by Tyler Cowen
on November 1, 2009 at 12:15 pm
1. Greg Mankiw's very good column on health insurance and marginal tax rates; Greg adds comment.
2. Somerset Maugham: the perfect traveler?
3. Ten smelly foods from Asia.
4. Slew of Ayn Rand links.
5. The Lehman failure really was at fault; Arnold Kling adds comment.
6. MR is a start-up, as is Modern Principles.
Ayn Rand. Oh no…
“Whenever Ayn Rand met someone new—an acolyte who’d traveled cross-country to study at her feet, an editor hoping to publish her next novel—she would open the conversation with a line that seems destined to go down as one of history’s all-time classic icebreakers: “Tell me your premises.†”
Made me LOL.
“You could only make four pictures, and then you were in the top bracket,” Mr. Reagan would say. “So we all quit working after four pictures and went off to the country.”
Sounds like a good life, and more actors get a chance to make movies. What’s not to like?
The link re: Ayn Rand and India was really interesting.
Gore Vidal: “For one thing, it is gratuitous to advise any human being to look out for himself.”
That would have been the very best possible advice I could have received entering graduate school, that most progressive of institutions. I presume Gore doesn’t want people looking out for themselves in the same way that academic departments do not. He’s a smart guy.
Thanks for the wonderful review of Somerset Maugham by Pico Iyer. Definite equivalence to a discreet waft of durian or shrimp paste landing you back with nostalgic bump in the kampung of Malaysia or Indonesia. The eccentricity and delicate tragic romance of expat life also unparalleled in Maugham; even Graham Greene does not really match it. For me, though, the adolescent excitement of discovering Spain was better captured in Laurie Lee’s ‘As I Walked Out One Midsummer Morning’.
Let’s see, when Reagan was under studio contract, basically paid a salary, he made 9 films in 1938, 7 in 1939, 7 in 1940, 4 in 1941, 4 in 1942, and only after his last film, King’s Row, was he able to negotiate a tripling of his salary.
From the beginning Reagan was very much a union man, joining SAG and becoming active quickly as a member of the board, seeking to cut the workload of the studio contract system, while preserving its salary like structure. He started at $200 a week for at least 19 weeks out of 26.
What cut back the number films generally was the antitrust action that broke up the studio system. The two practices of the studio system were the studios owning most theaters so they charged lower film rents, and they rented films in blocks, typically one A, and four B movies. When they were forced to divest of theaters, they raised the rental rate. And when theaters only rented A movies, the studios produced fewer films, but as their payroll were mostly fixed salary contracts, they had to raise the prices further. Reagan was strictly a studio contract actor, working for a weekly salary for a minimum of 40 weeks of work a year, and he negotiated his salary as hard as he negotiated the SAG contracts he worked on, seeing good pay and reasonable working conditions in the mutual interests of both studios and actors.
What cut back Reagan’s film work was the new stars while he was in the service making war films, and his reluctance to be a character actor; in the end his contract wasn’t renewed and he had to find a new career. That was as a GE spokesman, introducing the GE Theater as well as making lots of pubic relations appearances.
So, clearly the tax system had no impact on how much he worked; getting paid as much as he could for as little work as possible would better describe his work and salary history. He was known for showing up for work on time and in good humor ready to work.
About Prof. Mankiw’s post, it seems plain to me that if you have a subsidy based on income, the people with higher incomes will pay for the people with lower incomes. There might well be a give and take on the amounts, but the principle remains. As Prof. Mankiw says, there’s no “correct” answer to this question. It’s a question of political economy.
But, if it is, doesn’t the opinion of the fairness and justice of the tax make a difference in what tax rates people will accept? Or do economists simply figure there’s an iron rule about how much taxation people will accept?
In my mind, the problem with all plans is that they are having a hard time convincing large numbers of people that they are fair or just. It isn’t simply a matter of money. In that sense, whatever happens this round, the problem will remain until there’s some kind of consensus on one overall approach. As of today, my favorite plan, which is a variation of Milton Friedman’s plan, isn’t in play. Since I believe that this approach is the clearest approach featuring universal care and a decent mix of incentives and disincentives, I believe that this plan isn’t the end of this issue. But my problem isn’t economic. It’s rather that I can’t convince enough of my fellow citizens of the fairness and justice of my approach.
@Vernunft: Could you please explain how the zero-sum fallacy applies to movies where every one has an all new cast and therefore all new auditions and hirings? I understand the basics of the fallacy, but it doesn’t seem to work for this kind of employment.
