This post is written by (post)libertarian:
One of the most valuable gifts of economics to libertarians has been an understanding of how the price system transmits information in order to bring about efficient market outcomes. At its most basic, the theory is that people respond to the incentives (disincentives) created by higher or lower prices to change their patterns of production and consumption. In the realm of economic behaviour, while challenged from time to time by arguments relating to market failure and monopoly power, this is a fairly well held orthodoxy.
However much more controversial is whether or not the prices altered by government have an effect on social behaviour. Governments alter prices two ways: by changing the reward for producing a particular good, service or kind of behaviour; or by changing the cost a particular good, service or kind of behaviour. While central planning at the firm-level has gone out of fashion, central planning at the individual-level through welfare payments, etc. has steadily increased over the past decades.
In this light, it is fascinating to read the work of Australian economists Joshua Gans & Andrew Leigh on unusual days, which showed the way that one-off changes by government in the prices of death and birth had significant effects on social behaviour as individuals altered their choices in order to maximise their wealth (or, in the circumstance of the 1979 abolition of inheritance taxes, the wealth of their beneficiaries). In summary, Gans & Leigh found that half of those eligible to pay inheritance taxes in the week before their abolition delayed their deaths until after their abolition; and that up to 1,000 couples delayed the births of their children in order to be eligible for the baby bonus when it came into effect in 2004.