Results for “from the comments” 1664 found
From the comments
From Dan Weber:
Maybe this should be posted once a week: http://www.marginalrevolution/2011/03/the-fallacy-of-mood-affiliation.html
From the comments, on the UK
This is from a loyal reader named “a”:
How high are marginal rates of deductions in the UK?:
Consider an employee paid £50,000 gross who gets a £1,000 pay rise.
Let’s assume they are yet to pay off their student loan and contribute 7.5% to a (underfunded*) pension scheme and get 8% employer contributions to their pension.
Our employee’s employer will also pay the government an extra £218 pension contributions and national insurance (payroll) contributions, 8% and 13.8% of gross earnings respectively.
So the total increase in cost to the employer is £1,218.
Of their pay rise our employee pays £75 pension contributions, £90 student loan repayments, and £370 in income tax, giving total employee deductions £555.
This gives a marginal deduction rate of 63.46% (£445/£1,218).
If our employee buys goods which are liable for VAT they will lose a further 20%, resulting in a 70.77% marginal rate of deductions.
Oh and our employee must pay a local government lump sum tax of around £1,500 from their net wages.
So our employee faces a marginal rate of deductions 63.46% on non-VAT items, 70.77% on VAT items, and an average rate of deduction of 52% of pre-deduction earnings.
A similar analysis on a worker paid the minimum wage (around £12,500 a year), or £1000 above the minimum wage results in a marginal rate of deduction of 32% and an average rate of deduction of 52%. This ignores the withdrawal of means tested benefits.
Might this be the supply side explanation Scott Sumner has been looking for?
* UK private pension schemes currently have a £265bn deficit.
From the comments (pleasing David Wright)
There seem to be an awful lot of arguments floating around the economic blogosphere lately that try to use “credibility” as a kind of magic trick to claim that some institution can get some desired result without having to do the yucky things it would have to do to, you know, actually get that result. I would love to see a post on this topic from our host.
That was from David Wright…and now he has his post.
From the comments
The “Primary Budget Surplus” is an ivory-tower concept that is counterproductive in the real world. A sophisticated lender or rating agency is concerned about the borrower’s ability to cover ALL of his expenses, and especially his loan repayments. The fact that the borrower could be solvent if he didn’t pay back his loan is not reassuring. In fact, this “primary budget surplus” condition puts the borrower in a moral hazard situation, where he might be better committing an Argentina-style default.
From the comments (Walpurgis Nacht)
Tyler Cowen November 17, 2011 at 4:39 pm
Piggy wants mood affiliation!
- G.L. Piggy November 17, 2011 at 4:44 pm
- Peter Schaeffer November 17, 2011 at 4:51 pm
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I don’t care about mood affiliation. However, Felix’s first chart is simply wrong. CP is “Corporate Profits After Tax”. FCTAX is “Tax Receipts on Corporate Income”. Felix thinks his chart shows “corporate income tax as a percentage of total corporate profits”.
It doesn’t.
- G.L. Piggy November 17, 2011 at 4:58 pm
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But just to be a little pedantic here, the frustrating thing – the part which spurred my need for mood affiliation – is that your position on corporate tax rates was brought up out of nowhere and then quickly qualified.
Laserlight November 17, 2011 at 4:45 pm
“Can we ever get a straight critique out of you”
Ah, you’re looking for Tyler the Ethnic Foods Critic. He’s down the hall to the left.
From the comments, on Sims and IS-LM
This is from E. Barandiaran and it relates to recent controversies in the blogosphere:
This is the last section of a Sims’s paper on the ISLM model (1998):
4. Conclusion
• Keynesian reasoning ought to be essentially forward looking and to emphasize expectational factors in savings and investment decisions. Traditional ISLM hides and inhibits development of this aspect of Keynesian modeling.
• ISLM ignores connections between monetary and fiscal policy that are enforced by the government budget constraint. In many policy contexts, this is a major gap.
• It remains to be seen whether there is a way to capture these aspects of Keynesian modeling in a package as neat and non-technical as ISLM, but that should not be an excuse for continuing to make ISLM the core of our teaching and informal policy discussion.
and this is the abstract
Abstract. ISLM inhibits attention to expectations in macroeconomics, going against the spirit of Keynes’s own approach. This can lead to mistaken policy conclusions and to unnecessarily weak responses to classical critiques of Keynesian modeling. A coherent Keynesian approach, accounting for endogenous expectations, implies very strong effects of monetary and fiscal policy and leads to greater attention to the role of the government budget constraint in making the effects of monetary policy conditional on prevailing fiscal responses, and vice versa.
From the comments
Here’s a Hill poll on inflation, and here’s a Gallup poll, and here’s a Rasmussmen poll.
