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FRAMEWORKPaper #65
The Fiscal Capture Theorem
Shows that governments dependent on tax revenue from system-degrading industries face a structural conflict: enforcement reduces the tax base. The theorem explains regulatory paralysis.
THEOREM TYPE
Framework
physically/biologically binding
SOURCE STATUS
Summary + deck generated
verified by paper record
OPEN HTML DECK ↗Deck mode is an on-site reading view, not a PowerPoint download.
Theorem status: evidence-traced claim under the cited paper's assumptionsFalsification: show the same game preserving system welfare without changing the payoff structure
KEY FINDINGS
THE FISCAL CAPTURE THEOREM
Let φ = R_tax / C_reform where R_tax is government revenue from industry i and C_reform is the political cost of structural reform. When φ ≥ 1.0, the government's optimal strategy is to perpetuate the Hollow Win regardless of regulatory intent. Reform requires fiscal restructuring before regulatory reform.
PLAIN ENGLISH
A state that earns 15% of its revenue from tobacco tax does not need to be bribed to oppose tobacco reform. The fiscal architecture does the work automatically. This is not corruption. This is structural incentive alignment between government revenue and system degradation. To reform the industry, you must first reform the government's dependence on it.
EVIDENCE & LIMITATIONS
- Theorem status: evidence-traced claim under the cited paper's assumptions
- Falsification: show the same game preserving system welfare without changing the payoff structure
REFERENCES / CITATION STATUS
Reference counts for this manuscript have not been published yet. Treat its citations as unverified until a source list is available.
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SOURCE QUESTIONS
SSRN not yet postedDeck ↗
WHY THIS MATTERS
For the economist
A structural claim about when bilateral optimization degrades the shared system. Read the formal statement and its stated axioms.
For the regulator
The constraint is physical or biological, so disclosure alone will not internalize it. The policy lever is to bound exposure, not to price it away.
For the executive
This is where a privately efficient decision can degrade the system the business depends on. The governance question is which decision records would make that system cost visible before it is normalized.
For the teacher
An on-site HTML deck and the expanded curriculum cover the argument, the evidence, and the measurement. Use the deck as a self-contained class session, then route deeper through the 45-50h core course or 100+h full curriculum.
For the affected community
In plain terms: who gains from the current arrangement, who pays for it, and what rule change would alter that split. The summary states each without jargon.
© 2026 Erik Postnieks · Independent Researcher · Salt Lake City