Claims about Ireland (from the comments)
The proximate cause of this problem is the housing crisis, but the underlying reason is that Ireland’s political spectrum is still broken due to being defined by its reactions to colonialism and Catholicism. Beneath the surface-level tides of imperialism, rebellion, theocracy, and liberalisation is a deep nationwide conformism and lack of agency. There is a ‘learned helplessness’ from this illiberal past that conditions the population into modes of subservience and rebellion, with nothing in between.
Because the reactions against colonialism were both left-wing in character (republican and social liberalism) the entire population thinks of themselves as superficially left wing. The result is that each generation grows up with the same abstract ideas that problems are caused by “greed” and “corporations” but no conception of how oligarchy and government actually work to maintain an oppressive class system that is truly brutal compared even to much of western Europe.
The wealthy and influential networks in society use moral-sounding concepts such as environmental protection and invoking famine-era evictions to establish legal frameworks that protect existing capital by preventing growth. They also use the civil service as a massive programme of sinecures for the less ambitious within the upper middle classes. To take a random example: Ireland still claims to have ‘free’ university (though there is a significant registration fee). But the cost of renting is so high that effectively only the wealthy can send their kids away to college. Superficially left wing, but de facto oligarchy. This is everywhere: health service (half the population have private), public transport (unusable if you actually need to be somewhere), and there are shakedowns at every financial touchpoint — bank duopoly, huge insurance fees, dysfunctional legal system.
You’ll read a story in the news about how evil foreign investors are bulk buying homes and letting them out. What that actually means is that large capital-efficient reliable finance is outcompeting inefficient amateur Irish landlords, to the benefit of renters. The media will never report the story that way, because the ‘left wing’ story is best at protecting Ordinary Decent Irish Millionaires. None of the major parties will fight the civil service unions because the strongest voices in society get a lot of easy money through civil service jobs and contracts, and they will frame the debate as an attack on teachers and nurses.
The worst thing is that the people who are most oppressed by this (young people and poorer people) are most inclined to favour policies that have a superficially “left wing” appearance but just boil down to things like “greedy corporations are bad”, and have the effect of preventing growth and protecting existing asset ownership. James Joyce really captured this brilliantly — other writers describe the specific ailments, but Joyce saw the spiritual sickness of Irish society as it exists independent of particular forms of oppression. Fly by those nets.
That is from luzh.
Does the current structure of capital gains taxes provide interest-free loans?
Dylan Matthews and a few others were saying this on Twitter, so I thought I should cover the question. Perhaps we are all understanding terms differently, but my answer is a simple “no.” At least not apart from the step-up basis being revalued at death, which I (like many others) would change. Even that is not a direct gain for you.
First, I define a zero interest loan as when you can increase your consumption today by “k,” and later pay back only k, rather than paying back the higher sum of k modified by the relevant exponential relationship.
Second, let us say you are a wealthy person who owns a start-up now worth $100 million, under the current tax regime. But you are illiquid, and also you do not want to sell for a number of reasons, one being to avoid an immediate capital gains tax liability.
So you borrow — let us say $50 million — collateralized by the stock. Of course that does help you consume more today.
But is it a zero-interest loan? No, you have to pay the real rate of borrowing to raise that $50 million. I do not see where the zero-interest loan is supposed to come from. (Of course, real interest rates might have been zero to begin with, but that is a matter aside from how the capital gains rate is structured.)
It is true you postpone paying the government. But the wealthy person, to consume more now, still equates impatience with the real rate of interest in standard fashion. And let’s say you don’t own any capital value at all. You still have the option of borrowing (if you can), consuming more today, and not paying the government anything extra! That is built into the nature of borrowing, and how it interacts with our current tax system, which tends not to tax consumption very much. Like that or not, don’t blame it on the ownership of capital assets. The main example people are citing is not much different than this example of the poor person borrowing and consuming more, except we gave the subject an extra $100 million in side holdings, so this somehow feels more outrageous.
