Critical Point

Abstract

There is a social and economic law which is as important as it is forgotten. Luigi Einaudi called it the “critical point theory,” which he defined as “fundamental to both economic and political science”;¹ he attributed it to his fellow countryman Emanuele Sella (an Italian economist and poet who also wrote a treatise on “Trinitarian” economics²). The idea is that there exists an invisible but real threshold, a critical point, after which a positive phenomenon turns negative, changing in sign or nature. Today we could apply the law of the critical point to finance and also to taxes; if they exceed a threshold, they end up penalizing the honest people who pay them.