If top marginal income tax rates are set too high, they discourage productive economic activity. In the limit, a top marginal income tax rate of 100 percent would mean that taxpayers would gain nothing from working harder or investing more. In contrast, a higher top marginal rate on consumption would actually encourage savings and investment. A top marginal consumption tax rate of 100 percent would simply mean that if a wealthy family spent an extra dollar, it would also owe an additional dollar of tax.

The most glaring deficiency in traditional economic models is that they completely ignore the role of context in evaluation.

The most common mistake we make as teachers is attempting to tell our students too much.

One reason that might motivate a worker to accept a riskier job at higher pay, for example, would be that doing so would enable him to bid more effectively for a house in a better school district. But if other workers did likewise, none would achieve the goal they were striving for.

Many decry rising inequality because it makes those who've fallen behind feel impoverished. But it's done much more than cause hurt feelings. It has also raised the real cost to middle-income families of achieving many basic goals. The process begins with the completely unremarkable fact that top earners have been spending at a substantially higher rate than before. They've been building bigger mansions, staging more elaborate weddings and coming-of-age parties for their kids, buying more and better of everything.

John Stuart Mill believed that the only acceptable reason for government to limit a person's liberty was to prevent him from causing unacceptable harm to others. Mill was not a libertarian, but many libertarians are quick to cite this principle when arguing against a regulation that they oppose. And I believe most thoughtful libertarians are prepared to embrace something fairly close to Mill's harm principle. But accepting that principle implies accepting many of the institutions of the modern welfare state that libertarians have vigorously opposed in the past, such as safety regulation.

We've long known that firms can pay higher wages if they spend less on workplace safety enhancement. Libertarians ask, "If a worker is willing to accept higher wages in return for his agreement to exercise greater caution while performing his job, why should the government prevent him from making that choice?" It's a rhetorically powerful question, yet it overlooks the fact that the agreement in question will have adverse effects on others.