The Height Tax

Here is the abstract of a new paper by Greg Mankiw:

Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This paper shows that the standard utilitarian framework for tax policy analysis answers this question in the affirmative. This result has two possible interpretations. One interpretation is that individual attributes correlated with wages, such as height, should be considered more widely for determining tax liabilities. Alternatively, if policies such as a tax on height are rejected, then the standard utilitarian framework must in some way fail to capture our intuitive notions of distributive justice.

The paper's interesting tax suggestion is due to the well-documented finding that tall people tend to have higher wages. Any ideas on why that correlation may exist? Here is a link to the full paper.

What do you think? Should tall people be taxed more to even out the playing field? I may be biased, but I would be a strong supporter of tax credits for the short...

Irrational Taxi Drivers?

There is high demand for taxi cabs in NYC when it is raining, of obvious reasons. However, taxi drivers tend to work fewer hours on rainy days.

The first perspective on this phenomenon is that the taxi drivers are behaving irratioanlly. According to a paper by behavioral economists:

They speculated that cab drivers have a particular income level they target each day. When they hit that target, the cabbies go off duty. The increased cab demand in bad weather increases the number of fares per hour, so cab drivers reach their target sooner, and go off duty. Economists consider such a strategy irrational. After all, if each hour of work is more lucrative, shouldn't cabbies work more hours?

However, on the Free Exchange blog, the author proposes another idea that brings the taxi drivers behavior back into the realm of the rational:

They claimed the reason they stop work early on rainy days is the dangers associated with driving in such conditions. Rain makes the roads slick and encourages irrational behaviour from pedestrians. As one cab driver put it, “The people become crazy; they walk right in front of oncoming traffic to get out of the rain.” Assuming high costs associated with getting into an accident or hitting a pedestrian, it may be very rational to work fewer hours at the higher wage. When you subtract the cost of getting into extra accidents, the wage may not be as high as it seems.

Any thoughts on which side is more likely?

(Source: Free Exchange)