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One of the most striking conclusions from economics is that the damage done by taxes, which economists call the deadweight loss (DWL), is proportional to the square of the tax rate. Double the tax rate and you quadruple the deadweight loss. In this month's Econlib Feature Article, economist Cyril Morong shows that a good metaphor for the DWL from taxes is the Noise to Signal Ratio (NSR). He shows that the relationship between the DWL and tax rates is similar to the relationship between the NSR and tax rates and for similar reasons: just as noise distorts the information we extract from a signal, taxation distorts the valuable guidance given by prices.

Arnold Kling

Ideas and Economic Growth

Arnold Kling
January 2, 2017
Arnold Kling find himself among those who credit the tremendous economic growth experienced since the Industrial Revolution as owing more to intangible than material factors. This month, he reviews the newest book from another such believer, Joel Mokyr's "A Culture of Growth."
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THINKING STRAIGHT

Anthony de Jasay

Catching Up: Could We Have More Growth?

Anthony de Jasay
January 2, 2017
What are the prospects for economic growth in the European Union as the new year opens, and will Europe's sclerotic rates ever catch up to America's? Anthony de Jasay weighs the chances in this month's column, ruminating on the stability of the euro zone and the impact of coming electoral decisions.
MORE ARTICLES BY ANTHONY DE JASAY