Calculation and Corporate Tax Incentives in the Carolinas

Abstract

Amazon’s HQ2 campaign drew both large support at the possibility of job creation and backlash for perceived cronyism. In this paper we evaluate corporate tax incentive policies in light of the Austrian contribution to the problem of economic calculation. In doing so we highlight the contextual nature of the knowledge problem associated with policy packages and the potential cronyism arising from such a problem. We argue that because political decision-makers lack the knowledge generated via competition in the market process, they are unable to allocate resources in a way that achieves economic growth. In the place of this knowledge, they tend to gain knowledge from the political process which helps them respond to political incentives and rent-seeking behavior by special-interest groups.