by Tyler Cowen
on February 3, 2017 at 1:28 pm
1. New Joshua Gans book on scholarly publishing.
3. Dark matter and the border adjustment tax.
4. The polite moose.
4. Seems like a nice lady. Far nicer than I’ve ever encountered after breaking into someone’s basement and shitting on their floor.
You beat me to be the first to say this Turkey. Notice her son lives in mom’s basement, not unlike me (I LIKE it down here, ok?) and maybe the moose reminds her of him?
First thing came to my (alleged) mind, “The only good moose I ever saw was dead.” They taste great. See, I’m not one of you tree-huggers.
Never tasted moose, I wonder if it tastes like pork? I hear bear has trichinosis (http://honest-food.net/on-trichinosis-in-wild-game/) but moose seems clean. Also of interest is USDA pork is apparently 99.999% trichinosis free.
Bonus trivia: in the Philippines I’ve met people who have eaten dolphin. Not the fish, the mammal. Tastes like chicken (just kidding, don’t know what it tastes like, probably beef).
Lots of people have eaten dolphin, in the states it is called tuna fish.
Most of the mousse I have had tastes like chocolate, but apparently you can put other stuff in it.
About 100 years ago (In BC, Canada) my grandfather’s boss asked to borrow some guns so that he could go bear hunting. My grandfather didn’t like to loan his guns, but it was his boss. Then the boss gets back and invites everyone over to eat bear. My grandfather hated that even more. “Everyone knows bear tastes terrible.”
In modern Indonesian a dolphin or a porpoise is called lumba-lumba. But the slightly older Malay term translates as “the Pope’s fish”.
Because the Portuguese would eat it on Fridays when they were not allowed meat.
lumba lumba would be dolphins. Indonesian has the obnoxious practice of doubling words to pluralize them.
Moose typically tastes like venison (deer, caribou, elk). Not too gamey, and some find it slightly sweeter than beef. To me, it tastes just like beef when prepared in a stew, a curry or a chilli dish. (Bear is slightly “greasy” and very very fatty.)
3. It strikes me that booking of exports here or there is relatively moot (if they are untaxed here or in a tax haven there), on the other hand the share of dark matter that is really profit here (domestic sales) booked there, is a tax cheat and revenue loss. Capturing it would generate tax receipts, and restore jobs as it becomes less possible to pretend to do everything in Ireland.
#3 – the Setzer blog is a bit dishonest. Setzer implies (but doesn’t quite say it) that it is he, not Ricardo Hausmann, that coined “dark matter”. But if you Google it, that doesn’t appear to be the case. First, Hausmann et al’s paper was from Nov. 13, 2005, while Setzer says “I first started looking at the impact of firms’ tax strategies on the balance of payments back in early 2006”. 2005 < 2006. What a slimeball. Trying to capitalize on the fame of others? It's like somebody blogging on somebody else's blog just to gain a wider audience. Sleezeball. At least our own TC acknowledges the pioneer in the Great Stagnation argument (which TC clearly popularized), Robert J. Gordon. By contrast, Brad Setzer seems to be trying to ride on Hausmann and Sturzenegger's coattails.
Yeah, Setser doesn’t say anything like “Harvard’s Ricardo Hausmann has always had a way with words. He named the forces that kept the U.S. income balance positive even as the U.S. ran persistent trade and current account deficits: dark matter.”
OK thanks, I saw that but “naming” the phenomena is that the same (in my mind) as inventing the concept.
Don’t know if naming is the same as inventing, but I am pretty sure it is the same a “coining.” But maybe I misunderstand the vernacular.
Yeah, my bad, should not have used the term “coining”
How do you distinguish these tax avoidance schemes from a perfectly legitimate transaction? For example, let’s say an inventor in Ireland develops an effective drug for stopping the progression of Alzheimer’s disease. He licenses it to a company in Germany that pays him a billion dollars in royalty. What claim does the United States have on that money?
Let’s say he had the invention in the United States, but moved to Ireland and became an Irish citizen before licensing the German company. Again, what claim does the United States have on that money?
Now, let’s say Apple or Google or any other company takes their most precious intellectual property and spins it off to a separate company in Ireland. That company collects royalties for foreign use of the IP. What claim does the United States have on that money? If you think there’s anything wrong with that, how do you distinguish this case from the Irishman collecting royalties from Germans? I don’t think you can.
