Wednesday, April 25, 2007
Sunday, April 22, 2007
More Ivory Tower Craziness
..... and this time Judge Posner wins the prize. Posner exclaims that he doesn't know what all the fuss is about increasing education for people. He thinks the costs outweigh the social benefits:
"I am skeptical that it should be a national priority, or perhaps any concern at all, to increase the number of people who attend or graduate from college. Presumably the college drop-outs, and the kids who don't go to college at all, do not expect further education to create benefits commensurate with the cost, including the foregone earnings from starting work earlier."
Spoken only like someone from WAYYYYYYYYY up top on the Ivory Tower. How about kids that would like to go to college but can't afford to, perhaps because of their parents' lack of income or support. Sallie Mae can only take one so far - and at a cost at that. What's so hard to understand that by reducing that cost, might entice kids who are eager to learn, to go to college.
Beyond that, Posner apparently thinks their are only two reasons students go to college: future income and networking (that leads to future income). Again, this thinking is consistent with someone of the Ivory tower. I know plenty of kids that go because their friends go, or go for the social aspects of college (beyond 'networking'), or go just to get away from the folks in an envronment that does not leave them entirely independent or alone.
Here is a bit more elitism from Posner:
.... "This would be an entirely rational decision for someone who was not particularly intelligent and who did not anticipate network benefits from continued schooling because the students with whom he would associate would not form a valuable network of which he would be a part, either because he could not get into a good school, in the sense of one populated by highly promising students or because if he did get into a good school the other students in the school would not consider him worth networking with"
Here Posner is not so subtely saying that stupid kids (and they do exist I admit) won't socialize or network with smart kids. Such a naive statement leaves me to wonder if Posner himself has actually ever been to college??? Even stupid kids have appeal either in terms of looks or actions. I have a few stupid friends: they make up for that drawback in other ways. Also, the idea that lower-end grad schools might not have just as signficant number of networking capabilities as say a Harvard or a Princeton is ridiculous.
Finally, Posner says:
Nor are these marginal students [who might go to school if given funding etc] likely to be educated into an interest in political and societal matters that will make them more conscientious voters or otherwise better citizens."
That may or may not be true on average. Data? I seem to recall Bill Gates was a drop out.........
"I am skeptical that it should be a national priority, or perhaps any concern at all, to increase the number of people who attend or graduate from college. Presumably the college drop-outs, and the kids who don't go to college at all, do not expect further education to create benefits commensurate with the cost, including the foregone earnings from starting work earlier."
Spoken only like someone from WAYYYYYYYYY up top on the Ivory Tower. How about kids that would like to go to college but can't afford to, perhaps because of their parents' lack of income or support. Sallie Mae can only take one so far - and at a cost at that. What's so hard to understand that by reducing that cost, might entice kids who are eager to learn, to go to college.
Beyond that, Posner apparently thinks their are only two reasons students go to college: future income and networking (that leads to future income). Again, this thinking is consistent with someone of the Ivory tower. I know plenty of kids that go because their friends go, or go for the social aspects of college (beyond 'networking'), or go just to get away from the folks in an envronment that does not leave them entirely independent or alone.
Here is a bit more elitism from Posner:
.... "This would be an entirely rational decision for someone who was not particularly intelligent and who did not anticipate network benefits from continued schooling because the students with whom he would associate would not form a valuable network of which he would be a part, either because he could not get into a good school, in the sense of one populated by highly promising students or because if he did get into a good school the other students in the school would not consider him worth networking with"
Here Posner is not so subtely saying that stupid kids (and they do exist I admit) won't socialize or network with smart kids. Such a naive statement leaves me to wonder if Posner himself has actually ever been to college??? Even stupid kids have appeal either in terms of looks or actions. I have a few stupid friends: they make up for that drawback in other ways. Also, the idea that lower-end grad schools might not have just as signficant number of networking capabilities as say a Harvard or a Princeton is ridiculous.
Finally, Posner says:
Nor are these marginal students [who might go to school if given funding etc] likely to be educated into an interest in political and societal matters that will make them more conscientious voters or otherwise better citizens."
That may or may not be true on average. Data? I seem to recall Bill Gates was a drop out.........
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.
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.
Friday, April 13, 2007
The naughty side of supply side
Mankiw (in about 3 different recent posts-the most recent one being here) argues in favor of 80's supply-side economics on pretty much all counts: incentives to work, tax cuts for high martginal tax rates (of the rich) to create increased labor output (at the higher ends of marginal productivity), tax cuts are revenue creating to a large degree (though he admits they don't completely offset the loss in revenue from the tax cut). ...
Don't get me wrong, I like supply-side policies (just not "Supply Side Economics" with a capital S). I think cutting taxes on the more productive members of our society can be good - but only when tempered with decreased government spending in some of the more wasteful areas of our government (like Gerorge Bush's salary). I am not a tax and spender, but I am also not a tax cut and spender.
