That is me, I would like to throw in a little something I put up at Angry Bear the other day.
The topic was the empirical data of the effect of tax rates on economic growth. Fellow Bear cactus, who has a book on this coming out soon, has showed conclusively that even adjusting for lag effects that economic growth has been higher under Democratic presidencies with higher tax policies than under Republican presidencies with lower tax policies. Which shows that the Supply Side claim that higher taxes discourage work and investment does not have an empiric basis.
Which of course caused a commenter to rather smugly point to the Wiki article on 'Correlation does not imply causation'. Well true enough, but the relation is not symmetrical. Hume pointed out a few hundred years ago that no amount of positive observations of B following A logically proved that A causes B. It may in fact result in a psychological certainty that the Sun will really will rise in the East tomorrow which makes it perfectly rational to act as it it were a certainty. Which doesn't make it one from a strictly logical position.
Now Popper came at this from a different direction. If someone is making the positive claim that A causes B then even a single negative observation casts doubt on the relation. This he called 'Falsification' and used as the demarcation between Science and Pseudo-Science.
Supply Side economics and the broader Classical Liberal Economics from which it brings has relied on claims of logical certainty, they predicted certain specfic effects that didn't happen. Which causes them to adjust the THEORY to account for the differing outcome and leave the practice whether this be deregulation or tax cuts alone.. The Left generally is not immune from this impulse, certainly Vulgar Marxism has had no difficulty swallowing outcomes that are contradictory to predictions and so staying the course.
FDR struck a new course and so established a new kind of Liberalism that was not as theory bound as the Classical Liberalism that spawned both Chicago style liberal economics and Marxism, the New Deal did not insist that was either a magical Invisible Hand that would fix everything, or that we should institute rigid and very visible Five Year Plans whose failures would be explained away by 'Wreckers' who could then be sent to the gulags.
So I think it is fair to describe New Deal Liberalism as Enlightenment Liberalism, its practitioners have confidence in its methods which are empirical and outcome based without welding themselves to some big-C Certainty.
Now it is always psychologically more comfortable to cling to Certainty and never more so than in a time of serious economic and social flux, it is not easy being the anti-proverbial atheist in a fox hole. But Popperian style Empricism forces us to accept that we live in a probabalistic world, excorciating the Leader for not being true to the Faith or the Faithful for not being true to the Leader is ultimately counterproductive.
Sunday, July 12, 2009
Sunday, May 31, 2009
Mankiw, height taxes, and wilful blindness to history
Comment on "Redistribution, height taxes and utilitarianism" at Economists View
Mankiw is committing the common mistake of classical economists, they simply ignore actual economic history and the differing motivations behind the progressive agenda.
Some parts of that agenda are driven by utilitarianism. For example I would put universal single payer in that category. As a democratic people we have decided some goods should be delivered by public means. This includes such things as schools, most roads, fire protection, libraries. More controversially in the 60's we added such things as basic nutrition, income and medical coverage for the poor. None of this was inevitable, in colonial days all of those services were delivered in large part or in whole via the private sector either on a profit, subscription or charity basis. The extension of this to universal health care may to some be driven by morality, to others by ideology, but in a democratic society the real driver is utilitarian considerations.
Progressive taxation has much more mixed roots. Certainly it is partially utilitarian in impulse, once we have decided that things like libraries are public goods we have to acknowledge that not all people who utilize them can afford to pay a pro rata share, or else we could have just left them on the existing subscription system. The inevitable result is that there will end up being some downwards subsidy. The solution devised was to fund most of these from taxes on property and sales, with some exemptions built it. But in any event these taxes are proportionate and keyed to free actions, that is no one is forced to build a mansion and furnish it luxuriously and so incurring huge property and sales taxes.
Which gets us to the progressive income tax which is by designed not strictly proportional. And the motivation for this is only partially utilitarian, it is also a concession to the historical reality that distribution of the gains from productivity are not delivered by some magical and precise division of those gains by the exact contribution of capital and labor inputs, that is a textbook fantasy promulgated by the servants of the winners in this particular game, e.g. the Manchester School.
I have just begun re-reading E.P. Thompson's The Making of the English Working Class and its lesson is clear. You can explain much of the political and economic history of England as a constant battle to protect property rights from democracy, and this too even for those among the leadership of the popular side of the English Civil War. On the one side you have the Leveller Colonel Rainborough:
"For really I think that the poorest he that is in England hath a life to live, as the greatest he; and therefore truly, sir, I think It's clear that every man that is to live under a government ought first by his own consent to put himself under that government .... I should doubt he was an Englishman or no, that should doubt of these things."
