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Behavioural economics vs. classical economics and taxes.

August 12, 2012

In classical economics (CE) the tax code is a disorganized patchwork of rules of collecting and spending money by government based on the belief that human decision-making is infallible and therefore is out of the equation (allowed to be ignored). In behavioural economics (a system in the making) the tax code will be an organized system of collecting and investing (not just spending) money by government based on understanding that human decision-making is not infallible and therefore behaviour should be part of the equation.  Classical financing is the national mode in the US thus collecting is not equitable and spending is not justified,  but classicists (called Econs by Thaler) believe behaviour should not be accountable because after all we humans are logical and exercise common sense in our dealings. In CE collecting public money evolved as layer upon layer of complex common sense rules  emerging from the logical interaction between Classical politicians (those who know how to get elected without accountability), classical economists (those who have PhD without understanding the psychology of decision-making in the market place) and classical IRS personnel (those who run the system without contingency management skills), all these individuals deciding within their jurisdictions what is fair and equitable taxes, how to collect and how to spend the money for the public good.

Behavioural economics as a national system does not exist yet. The 4th annual convention of the fledgeling discipline is in New York City nest month in September. I am a member of the Academy of Behavioural Economics and Finance but my views are not official. Being a discipline in its infancy, I have no views as to how to collect taxes equitably (a complex matter) but I do have definite views how to invest tax money. Money should never be spent, only invested in infrastructures, behavioural education, behavioural health care, important job creation and products and services that bring real, concrete actual returns, not unaccountable promises as it is in classical economics.

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2 Comments leave one →
  1. August 15, 2012 7:31 am

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  2. September 27, 2012 6:47 am

    WONDERFUL Post.thanks for share..more wait .. …

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