Suppose you believe that human beings seek status; it is desirable to them to win competitions for prestige versus their fellow humans. Suppose then you you make after-tax income equal through highly progressive taxation.

What would they do?

Tim Worstall's comment to Tyler Cowen's post is spot on:

If we close off or limit one form of status seeking, another will simply take its place. At various times and places status has been determined by how much you give away or destroy ("potlatch" societies), order of birth (aristocracies), religious fervour (theocracies), skill at decapitating peasants with a broadsword (feudalism) and no doubt many other forms I've left out.

If competition for social status there is going to be then that over the size of your yacht seems the least bad option: after all, in working to earn that your production has provided consumption goods for others, something that none of the other alternatives provide.

Adam Smith had already figured this out.

I often wonder whether figuring out the "black box" that is the utility function is really getting economics anywhere.

Labels: economics