Economists and policymakers historically have approached households as static constructs, governed by rhetorics of persistent poverty or a linear trajectory of upward mobility. This perspective is complicated by current research that emphasizes contingency and precarity as central features of the contemporary U.S. labor economy. In Pricing Low-Income Resource Volatility, David Hasen adapts an understanding of volatility from financial economics to model the effects of idiosyncratic, exogenous variations in households’ income and expense. Hasen finds that, under reasonable assumptions, resource volatility imposes substantial costs on a broad range of households, including those with incomes up to four times the federal poverty line. Moreover, the unavoidable, uninsurable costs of resource volatility for lower-earning households are social costs, rendering this volatility “a public goods problem masquerading as a distributive one” (31).

Hasen’s insight—that resource volatility imposes efficiency costs outside of (re)distributive concerns—represents a crucial reframing, not least because Hasen quantifies the deadweight loss associated with resource volatility at almost $700 billion annually. First, existing poverty metrics (clearly) should be reconstructed, perhaps to incorporate “precarity lines” at incomes over the poverty line (Hasen elucidates two candidates) or phase-outs that reflect the linear reduction of resource volatility as market incomes rise (Hasen charts these exquisitely). Second, resource volatility significantly affects the real value of marginal dollars for households. For middle- income earners, another dollar of earnings or transfer payments is worth $1.82, when accounting for lower costs due to resource volatility. The tax and transfer system (clearly) should be rethought in light of this phenomenon. Third, the dynamics of resource volatility provide a novel lens for understanding and assessing features of existing tax and transfer law. For example, resource volatility favors consumption taxation for middle-income households, which generally is consistent with current implementations of tax-advantaged retirement savings. Tweaks to the current legal landscape (clearly) should account for any implications for resource volatility. Hasen’s article addresses a big—and severely underappreciated—idea, and there is much to be mined from his discussion.

In some sense, Hasen’s article pushes economists and legal scholars to engage with issues well- traveled in other social science disciplines. Central to Hasen’s argument is the fact that resource volatility is essentially uninsurable through the private market and self-insurable only through sufficient income. Since the 1930s, however, sociologists and others have studied the puzzle of income-consumption disparities among low-resource households. Frequently, these disparities can be explained by support from community, social, and institutional networks, which serve as a type of informal insurance against shocks. Examples include meal trains among neighbors, or passing a collection plate at church. Among low- and middle-income households, these network may ameliorate resource volatility without redistribution across income cohorts—something that Hasen carefully outlines in the context of governmental tax and transfer systems (31–33). Social sorting by race or background or political ideology may further complicate the distributional landscape created by informal insurance. More generally, however, these informal mechanisms would reduce Hasen’s total social costs of resource volatility, setting aside the conceptual and data-based challenges of actually doing the computations.

Moreover, life cycle models of spending and saving also have implications for resource volatility. To the extent that small, low-income households comprise adults in retirement, they may use prior-period savings to self-insure against resource volatility. Similarly, households at earlier points in their life cycles may draw on non-household family members—typically, parents—when their income or expenses change unexpectedly. In each of these cases, the social costs of resource volatility presumably are less than revealed by Hasen’s model. These cases, of course, do not detract from Hasen’s overall point about the need to account for resource volatility in setting social policy. More texture, however, is needed to fully understand how resource volatility affects households in their broader social context, especially across demographic categories.

Finally, Hasen’s article adds additional nuance to well-traveled double-distortion arguments that advocate efficiency-oriented legal rules backstopped by a redistributive tax-and-transfer system. As Hasen notes, efficient legal rules that mitigate resource volatility may have incidental redistributive effects (32). Disentangling these properties may prove impossible as a practical matter, which implicates social costs alongside the social benefits of reduced resource volatility; there are threads of the “tagging” literature on targeted social provisioning. In addition, the political economy of these entanglements is potentially complicated. While efforts to reduce households’ resource volatility may prove popular politically, any connection to redistribution may allow ideologues to reject such measures. Alternatively (and Hasen takes this view), redistribution may be “along for the ride,” in a salubrious way, when lawmakers address the efficiency costs of resource volatility (32, 34–35). Either way, however, the politics of resource volatility are themselves potentially volatile, with important stakes for the content of legal rules.

Overall, Hasen’s article is a major contribution to economic study of tax law, opening a number of new avenues for scholarly exploration and reframing the stakes of existing and future policies. Hasen challenges well-established literatures in novel ways, and his article should be of interest to tax academics and policymakers, as well as social scientists outside of law.