Jonathan Swift/Gulliver/Laputa optimal taxation
I heard a very warm debate between two professors, about the most commodious and effectual ways and means of raising money, without grieving the subject. The first affirmed, “the justest method would be, to lay a certain tax upon vices and folly; and the sum fixed upon every man to be rated, after the fairest manner, by a jury of his neighbours.” The second was of an opinion directly contrary; “to tax those qualities of body and mind, for which men chiefly value themselves; the rate to be more or less, according to the degrees of excelling; the decision whereof should be left entirely to their own breast.” The highest tax was upon men who are the greatest favourites of the other sex, and the assessments, according to the number and nature of the favours they have received; for which, they are allowed to be their own vouchers. Wit, valour, and politeness, were likewise proposed to be largely taxed, and collected in the same manner, by every person’s giving his own word for the quantum of what he possessed. But as to honour, justice, wisdom, and learning, they should not be taxed at all; because they are qualifications of so singular a kind, that no man will either allow them in his neighbour or value them in himself.
The women were proposed to be taxed according to their beauty and skill in dressing, wherein they had the same privilege with the men, to be determined by their own judgment. But constancy, chastity, good sense, and good nature, were not rated, because they would not bear the charge of collecting.
First Pigou taxes on vice, then taxes on inherited rents, and finally no tax on ideas, knowledge, or wisdom. That is from part III, chapter six.
Is software eating Japan? (from my email)
I came across a great series of posts by Richard Katz about Japan and information technology. It shows that software has not eaten Japan (for now?).
Some interesting facts:– “by 2025, 60% of Japan’s large companies will be operating core systems that are more than 20 years old. Would anyone today use a 2005 PC?”
– ” It is worth noting that the OECD shows Japan suffering an actual drop in output per employee in ICT business services from 2005 through 2021, its ICT productivity having peaked out in 1999. By contrast, Korea’s productivity grew 41% in the same period”
– “Among high school boys, Japan ranks number one in using the Internet to search for information on a particular topic several times a day, and Japan’s girls come in second among OECD girls. Japanese boys also rank number one in single-player online games. On the other hand, these boys score at, or near, the bottom on other activities, such as multi-player online games or uploading their own content”.
– In an OECD study, Japan is third from the bottom when it comes to the share of students ” who foresee having a career, not just in ICT, but in any area of science or engineering” [that was quite shocking to me, to be honest. Positively shocking, on the other hand, was that Portugal leads the pack]
– “What’s even more remarkable is that Japan’s top performers on the math and science tests come in dead last in the share who foresee themselves working in science or engineering”.
– Maybe this provides a bit of an explanation: ” In 2021, the average annual income of a Japanese ICT staffer was just ¥4.38 million ($34,466), down 4% from 2019. That was 2% below the median salary in Japan, whereas in the US and China, ICT salaries are 8-10% above the median.”
sources: https://richardkatz.substack.com/p/2025-digital-cliff-part-i
https://richardkatz.substack.com/p/metis-2025-digital-cliff-part-ii
That is all from Krzysztof Tyszka-Drozdowski.
Saturday assorted links
1. Higher intergenerational mobility for African Christians than Muslims, demographically adjusted.
2. The oldest plans to scale of humanmade mega-structures.
3. An LLM trained on the Dark Web. (Remember when you all were complaining about how “Woke” some of the current products are?)
4. Henry Oliver on Edmonds on Parfit.
5. “Here we report the discovery of a temperate Earth-sized planet orbiting the cool M6 dwarf LP 791-18.”
6. Why do people listen to sad songs? (NYT) And Girardian orcas.
Ezra Klein and Jean Twenge on teen mental health
They did an NYT podcast, here is the transcript, here is the podcast itself. Excerpt:
EZRA KLEIN: Violent crime actually gets at why I wanted to ask this before we got into smartphones, because I’m much more familiar with the debate over crime than I am over the debate over suicide trend lines. And the thing that has always striking to me, and I think really underplayed in our national discourse over crime, is that we don’t really understand it, that if you go into the ’80s and the ’90s, you see crime goes way, way up in the 70s, way, way up in all kinds of different jurisdictions, more or less all at the same time.
