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SCI LIBRARY

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.