I also don't know why we don't hear about tax cuts for the poor - under the understanding that, theoretically (data as well?) they would be more likely to work more given a tax cut then a person already making a nice living for him/herself. Of course, you wouldn't have much revenue gains from the incentive to work by giving tax cuts to the poor, or as big a productivity kick....but it would be something! Again, provided there would be reduced government waste or an increase in a more efficient tax, like consumption taxes (which I like). But, government wants the big revenue for the big spending. And you did get that from the little guy - even though, on an individual basis, that tax cut could mean a great deal.
Of course, one could argue poor people don't pay much tax now anyway. And, there are certainly a plethora of support programs for the poor....
UPDATE: Mr Frank's Excellent response to Mankiw in which I quite agree with most everything he says....
Don't get me wrong, I like supply-side policies (just not "Supply Side Economics" with a capital S). I think cutting taxes on the more productive members of our society can be good - but only when tempered with decreased government spending in some of the more wasteful areas of our government (like Gerorge Bush's salary). I am not a tax and spender, but I am also not a tax cut and spender.
I also don't know why we don't hear about tax cuts for the poor - under the understanding that, theoretically (data as well?) they would be more likely to work more given a tax cut then a person already making a nice living for him/herself. Of course, you wouldn't have much revenue gains from the incentive to work by giving tax cuts to the poor, or as big a productivity kick....but it would be something! Again, provided there would be reduced government waste or an increase in a more efficient tax, like consumption taxes (which I like). But, government wants the big revenue for the big spending. And you did get that from the little guy - even though, on an individual basis, that tax cut could mean a great deal.
Of course, one could argue poor people don't pay much tax now anyway. And, there are certainly a plethora of support programs for the poor....
UPDATE: Mr Frank's Excellent response to Mankiw in which I quite agree with most everything he says....
Wednesday, April 4, 2007
On Discrimination and Employment
Yesterday, the Indiana House subcomitte voted down an amendement to the State Constitution that would ban gay marriage, and ban civil unions and make unclear whether unmarried couples could get employee benefits etc.
A statement in the proposed amendment read:
"...may not be construed to require that marital status or the legal incidents of marriage be conferred upon unmarried couples or groups."
It was an emotional vote, but a good one for the State.
This smackdown comes just a week or two after some of Indiana's largest employers - Eli Lilly, Cummins, Wellpoint, and Emmis Communications - all sent statements to the legislature denouncing the proposed amendment. A statement from Cummins:
"This resolution had no place in a state that professes to treat all residents with dignity... Those who defeated it have done something good for Indiana and good for business."
These companys' main argument was that the amendment would make Indiana an unattractive place for gays and others (straight individuals) who deem certainty of spousal benefits important. If labor economics teaches us anything, it teaches that individuals make the decision to work based not just on the wage level on the table given their labor/leisure tradeoff, but also with regard to fringe and non-monetary benefits that many companies offer - including domestic partner benefits for health, life insurance, 401K, etc. It is therefore obvious to any student of Economics that such a bill that puts such benefits in jeopardy would likely be a serious detractor for many people.
Indiana should be thanking these high-profile companies for stepping up to the plate for common decency.
A statement in the proposed amendment read:
"...may not be construed to require that marital status or the legal incidents of marriage be conferred upon unmarried couples or groups."
It was an emotional vote, but a good one for the State.
This smackdown comes just a week or two after some of Indiana's largest employers - Eli Lilly, Cummins, Wellpoint, and Emmis Communications - all sent statements to the legislature denouncing the proposed amendment. A statement from Cummins:
"This resolution had no place in a state that professes to treat all residents with dignity... Those who defeated it have done something good for Indiana and good for business."
These companys' main argument was that the amendment would make Indiana an unattractive place for gays and others (straight individuals) who deem certainty of spousal benefits important. If labor economics teaches us anything, it teaches that individuals make the decision to work based not just on the wage level on the table given their labor/leisure tradeoff, but also with regard to fringe and non-monetary benefits that many companies offer - including domestic partner benefits for health, life insurance, 401K, etc. It is therefore obvious to any student of Economics that such a bill that puts such benefits in jeopardy would likely be a serious detractor for many people.
Indiana should be thanking these high-profile companies for stepping up to the plate for common decency.
Tuesday, April 3, 2007
My final thoughts on the separation of politics and Economics...
I don't usually draw in a quote from the Mises institute. While I applaud them for thinking outside the books on various economic issues, I often find their arguments a bit extreme and a bit too black and white (see Ivory Tower - albeit of a different kind) for my liking. An example of thise extremeness:
"economics seeks understanding of invariable principles; politics is ephemeral, its subject matter being the day-to-day relations of associated men. Economics, like chemistry"
However, Frank Chodorov of the Institute just published on the Mises blog a topic entitled: "Economics Vs. Politics," which basically spells out what I agreeably believe is a current problem in our field. The piece is taken from Chodorov's book, "The Rise and Fall of Society," which I have not read, and judging by the title, I probably won't ever read it.