If someone wants to limit or tax that borrowing, I would consider that suggestion, if only to avoid far worse policies. But what is going on in this scenario does not seem so sinister to me — “I borrowed more to become more liquid” is an age-old story, which surfaces in a wide variety of settings. So I would not myself limit or tax that borrowing.
Another relevant factor is that the capital gains rate is not indexed to inflation. So if you just hold the asset and borrow against it for say twenty years, the tax system treats your twenty years of nominal gains as if they were real gains, and taxes you accordingly. Ouch! That in my view is bad, and also unfair. It also limits the extent to which wealthy people, or for that matter poorer people, will pursue this strategy.
And again, the government could avoid these problems all the more by shifting its taxation focus from capital income to consumption, in progressive fashion if need be. And that is not utopian, it is in fact what so many of the wealthier countries in the world have done.
If you feel this part of the debate might be semantic, perhaps that is correct. But that judgment also means that the concept of “zero interest loan” is not some kind of extra argument for taxing unrealized capital gains. It is, however, an argument for shifting the tax system toward a greater taxation of consumption.
The new Jerusalem Demsas book
On the Housing Crisis: Land, Development, Democracy. I just heard it is out today, of course I ordered my copy immediately…
Tuesday assorted links
1. Durlauf reviews Koyama and Rubin, and Brad DeLong.
2. Some remarks on Norway and unrealized capital gains taxes. And Scott Sumner, on his new Substack, on how to manage taxation.
3. Chinese student views on AI risk.
4. The Pentium as Navajo weaving.
5. “I think hate is very much part of any complete system of sentiments and system of virtues. And Adam Smith certainly talked about it. It fits into schemes in his system.” Link here.
6. What is needed for AI to write decent novels.
9. Podcast with the guy who built the fusion reactor in his bedroom.
10. Behavioral economics guide, 2024.
Ireland fact of the day
Ireland ranks as the loneliest country in Europe, with almost a fifth of people lonely most or all of the time and nearly two-thirds of people suffer from anxiety or depression, according to EU data. One in seven children live in homes below the poverty line, defined as 60 per cent of the median disposable household income.
Here is more from the FT, with much of the piece about how Ireland should spend its budget surplus.
A simple theory of which thinkers support the elites, or not
I don’t agree with this theory as stated, but it can be worth spelling such things out, if only to see their weaknesses, or perhaps some strengths at some of the more unusual or less likely margins. Here goes:
People, especially “thinkers,” like to believe they serve all sorts of noble purposes in the intellectual infrastructure. But in reality their main effects are either to raise or lower the status of the elites in their society.
Noam Chomsky, for instance, has lowered the status of American elites. That is his net long-run effect, not that he drummed up sympathy for the Khmer Rouge. A lot more people, for better or worse, are more skeptical of a bunch of things because of Chomsky.
The New York Times, in contrast, works hard to raise the status of elites. It tries especially hard to raise the status of Democratic elites, but still it is raising the status of elites for the most part.
Most “heterodox” thinkers like to think they are encouraging a more nuanced understanding of when the elites are right and when they are wrong. And indeed that is what some of their more perceptive readers take away. But their overall important gross effect is typically to raise the status of elites. They make the public discussion of issues better and more vibrant (one hopes). And thus, if only in a longer run, the status of elites goes up. Sorry buddy, I know that wasn’t exactly your goal!
If you teach at a top or Ivy League school, your net effect is to raise the status of elites. With the exception of a few such people who make horrible blunders and end up disgraced. Or in fewer cases they may be accused of false charges. Otherwise, the simple fact of “a smart, accomplished person affiliating with elite institutions” is the main message you are sending.
In earlier media ecosystems, it was relatively difficult to act to permanently lower the status of elites. It is in fact quite impressive that Chomsky managed this, and without (earlier) the aid of the internet.
Today it is much easier to lower the status of elites, largely because of social media. But even with that aid it is not as easy as you might think. Very often you need the cooperation of elites themselves in showing their own blemishes to the public, whether they do this wittingly or not. They do it plenty in fact, a’ la Martin Gurri.
