Positive and Normative Judgments Implicit in U.S. Tax Policy, and the Costs of Unequal Growth and Recessions

32 Pages Posted: 1 Feb 2016

See all articles by Benjamin B Lockwood

Benjamin B Lockwood

University of Pennsylvania - The Wharton School

Matthew Weinzierl

Harvard Business School - Business, Government and the International Economy Unit

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Date Written: January 2016

Abstract

Calculating the welfare implications of changes to economic policy or shocks requires economists to decide on a normative criterion. One approach is to elicit the relevant moral criteria from real-world policy choices, converting a normative decision into a positive inference, as in the recent surge of "inverse-optimum" research. We find that capitalizing on the potential of this approach is not as straightforward as we might hope. We perform the inverse-optimum inference on U.S. tax policy from 1979 through 2010 and argue that the results either undermine the normative relevance of the approach or challenge conventional assumptions upon which economists routinely rely when performing welfare evaluations.

Suggested Citation

Lockwood, Benjamin B and Weinzierl, Matthew, Positive and Normative Judgments Implicit in U.S. Tax Policy, and the Costs of Unequal Growth and Recessions (January 2016). NBER Working Paper No. w21927. Available at SSRN: https://ssrn.com/abstract=2725705

Benjamin B Lockwood (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Matthew Weinzierl

Harvard Business School - Business, Government and the International Economy Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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