Results for “corporate tax” 239 found
Wednesday assorted links
Shopping While Black: Past, Present and Future?
The original Sears mail-order catalogue changed how African Americans in the South shopped:
…the catalogue format allowed for anonymity, ensuring that black and white customers would be treated the same way.
“This gives African Americans in the Southeast some degree of autonomy, some degree of secrecy,” unofficial Sears historian Jerry Hancock told the Stuff You Missed in History Class podcast in December 2016. “Now they can buy the same thing that anybody else can buy. And all they have to do is order it from this catalogue. They don’t have to deal with racist merchants in town and those types of things.”
More recently, Uber has alleviated many of the traditional difficulties that blacks have had hailing taxis.
In a heartfelt essay Ashlee Clark Thompson explains how the “grab and go” technologies now being tested at Amazon Go made her confront lessons learned from decades of shopping while black:
The idea of walking into a store, taking an item or several off the shelves and strolling right back out again boggled my mind. It ran counter to everything I had learned about being black and shopping.
…I grabbed one of the orange Amazon Go bags and began to make my way around the perimeter of the store. I was studying the various bottled waters and debating whether to get fizzy or still, or a bottle of kombucha, when I realized what I was really doing: I was stalling. The fear I had carried with me for decades reared its head as I stood in front of the refrigerated display. I was afraid to make a choice, remove it from a shelf and put it in my bag. I was afraid someone would pop out from behind a display of Amazon-branded merch and scream, “Get your hands off that!” And I was mad that this fear couldn’t even let me fully enjoy an experience that’s designed for everyone to grab and go, no questions asked.
Eff this, I thought. I’m getting some Vitamin Water.
Once the plastic bottle hit the bottom of my reusable bag, I glanced around to see if anyone noticed. The Amazon employees shuffled around the small store and restocked shelves. Tourists chatted in small groups as they pointed and looked for the sensors that were keeping track of our every move. One guy with his phone on a selfie stick recorded himself as he selected snacks. And then there were the folks for whom the novelty had worn off and just wanted a vegetarian banh mi sandwich.
No one cared what I was doing. Is this what it feels like to shop when you’re not black?
…Amazon Go isn’t going to fix implicit bias or remove the years of conditioning under which I’ve operated. But in the Amazon Go store, everyone is just a shopper, an opportunity for the retail giant to test technology, learn about our habits and make some money. Amazon sees green, and in its own capitalist way, this cashierless concept eased my burden a little bit.
The similarities in these cases are interesting but so are the differences. In the Sears case most of the effect of diminished discrimination was driven by greater competition in one-shop towns. In the one-shop town the owners sometimes took a share of their monopoly profits in invidious racism–this appears to explain why shop owners would prevent blacks from buying more expensive products (or perhaps the one-stop shop had to cater to racist customers who demanded invidious discrimination.)
In the Uber case my bet is that a large share of the reduction in discrimination was due to the fact that Uber drivers don’t carry cash and so are less worried about robbery and the app increases safety because it records in detail rider, driver and trip data. In other words, the Uber system reduced the value of statistical discrimination. It’s difficult to know for sure, however, because there was probably also some decline in invidious discrimination brought about by Uber hiding some rider information from drivers until trips are accepted.
The last case, the Amazon Go case, is in part a decline in the value of statistical discrimination since shoplifting is no longer a problem (in theory, assuming the technology works) but in this case the decline in statistical discrimination is driven by much finer discrimination. The moment a shopper enters the Amazon Go store, Amazon knows their name, address, entire shopping history, credit history and potentially much more. Moreover, a shopper’s every movement within the store is tracked to a level of detail that no store detective could ever hope to match. To the customer, especially the black customer, it may feel like they are no longer being watched but in fact they are watched more than ever before–the costs of technological monitoring, however, are mostly fixed which means that everyone is monitored equally. No need for statistical discrimination in the panopticon.
Addendum: A good dissertation might be to incorporates the cost of information, the value of statistical discrimination and the demand for invidious discrimination in a general theory that explains the various cases mentioned here and the effects of information bans such as ban the box.
Is it better to have more corporations?
A reduction in the corporate income tax burden encourages adoption of the C corporation legal form, which reduces capital constraints on firms. Improved capital reallocation increases overall productive efficiency in the economy and therefore expands the labor market. Relative to the benchmark economy, a corporate income tax cut can reduce the non-employment rate by up to 7 percent.
