Russell Roberts's Blog, page 1485
January 23, 2011
Obama Reformed?
A friend of mine, who asks to remain anonymous, e-mailed to me just now the following thought on Pres. Obama's alleged new-found enthusiasm for markets and deregulation:
Obama & Business
A known offender is seen hanging out at the playground, acting aggressively towards the children. A watchful mom confronts him and scolds him and tells him she's got her eye on him. The next day he is back, now acting friendly towards the kids and handing out pieces of candy.
Who would find that reassuring?
UPDATE: Here's Boston Globe columnist Jeff Jacoby writing today on Obama's feint toward deregulation.
More on "Failure to Tax" as Subsidies
My friend and neighbor, egrass, e-mailed me this morning pressing his point that tax deductions are government subsidies – and again accusing me of seeking government subsidies when I raise tax-deductible contributions to George Mason University's Department of Economics.
I addressed my profound disagreement with egrass's perspective somewhat in this earlier post.
Here I make another, different attempt – inspired by this line in egrass's latest e-mail to me:
we live in a closed system such that tax and other government policy necessarily transfers money from A to B unless that policy is strictly neutral for everyone.
There's a huge and ancient literature on tax neutrality. Such neutrality is, I think it fair to say, nearly impossible to acheive. That unicorn has been hunted and proves elusive.
The closest we can actually come to a tax that is both economically neutral and satisfies widely accepted conditions of fairness is a head tax – a lump-sum levied regularly on each person regardless of that person's income, status, or anything else. For example, I pay $1,000 annually, egrass pays $1,000 annually, and Bill Gates pays $1,000 annually. The economic distortions would be minimal, and no income-earner avoids paying.
I believe that egrass should support such a tax, as well as support ridding our polity of every other tax. Or he should at least support a flat tax.
After all, by his logic, taxing lower-income persons at lower rates than are imposed on higher-income persons is, in effect, for government to subsidize lower-income people. Money not taxed is – the clear-eyed realist sees – money given by government in this alleged "closed system" of ours.
Every person not in the highest income-tax bracket is on the government dole! Sure, they might not realize that they're free-riding on others. They might think that just because they get no food stamps and no other cash handouts from government that they are paying their own way – pulling their own weight. But they would be wrong. They are all, every last one of them, simply by virtue of not being in the highest income-tax bracket, recipients of government subsidies no less than they would be were government to raise their income-tax rates and then immediately rebate to them the difference between what they pay in taxes at the highest tax rate and what they would have paid at the lower tax rate.
It is, as egrass says, merely a matter of arithmetic:
$X – X(.15) = $X – [$X(.40) - $X(.25)] QED
While a head tax comes closest to eliminating such subsidies, a flat tax – proportional taxation – comes much closer to doing so than does the current progressive system of income taxation.
Instrumental vs. Ultimate Goals
Here's a letter to the New York Times:
Cab driver Melissa Plaut asserts that Mayor Bloomberg's proposal to allow livery cabs to pick up street hails in New York City "would hurt the taxi industry more than it would help the public" ("Mayor Bloomberg, Back-Seat Driver," Jan. 22). She then offers versions of some of the same specious arguments used 35 years ago by airlines and trucking firms to argue against what experience now shows to have been the successful deregulation of those industries.
The ultimate purpose of the taxi industry is not to secure benefits for itself; that purpose, rather, is to transport willing customers. The only relevant test for this proposal is if it increases benefits to paying passengers. Period. If paying passengers benefit over the long run, even if only a smidgen, no amount of corresponding harm to the taxi industry justifies blocking the proposal.
Sincerely,
Donald J. Boudreaux
January 22, 2011
Yet Another Open Letter to Ian Fletcher
22 January 2011
Mr. Ian Fletcher
Dear Ian:
Thanks for your e-mail today in which you offer to sell me a copy of your book Free Trade Doesn't Work.
Just this once I'll accept your argument that free trade, in fact, doesn't work – and so, in honor of your discovery, I refuse to import a copy of your book into my home.
After all, I have my own competing book on trade, and I continue to produce writings on this topic almost daily. Surely you agree that any support that I give to a rival will only harm me – that my spending money on your book leaves less money for me to spend on my own book. And why would I do such an unstrategic thing? Why should I buy from strangers – persons, such as yourself, who are foreign to my household – products and services that I make a good living producing myself?
Indeed, why would anyone outside of your own household buy your book if, as you claim, free trade doesn't work? The path to riches is for each household to write and print its own books!