While all differ on the exact numbers, they agree in broad strokes. The median voter is highly worried about inflation. Democrats are worried less about inflation, but still quite a lot. Indpendents are virtually indistinguishable from Republicans in worrying a lot about inflation.
That means that the inflation/hard money bit from the GOP is not an appeal to the base. It’s actually a reach to the center.
Worrying about inflation may be wrong– and I think it is wrong, according to the data– but it’s an attempt to go after the median voter, not play to the base.
Scott Sumner and Arnold Kling have related comments, and most directly here is Scott Sumner again.
From the comments
“Lord” has a way with words:
The filp side of AD is unused capacity which is why it takes long to adjust, more of the same can be produced from productivity improvements alone and more investment is unnecessary. This means high profits for incumbents that are not competed away because everyone knows the encumbant can always undercut them if they had to. The combination of low inflation and productivity growth result in little to no progress in price adjustment. The entirety of growth must be borne by innovation which is small and slow, especially now. The wealth loss means debt liquidation will proceed for an extended period of time, doubly long since collateral values aren’t there to lower rates and risk premiums are greatly enhanced. Those are structural but ones that could be fixed monetarily with a sufficient money drop but probably not otherwise with conventional policy since there is little reason to borrow by anyone with the capacity to do so and little capacity to borrow by those with reason to. Game over.
From the comments, on local employment of teachers
The scaling in the chart makes a big difference. Here’s the data behind the chart, which can by found by following a link on the site that Tyler links to: http://1.usa.gov/oOQXeO. For the local government column only and April figures. (May would be better but the series runs out at April 2011.) April 2011 was at 8.3 million, about 160K less than the peak two Aprils earlier. That’s about 1.5% difference.
That is from RZO, the link and context is here. In the same comment thread, Frank Howland notes that:
K-12 enrollments fell by 0.85% from 2007 to 2009
That’s not exactly the same years and the data go only to 2009 but could it be a general trend across 2009-2011? Given that context, there is still some decline in per capita local teacher employment. Note this is a sector where there is a growing realization that quite a few of the workers should, for non-cyclical reasons, be fired anyway.
Addendum: Karl Smith has a useful graph with seasonal adjustment, coming up with somewhat different numbers.
From the comments
It seems like market forecasts of low real yields 30 years into the future support TGS. How long does it take for long-run money neutrality to win out? If the yield curve showed low yields 100 years out, would that dissuade those looking for a monetary solution?
That is from fmb. Here are the real yield rates.
From the comments, on nominal wage stickiness
MR commentator Donald A. Coffin posts on the wage stickiness issue:
There is, as it turns out, some actual research on this issue in the job search literature. The bottom line is that reservation wages appear to fall relatively quickly with duration of unemployment. One common conclusion is that wage stickiness comes from the behavior of *employers.* Some citations:
“Reservation Wages, Offer Wages, and Unemployment Duration–Some New Empirical Evidence” http://ideas.repec.org/p/kie/kieliw/1095.html The authors conclude that offer wages fall faster than do reservation wages (not that reservations wages do not fall).
“The Relationship Between Unemployment Spells and Reservation Wages as a Test of Search Theory,” by Stephen R. G. Jones, QJE, V. 104, N. 4, 1988. “…the main finding is that reservation wages play a significant role in the determination of duration.”
“Short-Run Equilibrium Dynamics of Unemployment, Vacancies, and Real Wages,” by C. A. Pissarides, AER, V. 75, N. 4, 1985.
“Efficiency Wage Models and Unemployment,: by J. L. Yellen, AER, V. 72, N2., 1984. The stickiness of wages is attributed to the reluctance of *employers* to reduce wages.
“Unemployment, Wage-Setting, and Insider-Outsider Relationships,” by A. Lindbeck, AER V. 76, N. 2, 1986. The stickiness of wages is again attributed to the reluctance of *employers* to reduce wages.
“Wage Dynamics: Reconciling Theory and Evidence,” by O. Blanchard and L. Katz, http://www.nber.org/papers/w6924 1999. “In this paper, we ask whether one can reconcile the empirical evidence with theoretical wage relations. We reach three main conclusions. First, we derive the condition under which the two can indeed be reconciled. We show the constraints that such a condition imposes on the determinants of workers’ reservation wages as well as the relative importance of workers’ outside options as opposed to match specific productivity in wage determination. Second, in the light of this condition, we reinterpret the presence of an “error correction” term in macroeconomic wage relations for most European economies but not in the United States. Third, we show that whether this condition holds or not has important implications for the effects of a number of variables — from real interest rates to oil prices to payroll taxes — on the natural rate of unemployment.”
“An Empirical Test Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis,” N. Keifer and G. Neumann, JPE, V. 87, N. 1m 1979. “Reservation wages are found to decline significantly with duration.”
