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He just wants to fix it. No comments from this peanut gallery. But Scott Sumner hits a 600 foot homer, do read the whole thing:

Here’s what Yglesias misses. Unequal consumption matters because of opportunity cost—another bedrock of economics. The resources that went into that $200 million yacht could have produced lots of other goodies for average people. But if the psychic benefits of owning a basketball team go to a hedge fund manager, they are denied to one average guy–a problem too trivial to even mention. Yes, there are practical problems with consumption taxes just as with any other taxes. But can’t we all agree that we should start with a progressive consumption tax, and then add on a few fixes for the hedge funds managers engaged in dodging taxes? Can’t we agree that the vast majority of ordinary people with full time jobs and some money in stock and bond funds should pay zero interest on their investment income? At one time I thought really smart progressives like Yglesias would take that bargain, now I see the left drifting away from economic rationality, to the point where they embrace 90% tax rates on the assumption that the rich are producing relatively little of value, and that their incomes are pure exploitation. That’s true in a few cases, but if we go down that road we are essentially throwing in the towel. Admitting we are no better than an oligarchic state like Russia and just need to give up on reform.

I’m not ready to give up yet.

And then Kling steps up to the plate and hits one deeper:

From my January 31st post:

Again, I have not read the book (it will be released in about 6 weeks). Does he come out in favor of privatizing Social Security? If not, then why not?

According to Arpit Gupta, Piketty understands how his analysis helps make a case for privatizing Social Security, but he says

one must bear in mind that the return on capital is in practice extremely volatile. It would be quite risky to invest all retirement contributions in global financial markets. The fact that r > g on average does not mean that it is true for each individual investment. For a person of sufficient means who can wait ten or twenty years before taking her profits, the return on capital is indeed quite attractive. But when it comes to paying for the basic necessities of an entire generation, it would be quite irrational to bet everything on a roll of the dice. The primary justification of the PAYGO system is that it is the best way to guarantee that pension benefits will be paid in a reliable and predictable manner: the rate of wage growth may be less than the rate of return on capital, but the former is 5-10 times less volatile than the latter.

What’s that, Dr. Piketty? There’s risk, you say? Capital income is 5-10 times more volatile than labor income? It is “quite irrational to bet” on capital unless you are “a person of sufficient means”? And these factors only matter in the context of Social Security privatization, but can be ignored in the main part of your book?

In case his point is not obvious, it is that the risk adjusted rate of return on capital is not higher than the rate of economic growth, which Picketty admits. So, much like Kapital in the 19th century, Kapital in the 21st century assumes its conclusion and is build not just on shaky theoretical grounds, but on internally contradictory grounds. And he doesn’t hate “capitalism?”

 

Happy Earth Day

What is most striking about the “E”nvironmental “movement” is the reaction of members to good news. I’ve never, ever, ever, ever been around someone who responds to good news with such … anger … and disappointment. Seriously, show an “E”nvironmentalist something like these, and the tendency is to say the data are cooked, or to say, “well, that’s just air quality, we’re going to boil the planet anyway.” It’s not even ironic, but disappointing, that the community of “E”nvironmentalists has coined the term “denier” to describe Global Warming skeptics (ironically without understanding what people are skeptical about), but are almost religiously unable to examine data on life expectancy, calories consumed, quality of air and water, resource availability and at least recognize that there is a little disconnect between their rhetoric and reality.  

In any event, since it is a requirement to talk about Global Warming on this holiest of holy days, let me make one of my positions on the topic very clear. In my reading of the science and economics, global warming is very real and has some very serious tail risk. But it is just not the case that global warming is an environmental economic problem that is particularly worth worrying about.