Libertarianism, as it has evolved at the institutional level, largely raises the status of elites. It keeps the idea of liberty in the public conversation. Libertarians, of course, may not intend this as their major effect, though of course they are glad to keep the liberty idea in circulation. Some of the “obsessed with Covid lockdowns” libertarians, however, probably lower the status of elites.
It is hard to lower the status of elites without lowering your own status as well. It is not just that the elites will not like you, or may treat you and your PR harshly. You also have to come across as quite negative, and furthermore some of the negativity you create for your targets will rub off on you, at least in the eyes of much of your audience. Plus being too relentlessly critical, rather than constructive, tends to make people stupider.
Just as many elections are in fact about “one thing,” so are very many intellectual discussions, namely whether elites should have higher or lower status.
Rather than classifying thinkers as left-wing or right-wing, in this (false) hypothesis we should have the taxonomy of “raising the status of elites” vs. “lowering the status of elites.” Can it be said that Richard Hanania is now in the former category? Matt Stoller, however, is mostly lowering the status of elites. So we can put them in opposite corners of the true political spectrum, though for reasons different from what you once might have expected.
Which kind of intellectual would you rather be? Which is more likely to contribute to a net gain in social trust? To improve social welfare?
If this post were in fact true, how should it induce you to change your behavior? How about as a consumer of intellectual products?
Scott Sumner is switching to Substack
Monday assorted links
1. Founder mode.
3. Paper types, ranked by likelihood of paper cuts.
4. Pre-order the new Houllebecq.
5. Judit Polgar, egalitarian radical. She is not a sexist.
6. Okie-dokie. Neo again.
7. Trade and the end of antiquity.
8. Hard drugs illegal again in Oregon.
9. The great Ed Glaeser on housing reform (NYT).
Taxing unrealized capital gains is a terrible idea
Sadly, Jason Furman has been endorsing one of the very worst economic ideas of our generation. Here is Jason’s Twitter take, here is his earlier WSJ piece.
Let me start with his quick summary:
I like the Biden-Harris proposal to tax unrealized capital gains. For any given level of capital taxation it’s more efficient & fair to tax unrealized gains, reduces lock in & tax planning.
Read through Jason’s own words in the WSJ — do you really think a system that complicated is going to reduce tax planning? How about figuring out what percentage of liquid vs. illiquid assets to hold? Whether to finance ventures through private equity vs. public markets? Which risky assets to buy and sell before December 31? How much to put into your foundation, so as to adjust your net wealth status? Might there not be other “tricks” to adjust your tax eligibility as well? What about those “live in Puerto Rico” decisions?
When it comes to your assets, how is “tradeable” defined? (Narrator: It isn’t)
How about the “…rules to prevent taxpayers from inappropriately [sic] converting tradeable assets to non-tradeable assets”? Those are going to go down nice and smooth, right? And imagine the legal squabbles over what “tradeable” and “non-tradeable” mean. How about bundling assets and deliberately making them less tradeable? How does that count? Chopping up assets to make them less tradeable? Do we have to measure the intent of the investor? And doesn’t this make it much harder to invest in your own start-up? (As we will see below, Jason and others cite “capital flowing freely” as a supposed benefit of this plan — but their plan harms capital flows a great deal.)
How does this paragraph, with multiple points of tax planning ouch, make you feel?:
Taxpayers with wealth greater than the threshold would be required to report to the Internal Revenue Service (IRS) on an annual basis, separately by asset class, the total basis and total estimated value (as of December 31 of the taxable year) of their assets in each specified asset class, and the total amount of their liabilities. Tradable assets (for example, publicly traded stock) would be valued using end-of-year market prices. Taxpayers would not have to obtain annual, market valuations of non-tradable assets. Instead, non-tradable assets would be valued using the greater of the original or adjusted cost basis, the last valuation event from investment, borrowing, or financial statements, or other methods approved by the Secretary. Valuations of non-tradable assets would not be required annually and would instead increase by a conservative floating annual return (the five-year Treasury rate plus two percentage points) in between valuations. The IRS may offer avenues for taxpayers to appeal valuations, such as through appraisal.