I agree with the following statements:
"The intrusion of politics into the field of economics is simply an evidence of human ignorance or arrogance..."
"This is not to say that economics can explain all the facets of these institutions [society, government, etc] , any more than the study of his anatomy will reveal all the secrets of the human being; but, as there cannot be a human being without a skeleton, so any inquiry into the mechanism of social integrations cannot bypass economic law. "
Ok so the last part of that last quote I don't fully agree with... the whole notion of 'economic law' is ridiculous. Economics is not math, nor should it be. It is not physics or chemistry, nor should it be. But like I said, Mises can be extreme....
"economics seeks understanding of invariable principles; politics is ephemeral, its subject matter being the day-to-day relations of associated men. Economics, like chemistry"
However, Frank Chodorov of the Institute just published on the Mises blog a topic entitled: "Economics Vs. Politics," which basically spells out what I agreeably believe is a current problem in our field. The piece is taken from Chodorov's book, "The Rise and Fall of Society," which I have not read, and judging by the title, I probably won't ever read it.
I agree with the following statements:
"The intrusion of politics into the field of economics is simply an evidence of human ignorance or arrogance..."
"This is not to say that economics can explain all the facets of these institutions [society, government, etc] , any more than the study of his anatomy will reveal all the secrets of the human being; but, as there cannot be a human being without a skeleton, so any inquiry into the mechanism of social integrations cannot bypass economic law. "
Ok so the last part of that last quote I don't fully agree with... the whole notion of 'economic law' is ridiculous. Economics is not math, nor should it be. It is not physics or chemistry, nor should it be. But like I said, Mises can be extreme....
Thursday, March 29, 2007
In Support of FairTax
I'd like to formally pledge my support, for what it is worth, to the FairTax movement.
For the uninitiated, basically FairTax seeks to eliminate, via legislation our current system of national income tax in favor of a ~23% sales tax on most retail items (with few exclusions such as education tuition, supply inputs, etc). There would be no other exemptions or other fun little loopholes companies like to take advantage of. The regressivity issue has been addressed by basically providing an annual rebate in an amount up the consumption at poverty level (in other words, you wouldn't be taxed on necessity items). There really are very few downsides and a whole lot of upsides which I think their website goes into pretty well.
One great thing about this that people don't think about is that the US would lose the ability to provide targeted tax incentives (or disincentives) for economic development. This is a GOOD thing. The companies that currently receive these tax incentives are precisely the ones, often, that don't need them. Often, these companies get the funds via earmarks - which is nothing more than political location-pandering - and is extremely inefficient. The FairTax takes basically all taxation out of business operations and puts the onus on individuals. This of course is good for long-term growth.
The great thing about FairTax also is that we can still 'play' with our tax code (in the future) if we wanted to. Say, for example, that we wanted to disincent tobacco companies and smokers - we could just increase the sales tax. Doing so provides a disincentive to smoke which in-turn reduces the clout of tobacco companies via reduced revenues and market power. Right now, we can punish smokers via state sales tax, but it is very difficult to punish tobacco companies via the tax code.
Of course, this is a political longshot. This is not a new concept - it is just in vogue now. But if policymakers can convince people that is actually structured quite progressively AND it promotes growth, then the age-old economist argument may actually take shape - albeit in a bit more compassionate form.
For the uninitiated, basically FairTax seeks to eliminate, via legislation our current system of national income tax in favor of a ~23% sales tax on most retail items (with few exclusions such as education tuition, supply inputs, etc). There would be no other exemptions or other fun little loopholes companies like to take advantage of. The regressivity issue has been addressed by basically providing an annual rebate in an amount up the consumption at poverty level (in other words, you wouldn't be taxed on necessity items). There really are very few downsides and a whole lot of upsides which I think their website goes into pretty well.
One great thing about this that people don't think about is that the US would lose the ability to provide targeted tax incentives (or disincentives) for economic development. This is a GOOD thing. The companies that currently receive these tax incentives are precisely the ones, often, that don't need them. Often, these companies get the funds via earmarks - which is nothing more than political location-pandering - and is extremely inefficient. The FairTax takes basically all taxation out of business operations and puts the onus on individuals. This of course is good for long-term growth.
The great thing about FairTax also is that we can still 'play' with our tax code (in the future) if we wanted to. Say, for example, that we wanted to disincent tobacco companies and smokers - we could just increase the sales tax. Doing so provides a disincentive to smoke which in-turn reduces the clout of tobacco companies via reduced revenues and market power. Right now, we can punish smokers via state sales tax, but it is very difficult to punish tobacco companies via the tax code.
Of course, this is a political longshot. This is not a new concept - it is just in vogue now. But if policymakers can convince people that is actually structured quite progressively AND it promotes growth, then the age-old economist argument may actually take shape - albeit in a bit more compassionate form.
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