One way to think of this is to actually ask about all of the risks that global warming is thought to exacerbate, and ask the following question (and demand that “E”nvironmentalists answer it, and you will get our favorite animal): “yes,I absolutely understand that global warming is thought to do ______, but then please tell me, where on the list of threats to ______ does global warming rank? I ask this all the time when it comes to groundwater and fracking and get crickets time and time again. Sure, fracking is thought to contaminate water sources, but where on the list of threats to water sources does fracking rank, and how does “banning fracking” place with other solutions to cleaning up the water? Similarly, suppose you are supremely concerned about species extinction (and can clarify for us why, exactly, you are concerned, do you know how land use has changed over time? Will you tell us about how land conversion for agriculture has an impact on species extinctions as compared to the hypothetical impact global warming is supposed to have on it? This says NOTHING AT ALL about whether you believe in or do not believe in global warming. Despite this fact, yes fact, merely asking such questions gets one labeled a “denier.” All serious “science” is asking here is to consider the important factors that contribute to extinctions, and then rank where global warming falls with the others. Is it even possible that global warming is not at the top of the list? 

Here is an example of what I mean, from a paper I am perusing for my Environmental Economics class prep:

The demand for accurate forecasting of the effects of global warming on biodiversity is growing, but current methods for forecasting have limitations. In this article, we compare and discuss the different uses of four forecasting methods: (1) models that consider species individually, (2) niche-theory models that group species by habitat (more specifically, by environmental conditions under which a species can persist or does persist), (3) general circulation models and coupled ocean–atmosphere–biosphere models, and (4) species–area curve models that consider all species or large aggregates of species. After outlining the different uses and limitations of these methods, we make eight primary suggestions for improving forecasts. We find that greater use of the fossil record and of modern genetic studies would improve forecasting methods. We note a Quaternary conundrum: While current empirical and theoretical ecological results suggest that many species could be at risk from global warming, during the recent ice ages surprisingly few species became extinct. The potential resolution of this conundrum gives insights into the requirements for more accurate and reliable forecasting. Our eight suggestions also point to constructive synergies in the solution to the different problems.

In the paper you will see that in North America, only a SINGLE tree species is thought to have gone extinct during the last Ice Age (see Plumer below indicating how hard it is going to be to adapt) … though large mammals did face more serious extinction pressures (I suppose we are among them),

The economic impacts of “doing nothing” are not going to be very serious or all that hard to deal with, and totally irrespective of the benefits and costs of “doing something” about it now, if you think about doing triage about the kinds of “tail risk” we ought to be really paying attention to, I am not at all convinced that “global climate change” makes it anywhere near the top of the list. There is certainly going to be a very hard case to be made that nuclear proliferation, the prospect of world war and civil wars, for example, are even in the same league as global warming. Indeed, take the global warming reports from the IPCC seriously and make a list of the things people expect will happen. Ask how hard it really is to deal with those things. Ask how scary and problematic those things are to the prospect of world war, to the amount of people who die because of antibiotic resistance, or who are victims of political crises in country after country after country. Not … in … the … same … league. 

If people were truly going to use Earth Day to “raise awareness” of things that threaten Mother Earth, you’d think there would be some actual triage on the things that really, really, really threaten the Earth. But no such thing is coming. 

UPDATE: here is the treat Vox has prepared for us today.

How many economics departments actually teach a class on the Great Depression? The Depression is perhaps the greatest, most difficult to understand economic episode in modern U.S. history. How many economics departments offer a class on political economy, and in particular one that pays attention to the Public Choice school of economics?

I suppose those are rhetorical questions. I’d love to see a systematic study of the above, and then compare it to where one, at a university, might actually learn about these topics. I’d bet that if one wanted to learn about the Great Depression, one could go to a History Department and have much more success finding it.  And if one wanted to learn about Political Economy you could go to a Political Science department with much more certainty. It’s “funny” that “we’ve” outsourced those topics. 

Readers who are following the adulation of Thomas Picketty’s Capital in the 21st Century do not need much information about the book

One major theme of the book is that if the rate of return on “capital” exceeds the overall rate of return in the entire economy, then it follows that the rich and elderly gain in relation to everyone else. Ignore for now the major difficulty of such a claim – that it is not really clear what capital is, and how one might actually compare, value, and add-up different types of capital – that seems to me to be the major difficulty with the book. But what stands out about the claim above is that it, while has empirical backing (i.e. the rich and elderly HOLD a larger share of capital than the non-rich and non-elderly) I am not sure it has any practical meaning. The fear of Picketty is that of course this kind of accumulation of capital leads to a positive feedback of wealth accumulation, then inheritances, which lead to even more capital accumulation, and hence wealth, relative to those folks who do not obtain a large share of their income from capital, which exacerbates inequality, which leads to more capital for the rich and elderly, which leads to larger inheritances and so on. 

