by Tyler Cowen
on April 14, 2012 at 6:19 pm
1. An infographic portraying the fairness, or unfairness, of our tax code and various options, and via Chris F. Masse, there is real money inside.
2. Garry Kasparov on technological stagnation.
3. The recent growth of Panama.
4. The Thomas Schelling alarm clock.
5. Bentham’s defense of homosexuality.
“For example, my iPod containst latest technology from 1981.” Interestingly, in 1981 I saved a copy of the Sliver Anniversary issue of Electronic Design News. It is sub-titled “Electronic Technology, The Next 25 Years.” It contains many essays by domain experts, including one by Raymond C Freeman Jr., who predicted a 3000-fold increase in storage density for random access devices. In 1981 hard disks were not a consumer product, but I’ll give you 2 years and call the 10MB IBM XT the introduction. 3000 times that would be 30 GB. Today’s iPod classic comes in at 160 GB.
That’s a lot of hard work to write off as stasis, Mr. Kasparov, and Mr. Cowen.
(Perhaps magic, delivered every day, ceases being magic.)
My problem is that my hard drive is still full after 3 years and my laptop starts running slowly even sooner than my IBM XT did. Some technological advance is used up keeping pace with slop creep.
Filesystem 1K-blocks Used Available Use% Mounted on
/dev/sda1 611227896 10273232 569906064 2% /
Thanks for the first link. I’ve been trying to find a way to effectively show how delusional people are about spending more money and paying for it by raising taxing the rich more, and this is it. The only way that we can spend more is if we tax everybody more. That involves VATs or national sales taxes, higher tax rates for all brackets, lower tax bracket thresholds, and elimination of every semblance of progressivism that we have in our tax code.
It would be more interesting if we had similar tools to compare against other countries. If our country’s progressives understood how regressive European tax codes are, I think they would be all for reduced spending as well.
Or, we could think in terms of what general welfare public goods are being under-utilized.
We obviously can’t think of any as evidenced by the rise of direct cash transfers.
We have 2 sets of delusionals. Heh, people who think someone else will cut spending for them, and people who think someone else will find some new revenue.
If you are going to cite the VAT as evidence that Europe has more “regressive” taxes than the U.S., you have to include America’s payroll taxes and the sales taxes that exist in most states in your analysis. As it turns out, though, most other developed countries are able to sustain higher levels of both taxation and spending without the “elimination of every semblance of progressivism” in their tax codes so it is not clear where you are getting these assertions from.
Bentham’s defense of homosexuality.
He specifies pederasty and indeed the word is in the title of his essay. He mentions boys and young males in his essay.
So I don’t know why you didn’t title #5 “Bentham’s defense of pederasty.” Presumably because pederasty is still looked down upon, while homosexuality is aggressively supported. People love to point to older sources, especially from figures who hold some weight as contemporary moral authorities, in order to marshal support for and normalize certain behavior, and the same thing is being done here with respect to homosexuality, albeit obliquely since pederasty is still unacceptable.
He *defines* pederasty in his essay as “[Use] Of an object of the proper species but the wrong sex. This is distinguished from the rest by the name of paederasty.”
His attitudes toward sex between adults and minors are certainly different from today’s – this is one area where our codes are a lot tighter than those of the past and good job too. – but I didn’t see him distinguishing homo- and heterosexual intercourse in this regard. Nor do I see why he should.
[quote]Nor do I see why he should.[/quote]
You sound like a pedophile who doesn’t care as long as it’s underage.
Wait, what? I said I didn’t see any reason he should regard homosexual child molestation as worse than its heterosexual counterpart. Did you misread, or are you saying that’s not true?
Given that women were usually marriageable, and beddable (in principle if not always in prcatice), as soon as they reached puberty, someone wishing to defend homosexuality in such times and places would probably not distinguish between teenage boys and adult men either.
#5 is full of fun stuff: “It is wonderful that nobody has ever yet fancied it to be sinful to scratch where it itches, and that it has never been determined that the only natural way of scratching is with such or such a finger and that it is unnatural to scratch with any other.”
Butt-plug say what?
For the schellingesque clock to work, one of my multiple selves (the responsible, foreseeing one) must first purchase and install the clock, but I fear that another one of my multiple selves ( the hedonistic one) might out-maneuver the first self and refrain from buying the clock
The tax thing is pretty limited. We can only adjust 5 out of 1000000 distortions. Matt Yglesias talking about it, has made me realize that figuring taxes given taxable income is pretty easy. Mail everyone a tax table with a simple postcard in it.
f(taxable income-standard deduction)-standard refundable credit
What I want to see.
If we got rid of all the distorting deductions and credits how low would f() be able to go? How high could the standard deduction/standard credit be.
The problem isn’t that everyone doesn’t realize that this is a good idea. The problem is the same as all of politics… diffuse costs and concentrated benefits. Tax accountants, and people who have lots of deductions do very well under the current system, and they are very politically powerful. When you can figure out how to solve the problem of diffuse costs and concentrated benefits, and win your econ Nobel then we can talk.
