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.

Macroeconomics I find interesting but don't entirely understand...

Ron Paul writes in the WSJ about the role of the Fed in the financial crisis.

Eventually, the economic boom created by the Fed's actions is found to be unsustainable, and the bust ensues as this malinvested capital manifests itself in a surplus of capital goods, inventory overhangs, etc. Until these misdirected resources are put to a more productive use—the uses the free market actually desires—the economy stagnates.

Pretty standard Hayekian interpretation. It sounds logical, but I haven't seen much actual evidence. (HT: KPC)

On the other hand, Scott Sumner presents lots of evidence for a different story. It is pretty interesting: his data suggests that it was tight money, not inflation, that caused the recession. Good, short talk.



Bottom line: economics is hard.

Remedy for the Economy

Nothing new, but well said.

Arguably, the problem with the economy in the United States is that the government has not fostered a very good business climate. The answer to that would be smaller government, stable rules, and fewer regulations. When businesses feel confident that expansion is going to be profitable, they'll hire people. When they don't, they won't take the risk.

Or maybe it's aggregate demand? In that case, government spending works and you can pay workers to dig ditches and fill them back in again. It's no suprise that the promise of a free lunch through Keynsian stimulus is politically feasible. It's also no suprise that it doesn't work.

You can't have political freedom without economic freedom...

I don't much care for political analysis conveyed as propaganda via youtube video, with flashy imagery, eerie background music, sombre voiceovers (usually substituting for reasoned thought and argument), but this one happens to confirm my bias.

Wall Street's Gullible Occupiers

This WSJ article is right on the mark!

Reckless government policies, not private greed, brought about the housing bubble and resulting financial crisis.


I am very familiar with some of these arguments, but I haven't seen the overall point this well organized.


Also like this point about the greed narrative:

The narrative that came out of these events—largely propagated by government officials and accepted by a credulous media—was that the private sector's greed and risk-taking caused the financial crisis and the government's policies were not responsible. This narrative stimulated the punitive Dodd-Frank Act—fittingly named after Congress's two key supporters of the government's destructive housing policies. It also gave us the occupiers of Wall Street.

Although I don't entirely agree with link to the Wall Street movement. They definitely have it wrong, blaming capitalism etc... but they aren't happy with too big to fail, monetary policy etc... either. So partial credit for them, in my books.

Will you defend incest?

On moral consistency:
I know a lot of people get upset and railed up about life, death, and choice issues like abortion, euthanasia, and capital punishment. I don’t have firm opinions on any of these issues, for reasons I’ll explain in a moment, but I tend to be liberal:
1. Pro choice
2. Anti-capital punishment
3. Pro-Euthanasia

The Conservative stance tends to be:
1. Pro-life (anti-abortion)
2. Pro-capital punishment
3. Anti-Euthanasia

Now, if you think about it, neither position is very consistent. Liberals (such as I) have no problem killing babies and old people, but we want to protect criminals.

Conservatives want to save babies and old people, but kill criminals.


I don’t know if there is a way to resolve this. I do understand that the issues are a bit more complex than this. For instance, Doctor assisted suicide is voluntary on the part of the patient, while capital punishment is involuntary. But there are some issues where one is inevitable dragged through the requirement of logical consistency, into uncomfortable moral positions.

Here is a really weird one: can you be (consistently) pro-choice, but anti-incest (in favour of laws banning it, not a fan of the practice itself)? Ok, think about it…. We all agree that consenting adults can do what they want in the bedroom. If you’re pro-choice, you also agree that the rights of the body outweigh the rights of the foetus, and probably even have the view that the foetus has no rights at all. So if you are pro-choice you cannot employ the most common objection to incest, namely, that it hurts the offspring. If you were to assert the rights of the child in this case, you would have a hard time defending your pro-choice stance. You simply can’t have it both ways, in my opinion.

Ron Paul is not a good Libertarian

Wilkinson points out:

Thanks to Ron Paul, libertarianism of a certain stripe may be more popular than ever, and its influence on the Tea Party and the broader conservative movement is not hard to see. All the same, this brand of libertarianism is never going to "cross the chasm," as the marketing folks like to say. It's destined to remain a minority creed, and that’s not because most Americans are stupid or immoral. It’s because libertarians have done a terrible job countering the widespread suspicion that theirs is a uselessly abstract ideology of privilege for socially obtuse adolescent white guys. Ron Paul sure isn't helping.

HT: KPC

Atheist libertarians ... and charity..

PZ Meyers asks libertarian atheists: should the atheist community be more involved in charity?

So this is the question for libertarians: do you endorse the liberalization of organized atheism?

My answer, as a libertarian atheist is: yes. I wholeheartedly support this. Charity is a good thing. Supporting the needy is a good thing. I don't think that either (a) government; (b) religion should have a monopoly on this. I'm not so much of a libertarian that I would totally eliminate the social safety net or wealth transfers, but I would like to see government play a smaller (and different) role and private, community organizations a larger one.