That is from the new AEJ: Macroeconomics, by Daphne Chen, Shi Qi, and Don Schlagenhauf.
The rant against Amazon and the rant for Amazon
Wow! It’s unbelievable how hard you are working to deny that monopsony and monopoly type market concentration is causing all all these issues. Do you think it’s easy to compete with Amazon? Think about all the industries amazon just thought about entering and what that did to the share price of incumbents. Do you think Amazon doesn’t use its market clout and brand name to pay people less? Don’t the use the same to extract incentives from politicians? Corporate profits are at record highs as a percent of the economy, how is that maintained? What is your motivation for closing your eyes and denying consolidation? It doesn’t seem that you are being logical.
That is from a Steven Wolf, from the comments. You might levy some justified complaints about Amazon, but this passage packs a remarkable number of fallacies into a very small space.
First, monopsony and monopoly tend to have contrasting or opposite effects. To the extent Amazon is a monopsony, that leads to higher output and lower prices.
Second, if Amazon is knocking out incumbents that may very well be good for consumers. Consumers want to see companies that are hard for others to compete with. Otherwise, they are just getting more of the same.
Third, if you consider markets product line by product line, there are very few sectors where Amazon would appear to have much market power, or a very large share of the overall market for that good or service.
Fourth, Amazon is relatively strong in the book market. Yet if a book is $28 in a regular store, you probably can buy it for $17 on Amazon, or for cheaper yet used, through Amazon.
Fifth, Amazon takes market share from many incumbents (nationwide) but it does not in general “knock out” the labor market infrastructure in most regions. That means Amazon hire labor by paying it more or otherwise offering better working conditions, however much you might wish to complain about them.
Sixth, if you adjust for the nature of intangible capital, and the difference between economic and accounting profit, it is not clear corporate profits have been so remarkably high as of late.
Seventh, if Amazon “extracts” lower taxes and an improved Metro system from the DC area, in return for coming here, that is a net Pareto improvement or in any case at least not obviously objectionable.
Eighth, I did not see the word “ecosystem” in that comment, but Amazon has done a good deal to improve logistics and also cloud computing, to the benefit of many other producers and ultimately consumers. Book authors will just have to live with the new world Amazon has created for them.
And then there is Rana Foroohar:
“If Amazon can see your bank data and assets, [what is to stop them from] selling you a loan at the maximum price they know you are able to pay?” Professor Omarova asks.
How about the fact that you are able to borrow the money somewhere else?
Addendum: A more interesting criticism of Amazon, which you hardly ever hear, is the notion that they are sufficiently dominant in cloud computing that a collapse/sabotage of their presence in that market could be a national security issue. Still, it is not clear what other arrangement could be safer.
Sunday assorted links
1. “Japanese Are Polishing Foil Balls To Perfection, And The Result Is Too Satisfying.”
2. Justin Wolfers is correct about the tax law and buybacks (NYT).
3. Bach was more religious than you might think (NYT).
4. The most expensive weather disaster of 2018? How many of you have heard about it?
5. The Chinese shift in attitudes toward female fertility.
6. A new California initiative to give better incentives for “buying down” in real estate, to induce people to move more from very expensive homes.
Saturday assorted links
1. The re-promotion of Peter Navarro.
2. Norway is worried about winning too much (NYT). They even offer aid to other countries to compete against them, for fear that otherwise the rest of the world will lose interest in those sports.
3. Profile of Peter Sloterdijk.
4. Were women better represented in Victorian fiction?
5. A lot of the gains from tax reform are going to domestically-oriented firms (The Economist).
Georgescu-Roegen vs. Henry George vs. Wakefield vs. Solow
For Georgescu-Roegen, the ultimate fixed factor is the laws of physics, due to entropy. Economic systems cannot receive an ongoing influx of both energy and matter indefinitely, and so eventually they reach limits to growth. At that margin substitutability breaks down and catastrophe ensues. To check this outcome, we must find a way to live with slower rates of economic growth, and eventually a zero or negative rate of economic growth. For him this is as much a criticism of Marxism as of capitalism, and he wrote about making do with agrarianism. Consistent with this view, his consumer theory portrayed wants as hierarchical rather than smoothly substitutable. He would have liked this Alex post on not all gdp being created equal.