And then it begins going way, way down in all kinds of different places all at the same time. So you have stories that people know, like there’s New York with Rudy Giuliani and broken windows policing and stop and frisk. But it also goes down in all these places that didn’t do what New York City did. It’s so widespread, both the rise and the fall, that you end up having researchers trying to think of even broader explanations, like whether or not lead and the amount of lead in young kids’ bloodstreams — and thus, the effect on their executive function when they got older, maybe that’s the causal mechanism.
And it made me wonder if there isn’t a chance that suicide and teen mental health is like that, that it has this kind of all the way up, all the way down in all places, and we don’t really understand why pattern to it.
Do read/listen to the whole thing, interesting throughout.
*The Fall of the Turkish Model*
The author is Cihan Tuğal, and the subtitle is How the Arab Uprisings Brought Down Islamic Liberalism, though the book is more concretely a comparison across Egypt and Tunisia as well, with frequent remarks on Iran. Here is one excerpt:
This led to what Kevan Harris has called the ‘subcontractor state’: an economy which is neither centralized under a governmental authority not privatized and liberalized. The subcontractor state has decentralized its social and economic roles without liberalizing the economy or even straightforwardly privatizing the state-owned enterprises. As a result, the peculiar third sector of the Iranian economy has expanded in rather complicated and unpredictable ways. Rather than leading to liberalization privatization under revolutionary corporatism intensified and twisted the significance of organization such as the bonyads…Privatization under the populist-conservative Ahmedinejad exploited the ambiguities of the tripartite division of the economy…’Privatization’ entailed the sale of public assets not to private companies but to nongovernmental public enterprises (such as pension funds, the bonyads and military contractors).
This book is one useful background source for the current electoral process in Turkey.
Corporate Ownership and Firm Performance: Evidence from Fertility Clinics
Corporate investors are often credited with boosting target firm performance but criticized for prioritizing profits over consumer well-being. This tension is particularly evident in the healthcare sector, where information frictions contribute to underinvestment in quality. This paper finds that corporate ownership can improve healthcare outcomes in a setting where patients have access to service pricing and quality information – the market for In Vitro Fertilization (IVF). After acquisition by a fertility chain, clinic volume increases by 28.2%, and IVF success rates increase by 13.6%. Fertility chains also implement changes that enhance quality, benefit underperforming clinics, and expand the IVF market.
That is from a new paper by Amber La Forgia and Julia Bodner. Via the excellent Kevin Lewis.
How to use GPT-4 plus web browsing
I like:
What are three prominent stories about the economy of Nairobi, appearing in Kenyan newspapers in May of 2023?
…and then keep on going…much better than trying to read Kenyan newspapers.
Friday assorted links
1. 1950-2020, what predicts U.S. urban density?
2. Will AI want to self-improve?
4. Ross against marijuana legalilization (NYT).
5. Rasheed Griffith on Caribbean dollarization.
6. “One of the most common mistakes in American politics today is to suppose that rival groups pose an “existential threat” when they, in fact, do not.” David Corey’s critique of the New Right.
Mississippi Learning
In 2002, Florida adopted a phonics based reading strategy due to Charlie Crist. Scores started to rise. Other southern states started to following suit, including Mississippi long deried as the worst in the nation.
APNews: Mississippi went from being ranked the second-worst state in 2013 for fourth-grade reading to 21st in 2022. Louisiana and Alabama, meanwhile, were among only three states to see modest gains in fourth-grade reading during the pandemic, which saw massive learning setbacks in most other states.
