The Art of Taxation

by  Alex Tabarrok in

In Mexico, visual artists can pay their taxes with art works.

That's the deal Mexico has offered to artists since 1957, quietly amassing a modern art collection that would make most museum curators swoon. As the 2009 tax deadline approaches, tax collectors are getting ready to receive a whole new crop of masterworks…

There's a sliding scale: If you sell five artworks in a year, you must give the government one. Sell 21 pieces, the government gets six. A 10-member jury of artists ensures that no one tries to unload junk.

Under the program, the Ministry of Finance and Public Credit now owns 4,248 paintings, sculptures, engravings and photographs by Diego Rivera, Rufino Tamayo, Leonora Carrington and other masters.

Click on "Colecciones Pago en Especie" at apartados.hacienda.gob.mx/cultura/index.html to see the art works which have been used to pay taxes since the program began.

The Mexican government accepts all styles of painting for the program so, unlike in America, in Mexico you can have taxation without representation.

Should the SEC self-finance?

by  Tyler Cowen in

I haven't seen this issue receive much attention on the usual blogs (Yves Smith is one exception).  Here is one argument for self-finance:

The Obama administration has requested long overdue increases in both budget and staff for the S.E.C., and has plans to add as many as 374 employees. Those increases are vital, but because they’re dependent on Congress, there is no guarantee that they will be sustained.

Instead, the commission should finance itself – much as the Federal Reserve and the Federal Deposit Insurance Corporation do today through fees on banks. These two pivotal financial regulatory agencies thus have the flexibility to adjust their own staff.

And it appears easy:

Such a self-financing system would not mean higher fees; the commission collects far more in fees from corporate filings and stock market trading than it gets from Congress. But those fees go back into the federal coffers. In 2007, the S.E.C. brought in $1.5 billion, almost twice its 2007 budget.

This seems like a short-run improvement, but the idea nonetheless makes me a bit nervous.  What will it look like in practice, ten or fifteen years from now?  Was reliance on fees in every way beneficial for the FDA?  Admittedly, self-finance is one pathway to higher levels of finance, but the two issues are conceptually distinct and we might prefer to implement the appropriate level of finance directly through Congress.  I fear that in the longer run self-finance means that the SEC never wishes to see the financial sector shrink.  (Of course maybe it's not going to shrink anyway.)  A related question is what kind of internal controls the SEC would need to maintain its own fiscal discipline and prevent overspending, backed by an excess raising of funds and fees.  So whether self-finance is a good idea probably depends on what you are comparing it to.  A final question, and not a small one, is whether you think the SEC should be more independent from Congress.

Here is the SEC's own case for self-finance.  Here is a 2002 GAO study of the idea, very useful and it also discusses other cases of self-finance among regulatory authorities.

I don't have any strong conclusion here other than "maybe."  

Advertising markets in everything

by  Tyler Cowen in

A Springfield man with colon cancer who has been told he has just months to live is selling advertising space on his urn. Aaron Jamison told KVAL-TV he hopes to raise $800 to help his wife Kristin pay for the cost of his cremation.

One friend, restaurant owner Dustin Remington, has already paid $100 for an ad. Jamison plans to hand-paint the ad on his urn.

The story is here and I thank Daniel Lippman for the pointer.  In the meantime, also from Daniel, a town in Washington state sells on eBay for $360,000.

Ed Glaeser on historic districts in New York City

by  Tyler Cowen in

Here is his bottom line:

It’s hard to fault the Landmarks Preservation Commission for stopping development in historic districts. That’s its job: to “safeguard the city’s historic, aesthetic and cultural heritage,” as the city’s administrative code puts it. The real question is whether these vast districts should ever have been created and whether they should remain protected ground in the years ahead. No living city’s future should become a prisoner to its past.

Here is the article.

Bryan Caplan on adoption

by  Tyler Cowen in

I am now more rather than less puzzled.  Bryan writes:

On adoption: I think that adoption is a noble, generous act, and admire those who do it.  But I personally don't want to adopt. 

I can't disagree with any word in that first sentence, but it leaves me uneasy.  Bryan's forthcoming book — Selfish Reasons to Have More Kids — is about…selfish reasons to have kids.  (It will, I promise you, be very interesting and make a splash.)  So here is my challenge to Bryan: write down the ten most important selfish reasons to have kids and then ask how many of them apply to adopted children.  Most of them will.  Which isn't to say those are the only reasons to adopt (or have) kids, but they are real nonetheless.  So why do the adopting parents seemingly get described as selfless martyrs?  It's almost as if the selfishness, without the replication angle, has to be stuffed into a box somewhere.  Do all those selfish reasons for having kids require replication as a kind of amplifying mechanism, without with we are left with the slightly underwhelming purely altruistic motives?  

