Public Economics in Action: The Basic Income/Flat Tax Proposal

As explained in Chapter 1, it has not been my purpose in this book to argue for or against the Basic Income/Flat Tax proposal. In my view, it should definitely be on the agenda for public discussion, and there are certainly circumstances in which it would be, in my judgement, the best way to develop the tax and social security system in the European Union. My concern here, however, has been with the contribution that public economics can make to identifying these circumstances, and with the role which it can play in clarifying public debate on this important topic.

This in turn leads me to draw certain conclusions about the present state of the academic subject of public economics. In the course of the individual chapters, I have tried to highlight some of the areas where further research is much needed. These include the design of tax policy with non-welfarist objectives, the formalization of public choice theories, building general equilibrium models of incidence that take account of recent developments in the theory of labour markets, the incorporation of behavioural response into simulation models, and the study of aspects of household behaviour other than hours of work and participation.

At the same time, there is one overarching theme that I would like to stress: the need for greater integration of the different branches of the subject. This is set out schematically in Figure 8.1, which shows the subject divided into four main areas: design of policy (Chapters 2 and 3), public choice (Chapter 4), theory of incidence (Chapter 5), and empirical analysis (Chapters 6 and 7). Of the six possible pairings, at least four warrant, in my view, closer integration.

The first of these links is that between the design of policy

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