Contrary to what modern observers might have you believe, tax dodging during the 1950s and 1960s was more about tax cuts than tax increases. Faced with a high tax rate it did not support, but, for political reasons, it could not lower, Congress did the next best thing. It riddled the tax laws with “leaks, loopholes, exemptions, and preferences,” while looking the other way at much of the widespread “income-tax chiseling” in American society and only occasionally passing watered down legislation targeting the more high-profile tax dodging schemes.1 In effect, it cut the tax rates implicitly, rather than explicitly, which amounted to a tax cut of the worst kind. It was not transparent, it was not evenly distributed among the taxpayers or even targeted to achieve any policy objective in some cases, and, because it was too unpredictable for taxpayers to rely upon for planning purposes, it was inefficient.

This chapter traces the way that employers used the expense account and the deduction for entertainment, meal, and travel expenses to facilitate a rapid expansion of tax dodging. Employers were able to divert taxable compensation that would have been subject to the steep post-war marginal rates to business expenses that the employer could deduct and the employee could exclude from his individual income tax return. People of modest means were able to live lavishly, encouraging the development of country clubs, dinner clubs, expensive restaurants, and post-dinner entertainment options such as theaters and operas, to service this new demand. Resorts also began to host business conferences to attempt to make vacations tax deductible. Moreover, the rise in conspicuous consumption appeared to induce others to seek out similar opportunities to finance personal consumption with tax-deductible dollars.

The rise in rates and drop in the exemption, not increased interest in tax advice among the wealthy, but among the new generation of middle class taxpayers. Tax advisors spring up to fill this new demand, not only in the form of tax lawyers and accountants for the well-off, which existed, albeit in smaller numbers, before World War II, but in the emergence of retail tax help, such as H&R Block, self-help advice books, tax advice columns in newspapers and magazines, and fly-by-night advice for people with far less ability to pay. Some of these were focused on tax return preparation, but because of the pressures to attract customers in the low margin retail tax industry, there were substantial incentives to promise high refunds. The growth of the tax advice industry sensitized the average person to common tax dodging techniques and to the practice of planning, rather than merely reacting, to taxes. The growth of tax advice also created a space for tax dodging school and tax protester movements, who spread information on tax dodging methods and justifications for non-filing in this pre-internet era by distributing pamphlets, organizing small group meetings and giving lectures.

Tax advisors may have helped a meaningful percentage of taxpayers to dodge their taxes, but advertising was a far more powerful medium in mid-century America for signaling the rising respectability of tax dodging. Publicity and advertising provided exposure and exposure helped to demystify, destigmatize, and normalize tax dodging. Although stories about the high-profile tax dodging described in the previous section provided exposure too, advertising suggested that it was not something only available to the rich and famous. Advertising alone may not have changed attitudes toward tax dodging, but it mirrored and reinforced changes in social attitudes toward the practice.

This concluding chapter argues that language is a first-order driver of economic behaviour and outlines where the research should go next. It extends the LENS framework beyond one-shot decisions to strategic settings shaped by beliefs, and outlines the co-evolution between language and behaviour. Large language models are proposed as virtual laboratories, while a quantitative utility approach must accommodate multidimensional, non-linear emotions and norms, and expand to visual cues (VENS). The chapter highlights applications – from policy design to norm-sensitive AI – alongside serious risks of manipulation, surveillance, and bias. It closes with a call for transparent, ethically governed models that explain and responsibly influence decisions.

This chapter surveys how moral content shapes behaviour through language. It considers moral foundations theory and morality-as-cooperation theory, outlining their dimensions, correlates, critiques, and refinements. It then reviews lexicon-based approaches to normative analysis, from moral foundations dictionaries to newer MAC-aligned resources, and discusses the limits of current tools in separating personal, injunctive, and descriptive norms. Building on these insights, the chapter proposes language-based utility functions (LiMoLNoS and LiMoLENS) that integrate normative and emotional valuations to explain choices in economic settings. Overall, it argues that morality is multidimensional and measurable in text, enabling models that connect linguistic framing to decision-making and behaviour.

The development of artificial intelligence (AI) and machine learning is leading to a revolution in the way we think about economic decisions. The Economics of Language explores how the use of generative AI and large language models (LLMs) can transform the way we think about economic behaviour. It introduces the LENS framework (Linguistic content triggers Emotions and suggests Norms, which shape Strategy choice) and presents empirical evidence that LLMs can predict human behaviour in economic games more accurately than traditional outcome-based models. It draws on years of research to provide a step-by-step development of the theory, combining accessible examples with formal modelling. Offering a roadmap for future research at the intersection of economics, psychology, and AI, this book equips readers with tools to quantify the role of language in decision-making and redefines how we think about utility, rationality, and human choice.

This chapter challenges economic consequentialism by testing behavioural equivalence across economically isomorphic decisions and documenting systematic violations. Evidence spans lying aversion in sender–receiver versus isomorphic Dictator Games; moral linguistic framings that reshape choices in Ultimatum, Prisoner’s Dilemma, Dictator, and Equity–Efficiency Trade-Off games; and the ‘dark side’ where moral labels strategically manipulate others and even increase corruption. Beyond social contexts, language also shifts intertemporal, risk, and ownership decisions (e.g., foreign-language effects). Together, the results imply that utilities depend not only on outcomes, probabilities, and timing but also on language that activates moral norms and beliefs, motivating a shift to language-based utility.

This chapter argues that language matters for economic decisions and that modern large language models (LLMs) can quantify this effect. After outlining the limits of lexicon-based tools, it examines BERT and MoralBERT, showing that generic sentiment scores struggle to predict human behaviour, while adding moral dimensions helps but the results remain imperfect. LLM-based chatbots (e.g., GPT-4) enable context-sensitive sentiment estimates that predict framing effects, particularly in Dictator Games. Building on this, the chapter formalises language-based utility functions that combine payoffs with sentiment or moral polarity and derives testable predictions. Evidence across Dictator, Equity–Efficiency, and Bribery games supports the approach, while highlighting caveats and aveThe chapter highlights applicationsnues for refinement.

In 1962, John F. Kennedy proposed withholding for taxes on dividends and interest to close the large gap between dividends and interest paid and reported. Despite the familiarity with wage withholding, the proposal encountered an enormous wave of public opposition, generating one of the most significant letter-writing campaign ever mounted. Congress relented and stripped the dividend and interest withholding provision from the bill in favor of new information reporting requirements. Why did dividend and interest withholding generate such a populist revolt? In part, the populism on this issue was manufactured by the business community. Banks and corporations mobilized their depositors and investors to contact their congressmen to protest the proposal. This is only part of the story, however. The industry-led campaign struck a chord with taxpayers who had become disaffected by the special tax preferences and shelters enjoyed by high bracket taxpayers. They viewed omitting dividends and interest as their form of self-help, while others were indignant that Congress would attack tax evasion by going after them before solving high-end tax evasion first.

In their book, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, economists Emmanuel Saez and Gabriel Zucman lamented the retreat of the United States’ tax system from its heyday between the 1930s and 1970s when it was, in their words, “perhaps the most progressive in world history.”1 As seen in Figure I.1, the top rate shot up from 25 percent after World War I to more than 60 percent in the early 1930s and settled at the astronomically high rate of 91 percent for over a decade between 1951 and 1963. That turned out to be the high point for the top marginal rate. Over the next several decades the rate dropped to 70 percent, then 50 percent, and finally a low of 28 percent in the late 1980s. Although it has crept up since then, the top rate has never approached anything close to what it was at mid-century, remaining below 40 percent for the last four decades.