This is a demand for universal manhood suffrage. To which Cromwell's son-in-law General Ireton replied
"o person hat a right to an interest or share in the disposing of the affairs of the kingdom... that hath not a permanent fixed interest in this kingdom"
And by what reason does he privilege property holders so?
"All the main thing that I speak for, is because I would have an eye to property, I hope we do not come to contend for victory-but let every man consider with himself that he do not go that way to take away all property. For here is the case of the most fundamental part of the constitution of the kingdon, which if you take away, you take away all that"
Ireton here is drawing a straight line from democracy to socialism and even communism (in the pre-Marx sense), property however acquired is to be protected by the state from the demands of the workers.
The resultant distribution of gains from productivity was the direct result of one sector of society, those who controlled capital, having complete control of the political institutions. This was to some degree less true in the United States, the near absence of a landed aristocracy and the free availability of land to the West leveled the political power some, but still prior to the Progressive movement of the late 19th century political power was largely reserved for large property owners who in turn made sure that no issues around equity or actual analysis of the relative contributions of capital and labor ever entered into the question of distribution of gains of productivity. Instead we have and perhaps still continue to have descendants of the Manchester School acting as apologists for their masters and insisting that any attempts to redress the power imbalance simply a violation of Economic Law carried down on an Invisible Third Tablet from Mt. Sinai.
Progressive taxation is then driven by a democratic understanding that the reason it took Great Britain until 1918 and the U.S. in most respects to the One Man, One Vote rulings of the early sixties is because property owners continued to maintain a thumb on the scale of economic outcomes. The graduated income tax simply being an acknowledgement of historical reality.
So Mankiw's argument rests on fallacious grounds and weasel language. The very use of 'redistribution' builds in the assumption that the initial distribution was strictly proportionate to actual economic inputs. Anyone who ever believed that should have had their eyes opened by AIG bonuses, those bankers, like English aristocrats in the Edwardian Age, had become comfortable with their lavish lifestyles and had no attention of giving them up even after being revealed to be mostly economic parasites. That is Mankiw is serving in the role of Jeeves, the hyper-intelligent and clever servant to his master the hapless Bertie Wooster, here represented by the wealthy and ultra-wealthy of the U.S.
Mankiw wants to blur the line between redistribution and restitution, the wealthy of this country in large part got that way because the political and economic structures have always been rigged in their favor. The progressive and graduated income tax is a method for demanding restitution for their unfair grab of the original gains. To pretend that this is all the same as taxing people on the basis of their height or their I.Q. or whatever is historical nonsense.
Mankiw is committing the common mistake of classical economists, they simply ignore actual economic history and the differing motivations behind the progressive agenda.
Some parts of that agenda are driven by utilitarianism. For example I would put universal single payer in that category. As a democratic people we have decided some goods should be delivered by public means. This includes such things as schools, most roads, fire protection, libraries. More controversially in the 60's we added such things as basic nutrition, income and medical coverage for the poor. None of this was inevitable, in colonial days all of those services were delivered in large part or in whole via the private sector either on a profit, subscription or charity basis. The extension of this to universal health care may to some be driven by morality, to others by ideology, but in a democratic society the real driver is utilitarian considerations.
Progressive taxation has much more mixed roots. Certainly it is partially utilitarian in impulse, once we have decided that things like libraries are public goods we have to acknowledge that not all people who utilize them can afford to pay a pro rata share, or else we could have just left them on the existing subscription system. The inevitable result is that there will end up being some downwards subsidy. The solution devised was to fund most of these from taxes on property and sales, with some exemptions built it. But in any event these taxes are proportionate and keyed to free actions, that is no one is forced to build a mansion and furnish it luxuriously and so incurring huge property and sales taxes.
Which gets us to the progressive income tax which is by designed not strictly proportional. And the motivation for this is only partially utilitarian, it is also a concession to the historical reality that distribution of the gains from productivity are not delivered by some magical and precise division of those gains by the exact contribution of capital and labor inputs, that is a textbook fantasy promulgated by the servants of the winners in this particular game, e.g. the Manchester School.
I have just begun re-reading E.P. Thompson's The Making of the English Working Class and its lesson is clear. You can explain much of the political and economic history of England as a constant battle to protect property rights from democracy, and this too even for those among the leadership of the popular side of the English Civil War. On the one side you have the Leveller Colonel Rainborough:
"For really I think that the poorest he that is in England hath a life to live, as the greatest he; and therefore truly, sir, I think It's clear that every man that is to live under a government ought first by his own consent to put himself under that government .... I should doubt he was an Englishman or no, that should doubt of these things."
This is a demand for universal manhood suffrage. To which Cromwell's son-in-law General Ireton replied
"o person hat a right to an interest or share in the disposing of the affairs of the kingdom... that hath not a permanent fixed interest in this kingdom"
And by what reason does he privilege property holders so?