Thank you for articulating the intellectual case that saves me – and, hopefully, every other human being outside of your own home – from making the mistake of buying your book.
Sincerely,
Donald J. Boudreaux
Dog Bites Man!
Here's a letter to the Washington Post:
Your report "Corporate contributions have surged for new Republican leaders in House" (Jan. 22) is hardly news.
Golden-egg-laying geese are targeted for slaughter by hunters armed with big, bad bazookas. Vultures who thrive by feasting on geese carcasses incessantly peck at these hunters, prodding them to keep blasting away at the geese. The geese, for their part, try to save their skins by blinding the hunters with shiny golden eggs.
To add to the melee, some particularly greasy geese conspire with the vultures and hunters to arrange the massacre of other geese and to share the spoils.
The flock of geese thins. The bazookas get bigger and badder. The vultures, fatter than yesterday, circle.
And so it goes.
Sincerely,
Donald J. Boudreaux
My Admittedly Idiosyncratic List of History's 18 Top-10 Economists
Commenting here, IndianaJim asks my list of top-ten economists of all time. It's a difficult list to compile, but here goes – with a bit of fudging at the end:
1. F.A. Hayek
2. Adam Smith
5. Ronald Coase
7. Julian Simon
10t.* Joseph Schumpeter
"t" means "tentative." Other candidates for this coveted No. 10 slot are J.-B. Say, Carl Menger, Knut Wicksell, Philip Wicksteed, Alfred Marshall, Frank Knight, Aaron Director, and Gordon Tullock.
My Admittedly Idiosyncratic List of History's 18 Top-Ten Economists
Commenting here, IndianaJim asks my list of top-ten economists of all time. It's a difficult list to compile, but here goes – with a bit of fudging at the end:
1. F.A. Hayek
2. Adam Smith
5. Ronald Coase
6. Harold Demsetz
7. Julian Simon
8. Milton Friedman
9. Frederic Bastiat
10t.* Joseph Schumpeter
"t" means "tentative." Other candidates for this coveted No. 10 slot are J.-B. Say, Carl Menger, Knut Wicksell, Philip Wicksteed, Alfred Marshall, Frank Knight, Aaron Director, and Gordon Tullock.
January 21, 2011
Open Letter to an Anonymous E-mail Correspondent
Dear Mr. or Ms. FedupwithHayek:
You write: "You [Don Bx] wrong[ly] assume workers don't want more job security. They do. They don't appreciate trade lowering that security."
I disagree, at least with the implication that the value to workers of greater job security exceeds the costs of supplying such security. Consider:
Nothing prevents a firm – say, Acme, Inc., a hypothetical chain of hair-styling salons – from offering the following sort of deal to consumers: "Acme will cut your hair, but only on condition that you agree to buy at least six haircuts each year from Acme for the next 25 years." If Acme gets enough customers to buy haircuts on this condition, then it can offer more job security to its stylists, receptionists, and other employees than can Acme's competitors who do not condition the sale of haircuts on customers' willingness to sign such contracts.
Obviously, consumers won't buy haircuts from Acme on these terms unless Acme makes these terms worthwhile to consumers – say, by offering haircuts at much lower prices.
But to operate profitably while charging much lower prices, Acme would have to find enough employees who value job security so highly that they're willing to work for wages far below what they would earn by working elsewhere.
Because I see no such successful attempts by firms to cater to the alleged demand that workers have for greater job security, I conclude that workers in general are not willing to pay the cost of securing more job security. In short, the value to workers of greater job security is less than is the value to them of higher wages today.
Securely yours,
Donald J. Boudreaux
Greg Mankiw almost solves the deficit problem
He's a genius:
I have a plan to reduce the budget deficit. The essence of the plan is the federal government writing me a check for $1 billion. The plan will be financed by $3 billion of tax increases. According to my back-of-the envelope calculations, giving me that $1 billion will reduce the budget deficit by $2 billion.
Now, you may be tempted to say that giving me that $1 billion will not really reduce the budget deficit. Rather, you might say, it is the tax increases, which have nothing to do with my handout, that are reducing the budget deficit. But if you are tempted by that kind of sloppy thinking, you have not been following the debate over healthcare reform.
Read the rest of it.
Greg's only mistake is only asking for $1 billion. I have a better plan. Give me $100 billion and raise taxes by $300 billion. My plan is 100 times better.
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