For Henry George, the ultimate fixed factor is land, due to the nature of space. There is always enough energy, due to Julian Simon-like arguments that allow capital and ingenuity to be substituted for all other fixed resources, except for land. Economic systems cannot create or activate more land indefinitely, and thus the marginal benefits of growth are captured mostly by landowners, to the detriment of social welfare. At this final margin substitutability breaks down and widespread poverty ensues. To check this outcome, the returns to land must be redistributed to the rest of society, ideally through a single tax. Unlike many environmentalists, he wasn’t worried about soil erosion because land is land.
For 19th century colonial theorist Edward Gibbon Wakefield, human beings and the positive externalities from human contact are the ultimate scarcity. If you let people settle the countryside, you will have an underpopulated republic of deplorables — there is no substitute for city life! So the price of external farm land has to be kept high, so that settlers cluster in the city and as wage laborers contribute to ongoing innovation, urbanity, and economic growth. Wakefield worked in New Zealand — did they listen? If Wakefield were around today, maybe he would want to cut off broadband to large swathes of the Midwest and Appalachia. Justly or not, he cited rural French Canadians as an example of what he was worried about, whereas Georgescu-Roegen might have appreciated their agrarianism.
For Robert Solow, ultimate fixed factors do not come into play and substitutability reigns at all relevant margins. If some resources become scarce, just substitute in more capital. Growth continues forever, though it can be accelerated by investing more in the ultimate growth driver, namely new ideas. Georgescu-Roegen argued that Solow did not incorporate the idea of entropy or insights from science.
Is it proper that Solow’s model should have so dominated in the economics profession?
You cannot understand or evaluate environmentalism without revisiting these debates. One reason many environmental critiques do not seem so strong is that they are trying to measure costs in a Solow-like framework, when in fact the underlying model might involve core non-substitutabilities, a’la the other thinkers. Unless you stress how not all gdp is created equal, the costs of bad environmental outcomes won’t show up as very high, not relative to total wealth. It will appear as if you always can substitute away from bearing those costs full on, even though perhaps you cannot.
My own view is that the ultimate scarcity in today’s system comes from what the political economy of our societies and polities can bear, but that must await another day.
New Year’s first Monday assorted links
1. Is education more important for economic growth than we had thought? Without an educated population, intangible capital could not have anything like its current role.
2. How well did China do this last year?
3. Update to the Splinter and Auten paper on income inequality. There are other tax papers at that link too.
4. An expanded take on why everything took so long.
5. It’s now five pounds a month to subscribe to the on-line (London) Times. I believe that price is for outside the UK only.
6. Corporate Social Responsibility can induce the employees of the company to act less morally, as a kind of offset.
GDP, GNP, and foreign investment
A few of you have written me to ask what I think of Paul Krugman’s recent posts on tax reform and evaluating it by gnp rather than gdp, the latter being an emphasis in the GOP literature. Paul notes correct that a lower corporate rate will attract foreign investment, and the returns to that investment, by definition, will not accrue to American citizens. So far, so good.
Paul reproduces the following graph for the Czech Republic, ratio of gnp to gdp:
If the GOP literature focuses on gdp, it is fine enough to criticize it on that basis. What worries me, however, is that the corrective doesn’t go nearly far enough. Gnp isn’t the right standard either, nor is gnp/gdp, rather it is welfare, either nationally or globally.
From that gdp/gdp ratio graph, you might come away with a grim view of life in the Czech Republic, but consider this cheerier picture of consumption, which nearly triples over a twenty year period:
Pretty awesome. And under the standard story of the Czech economy, investment from abroad, most of all from Germany, has helped drive those gains. Germany invested more, that boosted wages, improved the local political economy, and transferred some technology and entrepreneurial skills. It is standard international economics, or for that matter Solow model, that capital-rich, lower-return economies should invest in their poorer peripheries (which is not to say it always works out that way).
It’s entirely fair to note that Czech household debt to gdp has risen to about thirty percent. Still, in the U.S. it is about eighty percent, so the Czechs are not in dire straits just yet. Private debt to gdp seems to run about 136 percent, compared to about 200 percent in the U.S.
