Month: August 2006

How much does government policy affect pre-tax income?

SA few days ago Paul Krugman argued (Times Select, or here is a Mark Thoma summary) that it matters a great deal which political party rules in the United States.  Republicans tend to bring gilded ages, Democrats tend to bring greater income equality.  So much for the median voter theorem (is this less reason or more reason to trust politics?  And is this view supported by event studies of elections?  I doubt it.).

Andrew Samwick points to Krugman’s own earning power and wonders if W. deserves the credit.  Greg Mankiw piles on.  Even Brad DeLong disagrees with Krugman.   

Matt ("he really ought to be an economist") Yglesias sides with Krugman, noting that tax policy affects pre-tax earnings through induced effort (an unexpected yet appropriate dalliance with the supply side) and how the workplace is geared to produce maximum value.

Four additional points:

1. It is much easier for policy to liberate a "shackled top 1 percent" and boost their earnings than it is for policy to lift the huddled masses.  See Mark Thoma on Australia.  Measures of inequality capture the difference between these two groups, but for Krugman’s questions this is not a helpful aggregation.  It is easier to toy with the lot of small groups than with very large groups.

2. Bob Tollison used to tell me: "No one other than Michael Jordan ever got truly rich selling his labor."  If policy is going to liberate top earners, look to the growth in capital markets.

3. Krugman doesn’t have many data points.  The 20s have a string of Republicans.  Then there is Roosevelt/Truman.  He tosses out Eisenhower for being centrist.  Nixon was like a Democrat on social spending and regulation.  Krugman tosses out Clinton for governing like a right-winger.  Give this one to Andrew Gelman and let him bite.

I’m OK with these classifications of Eisenhower and Clinton.  The deeper point is that how a party or president governs is itself determined by underlying social, economic, and technological forces.  Which brings us back to the political party not mattering very much for pre-tax income distribution.

4. If we take the left-wing view that money doesn’t make people much happier, and hard work is an oppressive rat race, the change in the distribution of utility is much much less than the change in the distribution of income.  In fact it is easy to argue that the United States has become more egalitarian in terms of well-being.  Most people get penicillin, and in utility terms a $20,000 stereo isn’t much better than a $400 stereo.

Addendum: Here is more Brad DeLong summary and analysis.

What’s Good for the Goose?

Writing in Slate, Tim Harford explains why conservation laws can kill the animals they are supposed to protect – the expectation of the conservation law leads to preemptive development.  Case in point?  (One that Tim doesn’t mention).  The prospective ban on foie-gras (click on the link for Anthony Bourdain’s definition) in Chicago has lead to an orgy of consumption:

With the city’s ban on foie gras…days away from going into effect, upscale restaurants in the
city are serving it up like never before. They’ve put together special
menus featuring it in course after course — searing it, chilling it,
throwing it into salads and turning it into sauce.

One restaurant is even relocating just outside the city boundary.

Here is more on why the future is meat-eating vegetarianism.

Thanks to Amanda "I won’t eat Jello" Agan for the pointer.

Who is Stirling Newberry?

Pub

His insight brings me to new peaks of excitement:

No movement in the
history of mankind has produced more words for free than the
libertarian movement.  And yet, its fundamental ideology is that people
do everything for money, that being how markets send signals about what
makes people happy – giving money to the people who do them.  One could
understand communists or Christian missionaries – but free marketeers?
Either they must believe that there is so much prosperity waiting for
them on the other side of the revolution that years of unpaid labor is
worth it, or they don’t really believe what they say they believe.

For a clear argument, try this:

To generate a Reactionary movement, all one needed to do is create a
demon, a nomos and a boundary that separated the two.  Rhetoric falls
out of this almost immediately, since it is all about either
emphasizing the evils of the demon, the self-justifying good of the
nomos, and the importance of having an absolute and simplistic boundary
between the two.  This means that not even a speck of evil can be
tolerated, not a single example.  It also means that whatever is inside
the tank, once all corrupting influences are removed, must be pure
good, and therefore even questioning it is evil.

Extreme economic literacy:

The essential insanity of the last decade has been this – by creating a
vast dollar glut, the United States has managed to create an
inflationary rev up of the world economy.  By moving much farther up the
curve of diminishing returns of oil production, it has manged to create
a small amount of extra growth, and a great deal of extra profit and
ownership for those involved in the oil production.

He blogs "economics" on TPM Cafe.  You can peruse this post for more.  He is also a composer.  I thank an avid reader of Stirling for the pointer.

As Robin Ficker used to say: "Josh Marshall, telephone…!"

Addendum: Here is another dose of Stirling

Rap music

Don’t they say "demography is destiny," or something like that?  Basically I like the rap CDs that all the other overeducated middle-aged white guys like.  That means rap which is musically complex, often ironic, and innovates with rhythmic patter and postmodern pop culture references.  Here are a few favorites:

1. Outkast, their entire ouevre.  They have mastered soul and funk as well.  Their new album is due August 22, but this time around the advance reviews are quite critical.

2. Eric B and Rakim, Paid in Full.

3. De La Soul, especially their clever early material.  They ran out of steam quickly, however, as have most rap groups.  But their "Jenifa Taught Me" cut might be the most fun rap song ever.

