Review of
The Economics of Taxation
by Harry Gunnison Brown
Henry C. Simons
[Reprinted from the Journal of Political Economy,
Vol. 34, No. 1 (February, 1926), pp. 134-136. The Economics of
Taxation,
published by Henry Holt and Co., 1924]
This book is a collection of delightful essays, some of which will be
familiar to readers of the Journal, on a range of topics common to
economic theory and public finance. In the course of eleven chapters
the author discusses the following: inflation as a species of
taxation; government borrowing; the incidence of taxes on commodities,
on labor incomes, on capital and income from capital, on land, on
loans, on sales of land and capital goods; the incidence of import and
export tariffs and of compulsory insurance of workmen.
Professor Brown has written for undergraduates. Few of his chapters,
however, will prove tedious for the most critical reader. In many
parts one finds nothing at all that is new, but lucid, straightforward
exposition and insistent emphasis upon the essential adequately reward
the reading. Some of the chapters challenge and merit careful study.
In these the author is evidently pursuing his declared intention of
preparing for an intermediate course material which is at least as
significant and difficult as that commonly presented in the "Principles."
The many ventures into problems of strict theory are productive of
rigorous, objective, and almost unerring analysis of the mechanics of
industry and trade. Especially noteworthy is the emphasis upon the
extent of the diffusion process and the precise definition of its
limits. At a few points, to be sure, the argument is inconclusive and,
much more rarely, in error. There are instances (pp. 60, 73-78, 109)
of objectionable confusion between "marginal product" and
the product of marginal producers. The tendency for all producers to
be marginal with respect to some part of their output is, at least,
not consistently recognized. The author's explanation does not readily
commend his conclusion (pp. 2I7, 239) that an increase in land taxes
will tend to bring more land upon the market for hire. Even most
ardent proponents of progressive taxation may hesitate to concur in
the assertion (pp. I97, i98) that "it seems a not unreasonable
conclusion that a graduated tax on incomes from capital probably tends
to discourage saving less than would a proportional tax levied at a
high enough rate to yield an equal total revenue." More serious
error-perhaps the only case of clearly unsound argument-appears in
discussion of the effect of commodity taxes on the general level of
goods, prices, and money incomes (pp. 62, 63, 65-67). Space does not
permit adequate examination of the author's position. Statement of the
case against his position, however, may be made without reference to
controversial aspects of quantity theory. Suffice it to say that the
main argument (pp. 65-67) appears to presuppose an altogether
mysterious disappearance of effective demand.
To do justice to the shortcomings of a book like this is a relatively
easy task, and a relatively unimportant one. It seems clear that the
reviewer's unfavorable criticism, whatever its merits, is almost
irrelevant to a judgment of the work as a whole. Professor Brown has
contributed a deal of acute analysis to a more or less special field
of inquiry in which most of the stuff that is written and preached is
of exceedingly unattractive quality. It is to be hoped that this book
will become familiar to many students. As a second text for the longer
courses in public finance it deserves serious consideration. For
shorter courses, selected chapters might well be included in the
assignments. The book may be recommended to students in the early
stages of advanced study who find economic theory a source of
distress. It would be very useful to any- one writing, or revising, a
text in public finance.
|