Friday, November 12, 2010

Ask & You Shall Receive: Saez's Median Voter Query Answered?

In my very first post to this blog, I referenced Emmanuel Saez' observation that:
"... in contrast to the standard political economy model, the progressivity of the current tax system is not being shaped by the self-interest of the median voter."
 How Progressive is the U.S. Federal Tax System? A Historical and International Perspective
by Thomas Piketty & Emmanuel Saez
Journal of Economic Perspectives - Vol. 21, No. 1 - Winter 2007 - ppg. 3-24

I wondered if the standard political economy was flawed. I concluded it very probably was. Albeit without much evidence or logical support.

I further postulated that there was some sort of distorting effect coming from the camp of the billionaires, Wall Street and Big Business, aided and abetted by conservative Republicon lackeys & front organizations.

Since then, I stumbled across an interesting paper dating from circa 2007 by Emanuele Canegrati, then a student at the London School of Economics. Entitled A Contribution to the Positive Theory of Indirect Taxation, it both answers my question and lends support to my speculation.

In summarizing, Canegrati explains:

The introduction of a probabilistic voting model characterized by the presence of single-minded groups overrules the classic results achieved by the median voter theorem, because it is no longer the position on the income scale to drive the equilibrium policy but the ability of groups to focus on their most preferred goods, instead. This ability allows them to achieve a strong political power which candidates cannot help going along with, because they would lose elections otherwise.

Some academic meat on my speculative bones? I don't know. It's an interesting theory.
As Kurt Vonnegut says [in "Slapstick", anyway]:  Hi ho!

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