You didn’t go sneaky enough. Let’s say an inventor in the US creates a drug, and then founds a company he fully owns in a tax haven. He licenses to the tax have company for $1, makes the drug in tax haven, sells it to his US distributing company for $100, which wholesales it for $101. In that case $100 of the profit is “foreign” and not taxed, $1 is on shore ant tax liable.
Now, can I distinguish that from an authentic and unconnected foreign manufacturer which does not simply shield profit for a US entity? Of course, but it takes some digging, some forensic accounting, to tell which is which.
That’s why a “boarder adjustment” or duty based on FOB value, makes a lot of sense.
It begs the question. A company or individual is free to make their product anywhere they want to and they are free to sell it anywhere they want (unless there are restrictions). But a sovereign nation is also free to tax products made elsewhere and sold within their borders. Most countries do exactly this today. The company really shouldn’t care if the U.S. places a tax on imports, why would they care??? They can still keep all their profit, they can still locate in a low or no tax country, they can still live in Ireland or China. No one really cares. The only thing different is that we would now tax products and services that are imported. No harm no foul.
To the extent that we “let” people like Mitt Romeny “make money” in Caribbean countries he seldom visits, we encourage tax avoidance and move some some number of jobs to tax havens.
Tax avoidance is legal. You are required to pay all the tax that is due and encouraged to manage your investments to minimize your taxes. Everyone with money, assets, investments practices tax avoidance.
Thanks to anon for making the example of Mark Thorson more clear. Truth is, there are few inventing Irishmen and lots of tax avoiders. As for “Gone”‘s comment (“But a sovereign nation is also free to tax products made elsewhere and sold within their borders”), I think the “unitary tax” practiced by California is onerous. No reason to tax worldwide income (see this historical paper, note Reagan was against the unitary tax: http://www.accountingin.com/accounting-historians-journal/volume-15-number-1/the-evolution-of-the-unitary-tax-apportionment-method/)
Bonus trivia: does anybody understand the US ATM? I use this ATM calculator and trust its answer, but I have no clue about how it comes up with the decision: https://www.irs.gov/individuals/alternative-minimum-tax-assistant-for-individuals (I see this calculator, which is handy, will be says the site retired in 2017, I wonder why?)
I understand ATMs. AMTs are a little more complicated 🙂
1. Gans is an Australian. LOSER.
2. Haterdate is for haters who can’t get dates. LOSERS.
3. Border Adjustment is only needed for countries that are LOSERS.
4. Fatties who don’t cause havoc are LOSERS.
You sound like the fake rayward, not verbose enough.
#3…It’s actually easier to understand the physics of dark matter than the tax code. Unreal.
4. Sounds like a great name for a pub in Alaska.
The best-named Alaskan establishment I am aware of is the Great Alaskan Bush Co. Note: I have never been a customer of said establishment.
I have, and it’s a strip joint.
It’s a roadhouse about 20 miles south of Fairbanks:
Are there people who DON’T hate slow walkers?
Anyone fleeing from the Zombie apocalypse?
#2 – The universe of things/persons hated (three) is much too small. I mean I could list 600 hundred before breakfast. .
Is one of them Dating apps?
I was disappointed they only had three.
It was not. I’ve been out of the dating scene (married) for 38 years (three of the best weeks of my life). I’m not convinced that hating the same persons/ideas/things is reason to attempt a long term relationship, er, ruin your life.
#3 — Interesting. The author makes the point that allowing repatriation of funds might not increase revenue as much as anticipated. However, am I correct in thinking that, all things being equal, the US would rather have that money repatriated than not? There are a lot of social benefits from investment in one’s own country beyond the impact on federal tax revenue.
Linked from #3 is an article that reads very differently in the context of a big policy push to change cross border adjustments:
The article is about the lack of US jobs generated by the iphone. There is a strong element of “Oh, well, nothing can be done. That’s globalization for you!”
Obama even asks Steve Jobs about it, and gets a direct cut down: “Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.”
The really interesting question from TrumpWorld: did Obama really want the jobs, or did he want an excuse for not trying harder to bring those jobs onshore? I don’t mean consciously wanting something — I mean in the sense of figuring out exactly what it takes to achieve a goal, then taking concrete actions to achieve it.
