Sunday assorted links


The very next story on Bloomberg: "The World Bank cut its forecast for Ethiopia’s economic growth in the 2020 fiscal year to 6.3%, well below the government’s projection."

Maybe they got it confused with population growth. There were 73 million Ethiopians at the time of the last famine. There are 107 million now. That's growth.

Just send the all to England. Free health care, free housing, free food, they give you money every month. Viva free stuff!

John Cochrane's takedown of the (extremes of the) wealth inequality literature is some of the best and most important blogging I've ever seen. I'd even go so far as to call it an expose because it's really damning.

Cochrane is as good as it gets!

The interest thing seems like a real howler (looking at Part I). Taking the interest on HY bonds yielding 6% and capitalizing it at 0.89% (113x multiple)? Yeesh.

However, Cochrane rejects their use of a multiplier for capitalizing business income. That's actually pretty normal in the M&A world ("the PE sponsor paid 9x EBITDA for the company, etc.). In Saez/Zucman's online appendix, a chart says they're only using 7x as a multiplier for business income, which seems fine.

Seems like a lot of what's driving these results is simple rate math as rates have come down near zero. But that doesn't repeat over a reinvestment cycle. In fact it becomes a problem if you're counting on a certain income but have to reinvest at ever-lower rates.

Those are vinyl sales. What's the point?

Vinyl is superior sound quality

OK, hipster.

Limited frequency response, poorer dynamic range, and the introduction of distortion does not constitute "superior sound quality."

4. Nonsense. High levels of wealth inequality is a problem only because it causes financial and economic instability. If it doesn't, then it's not a problem. But I get it: wealth inequality is the gift that keeps on giving: the more assets one owns, the greater the reward for rising asset prices. Or to put it another way, it's difficult to get one to understand the risks of high levels of wealth inequality when one's income depends on rising asset prices. Our Austrian friends understand the folly of the Cochrane view, but who listens to the Austrians? [To be clear, I don't agree with redistribution for redistribution sake: inequality is the price we pay for prosperity. What concerns me is the level of wealth inequality that creates financial and economic instability. What appalls me is those who refuse this reality when they know better.]

I see your commitment to Dunning-Kruger is as strong as ever.

Forget it Carmex, it’s Raywardtown.

#1 I think those numbers are fake. They do not jibe with what I know about those countries.

Phillippines 77%
Ray Lopez, can you confirm?

Duerte is pissed!

1. How accurate is polling in third world countries?

2. Good for them, but let’s keep the larger picture in mind. 10% growth on Ethiopia’s $1,000 GDP per capita is only $100. By contrast, 2% growth in the US on $60,000 GDP per capita is over $1,200. So in that sense, Ethiopia is not achieving convergence yet, instead it is falling further behind the US when measured in comparable dollars rather than percents of a different base. Most countries seem unable to keep GDP growth up at the point where they would experience convergence as measured in dollars rather than percents. Once they start getting close, the US tries to impede their growth.

And keep this up for some years! :-)

Tyler didn't mention that Ethiopia has been growing at about 10% for the past 16 years. The per capita was $650 in 2003 and is now $2,000, a significant improvement.

3.) What update? The link is months old?

... and Google News doesn't show any recent Roland Fryer news, so it's not a simple cut and paste error. Steve Sailer does this a lot: following an old link, maybe from Twitter, and thinking it's fresh.

America is producing a hidden army of incels. The threat is real:

Robin Hansen solved this problem already.

They could do like this Argentine guy:

According to the GSS, 30% of men 18-30 haven't had sex in the last year, up from 15% 10 years ago (women are at 15%, unchanged). This is the result of women becoming sexually independent, choosing their mates based on personal sexual preferences rather than the need to find an economic supporter, which is great for women and society as a whole, but it means that we live in a society with a large and growing minority of men who will not find sexual partners (the unf***able, close cousins to the deplorable). The thing with incels is that sexual frustration is not an extremist religious or philosophical ideology, it's something that literally every young man experiences. If a tiny fraction resort to violence, that adds up to a lot of individuals and incidents. I fear what will happen if incel terrorism becomes a copycat trend, like high school shootings became common after Columbine.

I'm not sure what is a solution; certainly not subtracting from a women's freedom to choose her partner. Easing prohibitions on prostitution? Government research and subsidies for sex robots perhaps? I'm only half kidding.