"All the main thing that I speak for, is because I would have an eye to property, I hope we do not come to contend for victory-but let every man consider with himself that he do not go that way to take away all property. For here is the case of the most fundamental part of the constitution of the kingdon, which if you take away, you take away all that"
Ireton here is drawing a straight line from democracy to socialism and even communism (in the pre-Marx sense), property however acquired is to be protected by the state from the demands of the workers.
The resultant distribution of gains from productivity was the direct result of one sector of society, those who controlled capital, having complete control of the political institutions. This was to some degree less true in the United States, the near absence of a landed aristocracy and the free availability of land to the West leveled the political power some, but still prior to the Progressive movement of the late 19th century political power was largely reserved for large property owners who in turn made sure that no issues around equity or actual analysis of the relative contributions of capital and labor ever entered into the question of distribution of gains of productivity. Instead we have and perhaps still continue to have descendants of the Manchester School acting as apologists for their masters and insisting that any attempts to redress the power imbalance simply a violation of Economic Law carried down on an Invisible Third Tablet from Mt. Sinai.
Progressive taxation is then driven by a democratic understanding that the reason it took Great Britain until 1918 and the U.S. in most respects to the One Man, One Vote rulings of the early sixties is because property owners continued to maintain a thumb on the scale of economic outcomes. The graduated income tax simply being an acknowledgement of historical reality.
So Mankiw's argument rests on fallacious grounds and weasel language. The very use of 'redistribution' builds in the assumption that the initial distribution was strictly proportionate to actual economic inputs. Anyone who ever believed that should have had their eyes opened by AIG bonuses, those bankers, like English aristocrats in the Edwardian Age, had become comfortable with their lavish lifestyles and had no attention of giving them up even after being revealed to be mostly economic parasites. That is Mankiw is serving in the role of Jeeves, the hyper-intelligent and clever servant to his master the hapless Bertie Wooster, here represented by the wealthy and ultra-wealthy of the U.S.
Mankiw wants to blur the line between redistribution and restitution, the wealthy of this country in large part got that way because the political and economic structures have always been rigged in their favor. The progressive and graduated income tax is a method for demanding restitution for their unfair grab of the original gains. To pretend that this is all the same as taxing people on the basis of their height or their I.Q. or whatever is historical nonsense.
Friday, May 22, 2009
Thursday, May 21, 2009
Sunday, May 17, 2009
Angry Bear Social Security Blogging: Northwest Plan edition
The Gathering Storm
Time for Clarity: Income vs Cost & the Six Approaches for 'Fixing' Social Security
The Northwest Plan: a Real Fix for Social Security
Mechanics of the Northwest Plan for a Real Social Security Fix
2009 Social Security Report
Assets of the OAS Trust Fund? or Just Phony IOUs?
Infinite Hooey: PV and Past Participants in Social Security
Sky is not Falling on Social Security
DI Trigger: Fixing What is Broken in Social Security
When Strawmen Collide: Biggs v Lind
NW Plan for a Real Social Security Fix: Ver 2.0
NW Plan: Combined OAS and DI Triggers
Hacktacular!: Robert Samuelson on Social Security
Social Security in Ecolanguage
Probability and Social Security
Northwest Plan for Social Security: Policy Proposal? or Benchmark?
Time for Clarity: Income vs Cost & the Six Approaches for 'Fixing' Social Security
The Northwest Plan: a Real Fix for Social Security
Mechanics of the Northwest Plan for a Real Social Security Fix
2009 Social Security Report
Assets of the OAS Trust Fund? or Just Phony IOUs?
Infinite Hooey: PV and Past Participants in Social Security
Sky is not Falling on Social Security
DI Trigger: Fixing What is Broken in Social Security
When Strawmen Collide: Biggs v Lind
NW Plan for a Real Social Security Fix: Ver 2.0
NW Plan: Combined OAS and DI Triggers
Hacktacular!: Robert Samuelson on Social Security
Social Security in Ecolanguage
Probability and Social Security
Northwest Plan for Social Security: Policy Proposal? or Benchmark?
Wednesday, May 13, 2009
Tuesday, May 12, 2009
2009 Social Security Report
The 2009 Report of the Trustees of Social Security is due out today 'late afternoon' DC time. Assuming the Trustees use the same file name conventions as they have in the past the following links should come live right as the Report is released to the web. If for some reason they are different you should be able to access the PDF and HTML versions or order the paper version at Reports from the Board of Trustees
Entry page
Table of Contents
List of Tables
List of Figures
Entry page
Table of Contents
List of Tables
List of Figures
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