Yes I know all about our current fiscal mess and the need to restore balance.  But ideally, under a well-crafted tax system and a responsible administration, should there be an estate tax?

My best guess is no, and for a simple reason.   When an estate is inherited, there are two beneficiaries.  First, someone receives the estate.  Second, someone wanted to pass along that estate, often to his or her children.

Death is tragic, but nonetheless a double benefit is created from the inheritance.  And a double benefit is diminished by the tax.

Now we might, like Steven Landsburg, decide that the "preferences of the dead" (in that case, Terri Schiavo) should not count for anything.  I reject that view, if only because the power of anticipation is so powerful.  That is, we like the idea of leaving bequests to our loved ones.  Respecting the preferences of the dead is one way to make the living happier.

Yes this sounds like craven apologetics for the rich.  But if you wish to tax the wealthy, tax their consumption, not their bequests and gifts. 

The best remaining case for an estate tax is if American politics will not otherwise support the requisite degree of "soaking the rich" at the consumption level.  But I worry about this kind of argument.  I prefer to reserve my public support for cleaning up previous messes rather than creating new ones.  And for those MR readers who consider yourself "left wing," it will do your cause no favor to convince the American people you want to tax the rich more no matter what.  Indeed it is the backlash against the sometimes-elitism of the left that has led to the very situation (i.e., Bush) where the estate tax might be repealed.  That is a development I would not have predicted fifteen years ago.

Addendum: One argument for an estate tax suggests that it is worthwhile to tax bequests, so as to encourage donations to non-profits.  To the extent this argument works, the estate tax is no longer a revenue-raiser.  Or read Mark Kleiman on the dangers of an inherited plutocracy, though this does not worry me.

By the way, here is Jane Galt’s proposal for estate taxation, and here is Jane on taxation more generally.

Three econometricians go hunting, and spot a large deer. The first econometrician fires, but his shot goes three feet wide to the left. The second econometrician fires, but also misses, by three feet to the right. The third econometrician starts jumping up and down, shouting "We got it! We got it!"

That is courtesy of the now-in-England Jane Galt.  Jane (Megan) is on a roll more generally, check out her blog.

Using the threat of tariffs to pressure the Chinese to revalue their currency. 

Matt Yglesias considers the politics, don’t forget Dan Drezner either.  Brad DeLong offers the full economic analysis.  The bottom line is a bit difficult to parse from Brad’s lengthy post, but I’ll offer my summary. 

The Chinese (and other foreigners) are offering a massive subsidy to current levels of U.S. federal spending.  It happens to coincide with their desire to subsidize their exporters.  A low renminbi implies high Chinese exports, high dollar reserve accumulation in China, and relatively low interest rates in the U.S..  Forcing this picture to end overnight would run a significant risk of plummeting U.S. asset prices and a run on the dollar.  In the longer run the not-really-stable Chinese currency might end up whipsawed by international capital markets (Indonesia?  Thailand?  Argentina?).

I’ll make all the concessions here you want.  The current Chinese arrangement is screwy and harms the Chinese citizenry.  I don’t usually favor fixed exchange rates or export subsidies, implicit or explicit.  Somehow, sometime, someway, the Chinese should look toward another policy.  I’ll make those concessions until they are coming out of my ears.  But I still won’t favor dropping a lit match on an open field of gasoline, which is what this American pressure would amount to.  Nor does it matter whether or not you "trust the Chinese," whatever that might mean.  This is not the right way to deal with them, and yes it will remind them of the Opium Wars.

I am not a pessimist about our current economic course, but we can still wreck things if we choose.  And right now we may well make this gross mistake.

Glaeser, Gyourko, and Saks cite regulatory obstacles as a primary reason why housing prices have risen so much since the 1970s.  I am not convinced that this explains the possibly bubble-like run-up of the last few years, but here is the paper.  Here are Glaeser’s other writings on the topic.  Thanks to an anonymous reader for the tip.

Housing can be lived in, most buyers have only one home, transaction costs are relatively high, and rarely are homes sold and resold in a matter of days.  All those features militate against a housing bubble.  Yet it is scary to see how high prices have risen in the Washington D.C. area.  Prices in my overall region are up 73 percent in the last four years, can houses be worth so much more?  Plus rent-buy ratios have reached apparently unsustainble levels, inconsistent with traditional assumptions about discount rates.

Let’s say you think there is no bubble, what are your options?

1. It has quickly become much better to live in good areas.  I can go to Wegman’s now.  Prices reflect this fact.

2. Traffic is getting much worse, and very rapidly.  People are paying more to be close to the action.  The price movement is lasting, though it does not reflect a true increase in real value, all things considered.

3. When you are trying to decide how much a house in worth, you also care how much other people think the house is worth.  Yet the entire slope of the demand curve is hard to observe.  The real estate market goes through a groping process.  Only as prices and quantities move does everyone realize what the market demand curve looks like.  Suddenly, over the last four years, many people have realized that many other people are willing to pay lots for a quality home.  Price has moved upward rapidly accordingly, but this need not be a bubble.

4. The higher housing price indices are a trick.  In reality some homes are worth a lot more and others are worth a lot less.  But prices move quickly in the upwards direction; in the downwards direction, housing quantity first adjusts and stays slow for a long time.  That is, if you can’t sell your family hearth in Kansas for a decent price, you simply wait for now.  So overall indices appear high but much of this move is a sectoral shift within the housing market from low quality to high.

I put the least stock in #1 and the most stock in #3 and then #4. 

I am not yet convinced there is a housing bubble.  But since I bought close to the peak — had to buy close to the peak — perhaps I am deluding myself.

Addendum: Here is my earlier post on the topic.  Here is Alex.  Here is Brad DeLong.  Here is some Austrian economics.