In this video interview, economist Art Laffer provides a very simple and easy to comprehend explanation concerning why it doesn’t make sense to pay people not to work and tax them if they do work!
Monthly Archives: November 2010
Assorted Links (11/29/2010)
Here’s a list of articles that I have been reading lately:
Lame Ducks Will Take the Plunge on Bush Tax Cuts
www.thefiscaltimes.com
“A lame-duck Congress returns this week to decide the fate of the Bush tax cuts, the debt ceiling, and whether to extend unemployment insurance to millions.”
www.thepublicdiscourse.com
“You might remember a bit of Monty Python nonsense from 1979, The Life of Brian. In one scene, we encounter the People’s Front of Judea, one of many tiny radical groups bent on the overthrow of the oppressor Romans…”
The Partisan Mind
nytimes.com
“The body-scanner debate would have played out very differently if it had occurred during the Bush administration.”
blogs.the-american-interest.com
“As World War Two broke out in Poland, WH Auden wrote about the despair of watching “the clever hopes expire/of a low, dishonest decade.” We are not yet at that pass, but Auden’s poem bears re-reading by anybody trying to read the signs of our increasingly dark and troubled times.”
Dead Green Treaty Stinks Up The Room
blogs.the-american-interest.com
“What a difference a year makes. Last year at this time, the Great Green Delusion — that the United Nations process could deliver a treaty that would stop global warming dead in its tracks — was the hottest idea in town. Those who dissented were scorned and despised; the environmental movement and its army of press loyalists were the Great and the Good who knew how to solve the world’s problems.”
Facebook Accounts for 25% of All U.S. Pageviews
mashable.com
“Facebook’s putting up some big numbers in terms of U.S. web traffic. Right now, the site accounts for one out of every four pageviews in the United States — that’s 10% of all Internet visits.”
Charles Krauthammer – The irrelevance of START
washingtonpost.com
“What difference does it make how many nukes Russia builds?”
How to Make Air Travel More Infuriating
online.wsj.com
“If you think TSA is dysfunctional and unpopular now, wait until it unionizes.”
The Weekend Interview with Dr. James Watson: ‘To Be a Good Leader, You Have to Ruffle Feathers’
online.wsj.com
“In The Wall Street Journal, Allysia Finley interviews scientist James Watson. The discoverer of the DNA double-helix discusses his thoughts about how to win the war on cancer in the next few years, and the role played by the Food and Drug Administration in new treatments.”
Review & Outlook: Harbinger in Hamtramck
online.wsj.com
“The Wall Street Journal on the bankruptcy lesson from a Detroit suburb.”
Conspicuous Consumption, Arms Races and the Needy
theunbrokenwindow.com
Here’s yet another discussion/critique of the economics of a progressive consumption and income tax…
How Private Property Saved the Pilgrims | Hoover Institution
hoover.org
“When the Pilgrims landed in 1620, they established a system of communal property. Within three years they had scrapped it, instituting private property instead.” Hat tip to Scott Harrington (cf. http://bit.ly/fEVYP2) for pointing this article out on his blog…
Giving thanks for the ‘invisible hand’ :: Jeff Jacoby
www.jeffjacoby.com
“GRATITUDE TO THE ALMIGHTY is the theme of Thanksgiving, and has been ever since the Pilgrims of Plymouth brought in their first good harvest. “Instead of famine, now God gave them plenty,” their leader, Governor William Bradford, later wrote, “and the face of things was changed to the rejoicing of the hearts of many, for which they blessed God.””
Apparently It’s Collectivism Only If It Is Pursued as a Means of Privation
shar.es
“Liberal Curmudgeon blogger Stephen Budiansky ridicules Rush Limbaugh, Glenn Beck, and others for describing early Plymouth colony as a failed experiment in collectivism.”
Description Is Prescription
nytimes.com
“One hundred years after Tolstoy’s death, measuring his lasting influence.”
The Special Assistant for Reality
online.wsj.com
“Obama needs to hear a voice from outside the presidential bubble, Peggy Noonan argues.”
Kimberley A. Strassel: The Lamest Duck, Ever – WSJ.com
online.wsj.com
“In The Wall Street Journal’s Potomac Watch columnist Kimberley A. Strassel writes that Harry Reid’s midterm strategy was a bust, and Democrats are now dealing with the consequences.”
W. Kurt Hauser: There’s No Escaping Hauser’s Law – WSJ.com
online.wsj.com
“In The Wall Street Journal, W. Kurt Hauser writes that tax revenues as a share of GDP have averaged just under 19%, whether tax rates are cut or raised. Better to cut rates and get 19% of a larger pie.”