I guess boomers still buy albums?

According to MusicWatch, roughly half of vinyl record buyers are under the age of 25, 13% are 51+.

#4 It all comes down to part 4; the problem with the tax system is that it is based on taxing income (with some gestures -- preferential taxation for dividends and retained earnings and capital gains -- toward taxing only consumption) rather than progressively taxing consumption.

Perhaps the pubic discussion of wealth taxes in particular and inequality in general will get conservatives to get on board with progressive consumption taxes.

Consumption tax has its own problems:

1. How to tax durable goods and real estate? Do you apply a sales/transfer tax or do you compute imputed rent and tax that every year? The latter would be complex while the former seems unfair since it results in the same thing being taxed multiple times.

2. How to tax consumption abroad? Easiest way would probably be a tax on foreign exchange purchases. Otherwise, expect rich people to hop over to the Caribbean or other tax havens more often to do their conspicuous consumption.

If we're taxing income, we should tax capital income at the same or higher rates than we tax wage income, for a start. Warren Buffett should pay the same marginal tax rate as his secretary.

Taxing consumption is economically preferable to taxing income, but leads to a problem. Rewarding savings sounds like a good idea, but those who already have savings will see those savings grow, increasing wealth inequality. If we're going to switch to generating revenue largely from taxing consumption, we should lower taxes on wage income, but retain or even increase taxes on capital income and/or estate taxes.

Consumption taxes are flat taxes. If you wish to benefit the most needy in our society (most do), and your taxes are flat, you have to provide benefits targeted to the poor, i.e. means-tested rather than making them universal. That's a problem in the US, in particular. FDR started us on a path of means-tested (progressive) taxation and universal benefits. It will be politically difficult to switch to universal (flat) taxation and means-tested benefits, even though it is the economically optimal path. There are currently calls for higher social security taxation on higher incomes, but few calls to instead curtail social security benefits for the prosperous; that kind of attitude stands in the way of consumption taxes.

Is there a Roland Fryer update? The link is from July

#4. Lots of esoteric economic arguments going on here. One of the key questions is do the wealthy have more influence over our government than the majority of the population.

Of course they do.

Here's a clear example: The IRS has been so starved of resources that it can no longer effectively audit tax returns of the wealthy. You are more likely to be audited if you receive the earned income tax credit, than if you are rich. How did that happen????

It's easy to find more examples.

Remember power corrupts and absolute power corrupts absolutely.

I got a kick out of Grumpy's claim that if a wealth tax went into effect there would be an explosion of tax avoidance schemes. Does he not know that there is already an explosion of tax avoidance schemes. Even South Dakota has gotten into the act and is now, perhaps, the best tax avoidance state in the union. Better than Delaware or the Cayman Islands.

5. More evidence of the great stagnation?

5. Amy Winehouse (Back to Black) in at #5 in the US and #2 in the UK. That's surprising. Was her appeal her voice or her sadness? Everything about her was sad, her addiction, her severe underweight, her mumbling. Watching Amy is like watching Judy Garland.

R u deaf? Her voice and her music are amazing

Amy Winehouse had a voice and talent that was shockingly good at singing sultry low alto parts, in a way that combined technical fireworks with the ability to convey heart-wrenching emotion. She had a voice, like Karen Carpenter's, that made not only the public but seasoned professionals stop and take notice. The choice of music was almost irrelevant; Back to Black is not a collection of brilliant compositions; the voice was the key. Some of her best work was never put on an album; I suggest people google "Amy Winehouse All My Loving" for a Beatles cover that she did for the BBC which is a stunning demonstration of her talent.

Yes, her death, like Carpenter's, was tragic, and that may be the source of a certain amount of fandom. But the reason audiophiles have to have a copy of her album is because a voice and talent like that only comes around once a generation, like a truly great boy soprano. We haven't seen "the next Amy Winehouse" because there likely won't be one for decades.

Well, I like jazz, so Amy is someone I often listen to. But really. Why would Amy be #5 in the US when the US appreciation of jazz is below, well below, appreciation of mud bogging.

Here is an excellent podcast discussing the Roland Fryer situation with The Case of Roland Fryer | Glenn Loury & John McWhorter [The Glenn Show]:

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