Such is why he concludes that a globally coordinated wealth tax is in order. Understanding correctly as he does that “the rich” are fairly savvy, and that capital is mobile, any one country that tried to ratchet up estate or wealth taxes on its own would find out that it collected no revenues and that it didn’t actually make inequality less, it perhaps may make it more severe. 

In thinking about this, one is led to wonder how capital ended up becoming “democratized” in the first place. After all, to the extent that there was any capital through history, it was ALL owned by the rich elites, and since the rate of economic growth through human history was zero, yes zero, then this condition of the rate of return on capital exceeding the rate of return on the overall economy seems to have existed prior to George Bush. So, what enabled the massive DECREASE in global inequality since modernization began? What has enabled ANYONE other than the nobles from hanging on to their castles and capital and passing it on to their children and exacerbating inequalities? Is it really only the ending of laws such as primogeniture and entail, worldwide, that are responsible for it? That doesn’t appear right to me. Was it a globally coordinated wealth tax that ended the horrific inequality the preceded Adam Smith’s time and place? Not at all. So what is different today that requires such a thing? 

Without belaboring the point too much, it seems of course that the book was written with the conclusion in hand, much like most books (on either side of the political spectrum). Kapitalism is convicted of horrible crimes (even if it has some good aspects) – it’s just the nature of the charges that changes from time to time. But what I find astonishing is the implication of the argument. If capitalism is bad, notice that the major proposal coming out of the most influential book of the 21st century is not central planning, or socialism directly, no. It’s just a coordinated wealth tax. Presumably this wealth tax would be distributed to the less wealthy. So in many respects this is not all that different than a Hayekian view of the world, though Hayek I am sure would have defended a far more efficient version of a tax than a wealth tax. But the real takeaway for me is the implicit admission that all of the lords of high knowledge have actually no idea how to fix things at the margin. There are not 10 chapters dedicated to green jobs programs, or the health care features of the rich countries, or the environment or anything like that. Maybe it couldn’t be, after all it is already 700 pages long.

In addition to what I think is glaring above, reconsider the main argument. So, rich guys and old guys have lots of the “good stuff” and the “good stuff” grows faster than the “regular stuff.”

  1. The book assumes a key. (students of mine likely get the joke). In other words, the book assumes that a globally coordinated wealth tax not only won’t reduce incentives to produce incredibly, but more important that those proceeds actually do get distributed to those who actually “deserve” them. And further, that there will be no government misuse of this new source of funds. Call me crazy for not buying that.
  2. Can’t people like me get in the game now? All I have to do is reduce my consumption a little bit and save my income in the stock market. How is that NOT being able to take part in the accumulation of capital? So, the argument against this would be that the rich guys start with a higher share of their income coming from the stock market, while mine is lower, so that even if we both see the same gains in capital as compared to our labor income, the wealth divide still increases, hence the need for a global wealth tax. Which brings me back to a regular point – this seems to be about equalizing outcomes. Because if it’s not, then why don’t we see policies proposed to address the supposed “power” that the landed rich have over the rest of us? My bet, and this is not empirically based at all, is that even if we ended up managing a successful wealth tax, these very same “former landed rich” would have just as much, or perhaps even more power over “us” than they did when it was clear that they did/
  3. An ancillary thought is that this sort of a book contains an argument that will HAVE to be dealt with should the machines ever take over. On the one hand, if machines make everything, from our medicines to our spaceships to our bacon and eggs, then we don’t “need” to work. And that’s nice because quite frankly work stinks (not to be confused with working), and moreso because when the machines take over, lots of stuff gets very very very cheap. On the other hand, you do need SOME income to purchase all the machine made stuff we want and need. So, how to we ensure that there are “jobs” for everyone when there are actually no laborers? I don’t think the question is too difficult, or is it. For those who love government, maybe you have a tax on capital that then is invested in a market portfolio of stocks – and every citizen is paid (or transferred) a share of such a portfolio. The point of course is that the challenge is to ask, “how to get non-capitalists cut in on a share of the capital income when that is the only source of income?”
  4. A somewhat related aside … What if technology and transactions costs evolved so much in the next 40 years as to make the forms of corporations as we know them today to be obsolete? We know that a corporation is just a fancy way to reduce transactions costs among people cooperating on a task. There is no reason, fundamentally, for example, why I couldn’t be an independent contractor teacher, who purchases classroom space, office space, chalk, etc. from independent entities, and then puts them all together myself to teach my classes. It’s just that given current technologies and consumer biases, it’s more efficient to have it done under one roof. I can easily see that world moving in the other direction. So, take that to the extreme. What happens to “workplace safety” regulations? What happens to “the power of unions?” and so on in that world. What happens to worker exploitation in such a world. After all, if we are all sole proprietors / independent contractors, we work for no one. Of course, good economics students can see that answer here … it is that being part of a corporation is no different. 