Strangers, Saints and Indians
online.wsj.com
“In The Wall Street Journal’s Houses of Worship column, John A. Murray recounts the story of the Pilgrims and Squanto who, according to Pilgrim Governor William Bradford, was sent of God.”
Thoughts on QE2
economist.com
“A LOT has been written recently, pro and con, about the Fed’s new round of quantitative easing, dubbed QE2. But, frankly, much of the discussion on both sides lacks a coherent analytical framework for thinking about the key issues…”
Big Government Not Invited to Thanksgiving Feast: Caroline Baum
bloomberg.com
“It is the tradition of this column every year at this time to recount the story of Thanksgiving. The history of the Pilgrims’ early struggles in their new land and triumph over obstacles resonates on many levels, from the personal to the political. The government’s actions in the wake of the financial crisis of 2008 — some necessary, others not — and intrusion on the private sector have given the story renewed poignancy.”
Reflections on an Ailing Society
advancingafreesociety.org
“Warren Buffet is once more calling for higher tax rates, in advising the Congress to revoke the Bush-era tax rates and apparently to return to those of the Clinton administration — reminiscent of the elder Gates touring the country stumping for a reinstatement of a substantial inheritance tax. Aside from the fact that the deficit is not due to falling revenues, but almost entirely a result of astronomical federal spending increases since 2000, this bromide is quite pathological, this peddling of elixirs that the sellers do not drink.”
douthat.blogs.nytimes.com
“Ron Wyden and Scott Brown have a plan.”
Democrats and the Deficit
nationalreview.com
“Josh Barro writes on NRO: Over the last few years, Democrats have had a field day pointing out (accurately) that Republicans were being wildly fiscally irresponsible. In fact, Republicans were such bad stewards of the federal budget that it was easy not to notice that the Democrats didn’t really hav”
A much more "rigorous" way to calculate 1+1 = 2
One of my Baylor faculty colleagues pointed out a very entertaining parody on the use of math in economics entitled “A First Lesson in Econometrics” (at least I found it entertaining :-)). Before reading this parody, I never realized how “deep” the equation 1+1 = 2 can be! Anyway, check it out!
]]>A much more “rigorous” way to calculate 1+1 = 2
One of my Baylor faculty colleagues pointed out a very entertaining parody on the use of math in economics entitled “A First Lesson in Econometrics” (at least I found it entertaining :-)). Before reading this parody, I never realized how “deep” the equation 1+1 = 2 can be! Anyway, check it out!
TSA Breast Milk Screening Harrassment Incident
Hat tip to Megan McArdle for posting the link to this YouTube video. Like Ms. McArdle, I would also love to hear the TSA’s side of the story and be able to to view the full surveillance video, including the 30 minutes which were apparently edited out by TSA prior to complying with the aggrieved passenger’s request for a copy of the surveillance video of the incident shown here.
Assorted Links (11/24/2010)
Here’s a list of articles that I have been reading lately:
The Other Taxes: Who Pays Them?
economix.blogs.nytimes.com
“Much of the income of lower-income Americans is needed to pay sales, property and payroll taxes, although they may pay little income tax, an economist writes.”
Doing the Math on a Groupon Deal
boss.blogs.nytimes.com
“Is Groupon the worst marketing ever? Or is it the best marketing ever? Here’s how to tell.”
How to Improve the Financial-Reform Law by Oliver Hart, Luigi Zingales, City Journal 23 November 201
city-journal.org
“A brief proposal to protect the system–without stifling innovation.”
The Desolate Wilderness – WSJ.com
online.wsj.com
“The Wall Street Journal relates the chronicles of the first Thanksgiving, according to Plymouth colony governor William Bradford.”
And the Fair Land – WSJ.com
online.wsj.com
“For all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators.”
Market Failure Cannot Be Resolved Without Regulation – Regulating Wall Street
stern.nyu.edu
“I am all for free markets and not mucking them up with government intervention. But the economic theory of regulation tells us that if there is a market failure, it cannot be resolved privately. The public sector must get involved.”
The Element of Surprise in Middle-School Football
freakonomics.blogs.nytimes.com
“No, this trick won’t work in the NFL, but Driscoll Middle School in Corpus Christi, Tex., pulled it off brilliantly.”
Deficit Reduction Plan Is Realistic – Economic View
nytimes.com
“The Bowles-Simpson proposal to cut the deficit by eliminating tax expenditures looks far better than the status quo.”