Trump, in his inept and blustering way, is trying very hard for Option #2. Obama, in his cool and collected way, settled for Option #1.
A very big question in American politics over the next few years will be whether those jobs are gettable or not.
D’oh! I meant Trump is trying for Option 1, while Obama settled for Option 2.
If you fundamentally don’t think an action is worth it, what you really want is an ironclad excuse for why some goal wasn’t achievable — you want someone to tell you, flatly, “Those jobs aren’t coming back.”
If you fundamentally do want to achieve that goal, what you really want is somebody to tell you “We must do X to achieve Y,” so that you can bulldoze through opposition to X.
If Y is achievable and X isn’t too bad, you’d rather have the policy.
If X is terrible and Y isn’t achievable, you’d rather have the excuse.
Those jobs aren’t gettable, as even China is now starting to automate them away. And is that what we want? Americans working at the equivalent of Foxconn in basically sweatshops making toys and clothes and phones?
Why not add a tarriff that makes the cost to produce the product in China (or wherever) the same as if the product were subject to US workplace and environmental laws?
Otherwise you are adding an extra regulatory burden to domestic production that outsources the domestic ills the US is trying to prevent, one which creates some amount of artificial domestic unemployment and dislocation as a result.
Indeed, the scenario where Americans start working in sweatshops seems more likely under a no-tarriff policy: if Americans can’t react with some sort of regulation-balancing tarriff, domestic political incentvies will be to roll back workplace and environmental protection in order to better compete.
Well that solves one problem while creating many more including dramatically higher prices. Trade and comparative advantage are a thing, and we should not strive to make everything here. I’d rather outsource the heavy smog and menial labor.
Again, are those the jobs we want? Rows of Wisconsinites snapping together iphones and Nikes?
The comparative advantage you cite is a result of artificial, inconsistent regulation over production. It is a result of failing to internalize negative externalities in US consumption behavior, instead subjecting foreign lands to them.
You only outsource smog and some amount of menial labor because you do not apply the same standards to foreign production. You can say (1) either your nation must apply US environmental and labor laws, or (2) you will be subject to a tarriff that makes the price of your imported goods equivalent to if they had been produced subject to such laws. If the foreign nation has a comparative advantage despite that requirement, they will still produce the goods.
Also, isn’t it likely that the US is far more efficient at reducing pollution than most such nations? This would mean the US has bot an absolute and comparative advantage in producing “less environmentally destructive products.”? Despite this advantage, production is artifically routed overseas as a result of regulations applicable in the US but not elsewhere, likely resulting in greater global environmental degradation.
Yes, prices are presumably higher. Due to efficiently forcing the internalization of negative externalities. Failing to do so leads to articificially high production.
But the main beneficiaries of the change would be the lower-skill workers who are no longer put at an artificial competitive disadvantage.
OK, fairly true. So again, rows and rows of Midwestern toy assemblers?
Also, if you are this concerned about the environment, and unconcerned with prices, how do you feel about a carbon tax?
We could even get close to your model by having a carbon tax here, and applying it to imports (unless we are satisfied with the exporter’s own pollution control). And if we make the carbon tax revenue neutral by say reducing the payroll tax, maybe the poor won’t be hurt too badly (by the higher prices)
I think a carbon tax without some offsetting tarriff that makes imports subject to the same amount of externality internalization will lead to more artifical outsouring of low-skill, polluting US work.
But since the relevant emissions are global rather than local, there isn’t even an argument that we benefit from moving local pollution into another country. Again, if anything, I would expect the relevant nations to be far less efficient than the US at reducing carbon emissions with capital-intensize technology. So global emissions could very well rise, while throwing low-skilled people into artificial unemployment and dislocation.
I have tended to favor a carbon tax despite not being convinced that the expected harms from any temperature rise are worth the cost. This is in substantial part because I think there are a lot of other pollutants created in the same production processes that are probably worth internalizing as an independent matter. So on net it might still be worth the costs when all pollutants are considered. Though of course something that isn’t just a carbon tax would be superior.
However, my concern with externalizing carbon emissions and hurting low-skill US workers has led me toward opposing any unilateral carbon tax.