Mankiw writes: Behind the healthcare debate is the classic tradeoff between equality and efficiency. Consider the following question, which is not about healthcare per se: Would you favor a substantial increase in marginal tax rates for millions of middle and upper income Americans to provide more resources for those toward the bottom of the economic ladder?
This clearly implies the choice is between increasing the margin tax rates for the poor in terms of their health care costs or their lost productivity due to shorter lifespans, or higher marginal rates on health care professionals who will be forced to eat the cost of uncompensated care.
If efficiency were the priority, the poor and sick would be euthanized to remove them as a burden on the economy. Why can’t economists come out and say clearly what they consider to be the best economic solution as a result of applying market solutions to the human ecology?
The more I learn about Maugham, the more I like him as a person. I just wish he had been a slightly better writer.
@rob – If you don’t agree with Ayn Rand then you are unlikely to appreciate Ayn Rand. And if you agree with Ayn Rand or at least find her deeply insightful, then you are unlikely to think of her ideas as of interest primarily because they are “original”. You think of them as of interest primarily because they are correct or insightful.
“What is the appeal of propaganda-art as art?”
Ayn Rand’s novels are arguments for her ideas. They attempt to persuade the reader of those ideas. If this makes Ayn Rand’s novels propaganda, then all the works of all the philosophers are propaganda. We don’t normally think of Hume’s An Enquiry Concerning Human Understanding as propaganda.
George Orwell also wrote fiction that attempted to persuade his reader of certain ideas, political ideas no less – and was fantastically successful in that regard. Gulliver’s Travels is another example of fiction that is a serious attempt to persuade the reader of certain ideas.
“The bill moves us closer to much of Western Europe by favoring equality and paying the price of reduced efficiency from much higher marginal tax rates.”
Except it really doesn’t. He also says:
“If large health insurance subsidies were offered to all Americans, regardless of income, the program’s cost would be exorbitant, requiring substantial increases in explicit taxes.”
My understanding is that is exactly what Western European governments do — they raise a huge percentage of their taxes via a flat VAT (that doesn’t have high marginal rates) and then offer the subsidies to everyone. The Western European recipe for big government is, “Tax everybody, subsidize everybody”, and that’s not what we’re talking about with Obama’s government expansion.
Obama would probably like to move more in the direction of Western Europe, but has boxed himself in (temporarily at least) with his repeated promises not to increase taxes on anybody but the rich. As he can’t possibly get enough money for the rich to pay for his programs, the plan appears to be to pass the programs, run gargantuan deficits, and then find himself ‘forced’ to impose a VAT in his second term when re-election is no longer an issue.
Somebody was asking why so many intelligent people like Rand. I’ll tell you.
Rand was 100 years ahead of her time, but as a cognitive psychologist, and not as a philosopher.
Her insistence that “A is A” sounds idiotic – a lame tautology – until you meet all the people who will say “A is not A” just to avoid even harmless social disapproval. You realize that empathy is, in many ways, the enemy of integrity.
Then you consider how that kind of social process, where people distort and self-censor in order to avoid disapproval, generates all sorts of institutionally bad outcomes and leads to horrible results.
Then you see the research, cited in the Wisdom of Crowds, that says that you get collectively rational results when individuals truthfully report their own beliefs. So you obtain better collective outcomes when individuals don’t let empathy get in the way of saying the truth.
Then you wonder what institutional arrangement most rewards people to rationally form the best beliefs and act on them, and you find that it’s markets, because markets reward people simply for being right, and not for being popular.
And you see Rand’s points.
“The perfect traveler must be a perfect contradiction. She should be open to almost
everything that comes her way, but not too ready to be taken
in. He should be worldly, shrewd…” It’s interesting to me that politically
correct pronoun usage always ends up betraying and reinforcing gender stereotypes.
Notice that the women is “open” and the man is “worldy, shrewd”. You see it
in microtheory testbooks–somehow it’s always in the chapter on consumption
that the author remembers to switch pronouns, which ends up reinforcing the
image of women shopping. This form of political correctness is a type
of imperialism; it says in effect, “it doesn’t matter to me that you
want to talk about literature, or travel, or economics; I will tamper with the very
means of expession available to you, so that you must focus your consiousness on gender
politics whether you mean to or not”. The “I” I take to be publishers or editors;
or perhaps authors who don’t want to get into demoralizing arguments with
most of the people in their peer group.
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