Values, Markets and the State
Edited by Geoffrey Brennan and Giuseppe Eusepi
Chapter 9: Do We Really Know Much About Tax Non-compliance?
Lars P. Feld Introduction Social norms have been a central theme in economics for many years. Indeed, the norms that guide individual behavior in the market place (and beyond) belonged to the main concerns of Adam Smith when he analyzed the role of morale for the functioning of societies in his Theory of Moral Sentiments (1759), long before he published his Wealth of Nations (1776 ). Since Hayek (1960), economists also know that norms of reciprocity provide for a crucial precondition of market exchange even in large groups. According to Buchanan (2005, Chapter 2, p. 15 et seq.) such a Kantian norm generally forms the basis of modern market economies: ‘The Kantian norm dictates constraints on behavior in accordance with fairness criteria, defined in terms of respect for the other person in some basic ethical sense’ (p. 15), ‘I can scarcely imagine an interaction setting in which persons refrain from cheating, stealing and keeping promises only because of some fear of punishment’ (p. 16).1 Without a basic individual willingness to reciprocate in market exchange, far less contracts between private parties will be concluded as the enforcement of each claim to the contracts in society becomes extremely expensive. Societies with properly working social norms thus obtain an economic advantage as compared to societies in which contract partners cannot rely as heavily on social norms. Only recently has this importance of social norms in studying compliance with the law been rediscovered in law and economics (Ellickson, 1991). In addition to the...
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