The turnaround in these three states has grabbed the attention of educators nationally, showing rapid progress is possible anywhere, even in areas that have struggled for decades with poverty and dismal literacy rates. The states have passed laws adopting similar reforms that emphasize phonics and early screenings for struggling kids.
“In this region, we have decided to go big,” said Burk, now a senior policy fellow at ExcelinEd, a national advocacy group.
These Deep South states were not the first to pass major literacy laws; in fact, much of Mississippi’s legislation was based on a 2002 law in Florida that saw the Sunshine State achieve some of the country’s highest reading scores. The states also still have far to go to make sure every child can read.
But the country has taken notice of what some have called the Mississippi miracle.
Addendum: See my previous posts on the closely related issue of Direct Instruction.
Population and Welfare: The Greatest Good for the Greatest Number
That is a new paper by Peter J. Klenow, Charles I. Jones, Mark Bils, and Mohamad Adhami, reject its implications at your peril:
Economic growth is typically measured in per capita terms. But social welfare should arguably include the number of people as well as their standard of living. We decompose social welfare growth — measured in consumptionequivalent units — into contributions from rising population and rising per capita consumption. Because of diminishing marginal utility of consumption, population growth is scaled up by a value-of-life factor that substantially exceeds one and empirically averages around 2.7 across countries and over time. Population increases are therefore consistently the dominant contributor, and consumption-equivalent welfare growth around the world averages more than 6% per year since 1960, as opposed to 2% per year for consumption growth. Countries such as Mexico and South Africa rise sharply in the growth rankings once population growth is incorporated, whereas China, Germany and Japan plummet. We show the robustness of these results to incorporating parental time use and fertility decisions using data from the U.S., the Netherlands, Japan, and South Korea. The effects of falling parental utility from having fewer kids are roughly offset by increases in the “quality” of kids associated with rising time investment per child.
If you worry about fertility rates, do you not have to accept something like this framework? Mexico — underrated!
In general, I think people should visit the high population countries more. For the pointer I thank Oliver Wang.
Attack monopoly power with deregulation
One recent study shows just how important regulation is in contributing to monopoly. Since 1970, increased regulation can explain 31% to 37% of the subsequent increase in market power.
Upon reflection, it is obvious that larger firms are better able to deal with regulatory burdens. They have more employees, bigger legal departments and are better suited to deal with governments. Startups are generally leaner and more nimble, but these aren’t necessarily advantages in dealing with Washington or state and local agencies. As regulatory costs rise, the comparative advantage shifts to the larger firms — exacerbating market power problems…
According to researcher Shikhar Singla, regulation costs an average of $9,093 per employee for a typical small firm, compared to $5,246 for a large firm. It is no surprise that, according to the data, smaller firms invest relatively less in more highly regulated areas.
Based on a study of regulatory comments, Singla also found that large firms oppose regulation in general, but push for regulation when such rules and laws damage the interests of smaller firms. Singla also finds that regulatory costs have increased significantly since the late 1990s.
Here is the full Bloomberg column.
Yes, automated tipping is out of control
Consumers already contending with a squeeze on their bank accounts due to inflation are now facing more pressure as businesses introduce new tipping features at self-checkout machines.
Companies, including airports, bakeries, coffee shops and sports stadiums, have now introduced the self-serve tipping option, where customers can leave tips including the typical 20%, despite facing minimal to no interaction with any employee, according to a recent report by The Wall Street Journal…
William Michael Lynn, a consumer behavior and tip culture professor at Cornell University’s Nolan School of Hotel Administration, told the newspaper that businesses “are taking advantage of an opportunity,” and “who wouldn’t want to get extra money at very little cost if you could?”
Here is the story, here is my earlier Bloomberg column on tipping. Just hand cash directly to individual humans who have helped you! Via Anecdotal.
Thursday assorted links
1. Transformers in time series: a survey.
2. AIs learning how to bargain.
3. The Long Now Foundation seeks new executive director.
4. Boettke and Coyne on developments in Austrian economics.
5. “When everyone can sound intelligent, elite conversations will become less intelligible.”
