The late Mancur Olsen was a very accomplished academic economist who described the unfortunate tendency of vote-seeking governments to behave like “stationary bandits,” seeking to extract the maximum amount of money from taxpayers.

I’m not nearly as sophisticated, so I simply refer to this process as “goldfish government.”

Tax competition is a way of discouraging this self-destructive behavior. Politicians are less likely to over-tax and over-spend if they know that jobs and investment can migrate from high-tax nations to low-tax jurisdictions (borders can be a hassle, but they are beneficial since they presumably represent a limit on the reach of a government’s power).

This is why I’m a big fan of so-called tax havens.

I want politicians to be afraid that the geese with the golden eggs may fly away. This is one of the reasons why “offshore” nations play a very valuable role in the global economy.

But it’s important to realize that there’s also a moral argument for tax havens.

Trust and Privacy

Ask yourself whether you would want the government to have easy access to your nest egg (whether it’s a lot or a little) if you lived in Russia? Or Venezuela? Or China? Or Zimbabwe?

Ask yourself whether you trust the bureaucracy to protect the privacy of your personal financial information if you lived in a country with corruption problems like Mexico? Or India? Or South Africa?

Here’s a story from France24 that underscores my point.

Turkish President Recep Tayyip Erdogan declared Sunday that businessmen who move assets abroad are committing “treason”, adding that his government should put an end to the practice. “I am aware that some businessmen are attempting to place their assets overseas. I call on the government not to authorise any such moves, because these are acts of treason,” Erdogan said in televised comments to party members in the eastern town on Mus.