This is already too long, point 4 deserves its own post and various smaller parts of the book deserve much more attention. 

Not My Vox

Let me preface what I am about to write with an admission of some thoughts that have nagged me lately. Those thoughts include that I am increasingly sympathetic with leftist concerns about super-wealthy people and their outsized influence on the world  (won’t go into the reasons why at the moment). Let me also recognize that the entire Wall Street apparatus to me is a mess of cronyism and, at current margins, destructive of economic value, if only because so many smart and dedicated people end up going there simply because that is where the money is. Let me also remind everyone, including the folks at Chicken Vox, whom I am about to write about, that the U.S. being a democracy is not because we are here to “give everyone a voice” as a way to get what it is that they want. As much as it is hard to believe, the point is that this was a political system envisioned to be the best protector of our liberty – and this is an idea that is supposed to cut across party lines. I fear that we’ve morphed far from recognizing that, and that irrespective of politics there are simply people out there who think that this is important and others who do not.

The point is that in our forthcoming discussion of taxes and inequality, “not liking it” is not a reason to do anything about inequality, and in fact the political system is supposed to prevent this sort of thing from winning the day. What IS required is that if (the emergent phenomenon of) income inequality imposes legitimate restrictions on the real liberty of others, then perhaps there is a political role.. But that’s not even so clear to me. If some outcome is the result of complex and varied processes which we can not much understand, then it’s not clear we even know how to do anything about it. This is not to say that emerged orders are “good” in any objective sense, not at all. This is to say that emerged orders are hard to understand and certainly harder to change in ways that are predictable. There’s more to say on this, but I wanted to get to today’s Vox.  It’s a piece by Matt Yglesias on the case for confiscatory taxation.

I don’t want to spend too much time on the premise – because that just becomes an ideological pissing match and despite the title (the case for confiscatory taxation) it would be nice to try to read the piece charitably. But it becomes tough to do. Here are few illustrations:

The Laffer Curve — the idea that tax cuts can sometimes increase tax revenue 

That’s the first sentence, and it’s not really right. To see why, let me come up with an analogy: “the demand curve – the idea that price increases can sometimes decrease quantities purchased” … that’s not even right. The Laffer Curve describes the relationship between the tax rate levied and the gross revenues raised from those taxes. That is what the curve is, so I find it misleading to talk about one of the implications of this relationship as the very first sentence in a big ideas piece. But maybe I am just really sensitive tonight.

Beloved by the right and despised by the left, one thing that both sides have tended to agree on is that knowing what side of the curve we’re on should be a key driver of tax policy.

