The System of Economic Contradictions, or Philosophy of Poverty is a work by Pierre-Joseph Proudhon published in 1846 by Guillaumin et Cie, Paris. It inspired Karl Marx to write his rejoinder The Poverty of Philosophy. According to George Litcheim, the "doctrine that emerged went something like this: what people really needed were use values, whereas they were actually being offered exchanges values by the market. These represented thesis and antithesis; Proudhon (having on this point misunderstood Hegel) looked for a synthesis which he termed 'constituted value.' This amounted to saying that goods should be exchanged in proportion to the amount of labour embodied in them - an arrangement that would do away with market fluctuations and at the same time satisfy the requirement of justice." (Litcheim, A Short History of Socialism, 1975, p.76). At Chapter VII, Proudhon introduces the idea of consumption tax.

P. J. Proudhon (15 January 1809—19 January 1865) was a French politician and the founder of mutualist philosophy. He was the first person to declare himself an anarchist and is widely regarded as one of the ideology's most influential theorists. Proudhon is even considered by many to be the "father of anarchism". He became a member of the French Parliament after the revolution of 1848, whereafter he referred to himself as a federalist. Proudhon favored workers' associations or co-operatives, as well as individual worker/peasant possession, over private ownership or the nationalization of land and workplaces. He considered social revolution to be achievable in a peaceful manner. He unsuccessfully tried to create a national bank, to be funded by what became an abortive attempt at an income tax on capitalists and shareholders. Similar in some respects to a credit union, it would have given interest-free loans.