Preference Change and Tax Policy, Again

Let's go back to Layard's attempt to justify his relative position “pollution” argument for taxation against his strawman libertarian critic:

Libertarians strongly object to this argument. They say it panders to the ignoble sentiment of envy, which ought to be disregarded. This is an extraordinarily weak argument. Public policy has to deal with human nature as it is. The desire for status is ubiquitous, and we all recognise it. Greed is also common, and libertarians do not disallow it. So why should they disallow the desire for status? Both sentiments are features of human nature. We are not perfect, and public policy should help us make the best of what we are. [Happiness, p. 153]

How many things are wrong with this argument? Feel free to count to ways in the comments.
Let me just say that it is cheap to equivocate between the desire for status and the desire for relative position in the income distribution. The latter is a contingent cultural expression of the former, as Layard himself concedes. And so public policy “dealing with human nature as it is” isn't therefore public policy that treats our tastes for relative position in the income distribution as having normative weight. Our taste for coalitional solidarity and out-group xenophobia is natural in precisely the same way that our taste for status is. But we don't think that this confers any significant normative weight on any old cultural expression of our tribalist impulses, such as apartheid, Jim Crow, or the Final Solution.
OK. Now try to square Layard's “rebuttal” to the libertarian with the following. . .
First, Layard emphasizes in a number of places that many of our tastes, desires, preference, etc., are determined endogenously by institutional and cultural factors. Second, he argues convincingly that we can choose to change our own preferences.

The fact is, we can train our feelings. [p. 188]

Advocating Buddhist meditation Layard says:

Buddhism tells us to address the “poisons” that are disturbing our peace of mind: our unrealistic cravings and our tempestuous anger and resentment. [p. 189]

It is difficult not to draw the connection between this “poison” and the “pollution” that is caused by our taste for relative position. The difference is that here Layard clearly admits that the poisons are a function of our own states of mind–our unrealistic cravings–not simply the external fact that others have moved up relative to us.
Advocating the practice of cognitive psychotherapy, he writes:

If happiness depends on the gap between your perceived reality and your prior aspiration, cognitive therapy deals mainly with the perception of reality. [p. 197]

From his discussion of Buddhism, Christian mysticism, and cognitive therapy, Layard draws this lesson:

A second conclusion is that we have to control our tendency to compare ourselves with others. [p. 199]

(The first conclusion is that we ought to develop Buddhist habits of mindful attention to the present, which is also a way of controlling desire based in social comparison.)
Finally, Layard says that public policy can help by undertaking the “education of the spirit” through, naturally, mandatory state-funded spiritual education programs aimed at producing more open, compassionate, benovelent, and less comparison obsessed children.[p. 200-1]
Other than the monstrously illiberal suggestion that there ought to be a state curriculum in spiritual education, I agree entirely with Layard's emphasis on our ability to shape our preferences through meditation, cognitive therapy, and, I would add, literary experience. But the spiritual education idea, in any case, amounts to conceding that a tax may not be the conclusion of the externalities/pollution argument, even if we insist on structuring policy around human nature as it is.
Indeed, if one of the most important lessons we should take away is that we can and should control our preferences based in social comparison, then why would we make public policy of a tax that is justified entirely in terms of those same unhealthy and controllable preferences? By choosing to treat these preferences as having normative weight in tax policy, isn't the state sending exactly the wrong signal? Wouldn't this be like arguing for a special tax on blacks on the grounds that this would increase total utility by pleasing the racist white majority, even though one has admitted that racist preferences are pernicious, and should be changed?

Author: Will Wilkinson

Vice President for Research at the Niskanen Center