How can a factual relationship be beloved by the right and despised by the left. If in fact this is true, this is a pretty shocking declaration of what the left is all about. But of course, I know this is not what the author means, he means that this particular IMPLICATION is beloved by the right and despised by the left. But of course, I don’t think that gets you too much further along the spectrum of reasonableness. Why? Because it is sneaking in, quite disingenuously it seems to me, a huge assumption about the goal of tax policy and motivations of “the left” and “the right.” The “point” of tax policy is not to maximize revenue or to even be located at a point on the Laffer curve where there is no gradient. Why is the implication loved or despised anyway? So, the fact that lowering taxes CAN raise tax revenues is HATED by the left? I don’t quite understand why. To see why, would “the left” actually object to a world where, at ANY given level of tax collections, citizens voluntarily contributed more to the government than they were being required to do? The implication of HATING that implication above would seem to be to be the case. And what makes anyone believe that left and right believe that what side we are on should be a key driver of tax policy? If I were a member of the right, which I am not, I would want simply a smaller government. So, I’d want to be on the far left side of the Laffer curve, not because lowering tax rates would raise revenues if we happened to be on the other side, or because further increases in tax rates would enable us to raise revenues should we need it, but because I’d not want very much revenues collected . And for “the left” why do “they” think the Laffer curve should be a key driver of policy? 

We already accept this principle for tobacco taxes. If all we wanted to do was raise revenue, we might want to slightly cut cigarette taxes. And since cigarettes are about the most-taxed thing in America, we certainly would want to cut out all our other anti-smoking initiatives. But we don’t do that because we care about public health. We tax tobacco not to make money but to discourage smoking.

Poppycock. I’d believe this if cigarette tax revenues weren’t relied upon not just for smoking cessation programs but rather absorbed into general budgets. Talk about setting people up for a bait and switch (as I am sure has been done already). Take the tobacco settlement funds that the states expected to get. Those revenues were supposed to support public health measures, Instead states actually issued derivative securities based on expected future revenues from the payout, and used those funds for all kinds of things (public goods of course, right?). And then when it turns out that the settlement revenues are lower than anticipated, what do you think happens? OUTRAGE that state budgets are being cruelly curtailed. Austerity! The same damn thing is sure to happen when we get the carbon tax, but I’ll say more on that below. So the point is, “We” DON’T accept this principle for tobacco taxes. It is SAID that it’s not about raising revenues, but that’s just a convenient short term cover for getting access to a new source of funds, so that new spending programs are “neutral” in terms of budget deficits. And should I have learned to be a better researcher or even a googler, I’d love to count the number of articles written by folks in favor of things like taxes on cigarettes, on doobies, on alcohol, and so on because in fact they are great places to raise revenues from – as if revenues in the form of taxes are “good” things and not mere transfers.

The same is true of widely discussed proposals to tax carbon dioxide and other greenhouse gas emissions. The goal here wouldn’t be to maximize tax revenue, it would be to reduce pollution. The revenue would be a pleasant side effect.

I do in fact find this disingenuous, condescending, and quite wrong – and again I am really surprised to read this from this particular author, whom I generally really like reading. The GOAL of Carbon Taxes is NOT to reduce CO2 emissions. If that is the case, then surely I won’t find other articles by this author, or anyone dressing themselves up as “economic” anythings claiming that Carbon taxes are Pigouvian taxes. What the heck do I mean?  The point of taxing “externalities” is NOT to reduce them, sorry folks. It is to make sure that we get an efficient amount of the “stuff” produced. The point, to make it clearer, is that we want to make sure we get more value from the activities which generate Carbon than the damage that Carbon is thought to do. It does NOT follow at all that this means reducing Carbon much if at all. It just means that we want to make sure that when individuals are deciding whether they want to do something, that the costs imposed by the carbon emissions are going to be part of their decision. It may very well be the case that an “efficient global carbon tax” would not result in very much Carbon reduction at all. By the way, how many “serious policy wonks” are ready to make the argument that, “I truly am being unbiased and scientific here, and I understand that it might be efficient to have a lot of global warming?” Call me stupid, but I don’t think there are many.  And once again, the revenue is NOT a pleasant side effect. It’s not a side effect. It’s just a transfer. And presumably, if we were being all scientific and socially-justic-y about it, then those “pleasant” side effects would be required to be paid to those who nonetheless are damaged from my actions and who have no agency in doing so (i.e. if I hire a worker to do something, like build a car she gets paid, but if I “hire” you to help build my car by accepting higher sea levels, you don’t automatically get paid because that cost is not internal to the firm making my car, but it is no less a production cost). It’s not just “pleasant” … it’s required.

