'Motivation spillover': tax policy design to mobilise collective action.

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'Motivation spillover': tax policy design to mobilise collective action.

ABSTRACT

Instrumental citizens have no incentive to vote because a single vote has only a minuscule chance of changing an electoral outcome. As individuals' motivation to vote is to express identity with values signalled by policy, there are incentives to design tax policy to appeal to expressive voters. The objective in this paper is to consider the implications for public finance management if policy preference and taxpayer response are sensitive to perceptions of the intrinsic value of expressive action. If policy is designed to emit low-cost signals that inform perceptions of the intrinsic value of expressive action, taxpayer response will depend on more than the impact that tax exerts on budget constraints (e.g. on relative price and on income). Policy design features are capable of mobilising collective action to achieve outcomes that would otherwise remain 'undersupplied' (in terms of individuals' own preferences). Tax policy can be designed to achieve more than the sum of instrumental response (to tax, subsidy and regulation).

1. INTRODUCTION

Public finance theory is usually premised on the assumption that individuals behave instrumentally. Response is predicted with reference to the impact that tax exerts on constraints, e.g. on changes in relative price and income (Stigler & Becker, 1977); Wagner (2006, p. 516) notes that "...public finance theory follows economic theory in taking individual preferences as given ...". But if other motivations are relevant, is it sufficient to analyse tax policy solely with reference to instrumental motivation? (1)

If individuals were solely instrumental they would have no incentive to vote (the probability that a single vote will change an electoral outcome is miniscule). Instead, voters participate to express identity just as they express identity when "... applauding a fine symphony performance or ... cheering the success of the home team" (Aldrich, 1997, p. 387). More generally, Akerlof and Kranton (2005) survey empirical studies that highlight the relevance of expressive motivation. A "... person's identity describes gains and losses in utility from behavior that conforms or departs from the norms for particular social categories in particular situations" (Akerlof & Kranton, p.12). As employees and as consumers they derive intrinsic value from expressive action. They "... define who they are in terms of the people they interact with and how they interact" (Wallis, 2003, p. 227). They take act...

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