Quick puzzle: how long to get to heaven? – Mind Your Decisions
mindyourdecisions.com
Here’s a quiz on queuing theory for my more numerate friends (you know who you are :-)): “A person dies and arrives at the gates to heaven. There are three identical doors: one of them leads to heaven, another leads to a 1-day stay in limbo, and then back to the gate, and the other leads to a 2-day stay in limbo, and then back to the gate. Every time the person is back at the gate, the three doors are reshuffled. How long, on the average, will it take the person to reach heaven?”
Stop, Thief!
economix.blogs.nytimes.com
“Taxes have a cost — and not just for the people paying them, an economist writes.”
The Conflicting Charter-School Numbers – The Numbers Guy
online.wsj.com
“Are charter schools underperforming or outperforming conventional public schools? Studies with various methods produce very different results.”
The Long Recall: An Aggregator of the Civil War
blogs.the-american-interest.com
American Interest is hosting a very interesting website called “The Long Recall”, which is a “…daily aggregator of Civil War news as readers would have encountered it 150 years ago”. During this Thanksgiving week, it’s worthwhile to “…take the time to look back on the state of our country 150 years ago and give thanks for the dedication, heroism and clarity of thought that somehow brought us through that storm.”
Wharton’s interview question leak raises ethical issues
management.fortune.cnn.com
“Several MBA admissions consultants recently gained access to Wharton’s updated interview questions, a stark reminder that the business schools admissions process is not a level playing field.”
RealClearMarkets – Criminalizing the Act Of Doing Business
realclearmarkets.com
“Successfully demonizing business, making it ripe for manipulation and plunder, takes a well planned effort sustained across multiple fronts.”
The Return of China
online.wsj.com
“After 500 years of Western predominance, Niall Ferguson argues, the world is tilting back to the East.”
State Tests Limits of Spending Cuts
online.wsj.com
“As states nationwide confront budget shortfalls, the tenure of Mississippi Gov. Haley Barbour offers a lesson about how governing has a way of clouding the clearest of intentions.”
Higher Taxes Won’t Reduce the Deficit
online.wsj.com
“In The Wall Street Journal, Stephen Moore and Richard Vedder point out that historically, when Congress gets more revenue, the politicians spend it.”
The ‘Build America’ Debt Bomb
online.wsj.com
“In The Wall Street Journal, Steve Malanga says the lame duck Congress should not extend the federal Build America Bonds, which have allowed states to continue to borrow imprudently.” Mr. Malanga explains the very opaque fashion in which the federal government effectively subsidizes and “enables” financially profligate states like California to continue to be financially profligate. His observation that “Illinois was at greater risk of default than Iraq” (based upon current pricing of credit default swaps) certainly qualifies as this week’s sign of the economic apocalypse!
Debating the Constitutionality of the Federal Health Care Legislation (11-18-2010)
Specifically, the individual mandate; hat tip to Kevin Stuart for bringing this video to my attention!
Assorted Links (11/21/2010)
Raise Retirement Age and More Become Disabled
thefiscaltimes.com
“Raising the retirement ages would likely increase the number of workers applying for and receiving disability insurance benefits.”
Review & Outlook: Science and the Drilling Ban
online.wsj.com
“The Wall Street Journal writes than an inspector general’s report shows science played little role in the moratorium.”
The Fed’s Bipolar Mandate
online.wsj.com
“Time to repeal the Humphrey-Hawkins Act of 1978.”
How to Succeed in Teaching Without Lifetime Tenure
online.wsj.com
“In The Wall Street Journal Cross Country column, Naomi Schaefer Riley writes about Franklin W. Olin College of Engineering. Despite the fact that the school does not offer tenure, it attracts 140 applicants for every faculty position.”
The Weekend Interview with Dick Armey: Revolutionary Do-Over
online.wsj.com
“In The Wall Street Journal, John Fund interviews Dick Armey, the congressional veteran and tea party maestro who is now counseling Republicans on how to avoid the mistakes of the last conservative insurgency.”
What’s Really Behind Bernanke’s Easing?
online.wsj.com
“In The Wall Street Journal, Andy Kessler says to forget the claims that more money in the economy could boost spending. More likely, the Fed fears that trouble is brewing in real estate and banks.”
Charles Krauthammer – Don’t touch my junk
washingtonpost.com
“A docile public can only tolerate only so much idiocy at airports.”
The Economic Consequences of America’s Elections by Michael Boskin – Project Syndicate
project-syndicate.org
“America’s lurch toward a European-style social-welfare state in Obama’s first two years appears to have been delayed, if not permanently ended or reversed. That is good news for the US – and for the global economy.”
