—–Original Message—–
From: D
Sent: Tue 6/21/2016 4:40 PM
To: Walter Block
Subject: Re: About the Aula Magna in Brazil

Professor,
The thing that makes me question the existence of Neoliberalism is that, here, it is defined as “the classic Liberalism applied on today’s standards”. Let me give you an example: in the Northeast part of Brazil, the State made some car construction industries free of taxes, so as to stimulate their installation in a poorer region on the country that need development, and that is defined as a liberal act. However, the way I see it, making specific sectors of the market tax-free while others are still charged is not liberal at all, on the contrary, it just contributes to interfering in the natural flow of the market: industries should install themselves where it is most lucrative and compete through the laws of offer and demand, not as a result of State intervention. If Liberalism was to be truly applied in this situation, it should extinguish the taxes on all
industries. Am I getting it wrong? Thank you for the attention!

Dear D:

You raise a very important question/issue. Yes, ideally, the

government should end all taxes for everyone. But, suppose they reduce, or eliminate, taxes only for some. For example, churches, “infant industries,” firms in poor areas, such as the case you raise. How are we to look at that. In two ways, I suggest. First, this is bad, because it misallocates resources within the economy from the ideal way that would occur in the absence of this policy. For example, we will have an over-optimal amount of churches, “infants” and industry in poor areas, compared to what otherwise would have occurred. Second, this is good, since we must favor reductions or eliminations of taxes, since they are depredations on the owners of the resources taxed. Take this hypothetical. There is evil slavery. We are in 1855 in the US. For some reason, we have the power to free only left-handed slaves, or those between the ages of 40-45, or any other subgroup. These amount, say, to only 5% of the slaves? Should we do it, even though this is “misallocative,” even though these slaves are no more deserving of freedom than any others? The answer emanating from libertarianism is, Yes, of course we should free whichever kidnap victims we can, even if we can save only a small proportion. Similarly, we should support any and all tax reductions, even if they are not equal across the board.

The Best of Walter E. Block