Claims about atheists
The group that is most likely to contact a public official? Atheists.
The group that puts up political signs at the highest rates? Atheists.
HALF of atheists report giving to a candidate or campaign in the 2020 presidential election cycle.
And while they don’t lead the pack when it comes to attending a local political meeting, they only trail Hindus by four percentage points.
…atheists take part in plenty of political actions – 1.52 to be exact. The overall average in the entire sample was .91 activities. The average atheist is about 65% more politically engaged than the average American.
And this:
The results here are clear and unambiguous – atheists are more likely to engage in political activities at every level of education compared to Protestants, Catholics or Jews. For instance, an atheist with a high school diploma reports .7 activities, that’s at least .2 higher than any other religious group.
Political engagement is clearly related to education, though. The more educated one is, the more likely they are to be politically active. But at every step of the education scale, atheists lead the way. Sometimes those gaps are incredibly large. A college educated atheist engages in 1.7 activities, it’s only 1.05 activities for a college educated evangelical.
From Ryan Burge, here is the full data analysis.
My Conversation with Simon Johnson
Here is the audio, video, and transcript. Here is part of the episode description:
What’s more intense than leading the IMF during a financial crisis? For Simon Johnson, it was co-authoring a book with fellow economist (and past guest) Daron Acemoglu. Written in six months, their book Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity, argues that widespread prosperity is not the natural consequence of technological progress, but instead only happens when there is a conscious effort to bend the direction and gains from technological advances away from the elite.
Tyler and Simon discuss the ideas in the book and on Simon’s earlier work on finance and banking, including at what size a US bank is small enough to fail, the future of deposit insurance, when we’ll see a central bank digital currency, his top proposal for reforming the IMF, how quickly the Industrial Revolution led to widespread prosperity, whether AI will boost wages, how he changed his mind on the Middle Ages, the key difference in outlook between him and Daron, how he thinks institutions affect growth, how to fix northern England’s economic climate, whether the UK should join NAFTA, improving science policy, the Simon Johnson production function, whether MBAs are overrated, the importance of communication, and more.
And here is one excerpt:
COWEN: If institutions are the key to economic growth, as many people have argued — Daron and yourself to varying degrees — why, then, is prospective economic growth so hard to predict?
In 1960, few people thought South Korea would be the big winner. It looked like their institutions were not that good. It was a common view: oh, Philippines, Sri Lanka — then Ceylon — would do quite well. They had English language to some extent. They seemed to have okay education. And those two nations have more or less flopped. South Korea took off. It’s now, per capita income roughly equal to France or Japan. Doesn’t that mean it’s not about institutions? Because institutions are pretty sticky.
JOHNSON: Yes, I think of institutions as being part of the hysteresis effect, if you can get it in a positive way, that if you grow and you strengthen institutions, which South Korea has done, it makes it much harder to relapse. There are plenty of countries that had spurts of growth without strong institutions and found it hard to sustain that.
You make a very good point about the early 1960s, Tyler. There wasn’t that much discussion that I’ve seen about institutions per se, but education — yes, absolutely. Culture — people made the same comparisons. They said, “Confucian culture is no good or won’t lead to growth. That’s a problem, for example, for South Korea.” That turned out to be wrong.
I think institutions are sticky. I think history matters a lot for them. They’re not predestination, though. You could absolutely carve your own way, but the carve-your-own way is harder when you start with institutions that are more problematic, less democratic, more autocratic control, less protection of property rights.
All of these things can go massively wrong, but building better institutions and making them sustainable, like Eastern Europe — the parts of the former Soviet Empire that managed to escape the Soviet influence after 1989, 1991 — I think those countries have worked long and hard, with very mixed results in some places, to build better institutions. And the EU has helped them in that regard, unquestionably.
I enjoyed this session with Simon.