Other atheists or libertarian comments?

Occupy Wall Street vs. Reason TV

This is pretty funny.

Welch: "Do you think the central government should take over the banks."
Protester: "For sure."
Welch: "what if the Republicans were running the administration?"
Protester: uh, no. I don't trust them.

lol.

The guy who pulls rank on the new guy is hilarious.
"This is a leaderless movement:
WM: "Well you sorta just pulled rank on that guy, are you the leader?"
Protester: "yeah."


HT: KPC

Chris Hedges v. Kevin O'Leary

This video is pretty funny. (I can't seem to embed it).

Some thoughts:
1. O’Leary is an ass. That’s no way to talk to someone you disagree with. Chris Hedges is completely right that this is Fox-news calibre debate.
2. I actually agree with some of what he says: Financial-crony capitalism has done lots of damage. The people who were behind it seem to be getting away with it, etc…
3. Finally: “Let’s restore the rule of law.” I actually agree with that as well. But I’m not sure we mean the same thing. In my book, the rule of law means that the government is bound to not use its power arbitrarily to confiscate private wealth; bail out losers; pick winners; impose burdensome and onerous regulation on economic activity etc… Rule of law is great, but it means getting the government out of the economy.

My biggest gripe with his argument:

He says that the cause of all of this was “unfettered capitalism.” He goes on to say that “There have been no regulations on Wallstreet,” that “Financial institutions don’t produce anything,” he praises John Raulston Saul (which made me dry heave for about 5 minutes) and concludes that Canada’a banking system is awesome.
This is pretty much all garbage. 1. Government intervention was the decisive cause of the financial crisis. 2. Wall Street, Banking, and Finance in the U.S. were heavily regulated before the crisis.
3. The real problem is not capitalism, but crony-capitalism. Crony capitalism is how I describe this unhealthy relationship between government and business in the U.S. I think we all agree that this is bad. But the way out is not more government (more corruption), or more burdonsom regulations (written by insiders, gamed by crafty traders). Rather, smaller government and stable rules is the smart way to go here.

Thoughts on cycling...

Are bicycles "road vehicles"? Must cyclists act like drivers of cars and trucks and obey every rule of the road? Or is there an element of the pedestrian in the bicycle?

The Real Johnson puts forward a strong argument that cyclists should not necessarily have to stop at all stop signs.

Because you see, cyclists aren’t actually the maniacal, fly-through-traffic, ignore-all-laws psychos that we are so often portrayed to be. In fact, you’ll probably find that the average person who has chosen to forgo a gas-guzzling car and opt for a vehicle that requires as much energy as a light bulb (coming from a person no less) is usually a pretty sensible person. Not only do we not seek to intentionally ignore the law simply for the sake being rebellious, we also understand that in a battle between a 175lb bag of meat and a 3000lb block of metal and chrome, there is only one likely winner. So, believe it or not, we actually take some caution when we roll through a stop sign– and with a head higher than your car’s roof, we’re also actually in a pretty good position to gauge traffic as we approach an intersection.

I completely agree. The difference between the cyclist and the driver is that the cyclist must be allowed some discretion. The rules of the road are in place for cars and trucks because there is very little room for error in a world of 5000+lb missiles. Cyclists have some aspect of the pedestrian in them. Pedestrians navigate traffic mostly according to their own judgement. It's because we're smaller, travel more slowely, and have only our own lives to lose in a collision with a car. When your life is on the line, you can be trusted to use good judgement.

As for me, I sometimes stop at stop signs, if it makes sense for my own self-preservation. That being said, I employ discretion at every encounter with cars. There is too much on the line. The rules may protect me in theory, but I don't always trust drivers to yield, or stop at interctions, or look before making a right hand turn into a cycle lane. So sometimes, yes, if there is no one around and it looks safe, i'll go through lights or stop signs. The way I see it, cyclists are kind of doing society a favour. Our choice of transportation is environmentally friendly, reduces congestion, and makes us healthier, all of which indirectly benefit other people. So let me have a little discretion on the road. Please. It's my ass on the line anyway.

Myths about China and the United States

I like when Foreign Policy Magazine sets out to debunk conventional wisdom on topics. They do a pretty good job of tearing down myths about China:

My favourite

China is America's banker. America cannot anger its banker. In fact, China is more like a depositor. It deposits money in U.S. Treasurys because its economy does not allow investors to put money elsewhere. There is nothing else it can do with its surpluses unless it changes its financial system radically (see above). It makes a pittance on its deposits. If the United States starts to bring down its debts and deficits, China will have even fewer options. China is desperate for U.S. investment, U.S. Treasurys, and the U.S. market. The balance of leverage leans toward the United States.

One point that the article does not bring up is the argument that China's rise is bad for the west. This is only true, in my opinion, if you consider power in relative terms. Military power, for example, tends to be relative. But economically, the rise of China is good thing. More people buying and selling things, more trade, more ideas etc.. this makes us better off as well. Trade and innovation are the engines of growth and prosperity, and it's better of us all to have a billion extra people in the mix.

