Creative Destruction versus Robert Frank’s Progressive Consumption Tax

Abstract: Joseph Schumpeter, like Ludwig von Mises, thought of capitalism as a process that often, over time, turned luxuries into necessities. Schumpeter warned that assessments that ignored this process, which he termed creative destruction, would misconstrue the social results that arise from capitalism in practice. This article exposes the applicability of this warning to the analyses of positional-good consumption presented by Robert Frank which led him to conclude that a steeply progressive tax on consumption would constitute a free-lunch, bringing in “trillions of dollars” without the loss of “anything of enduring value.”