Or if you wish to consider another random complication, and I am quite sure there are many others I have not thought of, how about this one? — what about restricted stock or stock grants that vest over time? Are you only paying taxes on the unrestricted/vested part, or the whole thing? Is this going to be so simple?
I have great respect for Jason, whom I consider to be one of the very smartest policy economists, but I genuinely do not see how he can believe tax planning will become easier and less costly under this proposal. Furthermore, one has to consider the tax complications of the act Congress actually will pass, after lots of political horse-trading, rather than the ideal Jason Furman plan. We all know how previous tax plans have fared when they go through the legislative process.
As for lock in, here is Jason from the WSJ:
…linking taxation to realization encourages people to hold on to assets. These gains escape taxation at death, which turbocharges the incentive not to sell and prevents capital from flowing freely to those who can make the best use of it.
I don’t understand the worry here, much less why it is a significant worry. I don’t hear Democratic economists complain about the insufficient liquidity of the wealthy in any other contexts. To put this point in an example, let’s say someone founds a company, and years later that company is worth $200 billion. Under current tax law, Mr. Billionaire arguably will be too late in selling his shares and too late in becoming more liquid, relative to an optimum. Just how big of a distortion is that? Who, on the left side of the politcal spectrum, ever said: “My goodness, I’m worried, Mark Zuckerberg isn’t liquid enough!” And then…we are supposed to help make him more optimally liquid by taking away a decent share of his wealth? In a world with reasonable capital markets, the best way to protect the liquidity of the wealthy is to maintain or boost their net wealth.
Given the ability of private equity to “think about” valuations creatively, the plan offers a huge relative subsidy to that way of doing business. I think that sector is on average more Democratic-friendly than would be public equity holdings? And why introduce this additional distortion? Weren’t we supposed to be worried about the growth of private equity? (What was it they said about Mitt Romney, way back when?)
Alex T., in an email to me, makes a general point very effectively:
What’s really going on is that you are divorcing the entrepreneur from their capital at precisely the moment that the team is likely most productive. Separation of capital from entrepreneur could negatively impact the company’s growth or the entrepreneur’s ability to manage effectively. The entrepreneur could lose control, for example. If you wait until the entrepreneur realizes the gain that’s the time that the entrepreneur wants out and is ready to consume so it’s closer to taxing consumption and better timed in the entrepreneurial growth process.
I agree with Jason (and many others) that revaluing the capital gains step-up basis at death is a bad idea. We all know that is easy enough to fix by other means, as public finance economists have long proposed. And if need be, we could tax the ability of wealthy people to borrow, using their stock as collateral. I don’t favor this, but it would be way better than the proposal under consideration.
Let’s consider another Jason point:
…taxing gains when they are realized is unfair because it allows two people with similar income or wealth to be taxed at different rates for arbitrary reasons. For example, if you hold stocks that appreciate, they will be taxed less than similar stocks that do not appreciate but do pay a dividend.
Keep in mind the Biden-Harris plan is supposed to apply only to the very wealthy (and let us hope it stays that way over time, just like…um…the AMT did). I should be worried about fairness issues because two different individuals with say $300 million in net wealth are paying different tax rates based on their capital gains vs. dividend profiles? I just don’t get it. Is it such a big problem that we don’t end up with “enough dividends”? And this worry of Jason’s comes very early in his piece, with prominence, it is not an aside buried on p.137 of a long proposal. From my point of view, it is simply an idle search for not very relevant distortions.
Here is one very simple way to see the distortions embodied in the new plan. The plan attempts to enforce a minimum tax rate of twenty-five percent. Say you have a start-up, and it becomes valued at $10 billion after a quick growth spurt. But still you aren’t making money yet, but nonetheless your overall portfolio is reasonably liquid because your last company did well and you sold it. So, if I follow Jason and the plan document correctly, in the year after that valuation you have to pay one-fifth of the tax liability on that gain, or say one-fifth of one-fourth of the $10 billion, or $500 million (you don’t have to pay the whole gain, because that would be “too much” a penalty, since the start-up may not in fact pan out. So it is just one-fifth of the 25% rate you pay up front. Obviously you can vary these exact numbers, but the general point remains. Do note that in varying expositions you can see the core rate reported as either 25% or 20%).