George F. Will – The trap of the Federal Reserve’s dual mandate
washingtonpost.com
“It cannot perform a political function and stay insulated from politics.”
The Politics of the Ghailani Verdict
advancingafreesociety.org
“The Ghailani verdict is going to play badly–very badly–in the political arena. It won’t matter that he will receive a minimum of a 20-year prison sentence and could well spend the rest of his life behind bars. It won’t matter that the same evidentiary problems that impeded his prosecution in federal court.”
8-14-23 or Fight!
online.wsj.com
“In The Wall Street Journal’s Wonder Land column, Daniel Henninger writes that lower tax rates are suddenly moving to the center of the political debate.”
This Lame Duck Session Should Be the Last
online.wsj.com
“In The Wall Street Journal, Betsy McCaughey writes that in 1933, Americans ratified the 20th Amendment to eliminate lame duck Congresses. For two decades Washington has been ignoring its intent.”
Review & Outlook: ‘Fair Pay,’ Fewer Jobs
online.wsj.com
“The Wall Street Journal says that the plaintiffs bar loses in the Senate.”
Book Review: Boom & Bust
online.wsj.com
“James R. Hagerty reviews Alex J. Pollock’s Boom & Bust: Financial Cycles and Human Prosperity.”
Martin Feldstein: The Deficit Dilemma and Obama’s Budget
online.wsj.com
“In The Wall Street Journal, Harvard Professor Martin Feldstein writes that much of the projected doubling of the national debt between now and 2020 reflects the spending and tax proposals in the president’s fiscal plan this year.”
Worst investing disasters of all time
moneycentral.msn.com
“As bad as the last few years have been, the markets have recovered from worse. Here’s a look at some of the biggest investing mistakes of all time.”
Fed Criticism Expands to Congress
economics21.org
Looks like a good idea to me – the Fed is expected to accomplish several missions simultaneously (e.g., fight inflation/deflation, promote full unemployment, regulate banks, regulate systemic risk, etc.) that are often at odds with each other. This is commonly referred to as “mission creep”. It would be better to focus the Fed on its primary traditional role, which is to focus on managing the money supply in a fashion which is consistent with maintaining price stability in the economy.
Morse code vs. text messaging
Morse code vs. text messaging (Hat Tip to Peggy Davies :-)):
On the “optimality” of inequality
Suppose there exists a one period society consisting of n identical individuals, each of whom is capable of producing output worth $1/n. Suppose that this society’s central planner imposes the following sharing rule: all n individuals in this society receive equal shares of total social output.
How much wealth will be created by this society? We already know that the maximum possible value for social wealth is $1. This outcome is only possible if we impose some highly restrictive behavioral assumptions. One possibility is that all n individuals’ objectives are to maximize total social wealth, and that no individual in this society suffers any “disutility” associated with putting forth the effort required in order to produce his or her maximum output. This outcome is also theoretically possible in a society consisting of self-interested individuals who suffer disutility from expending effort, so long as the central planner can not only perfectly and costlessly monitor effort, but also perfectly and costlessly enforce a “maximum effort” mandate for everyone in this society. In either case, total social wealth is $1, and everyone’s share is $1/n.
Now, suppose that there are costs to monitoring effort, and that self-interested individuals suffer disutility from expending effort. What happens then? The obvious answer is that shirking occurs, which reduces total social wealth as well as everyone’s per capita shares. Consider this problem from the perspective of one such individual who decides to shirk entirely; i.e., produce no output whatsoever. However, assume that the remaining n-1 individuals do not shirk. Then social wealth falls by $1/n, going from $1 to $(n – 1)/n; yet the shirker’s personal wealth falls by only $1/n2, going from $1/n to $(n – 1)/n2. Thus the net benefit of shirking is substantial; the shirker only has to forgo the utility of $1/n2 in order to avoid the disutility (or, equivalently, utility “cost”) associated with expending effort. This is commonly referred to as the “free rider” problem. Therefore, it is not possible to have a free and prosperous society without some level of inequality in the distribution of income.
I became interested in this topic from listening to George Mason University economist Russ Roberts’ podcast featuring Cornell University economist Robert Frank. Although Professor Frank “…argues for a steeply rising tax rate on consumption that would reduce disparities in consumption” (cf. http://www.econtalk.org/archives/2010/11/robert_frank_on_1.html), he concedes that inequality is inevitable in a free society, based upon a similar thought experiment to the one provided here.