I think Bryan understands the selfish reasons for having children differently than I do, though I will defer to his own statement of his view.  I put a big stress on how children help you see that a lot of your immediate concerns aren't nearly as important as you might think, and how spending time with children brings you closer to — apologies, super-corny phrases on the way — The Great Circle of Being and The Elemental Life Force.  In some (not all) ways, adopted children may be teaching you those lessons more effectively than do biological children.  It's an oversimplification to say that "children make you a better person," but they do, or should, improve your ability to psychologically and emotionally integrate that a) you want lots of stuff, b) what you end up getting remains, no matter what, ridiculously small and inconsequential, and c) you can't control your life nearly as much as you think.   

I would sooner say that these realizations are gifts which children give to us rather than calling them "selfish reasons" to have children.  The concept of selfish requires an understanding of our interest and children, very fundamentally, change our understanding of our interests rather than fulfilling our previous goals.  That, however, is a moot point and I do understand why Bryan's title packs the proper punch.

(I might add that the cross-sectional variation — who actually has more kids — suggests that religious reasons persuade people more effectively than do "selfish reasons," noting that the religious reasons may well have a significant selfish component.  Bryan portrays himself as an intellectual elitist, but he has an oddly unflattering portrait of the elite.  When it comes to the dreamworld of political debate, elites are relatively rational but that is exactly the sphere in which individuals are least decisive over actual outcomes.  When it comes to the really big, important decisions, such as how many kids to have, individuals in the elite are highly decisive in steering outcomes yet quite irrational.  They underappreciate the joy of kids.  On net, it would seem that the rational ones are the poor, the undereducated, and the highly religious, at least according to Bryan's latest book.  Bryan is a fascinating mix of an anti-elitist elitist, or should I say an elitist anti-elitist?)  

I can see why Bryan is keen to have more children of his own, given his charm, intelligence, enthusiasm, and general good-naturedness; free will or not, those qualities likely are heritable to some degree.  I might add that his current children are very appealing.

But I still don't grasp why, within his own framework, he is reluctant to adopt and to adopt for (partially) selfish reasons.  If you want "similarity," adopt a boy.  You can adopt an older child too.

It's not either/or.  What about when the pump runs dry or some other obstacle intervenes?  What if it's an adopted kid at the margin or just staying put with what you've got?  Why not take the plunge?  Is an adopted kid so bad on average as to negate the postulated large selfish returns from children?  Which of the selfish reasons to have kids are actually most important?  Are the selfish reasons so dependent on framing in terms of the Darwinian urge to replicate?

I await enlightenment from my very dear friend.

*The Dead Hand*

by  Tyler Cowen in

The author is David E. Hoffman and the subtitle of this recent Pulitzer winner is The Untold Story of the Cold War Arms Race and its Dangerous Legacy.  I recommend it highly, especially if you are too young to have remembered the middle years of the Cold War.  I hadn't thought of this before:

"The Russians sometimes kept submarines off our East Coast with nuclear missiles that could turn the White House into a pile of radioactive rubble within six or eight minutes.  Six minutes to decide how to respond to a blip on a radar scope and decide whether to release Armageddon!  How could anyone apply reason at a time like that?"

That's a quotation from Ronald Reagan.  There's also this bit:

…Guk [a KGB leader] was told that an "important sign" of British preparations for nuclear war would probably be "increased purchases of blood and a rise in the price paid for it" at blood donor centers.  He was ordered to report immediately any changes in blood prices.  

If you want to feel better about today's world, I recommend you read this book.  Until the last section or so, at which point you will feel worse about today's world again.  I shuddered at this sentence:

In the Soviet system, people were under stricter control than the fissile materials.

Parisian women and behavioral economics

by  Tyler Cowen in

Psychology is also at work when you look at the women of Paris. The principle at work here is the assumption of style and the amplification of grace. Because you are in Paris, you assume that women are fashion-aware, which colors all your judgments about dress, hairstyle, and other factors of appearance. Because you suppose the most stylish of intentions behind whatever the actual outcome, you will find seductive and ennobling qualities behind almost everything and anyone. What would be a dowdy old hag or a trampy termagant in the wrong part of Baltimore is suddenly the epitome of French cuteness. It’s a sophisticated variant on the “Emperor without cloths” syndrome.

That's from jfl at Ionarts.

Say’s law when aggregate demand is too low

by  Tyler Cowen in

Supply can still matter.  In a world of unemployed resources, imagine a company called Apple invents a device called — improbably — an iPad.  That's a positive supply shock.  People will be led to spend more money.  The inventors and their employees will have more money to spend.  There will be a positive multiplier throughout the economy, as analyzed by W.H. Hutt.  First aggregate supply went up and then aggregate demand went up.  It's all one step on the way to economic recovery.

Starting with insufficient aggregate demand does not cut off this process.  Starting with a liquidity trap, in contrast, would prevent this multiplier from picking up any steam, if you could sell the iPads in the first place that is.

One bottom line is that aggregate supply still matters when aggregate demand is insufficient.  Another lesson is that positive supply developments can increase output and employment.