Of course, this still could end up as a bad deal for the Czechs. They might waste their foreign investment, the accompanying wage gains, the associated external benefits, and end up having to snap back their consumption and see their whole country owned by Germany, China, and others. But that’s not the baseline case. The default assumption is that these are gains from trade like other such gains, in this case gains from trading with foreigners who wish to invest. They are not lesser gains or gains to somehow be subtracted from the overall calculus.
Here is a useful point of contrast. Let’s say I advocated high taxes on foreign trade, on the grounds that “half of the gains from those trades are shared with foreigners,” and therefore we ought to, post-tariff, trade more with fellow citizens, so that only Americans get those gains. We all know why that argument generally is wrong, noting there are some second best cases where tariffs can improve welfare. It’s still wrong when the trades involve foreign investments.
So it is misleading to induce people to mentally downgrade foreign investment as a source of welfare gains. I get that Krugman doesn’t quite say that, but that is the impression his discussion and diagram produces on the unwary. Technically, he might only be criticizing the Republicans internally, using their own gdp standard. The actual produced impression is to cause people to doubt that a lot of foreign capital inflow fully counts as a gain from trade.
America of course is in a quite different position than is the Czech Republic. But the gains from foreign investment into the United States also ought not to be downgraded, either explicitly or by implied presumption.
Trumponomics is in fact novel, we neglect it at our peril
That is the topic of my latest Bloomberg column, here is the opening bit:
I’ve seen hundreds of articles on President Donald Trump and trade, but the real significance of the Trump economic revolution — for better or worse — is a focus on investment. There is no coordinating mastermind, but if you consider the intersection between what the Trumpian nationalists want and what a Republican Congress will deliver, it’s this: wanting to make the U.S. a new and dominant center for investment, including at the expense of other nations.
And:
In essence, a new kind of supply-side economics has been invented. The theory of the 1980s focused mainly on individuals, and lowering the tax rates they faced on labor income and capital gains. Cutting these rates was supposed to mobilize the power of those individuals, through more work or more investment. The idea today is that the real power of mobilization comes through corporate associations. Assuming the tax bill passes, that theory is about to get a major test.
Strikingly, the tax bill and the trade policies of the Trump administration can be viewed as having a similar underlying philosophy, whether entirely intended or not. One of the president’s first official acts was to withdrawal from the Trans-Pacific Partnership. Although I favored that agreement, as did most other economists, it’s worth considering what the most intelligent nationalist case against the TPP looks like. It’s not about trade, because the deal wouldn’t have affected tariff rates faced by Americans very much (exports of beef to Japan aside). Rather, the TPP would have given American certification to Vietnam, Malaysia and eventually other emerging economies as stable repositories of foreign investment from multinationals. That could in turn draw investment away from the U.S.
Do read the whole thing, it is my favorite recent piece by me.
The show so far, a continuing series
1. The situation with North Korea has moved to one of open confrontation. That said, there are stronger commercial sanctions on North Korea than before, and the attitude of the Chinese does seem to have shifted toward recognizing North Korea as a problem needing to be solved. For the time being, both the missile tests and the jawboning have stopped, for unknown reasons. Note that the South Korean and Japanese markets remain high, of course the U.S. market is strong too.
2. Trump has spent a great deal of time with Prime Minister Abe, the real “pivot toward Asia.” Abe is being treated like the most important leader of the free world — is that crazy? Merkel is now teetering.
3. The Trump administration has recognized and encouraged a much more explicit semi-military alliance between America and India, also part of the pivot. China-India relations could be the world’s number one issue moving forward.
4. The apparent “green light” from the Trump administration probably raised the likelihood and extremity of the Saudi purge/coup. I give this a 20% chance of working out well, though with a big upside if it does. Whether you like it or not, so far it appears to me this is Trump’s most important initiative.
Just to interject, much of your assessment of the Trump administration should depend on #1-4, and I am worried that is hardly ever the case for those I see around me. While I do not view the current administration as “good executors” on foreign policy, the remaining variance on #1-4 is still very high and it is not all on the down side.
5. The Trump administration seems to think that keeping production clusters within this nation’s borders is of higher value than shaping the next generation of the world’s trade architecture. I don’t think they will get much in return for this supposed trade-off, but there you go.
