An Econ Lesson for Occupiers

Tax the rich! Sounds pretty simple, doesn't it. Well, it's not: people are smarter than planners.

Neil Reynolds at the Globe and Mail writes: A millionaires’ tax is all the rage, but it’s another thing to collect

One of the champions of a “millionaire’s tax” has been Chicago economist Austan Goolsbee, who chaired Barack Obama’s Council of Economic Advisers for a year until he stepped down in August. Yet, back in 1999, Mr. Goolsbee concluded (in a research paper) that “higher marginal tax rates led [in the 1990s] to a significant decline in taxable income.” In his study of America’s richest million taxpayers, he found that “a small number of executives,” by themselves, accounted for 20 per cent of the decline.

AM: Tax revenue = tax rate X tax base

The catch is this: when you raise the rate, you shrink the base. Higher rates kill economic activity and encourage people to find new ways to avoid paying.

System D: Parallel Economy in China

Great article in FP Magazine:

It used to be that System D was small -- a handful of market women selling a handful of shriveled carrots to earn a handful of pennies. It was the economy of desperation. But as trade has expanded and globalized, System D has scaled up too. Today, System D is the economy of aspiration. It is where the jobs are. In 2009, the Organisation for Economic Co-operation and Development (OECD), a think tank sponsored by the governments of 30 of the most powerful capitalist countries and dedicated to promoting free-market institutions, concluded that half the workers of the world -- close to 1.8 billion people -- were working in System D: off the books, in jobs that were neither registered nor regulated, getting paid in cash, and, most often, avoiding income taxes.

AM: Surpise, suprise. The fastest growing economy is unregulated, untaxed: capitalism in its purest form?

Richard Epistine with a contrarian view on inequality....

Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from PBS NewsHour.

This guy is a little nuts, even more my modest libertarian sentiments, but he speaks well.

Sam Harris on the ethics of Meat

I'm a fan of Sam Harris, generally. But despite the fact that he comes to what I feel is the correct conclusion, his thinking seems pretty muddled.

Two points stood out: He says that 'as soon as there is an alternative' to killing animals for food, it will no longer be ok. In other words, eventually we'll have synthetic meat, and then we won't need to kill. But in reality, well managed vegetarian and vegan diets are healthier than meat-based diets. Harris should probably have put in a little more effort into his own vegetarianism.

Second, citing Peter Singer, he says it's not ok to deligate the killing of animals to others. I'm not sure if this is what he meant, but it sounded as if he was implying that what is wrong is the act of deligating something you find repulsive, and not the actual act (for example, then hunting, or raising livestock might be ok if you thought so).

Quote of the day: Capitalism v. Cronyism.

Russ Roberts in Foreign Affairs writes:

The economist Milton Friedman liked to point out that capitalism is a profit-and-loss system..... If the protesters want to fix the symbiosis between Wall Street and Washington, the first thing they need to do is recognize the disease. The disease is not too much capitalism but too little. If firms that fund bad investments by other firms lost all their money, they would either disappear or learn to be more prudent. Washington needs to be less involved with Wall Street, not more. We need less crony capitalism and more of the real thing. We need to demand of our politicians that they stop bailing out losers 100 cents on the dollar. If we keep subsidizing recklessness, we will keep getting more of it, and the rest of us will pay the price.

AM: Exactly. The real story of the financial crisis, the housing bubble, and the recession that is rarely heard in the mainstream media is that it was created by govenrment intervention in the economy, not by uncontrolled capitalism.

Get the flab of the state off my dinner plate!

Wendy McElroy says: government has no business in the kitchens of the nation.

I particularly liked this point:

The typical counter-argument is to say that since society pays for our health care, we owe it to society to lead healthy lives. In short, your neighbour has a vested financial interest in what goes into your body. If you won’t take care of it, the government will make you.

This line of reasoning — rather than justifying a Nanny State or a nosy neighbor dictating your personal choices — constitutes a powerful argument against socialized medicine, but it doesn’t do much to say that the government should control what you eat. If socialized medicine had been advertised decades ago as a government mandate to control the minutia of your daily life, then it would probably have never been implemented.

Society does not have any claim over what you do with your own body. If that is what universal, single payer healthcare systems entail, then it's probably an argument in favour of changing the way we deliver healthcare.

This is not itself an argument against single payer healthcare systems. I only mean to suggest that advocates of more regulation should probably not justify this restriction with reference to universal healthcare.

The Tea Party v. Occupy Wall Street ...

Should Americans support the Tea Party or the Occupy Wall Street, movement?

The question could be rephrased: should Americans protest Washington, or New York.

Tom Palmer makes an interesting point:

What caused the crisis, the indebtedness, the unemployment, the stagnation? The culprits are state agencies and enterprises, including our Federal Reserve (our government’s bank), Federal Housing Administration (FHA), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac), which jointly flooded the country with cheap credit and encouraged and subsidized unsound banking and subprime mortgages, all to encourage wider home ownership, paper prosperity, and cozy relationships with their cronies. We got a housing bubble, mountains of unpayable debt, and a financial crisis. Thanks, Uncle Sam. The Occupiers have the wrong address. The subprime crisis was designed in Washington, not New York.

I'm sympathetic to this point. But I wouldn't consider myself a Tea Party Supporter. Rough analogy: I like the food network, but Iwouldn't buy Rogers cable to get it. Why? Because i'd have to buy some terrible channels as well. Rogers sells cable packages filled, mostly, with trash. Same thing with the Tea Party. I like smaller government, less cronyism, free markets etc... but to get these benefits they want me to hate gays, disavow science, and support really terrible and inept political leaders like Bachmann and Palin. Sorry. Can't do it.

OWS, you win by default.