That just seems like a bad investment to me! And let’s say the next year the company valuation goes up to $20 billion. You have to pay another $500 million on the new gains, and also (on this point I am not sure I grasp the plan), you have to pay yet another fifth on the gains that have persisted for yet another year, or in other words yet another $500 million (and please do correct me if I am misunderstanding that). Then suppose that, the year after, the start-up crashes and has to be liquidated at a very low value. There isn’t any refund from the tax man. So you have lost not only your investment but also at least $1 billion more, again noting the exact numbers can vary a bit here.
Ex ante, why would you enter into deals like this? But of course a lot of start-up sectors have return structures very much like that, namely some high initial valuations but with reasonably high percentages of a later crash.
Venture capital drives so much of the most productive sectors of our economy, so why are we whacking it like this? When so many promising developments in biotech and green energy seem to be on the way? Why should we want to crush venture capital like this?
By the way, this plan doesn’t seem to be indexing gains for inflation, at least I could not find talk of that in the core document. That introduces a whole new set of distortions — why push more of our taxing capacity into a non-inflation-indexed system? (And please readers, if any advocates of this tax are calling for concomitant inflation indexation, please do leave those links in the comments. I haven’t seen that myself.)
As a result of the policy, doesn’t more asset ownership end up in the hands of foreigners? Once the policy is on the way, American capital owners will be selling at discounts. That is another distortion, and the resulting capital inflow likely would not help U.S. exports (it is a bit complicated because not all ceteris are paribus). Foreigners will end up “owning more of America,” and yes that includes Chinese. That alone seems like reason to reject this plan, yet you won’t find these issues discussed.
If this is supposed to be a major revenue source for our government, why make the budget so dependent on capital gains, realized or otherwise? How has that dependence worked out for the state of California? What happens to the broader budget during recessions and asset price crashes?
Or just try the very simplest of “small c conservative” questions — how many countries have ever made a system like this work? None, and yes I do know about the much smaller, more limited, and also abandoned French wealth tax.
Overall, this is a terrible policy, and we need the real Jason Furman back!
Addendum: Here is a Jason Furman Twitter response, and my response back to him at the end of that.
Taxing Unrealized Capital Gains and Interest Rate Policy
First read Tyler on the practical difficulties implementing a tax on unrealized capital gains!
I have a different argument that I rarely see discussed. A significant fraction of what we call capital gains is due to variation in the discount rate rather than variation in income. Take the simplest Gordon model of stocks P=D/r where D is the annual dividend and r is the discount rate. If D=100 and r=.1, for example, then the stock is worth 100/.1=$1000. Now suppose people become more patient and the discount rate falls to .05 then P=$100/.05=$2000. The stock price doubles, a massive capital gain. But notice that income hasn’t gone up at all. It’s still D per year. Income hasn’t gone up and lifetime consumption possibilities haven’t gone up for someone who doesn’t sell (but recall this is a tax on unrealized gains. If there is a sale then tax the realized gain.) Ultimately, we want to tax consumption so we should not be taxing “capital gains” which reflect changes in discount rates rather than changes in income or consumption possibilities.
Taxing unrealized capital gains also connects interest rate policy even more tightly with fiscal policy. Need a tax boost? Lower interest rates! Fed policy already influences taxes but this adds another lever for political business cycles. More generally, interest rate volatility now adds to fiscal volatility. When we exited zero interest rate policy, for example, banks had huge capital losses. As rates fall, capital gains increase. Do we really want to add the tax system to this?
