Nov 22, 2021Liked by Liberty

The scrub article is very interesting. We want people to hack the system when the result is welfare-enhancing for society, like with a new drug, but we don't want people to hack the system in ways that decrease welfare for society, like finding legal ways to avoid taxes that don't align with what the law intended.

You definitely see this in sports - sports is an entertainment product, but as high stakes as sports are now, players and coaches find ways to exploit loopholes in the rules, eg by diving or fouling or so on, sometimes in ways that make the game less compelling to watch. So the leagues have to expend resources to evolve the rules or worse yet they can't agree and the game becomes boring. But it's not always clear which innovations make the game better and which make the game worse (although in some cases it's very clear).

Buffett is a good example. He steps over one foot bars on the investing side but he is also unwilling to exploit the same questionable tax loopholes most other big companies do, he doesn't run his profits through Ireland and the Netherlands and so on (I don't think). He does of course take advantage of tax deferral from long term holdings and those kind of things but generally he sticks to stuff that are clearly intended by the people who designed the tax code.

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