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    Ed Prescott: A winner of the 2004 Nobel Prize in economics is the W.P. Carey Chair of Economics.
Contact Professor Prescott at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

Recently the Wall Street Journal published a story describing a new method of measuring a nation’s progress--gross national happiness.  Maybe it’s just because it was during the election season, but one hopes that this indicator doesn’t catch on in the United States.  Of all the promises that candidates make, and of all the problems they pledge to fix, one shudders at the notion of candidates vowing to make us happier.  The mind reels at the thought of the ill-considered policies that would be concocted if the stated goal were to increase gross national happiness.  It’s hard enough to make everybody more prosperous, educated and healthy, but imagine if the government was responsible for keeping you in a good mood?  Just envision the data problems!

      I mention this not to poke fun at the idea of happiness.  Indeed, our Constitution in its elegant wisdom allows for individuals to pursue their own happiness.  But the individual pursuit of happiness is far different from the aggregate management of happiness.  This point is at the core of how we should think about many government policies, especially tax policy, which is the subject of this article.

      Let’s begin by considering a commonly held view which says that labor supply is not affected by tax rates.  In other words, labor participation would remain steady when tax rates are either raised or lowered.  If, as a policymaker you subscribe to this view, then you can confidently increase marginal tax rates as high as you like to attain your desired revenues.  You can increase or decrease tax rates whenever you like and blithely assume that this will have no effect on output.

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Tim Keller is the Executive Director of the Institute for Justice Arizona Chapter, a nonprofit public interest law firm dedicated to protecting individual liberty.  Contact Mr. Keller at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .  

Arizona has weathered two statewide election cycles under our scheme of publicly financing elections, the so-called Citizens Clean Elections Act.  Examining the fallout from these elections, the conclusion is that publicly funded elections stifle free speech.  

The Arizona Republic’s editorial board characterized the first statewide election under “Clean Elections” as “undeniably among the ugliest, muddiest ever.”  Candidates flush with cash from the Act’s matching funds provision and unaccountable to donors for their messages went on a spending spree of negative advertising.   

“Matching funds” means that any time a group makes an independent expenditure in support of a traditional, privately-supported candidate (or opposing a publicly financed candidate), that expenditure will be matched dollar-for-dollar by the Clean Elections Fund to the publicly financed candidate.   

Independent expenditures, by definition, are not controlled by the candidate in whose support, or against whom, they are made.  But matching funds are given directly to the publicly financed candidate to craft his or her response.  It is no wonder former gubernatorial candidate Matt Salmon observed, “As a privately supported candidate, I was praying that no one would make an independent expenditure on my behalf.” 

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