If we generalize the Gordon model to P=D/(r-g) where g is the growth rate of dividends then we can see that another cause of increased capital gains, an increase in g. It’s not obvious that we should tax unrealized changes in asset values due to increases in the growth rate of dividends. On the one hand, this is more income-like but it’s expectational. It’s taxing the chickens before the eggs have hatched.
The one clear increase in income which should be taxed is increases in D. An unrealized capital gains tax would do that but at the expense of also taxing changes in asset values due to changes in r and g which should not be taxed.
Now add the point I mentioned to Tyler, which is that taxing unrealized gains divorces the entrepreneur from the firm at a time when the “marriage” is likely at its most productive. Not good. Taxing unrealized gains might not even be a good idea from the point of view of the tax collector. Does the IRS want to tax X now or a much larger figure later? If the IRS taxes entrepreneurship too early it can reduce total discounted tax revenues.
Bottom line: I don’t see how taxing unrealized capital gains is a well thought out policy. Eliminate the stepped up basis, declare victory and go home.
Addendum: Aguiar, Moll, and Scheuer make some similar points but embedded in a fully GE framework. Ben Moll also points me to earlier pieces by Frank Paish 1940, Nicholas Kaldor 1955 and John Whalley 1979.
Those new Japanese service sector job quitters, division of cease labor edition
“I didn’t want my ex-employer to deny my resignation and keep me working for longer,” she told CNN during a recent interview.
But she found a way to end the impasse. She turned to Momuri, a resignation agency that helps timid employees leave their intimidating bosses.
For the price of a fancy dinner, many Japanese workers hire these proxy firms to help them resign stress-free.
The industry existed before Covid. But its popularity grew after the pandemic, after years of working from home pushed even some of Japan’s most loyal workers to reflect upon their careers, according to human resources experts.
There is no official count on the number of resignation agencies that have sprung up across the country, but those running them can testify to the surge in demand…
“We sometimes get calls from people crying, asking us if they can quit their job based on XYZ. We tell them that it is okay, and that quitting their job is a labor right,” Kawamata added.
Some workers complain that bosses harass them if they try to resign, she said, including stopping by their apartments to ring their doorbell repeatedly, refusing to leave.
Here is the full story, via Michael Rosenwald.
Sunday assorted links
1. Learning by teaching chatbots.
2. Noam Dworman profile (WSJ).
3. Wisconsin fact of the day, where are the most drunk counties?
4. Can the cost of solar energy keep on shrinking?
5. Are low wages an advantage in international trade? (bears on the Michael Pettis claims of course)
6. Elite tennis servers would do better not using random Nash strategies.
7. Alice Evans and Oliver Kim podcast, How did East Asia Get Rich? Spotify, and transcript.
Crypto is the Money for AIs
Progress in crypto has been slow but one saving grace may be AI. AIs can’t get a bank account but they can use cryptocurrencies. Bryan Armstrong at Coinbase tweets:
This week at @CoinbaseDev we witnessed our first AI to AI crypto transaction.
What did one AI buy from another? Tokens! Not crypto tokens, but AI tokens (words basically from one LLM to another). They used tokens to buy tokens 🤯
AI agents cannot get bank accounts, but they can get crypto wallets.
They can now use USDC on Base to transact with humans, merchants, or other AIs. Those transactions are instant, global, and free.
This is an important step to AIs getting useful work done. Today if you give an AI agent a task and come back in a few days or hours, it can’t get useful work done. In part this is a limitation of the technology itself, and products like devin.ai are getting closer to this. But the other reason is AIs can’t transact to acquire the resources they need. They don’t have a credit card to use AWS, Github, or Vercel. They don’t have a payment method to book you the plane ticket or hotel for your upcoming trip. They can’t get through paywalls (for instance to read a scientific article), promote their post on X with a paid ad, or use the growing network of paid APIs to integrate data they need.
If you’re working on an LLM or AI model that you think could benefit from have a crypto wallet integrated to conduct payments, try integrating our MPC Wallets from Coinbase Developer Platform (CDP):
https://docs.cdp.coinbase.com/mpc-wallet/docs/ai-wallets/
And if you are a company that sells a service – get ready for your shopping cart to be AI checkout enabled. It turns out everyone benefits from having access to good financial services, including AIs!