6. I am seeing deeply biased assessments of tax reform, from both sides. I don’t favor raising the deficit by $1.5 trillion (or possibly more), I do favor cutting corporate rates and targeting some of the most egregious deductions. I am disappointed that there is not more celebration of the very good features of the plan on the table, that said big changes in the proposed legislation still are needed.
7. In terms of regulatory reform (WSJ), the administration has done better than my most optimistic scenario. In their worst area, carbon, progress on solar and electric cars is bigger good news than the bad policy news. And for all practical purposes, the carbon policy of Trump is not much different from that of say Angela Merkel.
8. The suburbs are rebelling against the Republican Party. There is a decent chance the Republicans will lose the House in 2018, as well as numerous governorships. Soon we may get a window of a very different Trump, plus more investigations.
9. Various people connected to Trump will be nabbed for crimes and perjuries.
10. Trump has personally “gone after” many political and social norms, but it is not yet clear if they will end up weaker or stronger as a result. His “grab them…” tape for instance seems, in the final analysis, to have empowered a major rebellion in the opposite direction. #10 is a major reason why many commentators hate Trump as a person and president, and I can understand that response, but I am myself more focused on what the final outcomes will be and there we do not know.
11. The cultural and intellectual force of liberalism — broadly defined — has been greatly weakened by a mix of Trump and Trump-related forces. I find this tragic and a major source of despair.
12. I do not favor “a decline in the dignity of the presidency” in the manner we are seeing, but I find many of these criticisms are stand-ins for not liking the substance of what is happening. I don’t think we know what are the costs (or benefits) are from this transformation of the presidential image. I could readily imagine those costs are high, but as a sociological matter I am seeing “the dignity of the office of the president has been insulted” as a stand-in for “my dignity has been insulted.”
13. The quality of discourse continues to decline.
Who will win Monday’s Nobel Prize in economic science?
Clarivate Analytics, formerly a unit of Thomson Reuters, maintains a list of possible Nobel Prize winners based on research citations. New additions to its list this year were Colin Camerer of the California Institute of Technology and George Loewenstein of Carnegie Mellon University (“for pioneering research in behavioral economics and in neuroeconomics”); Robert Hall of Stanford University (“for his analysis of worker productivity and studies of recessions and unemployment”); and Michael Jensen of Harvard, Stewart Myers of MIT and Raghuram Rajan of the University of Chicago (“for their contributions illuminating the dimensions of decisions in corporate finance”).
Dozens of additional names appear on Clarivate’s list of possible future economics winners, including prominent figures on the American economics scene like Stanford’s John Taylor, a monetary-policy scholar who President Donald Trump is said to be considering for Federal Reserve chairman; Paul Romer of New York University, an expert on economic growth and the chief economist at the World Bank; Martin Feldstein of Harvard, who was chairman of the White House Council of Economic Advisers under President Ronald Reagan and has studied pensions, taxation and other topics in public finance; William Nordhaus of Yale University, who has studied climate change; Dale Jorgenson of Harvard, who has studied productivity; Robert Barro of Harvard, who has researched economic growth; Oliver Blanchard of the Peterson Institute for International Economics, the former top economist at the International Monetary Fund; and Richard Thaler of the University of Chicago, who has studied behavioral economics.
Former Fed chairman Ben Bernanke’s name has been floated in the past, given his academic work on the Great Depression, and his longtime collaborator Mark Gertler of NYU appears on the Clarivate list. So does Richard Posner, the recently retired federal judge who has written on the intersection of law and economics.
I’ve never once been right, but this year I’ll predict William Nordhaus (“Green Accounting”) and Martin Weitzman (climate change and economics of risk).
Social media are making price gouging too difficult these days
That is the topic of my latest Bloomberg column. Here is one bit:
Let’s say bottled water was selling at $42.96 a case at the local Best Buy, as shown in this photo. A customer can take out his or her smartphone, snap a photo and post it on social media. The photo may go viral, and many people, including the legal authorities, will be mad at the company.
The reluctance to raise prices is especially strong for nationally branded stores. A local merchant may not care much if people in Iowa are upset at his prices, but major companies will fear damage to their national reputations. The short-term return from selling the water at a higher price is dwarfed by the risk to their business prospects. More and more of the value of business capital is intangible capital, more than 84 percent of the S&P 500 by some estimates. That’s why Best Buy so quickly apologized for its store selling the water at such a high price, blaming the incident on an overzealous local manager.