Rather than pay $90 to Uncle Sam for the chance to send $10 more to their kids, rich people would give the money to a tax-exempt charitable institution instead. That wouldn’t help balance the budget — in fact, it would hurt those efforts — but it would help break the doom loop of oligarachy whereby concentrated wealth breeds political power breeds greater concentration of wealth.

Goodness. First of all, click through the link on the “doom loop” which among other things doesn’t actually demonstrate that it says it demonstrates, and includes such sterling economic insights that “one percent of the country owns over 40% of the wealth” –> which of course says nothing, and especially says nothing about how much of that wealth they produced first, or how “real” any of it is, or why that should have anything to do with political power. Read the rest for a treat. My other favorite implication is to ask how the “rich’s share of wealth” changed prior to 1913? Did they own 100% of the wealth until then? How did it evolve between 1789 and 1913? But to go back to the Yglesias quote, on what grounds is that claim made? How do we know they’d give money to some charity?  At least we could have seen the expression, “for example” as a prelude to such a statement. 

And to roll out another tired “statistic”:

About twenty years ago, Congress and the Clinton administration took a step that they thought would curb what they thought was excessive CEO pay. They said that salaries of over $1 million wouldn’t be deductible from the employer’s corporate taxes. Since that time, CEO pay has gone further up. Now the typical S&P 500 CEO earns 311 times more than his median employee. 

The associated chart, by the way, shows data for the top 350 firms, NOT the top 500. But once again, does anyone see the problem here? And no it’s not a “defense” either. It’s that he’s picking the CEOs from the largest most successful firms in the US and using their pay to compare to a “typical” worker. I’d LOVE to see what the real data looks like for “all CEOs.” One of my former students is the CEO of his own company, and I can assure you he does not pay himself 300 times more than his median employee. But why does THAT particular comparison matter? What about the top 50 movie stars’ pay as compared to a key grip over the past 50 years? 

Imagine a world in which we not only closed that loophole, but imposed a 90 percent marginal tax rate on salaries above $10 million. This seems unlikely to raise substantial amounts of revenue. If you really really really really desperately wanted to give your CEO a raise, you would have that option. But for every extra $1 you give him, you’d have turn over $9 to the government. Why not use that same $10 to give raises to three or four people lower down the food chain who pay lower taxes?

Do firms just wake up and DECIDE to pay the rich dudes some more for the sake of it? 

I’m losing energy … skipping to the end:

If you believe systematically lower CEO compensation packages would mean a mass withdrawal of talent from the business world and a collapse of American industry, then those smaller pay packages could be an economic disaster. But the more plausible theory is that systematically lower CEO compensation packages would mean systematically higher compensation spending elsewhere in the corporate structure. Either more frontline workers or better-paid ones. The new tax code would redistribute value inside the corporate structure without anyone actually paying the new sky-high taxes.

I’m pretty sure, ironically given the title of his last section, that this is a false dichotomy. 

 

True blooded green Environmentalists (I’d argue are politically are far to the left) … should LOVE monopolies (an undemonstrated claim made by the far left is that capitalism is prone to monopolies.

Similarly, true blooded school choicers (I’d argue are more oriented to the right) … should HATE the success of charter schools (to the extent they are successful). I think.

Here is the latest from Vox:

Obamacare succeeded for one simple reason: it’s horrible to be uninsured

So here we’ve come. Now the entire health care reform is a success because … people signed up for it. That’s sort of a low bar isn’t it? Well, maybe not:

The health-care law beat its mark because it was selling something 8 million people want to buy.

Maybe. Maybe not. The “law” beat its mark because THERE IS A MANDATE to buy it. Now, I surely am a know-nothing partisan hack. but I would not exactly call any program a success based on people signing up for it, and I surely wouldn’t double down on that claim by glossing over the fact, yes fact, they all of the sign-ups were legally required to do it.

I’m sort of at a loss for words for a good analogy. Maybe, “the 1st grade was a success because every kid signed up for it.” In any case, this might be more evidence that Vox is doomed. Or not, after all, I’ve always argued that people get what they want. 

