Economics Can Be Bewitching!

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By DANIEL HAMERMESH

Dan Hamermesh is a professor of economics at the University of Texas at Austin. Follow @freakonomics on Twitter.

An article on the BBC and elsewhere notes that witches and astrologers are now recognized occupations in Romania and no longer part of the underground economy.  Practitioners’ incomes are now taxable—and practitioners are now covered by the country’s pension and health insurance schemes.  Some witches have cast spells to overturn the new regulations, while others like the new benefits more than they dislike paying the new taxes.

This bizarre case should be an important reminder in these Tea Party days:  Our taxes buy something—the services of government.  Being locked out of government, as the witches were, has both costs and benefits. It’s natural to try to free-ride on the taxes of others; but if enough of us did that, simple economics shows that the services wouldn’t be provided. In a country like the U.S., with relatively low taxes and few services, do we want to provide even fewer services in order to keep taxes so low or cut them still further?

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