The FP article makes a good point along these lines.

China's decline will make our lives easier. China's decline may make the challenge for the United States more difficult for at least a generation. It could play out for a long time, even as China grows more aggressive with more lethal weaponry (e.g., what to do with surplus males?). Arguably, both Germany and imperial Japan declined beginning after World War I and continuing through the disaster of World War II. Russia is in decline by all useful metrics. Even so, it invaded a neighbor not too long ago. A declining, nuclear-armed nation with a powerful military can be more problematic than a rising, confident nation.

Demands and Suggestions ....

What does the Wall Street Occupation want?

Watch live streaming video from globalrevolution at livestream.com

Some pretty standard anti-globalization type demands: end free trade; $20 hour minimum wage (yikes); free college; single payer healthcare; massive debt forgiveness; but they have one I actually like
Demand nine: Open borders migration. anyone can travel anywhere to work and live.
Wait, so they want to end free trade but open up all borders to migration? Weird. I mean, I don’t see the point, but ok.
Why not add drug legalization to that list?

Anyway, I’m inspired. Here’s my list of “suggestions” (I’m not demanding anything.) Practical changes that would probably make Canadian society better off.

1. Legalize all drugs;
2. Privatize alcohol sales and distribution
3. Replace the current income tax system with a lower, flatter tax on income, corporate profits, and capital gains; increase and harmonize sales taxes. Eliminate tax loop holes
4. Abolish the CRTC and the Telecommunications act.
5. Introduce major market based reforms and private sector competition into healthcare and education
6. Eliminate agricultural subsidies and tariffs
7. Eliminate all trade tariffs and restrictions
8. Privatize public transportation and mail
9. Introduce a pigovian tax on carbon or maybe just gasoline;
10. downsize police; replace with community policing model to make more accountable; cut spending on prisons…
11. legalize euthanasia
12. Increase migration through some sort of more open border policy
13. oh, what the hell… since this is fiction: outlaw the killing of animals
14. Replace all government-delivered social services with a system of vouchers
15. End government regulation of food and drugs;
16. legalize the sale of human organs (read: evil).
17. abolish the monarchy
18. eliminate the department of Indian and Northern Affairs
19. end all licencing systems for professionals: aka
“hi Dr. Nick”

20. Abolish all human rights tribunals

Idealism is kinda fun... .

Was Trudeau a disaster?

The Citizen recently hosted an interesting debate on this issue.

David Frum argues that Trudeau was a disaster.

Lawrence Martin argues that Trudeau was not so bad.

I have to give it to Frum. He was out for blood on this one. His most solid set of arguments attacked Trudeau’s economic and fiscal legacy, from the national energy program, to healthcare, to fiscal policy.

Pierre Trudeau was a spending fool. He believed in a state-led economy, and the longer he lasted in office, the more statist he became. .... Three subsequent important prime ministers — Brian Mulroney, Jean Chrétien and Stephen Harper — invested their energies cleaning up the wreckage left by Pierre Trudeau.

On this point, he gets no rebuttal from Martin who concedes: “I’m no fan of his economic record either. But like any PM’s economic record it must be weighed in the context of the time.” All Martin really had to do was show that Trudeau "wasn't so bad." He didn't have to make the case that Trudeau was the best PM ever. It's a pretty weak position, but Martin did an ok job at redeeming some aspects of Trudeau's legacy.

Overall, Martin’s basic point seems to be that Trudeau did a pretty good job as PM in the face of some difficult circumstances. Frum argues that Trudeau basically mishandled everything and that many of the difficult circumstances, like the two recessions, were the result of bad government policy.

What about the Charter of Rights and Freedom? It’s hard to argue that this was a good thing, but I did like Frum’s conclusion:

Defenders of Trudeau’s disastrous governance habitually rally around one great accomplishment: the Charter of Rights and Freedoms. Well, Herbert Hoover had some excellent wilderness conservation policies, but we don’t excuse the Great Depression on that account. Would it really have been so impossible to achieve a Charter of Rights without plunging Canada into two recessions, without wrecking the national finances, without triggering two referendums, without nationalizing the oil industry, without driving not only Quebec, but also Alberta to the verge of separation?

Anyway, a good debate. I highly recommend both of these articles.

Americans are getting fatter...

In case you're wondering if Americans are, in fact, getting fatter:

http://www.cdc.gov/obesity/data/trends.html#State

During the past 20 years, there has been a dramatic increase in obesity in the United States and rates remain high. In 2010, no state had a prevalence of obesity less than 20%. Thirty-six states had a prevalence of 25% or more; 12 of these states (Alabama, Arkansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Oklahoma, South Carolina, Tennessee, Texas, and West Virginia) had a prevalence of 30% or more.

Source: CDC