First Minister Jack McConnell has warned that Holyrood will "subside into inertia" if MSPs continue to obsess about gaining new powers.
The first minister wants to maintain the constitutional status quo
His comments came ahead of a lecture on Tuesday where he defended the current devolved settlement.
However, two leading economists have argued that the Scottish Parliament must gain more control over tax.
And his comments were criticised by the SNP and the Conservatives, who said he was burying his head in the sand.
In an interview with BBC Scotland ahead of the lecture, Mr McConnell dismissed calls for more tax-varying powers as a "fad".
"My job as first minister and leader of the Labour Party in Scotland is to say what's right, and not necessarily is the current fad," he said.
"I think that in Scotland today we can see the benefits of devolution, of home rule.
"But we also know that in Scotland, we get a union dividend from our close working relationship with the rest of the United Kingdom."
Giving the annual JP Mackintosh lecture in Haddington, East Lothian, the first minister said the Scottish Parliament now had "a whole welter of powers" at its disposal.
"It can't be other than sensible for us to make the fullest possible use of those powers before demanding lots more," he argued.
"For if such demands become a persistent feature of Scottish politics, and there are those who want this to be so, then we'll sink all too quickly into a collective - and wholly self-imposed - inertia."
He said Scotland was seven years into "a great enterprise, a great venture".
"To abandon devolution here in Scotland after just seven or eight years - to declare the game a bogey and to take ourselves off in a huff - would be to demonstrate quite shocking irresponsibility," said Mr McConnell.
SNP leader Alex Salmond said Labour was running scared of a debate on independence.
"They are the wee fearties of Scottish politics," he claimed.
"Their unionism is backward-looking and inward-looking.
"Labour want Scots to believe the incredible proposition that we are the only country in the world that isn't capable of flourishing with independence."
Scottish Conservative leader Annabel Goldie said: "Jack McConnell is acting like a political ostrich, with his head buried in the sand.
"Scotland urgently needs fresh thinking and new ideas.
"We do not close our minds to new powers but argue that there should be a mature and reasoned debate about the way forward."
Last week a think-tank set up by the Conservatives called for Holyrood to be handed greater powers on tax-varying.
The case for more tax-varying powers was made on Tuesday by Glasgow University economist, Professor Ronald MacDonald and an American colleague, Professor Paul Hallwood, of the University of Connecticut.
They said that, under the current block grant from Westminster, Holyrood had no incentive to grow the economy or control spending.
Their report, in the Fraser of Allander Institute Quarterly Economic Commentary, restates their case for more powers after an earlier paper this year came in for criticism.
A commission has recommended to the Lib Dems that Holyrood be responsible for raising the money it spends.
Former Holyrood Presiding Officer Lord Steel said that a commission under his chairmanship had recommended to the Lib Dems that Holyrood be responsible for raising the money it spends.
He said: "We were greatly influenced by the experience of Ireland in boosting their economy with taxation policies markedly different from those of Westminster."