  1. It is commonly believed that workers are exploited, for a variety of reasons, by their employers. One retort of folks like me would be that if there are other options for you to work, then this really couldn’t be true. There are many other retorts. Let’s ask about one more: in how many jobs do you think workers have any room to slow down/slack off/etc? Right now, I am blogging this from my office when I should be prepping for my class. I suppose you could argue that this exercise is making me a better teacher and is really not slacking off, but is it? To the extent that there is ANY room to “slack off” at work, how can it be the case that you are exploited? And are there many jobs today where people are actually busting it for 8 hours per day? I’ll toot my own horn and argue my wife’s job is one such job, but outside of critical care units in hospitals I am not sure. I bet eBay auction activity peaks in the middle of the day, as does the filling out of tournament brackets and checking of sports scores.

  2. Related to the above, you know that about the only way you can “get”  a pay raise and get to keep 100% of that raise is … to … slack off at work. If you make a fixed salary, say, $10,000 per year. If you can manage to “get your work done” in fewer hours, while it may look like you are actually more productive by productivity measurements, you are actually not, since you are still on the clock for the same amount of time.. But if that time is spent daydreaming, listening to podcasts, planning vacations, e-mailing your mom, checking out college sports results, and so on, which I know NO ONE does, then of course you are taking higher pay home and it is not being taxed. I’d love to see some data on how such behavior (no one self reports that honestly however) correlates to marginal income tax rates and other effective penalties on work effort.

  3. I’ve been toying with fully “flipping” at least one of my classes. However, I think that in a room of 300 people that idea stinks. I also am having two other doubts. First, it’s that a flipped class is actually less effective than a well organized lecture and discussion, because I think the videos are far too canned to be as good as I’d want them to be – students cannot stop a video in the middle and ask my avatar a question, among other problems. Second, the more I think about it, the less I think “flipped” classrooms are innovative at all. If you have a well chosen set of readings, and require students to prepare for class by doing those, perhaps also by watching a few video supplements and a few podcast supplements, how is that any different than having them watch instructional videos? So, at any moment a classroom can and I argue should be flipped. I think some sort of hybrid model is probably right. But my new thinking on flipping is not that this is particularly innovative or educational, but perhaps more enjoyable form of delivery, or even an “easier” form of delivery for “millenials” who grow up not reading or liking to read, and who do not see value in struggling for a couple weeks on a brutal problem set or struggling on an exam with material that goes beyond rote memorization. I think the problem is not lectures per se, but huge classes that do not allow (me) instructors to spend time with all of their students, should those students actually want it.

  4. To this day, I’ve NEVER had a response to my point about our government collectively spending over $6 trillion per year and it still proudly parading around as if that’s not enough to do what they want to do. I’d make the additional observation here that if what the government were actually providing were true “public goods” then either (1) it would not have to spend nearly as much as the economy and the population grows, yet instead we’ve seen the opposite, or (2) if it were a pure transfer system that actually delivered benefits to the poor and needy and did not extract resources from the poor and needy and middle class and upper class to shower benefits on the chosen few, then the $6 trillion would perhaps be less of a “concern” since it would’t actually be all that costly. 

 

If you read the Fed’s consolidated financial statements for fun and take them seriously, you would learn that the Fed’s current leverage ratio is …

77:1.

It’s just a number of course.

He concludes an excellent piece with:

I don’t mean to criticize anyone in particular. (I used to be the economics instructor.) In all of these cases, there really isn’t anything any one individual can do to remedy the bad practices. Making a big issue of them would lead to useless excommunication. Instead we shrug ironically. In our society, an ironic attitude is a token of sophistication (a telling word, which once meant corruption but now implies competence). An ironic attitude towards collective ethics is adaptive. It helps basically decent individuals participate in coalitions that ruthlessly contend for rents. But perhaps we’d have a better society if, rather than turning our ethical discomfort into an object of aesthetic consideration, lots of us worked straightforwardly to remedy it. And perhaps more of us would do so if the risk of losing our place were not so terrible. Ethical behavior is endogenous. “Inequality” renders it costly.

The rest (long) is spot on in my view.

Update: the first article I read this morning was about a voice vote in the Senate which included, among other things, an extension for 2 more years, a 20 year old (but recently expired) wind production tax credit.

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