4. NWA, the Compton album.  A mini-opera, visceral like Verdi.

5. Control Machete, Mexican rap is generally worthwhile.

6. Nas, Illmatic.  A classic.

7. Dr. Dre, The Chronic.  The best parts are when SDD cuts in singing.

8. P.M. Dawn, most of all Jesus Wept, if you consider that rap.  Hits the sweet spot between gospel and Prince.

9. Kanye West, his last CD.  He has the talent to rival Outkast as the most important rapper(s).

10. My dark horse pick would be Schooly D, The Adventures of Schooly D, especially the stripped-down cassette version with only the album’s highlights.  The next step after Varese.

If we can count Robert Ashley, Perfect Lives is the best rap of them all.  He is in any case a pioneer for integrating voice into music.

The most overrated bad rap group is the snotty and execrable Beastie Boys.  The most overrated good rap group is Wu Tang Clan, who had gobs of talent but doesn’t stick in my memory.  Run D-M-Z and Public Enemy are both overrated, but I am not yet sure which category they belong in, good or bad underrated.

For more on the history of rap music, see my In Praise of Commercial Culture, chapter four.  Here is an article on rap music in the Middle East.

Across the web

1. How have Moneyball draftpick predictions held up?  Try this too.

2. Season two of Veronica Mars comes out on DVD Tuesday, but newcomers must start with Season one.

3. I have been trying to develop a theory of when some people get offended by the boasting of others.  In a personal ad it is OK to say you are a doctor, but not OK to say how much you earn.

4. Department of Duh: The number one search query on AOL is "Google."

5. Rousseau and Hume once played a chess game; Rousseau’s play crushed Hume’s weak understanding of the Philidor Defense in this short sacrificial gem.

6. Why Poincare’s possibly-now-proven conjecture matters.

Answering Jane Galt’s questions

1)  Why do you read blogs?

Blogs present compelling personalities, bundled with a bit of learning, plus of course links to use for this blog.  A new way of ordering the mental universe is going to be interesting, especially if it attracts smart people.

2)  Why do you read economics blogs, specifically?

You can be sure that (many) economists will think conceptually and keep the blah blah blah to a minimum.  Remember how Stravinsky’s Rite of Spring gets so quickly to the heart of things?  That should be a model for us all.

3)  What are your favourite economics blogs?

See our blogroll for a non-exclusive start, but given #1, I don’t find the "economics" category to be a primary one.  Greg Mankiw and Matt Yglesias have more in common than either does with David Altig’s Macroblog.

4)  Even more specifically, why do you read this blog?

See #1, plus the writing is especially good.  And meeting the blogger makes just about any blog much more interesting.

5)  What are your favourite blog features?

I like the connection and the creation of "story" generated by the regularity of posts and their temporal progression.

6)  What aspects of blogging annoy/repel you?

MR has great commentators but overall I don’t like the comments at most blogs.

7)  What would you like to see more of on economics blogs in general, and specifically on this one?

From you, more regular posts, even if you lower the average quality of post.  It is not just a frequency thing, it gets at the very heart of the medium.

8)  Are there things that aren’t currently found on economics blogs that you would like to see?

More discussion of actual economic research, especially the stuff that matters, although this can be time-consuming for the blogger.

9)  If you were a vegetable, what vegetable would you be?  This is our demographic control question

A green pepper.

Here is her initial post, with of course many comments.  Go add some more.

Chicken tikka masala

Robin Cook announced chicken tikka masala as the new national dish of Great Britain.  Food critics immediately responded by condemning it as a British invention.  Chicken tikka masala, they sneered, was not a shining example of British multiculturalism but a demonstration of the British facility for reducing all foreign foods to their most unappetizing and inedible forms.  Rathar than the inspired invention of an enterprising Indian chef, this offensive dish was dismissed as the result of an ignorant customer’s complaint that his chicken tikka was too dry.  When the chef whipped together a can of Campbell’s tomato soup, some cream, and a few spices to provide a gravy for the offending chicken, he produced a mongrel dish of which, to their shame, Britons now eat at least 18 tons a week.

That is from Lizzie Collingham’s Curry: A Tale of Cooks and Conquerors, an excellent look at the history of Indian food, and especially the Persian origins of many Indian dishes.

Unholy Water

The EclecticEconomist alerts us to a story in the Onion CBC News:

The United Church of Canada may ask its members to stop buying bottled water.

The
request is part of a resolution against the privatization of water
supplies that has been put before delegates at the church’s general
council this week in Thunder Bay….

"We’re against the commodification, the privatization is another way to say it, of water anyway, anywhere," [said a church leader.]

If the United Church cares about children they should reconsider their opposition.  Privatized water saves lives.  From my post, Water of Life:

…In the 1990s Argentina embarked
on one of the largest privatization campaigns in the world, including
the privatization of local water
companies covering approximately 30 percent of the country’s
municipalities.
Using the variation in ownership of water provision across time and
space generated
by the privatization process, we find that child mortality fell 8
percent in
the areas that privatized their water services and that the effect was
largest (26 percent) in the poorest areas….

That is the abstract to a very important paper, Water for Life: The Impact of the Privatization of Water Services on Child Mortality, by Sebastian Galiani, Paul Gertler and Ernesto Schargrodsky in the February 2005 issue of the JPE.  (free working paper version).