Consider an alternative: Instead of raising prices to very high levels, let’s say that the local big-box store sells out quickly during an emergency and has empty shelves for water. If those photos circulate, they will be interpreted as signs of general tragedy and want, rather than selfish corporate behavior. It’s too subtle an image to snap the price tag at pre-storm levels, contrast it with the empty shelves, and lecture your Facebook friends about the workings of market-clearing supply and demand and the virtues of flexibly adjusting prices.
Beware the culture of the image! As I’ve said before, we should levy a micro-tax on photos on Twitter.
Here is Don Boudreaux on price gouging. Here is David Henderson on price gouging. I agree with them both.
Saturday assorted links
1. Does cutting the corporate income tax boost the demand for labor?
2. “By threatening to sabotage their own interests but hurt the impatient state even more, citizens can compel the state to deliver broader policy benefits. We illustrate this logic with the case of polio vaccination in northern Nigeria, where entire communities have resisted the vaccine as a strategy to bargain for more desired services.” Link here.
3. Germans who swim to work. And Bill Kristol will interview me Sept.13 in Chicago. And apply to become new host of NPR’s Planet Money.
4. The quickest and slowest economics journals.
5. When the government (Venezuela) loots checked luggage.
6. Why democracy is safe in America. And are we overrating those North Korean ICBMs?
When was the Golden Age of conservative intellectuals?
Paul Krugman says a mix of “never” and “certainly not now” (my paraphrases, not actual quotations from him). Here is one bit:
On environment, a similar turn took place a bit later. The use of markets and price incentives to fight pollution was, initially, a conservative idea condemned by some on the left. But liberals eventually took it on board — while cap-and-trade became a dirty word on the right. Crude slogans — government bad! — plus subservience to corporate interests trump analysis.
I believe this is pretty far from the reality, here are a few points:
1. Conservative intellectuals never have turned against the idea of a carbon tax, as evidenced by Greg Mankiw’s leadership of the Pigou Club. Cap-and-trade is somewhat less popular, but that is probably the correct point of view, given the time consistency problems with governments that increase the supply of permits, as has happened in Europe.
2. Water economics is a big part of environmental economics. “Raise the price” and “define property rights better” remain central ideas in that field, commanding a lot of attention. David Zetland is one recent exemplar of these ideas.
3. The idea that there can be too much environmental regulation in many particular cases remains a central contribution, often associated with the Right. Of course this view is compatible with much tougher restrictions on carbon or other forms of air pollution.
4. The idea of properly applying “value of life” analysis to regulation, and seeking greater consistency (let’s save lives in cheaper rather than more expensive ways), remains a significant and undervalued insight.
5. Some of the key work on valuing biodiversity has come from Chicago-related methods, though I do not know the political affiliations of the authors.
6. Matthew Kahn, one of the leading environmental economists today, I would consider broadly in the classical liberal tradition. He recently published an important book on air pollution in China.
6. Jonathan H. Adler is a significant ongoing contributor to environmental law and economics. Or try the work of Terry Anderson.
7. Applying property rights analysis to animal herds, animal ownership, and the tragedy of the commons remains a significant conservative idea. You will note throughout I don’t like calling these “conservative” ideas, they are simply good ideas or bad ideas. Still, in the broader sociological sense you hear these ideas from conservatives and libertarians fairly often.
8. There is plenty of recent work on the political economy of the administrative state, and whether it generates abuses of the rule of law or bad incentives.
9. I could go on, with perhaps Vernon Smith”s recent work on peak-load pricing for electric utilities being next in line. Or pro-green, pro-nuclear analysis often comes from the Right.
10. Overall, “schools of thought” have been dwindling in economics, and so it might seem that the golden ages of various ideologies or schools of thought lie well behind us. But if we focus on the ideas and their influence, rather than whether carriers of those ideas bear particular political labels, the influence of Chicago, UCLA, cost-benefit, and Montana/PERC ideas in environmental economics never has been stronger. In that sense the golden age is right now.
Addendum: Here is a better Krugman piece on the history of thought, though I would note that capital movements were integrated into the price-specie-flow mechanism in the 18th century and fully by the time of Henry Thornton.