I have probably argued as a fervent free trader more than as somewhat protectionist throughout my life. But I don’t think I was giving the counter-considerations a fair hearing (partly because forms of them are often made by economically illiterate people).
My current view is much closer to what I have outlined in these posts than my former “all free trade and endless globalization is good” self.
And yes, why not rows of midwestern toy producers, if that is the result that would hold absent artificially-increased US production costs? If we have inefficiently displaced such production, we should correct that.
I don’t think such work is so terrible, especially for a low-skill person. What do they do otherwise? Work retail?
Building toys would produce more good in the world and more satisfaction with the results than my current employment does (though of course I would make less). But I’m not the low-skill guy looking at either toy factories or unemployment, or toy factories vs. retail.
A last thing to consider is that the Fed has spent many years now trying to creation inflation with incredibly low rates and QE.
We could have achieved price increases by applying tarriffs to foreign goods subject to the model I have argued for here. Without the risk of substantial mal-investment caused by such low rates.
This actually seems like a pretty big blind spot for many people who opine on both issues (Tyler included, I think): (1) they would argue the policy proposed here is bad because it leads to higher prices, while (2) arguing that loose monetary policy is needed in order ti stimulate inflation. Seems likr a contradiction to me.
We could create “Special Economic Zones” within US borders, and allow foreign workers to move into those zones while being entirely subject to their home country’s labor and environmental laws, but subject them to US taxation instead of their home country’s taxation. Otherwise, though, it would basically be an extension of their homeland (except US Courts and police forces would resolve issues in these Zones based on the faithful application of foreign law, as this could otherwise result in incredibly high legal and enforcement costs). The taxes on the foreign workers would cover this.
This would be more economically efficient than the free trade status quo, and more environmentally friendly. This is because our current framework makes long-distance trade attractive in more situations than it would be with equivalent labor and environmental laws in each nation. By moving the supply local, we substantially reduce the wasted economic and environmental costs created by this inefficiency.
It would also not subject these foreign workers to any worse conditions than the status quo, while potentially improving their lot by allowing them to avail of the true Rule of Law available in US courts that may not be available in most of their home countries.
I suspect many would call this plan immoral, although it puts the workers in the same or better position, and actually improves economic efficiency and reduces worldwide environmental damages. Yet doing the same thing by placing these zones within foreign borders, while incurring economic inefficiency and environmental damage as a result, is considered fine.
Foxconn is thinking of investing in the usa. Automation means the plant can be in the usa. Apple moved production because it’s a regulatory headache as well as cheap labor but note Adidas and now underarmor are making fully auto atedd shoe plants in ge r, any and the usa respect tube l y.
“scholarly publishing” … I once read, on this site, I think, that somewhere slightly less than 10 per cent of scholars who publish do so for any other reason than careerism: i.e., they are no longer interested in what they are saying. There is no way I can find that comment again by googling – what useful search words would one use? One wonders about those nine, eight, seven and so on percent …. There was another comment I will likely never find again, maybe on this website and maybe not, from somebody interesting who sounded like he cared about understanding this world and he said his wife did not like it when he spent time reading or thinking about things that were not important to his immediate surroundings so, according to his comment, he compromised and read only x challenging books a year. I though it was a fascinating comment – more fascinating than I have made it sound – but I will likely never find it again, and I forget what the value of x was. Even if we only spend a couple hours a week reading, we should want to read something worth the opportunity cost of our time, whether we categorize that precious time as scholarly or not. Here is a quote I would like to share: “The volume was entitled Hortensius: On the Blessed Life, and its author brought home to the fiery spirit of the young Augustine that, if one wanted to attain such a life, one had to strive for true wisdom, which meant that one had to abstain from coarse pleasures. And …[who] would refuse to strive for blessedness”? (Hans Urs v. Balthasar, Zwei Wege zu Gott, translated in Explorations in Theology, volume 5, by Adrian Walker, Ignatius Press, San Francisco, 2014, at page 12).
For the record I never use in actual non-written speech the word “one” as used in my 10:44 comment, second line: “One wonders” … but commenting on the internet “One does this” or “One does that” can be useful.
2) I was excited until I saw iphone only. What if you hate iSheep?
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