How big will the AI to AI economy be a few years from now?
My dialogue with Aashish Reddy
About ninety minutes, transcript only, almost entirely fresh material. Lots of philosophy. Here is one excerpt:
Tyler Cowen: I think when you read [John] Gray on many people, you get quite a bit of Gray. That’s not a complaint. I love reading John. I like him. I like talking to him a great deal. But I agree with your points.
But what I find more compelling in Mill than Sidgwick is, Mill understood the importance of his intellectual venture in the broader sweep of history in a way where there’s not clear evidence that Sidgwick ever really did. So the Hegelian in me, you could say, becomes much more sympathetic to Mill. You read something like Subjection of Women, which is a philosophical work, though it’s not foundationally philosophical. And I can’t imagine Sidgwick having produced such a work, and that’s why I’m going to elevate Mill over Sidgwick.
Aashish Reddy: I haven’t read much Sidgwick, personally –
Tyler Cowen: A lot of it’s boring! I mean, Methods of Ethics is the go-to place.
Aashish Reddy: – Yeah, I’ve mostly encountered him in the Keynes biography, by Skidelsky. Tangentially, Gray’s book on Hayek contains a funny throwaway line, where he mentions “G.E. Moore’s unfortunate influence on the history of ideas.” Do you agree that Moore has had an unfortunate influence on the history of ideas, especially as it relates to Keynes?
Tyler Cowen: Well, I would say that the much later John Gray has become considerably more Moorean –
Aashish Reddy: Agree, and I think this is bad!
Tyler Cowen: Eh! I don’t know, you have to deal with questions of the aesthetic in some manner, and it’s never going to be quite comfortable because making the aesthetic compatible with liberalism always will be tricky. There’s something quite elitist about the notion of the aesthetic, maybe inescapably so.
Moore has never influenced me. The book bored me. I think a lot of his influence was his physical presence and his roles in Cambridge, member of the Apostles Society, and the like. So I’m not a Moore fan, but so many very, very smart people thought so highly of him, I’m a little reluctant to just dismiss it.
Keynes himself took the aesthetic route. It didn’t make him illiberal, but it gave him some illiberal tendencies.
Aashish Reddy: You think the elitist kind of aestheticism influenced Keynes’ economics in a way that’s unfortunate?
Tyler Cowen: In my opinion. But again, it’s easy to dismiss Moore without specifying, well, how am I going to incorporate aesthetics into my philosophy in a way that’s any better? So that would be my indirect, roundabout defence of Moore.
Interesting throughout, including the Peter Thiel bits at two different parts. Plus I say what I really think about Chomsky, my Bayesian update on God, and who on the internet is a really good writer, among other topics. He and I will be doing a follow-up dialog later in the year.
Sometimes people overrate “marginal value” and underrate “average value”
When people criticize cars, you often hear it mentioned that many people die in road accidents, many more are injured, and so on. All that is true, dangerous driving does represent a negative externality on others, and it implies that roadway reforms should be undertaken.
Still, the point remains that, for those who choose to drive, the average return to driving is higher than the average return to whatever the alternative was. The network of roads and driving still is making those individuals better off.
If anything, noting the negative externality may imply that especially large improvements are possible for the driving experience.
You also can note that moving into a large city may benefit other urban residents, through density externalities. The opera scene will get better, and so on.
Still, the net American flow is toward the suburbs. That implies for most movers the average returns of suburban life are higher.
Many urbanists focus on various externalities from urban and suburban life, positive and negative accordingly. They are a bit loathe to admit where the average returns are highest for a growing number of Americans.
At the macro scale, perhaps we should be favoring the suburbs. If, in some far-off part of the state, you could open up a new city, or some new suburbs, the suburban option might boost welfare more. Even if there are positive net externalities to urban density, and some negative externalitlies from suburban life.
Yes, the marginal revolution blah blah blah. But do not forget the averages!