Agent-based Modeling of Tax Evasion

Chapter 2How Should One Study Clandestine Activities: Crimes, Tax Fraud, and Other “Dark” Economic Behavior?

Aloys L. Prinz

2.1 Introduction

In this chapter, research methods are studied with respect to their adequacy and appropriateness for the detection, explanation, prediction, and combating of clandestine and dark economic activities. The main result is that there are two pitfalls of such studies, namely “the fallacy of misplaced concreteness” (A.N. Whitehead) and “the fallacy of disregarded abstractness” (M. Schramm). These potential fallacies point to the issue of the adequacy and the appropriateness of research methods and research goals. The more abstract the research objective, the more general its propositions; the more specific the study intentions, the more specific the various considerations. As a consequence, there can be no single method of research for all objectives. At this point, the availability of research methods becomes a major issue. For instance, in the more distant past, the tools consisted of theoretical models and a certain number of empirical methods. Neither laboratory and field experiments nor computer simulation models were on hand. Newly available methods now allow for an expansion of research in two directions toward a deeper understanding of economic and social phenomena, and to different levels of analysis.

Take tax evasion as an example. Theoretically, there are a number of general theories (expected utility theory, psychological theories, ...