Even when a politician is being honest about trying to simplify the tax code, they only want to get rid of the deductions they don’t like(or conversely get rid of all the deductions except the ones they do like) . If someone proposed to take it all out at one blow, I believe it would benefit just about everybody, except for the tax accountants. It is only when you go one by one that that dynamic is in play. I really believe that this would be a positive sum policy for a huge majority of the population, although I have never seen anyone even claim to do the math(which is what I was hoping for on that site), so I could be persuaded otherwise.
although you are right, that all of the deductions would slowly creep back in, even if I did get my nobel by figuring out how to get rid of them all in one blow. My main thing here is that I was wishing that they had done the math to show how much the rates could go down(or how high the standard refundable credit could be) if we did actually achieve the impossible of getting rid of all the distorting deductions and credits. It is possible that while large enough to be distorting and a headache all the deductions and credits don’t actually add up to much.
This is one reason why it isn’t clear to me why offering a choice of a no-deduction plan is more complicated as many pundits said. True, if it was always cheaper to itemize people with incentive would. But what if you made the no-deduction plan the mean of itemized plans. Then having the choice would be simpler for a non-zero percentage of people I think. It would also provide the mechanism to move towards more no-deduction tax accounting.
It’s funny that modern times have actually undermined Bentham’s argument.
Tyler, so do you still think Kasparov is a ‘great mind’?
How do you consider this
People have a sense that we should receive benefits from our investment, but need to reduce the uncertainty. Risk should be less, but the income should be the same. This creates a gap, because in a free society, in a market economy, there is a direct relationship between risk and return. If you want to avoid risk, but receive ten percent of of your annual income from your investment, you open the way for the so-called financial engineering. In fact this is all fake, not real income, because it is not based on real changes in the economy, because you do not create new and tangible assets. In the 1960s young boys dreamed of becoming aerospace engineers, now they want to be financial engineers, working in investment companies, which are the most attractive spheres for talent. This naturally affects the quality of the total scientific potential, because financial engineering creates nothing.
in fact financial engineering allows more risky projects, including in a field of engineering ( think of private rocket launches). Or would you argue otherwise?
If we talk about the Internet, then do not forget that the whole theoretical framework has been prepared in the 1960s in America, and the first communication session was 1969.
sorry to say, but unlike Kasparov – we could use wikipedia. http://en.wikipedia.org/wiki/History_of_the_Internet you would find it more funny, that I gave the link to Kasparov in his russian blog, but he failed to see, what any person could see: internet development was not one time invention, originally this was a vision with a mix of ‘wires as in telephone, packets like in post’, then a series of developments, which still do continue ( including online video, social networks, etc ). More, as it turns, innovation is usually not isolated, but is coevolution of ideas, look for example The Nature of Technology: What It Is and How It Evolves by W. Brian Arthur ( there are other books which try describe the nature of technological development, and there is no any which will pretend that innovation is one time invention by one genius )
so what we see – pushy ‘genius’ with mechanical mind ( when he can compute chess, but fails to understand what is written in quite good wikipedia article, but which almost any other person could get ) who found good friends which are concerned with technological slowdown, then offers all sorts of plain and wrong ideas.
But still, Tyler would persist and keep saying that actually if a grand master looks like idiot, it is rather others are idiots and could not catch such ‘grand’ ideas and his belowed grand master actually has all around great mind.
why would such a harsh tone? Just for the reason. Kasparov likes to push his ideas on others ( he is fighter after all, he fought all his life, so he likes to crush others intentions and desires). And, being idiotic, they just harm. And it is Tyler, who is not concerned, that mad chess grandmaster might be very harmful. I already mentioned – Kasparov managed to destroy opposition to Putin several times and he would keep doing this with a help of good ‘friends’ who present him as a great mind, and not a strange mechanical idiot, who is good in chess, but is really dangerous in real life of common people.
He seems not to believe, as I do, that technology and the market are things. Some things will work and some not. There is a definite potential within a few alternate realities, but that ultimate potential has little to do with anything we are “doing to” technology. A lot of advancement is on the lines of how small we can manipulate things like circuits, cells, and molecules. Cells and molecules and of course circuits are irreducible at some point and our ability to manipulate them is limited by the size of our tools. What he might be right about is the amount of residual energy used to build out cell coverage, computers, and the internet, which incidentally I use almost exclusively to read text.
it is more prosaic – he just borrowed very common misconceptions among russian sefl styled economists ( and Kasparov specially gathered around him very strange semi marxists )
Also, remember, that during USSR time we had no good economic education, and all current acting economists are sort of self taught persons, with absurd mix of Marxist ideas with modern economic schools, some to less degree, some to more degree ( again Kasparov’s russian economic friends are plain idiots ) – thus such an attachment to ‘real’ money. So Kasparov disdain to financial innovations is a result of poor education, his inability to understand marxist influences and thus inability to think more or less sane about finances and not due to some sort of really deep new ideas or personal understanding. His ability to understand context is well below of any common person, so he just borrowed someone’s wrong vision.
