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Saturday, April 21, 2007

Mankiw on the Ivory Tower

In a recent post, Mankiw exclaims what he believes to be a fundamental beneficial attribute of the Ivory Tower: " One of the luxuries of the ivory tower is the ability to reflect on fundamental questions of a more abstract variety."

Mankiw has recently coauthored a paper about optimal taxation based on a person's height. The idea is simple - he and his collegue are in search of a way to create tax policy in a non-distortionary way. Taxing things that can't be easily changed (such as height) is one way to reduce/eliminate distortionary behavrioral changes due to the tax. (For example, an income tax can incentivizes people to not work, a capital gains tax can incentivize people to not save/invest, a tax on height doesn't have those adverse affects because people can't change their height, and therefore can't try to change the amount of tax they end up paying....... )

I think it's interesting to try to find good taxation mechanisms. I also think it is rather mundane and futile to try and find a non-distortionary tax. If a good and just and non-idiotic way to tax people non-distortionally existed, then that would have been found and used by now. The fact is, any kind of tax as such, be it height, weight, race, or whatever, would not only be demeaning to certain groups, it could be considered to be downright immoral. What kind of brave new world would we be living in if we taxed all non-blue eyed persons just because we found a positive correlation with their wage rates...... ridiculous.

So Mankiw has wasted his time on this pedantic venue. But even he admits that many people can legitimately find the idea of taxing height absurd:
"Many readers will find the idea of a height tax absurd,".... He goes on to talk about some of the big problems with his idea: "Disutility and stigma: recipients of a categorical transfer will have lower self-respect, an unmodeled component of welfare." Indeed they would Prof. Mankiw, indeed they would.

My big question is then, why use height as a correlate to
income..... it seems race is a better correlate. We should tax people for being "more white." Blacks don't earn nearly as much as white individuals, and unless you are Michael Jackson, it's really hard to change your race. Why not redistribute wealth based on that? Or why not tax men more than women? It seems discrimination and job self-selection may make the relationship between race/sex and income pretty systematic and stable for a good long while at least. You can always change the demographic variable of choice in the future to suit the needs of the government. I KNOW. How about a rotating income correlates. Use race for one decade, then move on to sex, then height, then eye color, then sexual orientation........... you know - some of these may or may not have a stable long-run relationships to income, but I bet some of them do.... and of course I'm sure Mankiw could write another paper to find more. And really, who cares why the relationship to inome exists if and when we find more variables.

Afterall, Mankiw opines: "What matters for optimal height taxation is
the consistent statistical relationship between [INSERT non-distorionary DEMOGRAPHIC HERE] and income, not the reason for that relationship."

What Mankiw fails to see is that it is precisely the REASON for this relationship that is the problem. The reason, one could argue (and it is in Mankiw's paper) that height correlates to income is that height provides a person a specific social and sexual status growing up - thereby providing an environment for development superior to that of short people. Height is a sign of strength and virility. Our culture loves tall people. The idea of the government exploiting that cultural discrimination is quite frankly disgusting. Here you lesser short people or you lesser races, or you gay guys..... have some money because your government pities you....

disgusting - this is the problem with the Ivory Tower in Econ. It focuses on a societal issue and looks at it through the narrow lens of an econ text book.


pukku said...

Hi! I don't know anything about economics, per se, but this post mentions Mankiw, and I ran up across this: Mankiw's principles of economics, translated, and thought of this blog...



Garth said...

Hey Ricky, how's it goin?
I have seen that recently actually and think it's hilarious. I'm thinking of using it in teaching my class next semester as a kind of ice breaker.