Deadweight Loss


It occurred to me that I’ve alluded to deadweight loss pretty frequently here over the years without defining it. The triangle formed by the right edge of the grey tax income box, the original supply curve, and the demand curve is called Harberger’s triangle. That is the loss of economic activity that results from taxation. That is the deadweight loss of taxation. There are other forms of deadweight loss including the deadweight loss from price supports and the deadweight loss from crony capitalism in general.

One way to improve economic growth is to constain government only within the limits of what we actually need and only taxing to that degree. I think a substantial reason for slower growth in developed countries is deadweight loss of various different varieties.

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  • TarsTarkas Link

    Elizabeth Warren obviously believes in deadweight loss. Why else would she propose an exorbitant exit fee to encourage people to be slowly bled to death financially instead of immediate execution? But that inconvenient diagram doesn’t matter to her. Seizing and exercising power is her goal and has been for quite some time.
    She, Sanders, AOC, and most if not all of the remaining Democratic Presidential candidates seem to either believe or pretend to believe that not only can they kill and eat the goose that laid the golden eggs but afterwards order it to continue to lay golden eggs and at a faster pace. But then dead geese don’t consume valuable resources, so that’s a plus, especially for the environment. Warren seems to be pinning her hopes for paying for her plan to achieve utopia on MMT, i.e. print all the money you can and make inflation illegal (except when it benefits the government).

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