Kasparov doesn’t even believe in the Roman empire, never mind technology and the market. He’s a classic Russian intellectual nutjob
We can access our whole social network, real-time data from all sorts of places, banks, millions of apps, libraries of photos and books, wikipedia, YouTube, — all from a handheld device — while standing or driving anywhere in the world.
Most of these things weren’t even available 15 years ago, nor was the mobile internet. It’s still the same underlying tech, ok, maybe, but the jump in utility is easily equivalent to the advent of the commercial plane.
Try to imagine your life without these services and no mobile internet – it’s like the Dark Ages.
“Try to imagine your life without these services and no mobile internet – it’s like the Dark Ages.”
Now this is bullshit. I lived without them 15 years ago and my life was nothing like the Dark Ages. Moreover, these new technologies have not changed anything fundamentally – and thank God for that.
Kasparov’s argument seems weak. It seems to have always been the case that inventions have come mostly from figuring out new ways to use and combine previous technological breakthroughs. It is true that the personal computer, the internet and mobile phones all rely on old technological breakthroughs but the way we are using them now is only economically viable because of massive improvements in battery technology, processor speed and storage.
The industrial revolution also started off based on a relatively small number of breakthroughs. It is how we leverage and combine those breakthroughs and focus resources on incremental improvements in other areas that leads to technological progress. One might be able to make the claim that the period 1870-1920 or so had an unusually large number of revolutionary breakthroughs in technology but otherwise progress is incremental. The fact that it took 25 years to gradually move from Intel 386 processors from the god-knows-what-the-latest-model-is-now processors of today doesn’t make the change any less impressive than if there had been a sudden revolutionary breakthrough 12 years ago that produced the same result.
That tax infographic is pretty cool, but it leaves out the effect of FICA (social-security payroll taxes) which makes effective federal tax rate on the educated middle class (two white-collar incomes) highest of all. It also suggests that rich people pay 27%-ish, which is simply not true: the very rich pay only 15% on their incomes because they can characterize what they get as “capital gains” instead of “ordinary income.”
A common misunderstanding is to claim that investment returns are taxed at a lower rate. They are actually taxed at a higher rate; it is just that the tax is broken into two steps. First there is some labor income which gets saved. This is taxed. Then the savings is eventually consumed. At this time the same income that has already been taxed is taxed again. Currently we tax this at 15%. But when this second tax is any number greater than zero, the tax on savings is higher than the tax on wages, not lower as you mistakenly thought.
Sort of. Carried interest and leveraged assets rely on other people’s savings. Carried interest in particular is an absurd carve-out.
Jon, your example is technically wrong– in the US, when you save what’s left of your income after paying income tax on it, you may later consume your savings without paying income tax again.* You pay income tax only on any additional money you receive from others (interest, dividends, or capital gains) as payment for the use of your capital. There is a terrific injustice here, which is that you pay income tax on illusory gains from simple monetary inflation– monetary inflation deliberately inflicted by the US government**– but that is oblique to the tax code.
However, a more common misunderstanding is to suppose that there is any difference between investment “returns” and labor “income,” on the one hand, and between interest, dividends, and “capital gains” on securities on the other. Remuneration for labor is “return” on human capital. Interest, dividends, and capital gains on securities are all one, because corporate boards choose whether to pay out interest, or dividends, or to “buy back” shares to provide their holders with capital gains.
*Straight consumption taxes, like sales taxes, are levied more or less at the time of consumption, whether or not the capital expended has been saved for a while after it was earned.
**Even the host of this blog favors the destruction of savings by inflation and taxes– he has advocated continuous inflation for the purpose of eroding “sticky” wages, which means savers get taxed on illusory gains, and (due to “progressive” marginal income-tax rates) workers pay ever higher income taxes on stable real incomes.
I don’t think I understand your point. Suppose I earn $100 more and pay $25 in income tax. If I consume the remaining $75 immediately, you presumably agree I paid tax on the entire amount. If I consume some of it later, why would that judgment change?
Alternately, if you agree that a straight consumption tax is a tax on all of my earnings, regardless of whether I save some of them and regardless of how large the return to capital is (or even if it’s zero), why do you not agree the same is true for a payroll tax? Payroll taxes with zero taxes on any capital are pretty much one-to-one with consumption taxes.
NM, I’m an idiot. You’re pointing out that capital gains/dividend/interest taxes aren’t on the principal as well.
Comments on this entry are closed.
Previous post: Huffington Post covers *An Economist Gets Lunch*
Next post: Will Fairfax follow through with The Great Experiment?
Email Tyler Cowen
Follow Tyler on Twitter
Email Alex Tabarrok
Follow Alex on Twitter
Subscribe in a reader
Follow Us on Twitter
Marginal Revolution on Twitter Counter.com
Get smart with the Thesis WordPress Theme from DIYthemes.