“An Econometric Analysis of Reservation Wages,” by T. Lancaster and A. Chesher, Econometrica, V. 51, N. 6, 1983. Their table A-IV clearly shows reservation wages falling with duration of unemployment, from 21.28 pounds per week for durations less than 13 weeks to 17,74 pounds per week for durations exceeding 52 weeks,
I could go on, but go to Google Scholar and search on “reservation wages and duration of unemployment” if you want more.
If the employers don’t want you at the high wage, and don’t want you at the low wage, what might your perceived MP be, temporarily or not? Keep in mind, firms are flush with cash.
From the comments (ouch!)
E. Barandiaran passes along to us:
On the substantive issues of how to solve U.S. fiscal crisis, I suggest to read Ray Fair’s latest paper http://cowles.econ.yale.edu/P/cd/d18a/d1807.pdf
ABSTRACT: This paper estimates how large fiscal-policy changes have to be to solve the U.S. government deficit problem. This question is complicated in part because of endogeneity issues. A fiscal-policy change designed to decrease the deficit has effects on the macro economy, which in turn affects the deficit. Any analysis of fiscal-policy proposals must take these effects into account: one needs a model of the economy. This paper uses a macroeconometric model of the world economy to examine the deficit problem. A base run is first obtained in which there are no major changes in U.S. fiscal policy. This results in an ever increasing debt/GDP ratio. Then net taxes (taxes minus transfers) are increased by an amount sufficient to stabilize the long-run debt/GDP ratio. The increases are linearly phased in over a three-year period beginning in the first quarter of 2012. The estimates of the needed net tax increases are large. Compared to values in the base run, net taxes after the phase in need to be about $650 billion higher each year in 2011 dollars. In percentage terms this translates into about 45 percent of personal income taxes, 51 percent of social security taxes, 24 percent of transfer payments to state and local governments and to persons, 44 percent of purchases of goods and services, and 176 percent of corporate profit taxes. The output loss is 1.38 percent of real GDP over the 9 years analyzed.
Indeed, Ray shows that your crisis it’s not a laughing matter.
I’m more skeptical about macro models than is Ray Fair, and that includes more skepticism toward the Fair model. Still, I don’t think there is any kind of free lunch available which renders this general mode of reasoning invalid. Ouch!
File under “We’re not as wealthy as were thought we were.”
From the comments
This is from Mark, the caps are his:
We had these big interconnected undercapitalized things that were mandated by federal policy to keep expanding the amount of paper they bought or backed, which meant inevitably they were going to reach the point where the paper they were backing was too risky, and the GSE’s mandated growth necessarily called for them to issue more paper of their own to do that..And then you had Basel II and its US application that made GSE paper Tier I capital to support maximum loan growth in private sector banks. No wonder credit dried up when the GSEs were taken over in Sept 08. But you never see the Rortys and Mins speak to this perspective. THE GSE’S WERE PROCYCLICAL VECTORS THAT TRANSFORMED HOUSING DEMAND TRENDS INTO CREDIT MARKET TRENDS AND VICE VERSA, FREQUENTLY AMPLIFYING THEM, BUT THEY WERE NOT STRONGLY CAPITALIZED ENOUGH TO ABSORB A TREND REVERSAL.
From the comments
Wiki writes:
One way to think about it is how much even relatively wealth Americans (those who travel abroad) willingly pay for expensive internet access while traveling. The answer is: Not very much. Look at how many people put up with less internet than they’re used to or go out of their way to find a cafe with free wifi when hotel charges are on the order of $10 or $15 per hour. But since it often takes search plus travel time (say 15-30 mins) to get to these inconvenient locations that tells me it’s REALLY not worth more than a few hundred dollars a month for most people to have internet for several hours a day in the most convenient locations. And think of all the people who can’t afford to travel or who don’t bother to get smart phones or who pay for neither texting nor email.
The infovores are overvaluing themselves and the relative weight of their consumer surplus in the economy. Certainly compared to those who were heavy users of air travel (in for example the 1960s) or those who first encountered modern highways (1930s to 50s) or who benefited from mail order catalogs and phone books. And certainly compared to users of penicillin.
From the comments
Albert Ling writes:
How about this: Amy Chua’s method is better in raising successful kids career-wise, at the expense of emotional attachment, family warmth, etc. It’s a trade-off. If you envision your child’s future life to be of economic hardship and misery, maybe it’s a GOOD trade-off (as evidenced by the stricter methods of parenting on poorer societies, and also in the past when being poor really influenced your happiness).
If you already earn more than USD 25,000$ a year (which is the threshold after which income stops correlating positively with happiness), then it’s probably better to be a B.Caplan-style parent. (if your goal is to maximize your child’s total future happiness).
I think the answer is that simple.
Yes, I do. Just once!
Reply