order to allow for potential distortion at the hands of politicians.

Merit Want Status and Motivation: The Knight Meets the Self-Loving Butcher, Brewer, and Baker

When governments intervene in response to the presence of irrationality, merit wants are provided by reference to experts. Neoclassical microeconomic theory says little about why, when, or how such intervention is required. However, literature in experimental economics identifies anomalous behavior that is irrational by reference to predicted behavior of homo economicus but that is, nevertheless, systematic. This literature informs public finance theory. Government action, difficult to explain by reference to the preferences of homo economicus, can be rationalized by reference to a broader perspective of individual behavior. Although public finance discussion of merit wants has focused on demand, a more general analysis recognizes a rationale for merit want status with respect to supply considerations. Governments have an incentive to describe some public sector goods as merit wants when this affects willingness to supply labor.

Is democracy regressive? A comment on political participation

Concluding commentsIt has been shown that the positive correlation between income and electoral turnout is consistent with an opportunity cost argument. The argument highlights the impact of uncertainty costs generated by a broadening of the powers of government. It has implications for equity inasmuch as such costs are borne differentially. It thereby calls into question public policy with respect to the tax treatment of political participation expenditures.

Towards a “New” outrageous public choice

Abstract Public choice theory has identified and emphasised “failings” in political processes. However, an assessment of “failure” is sensitive to the framework used for evaluation. Recent developments in cognitive psychology and in experimental economics suggest that “deficiencies” in the political process (ie. “defects” that weaken the link between self interest and policy outcome) are, instead, attractive attributes (which safeguard individuals from the costs of “anomalous behavior”). A “new” public choice perspective (outrageously!) identifies “strengths” (as well as “failings”) in democratic political processes when what has been regarded as “anomalous” behavior is deemed relevant.

'What a difference a day makes...': Concern about a new approach to valuing a life

Abstract If individuals are interested in life per se (or perceive longevity as a goal worth attaining), there is reason to doubt that Brent (Journal of Public Economics, 1991, 22, 165–171) has provided a robust solution to the valuation of life in cost-benefit analysis.