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I suppose I am guilty of it, but tax guru Emmanuel Saez (one of the guys who work the IRS data to illustrate the rising income inequality in the US) just wrote a second paper in a few months with the implied (or direct) conclusion: raise taxes on the rich. Of course, it is all couched in lovely economic theory. I have a zillion comments on the first paper, but Scott Sumner covers most of them here, I recommend that piece. Here is a highlight of the second:

But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model.  This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity.  Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed.

Big surprise there. Let me remind folks – if you want to criticize market enthusiasts for arguing that social optimality of market outcomes is everything, then remind me why that same argument shouldn’t be applied here?

3 Responses to “Gee, Who Would Have Predicted That?”

  1. Harry says:

    That was a great link, Wintercow. Maybe include it in your blogroll?

    Two comments:

    First, it is not merely Mr. Saez who is guilty of ignoring plain reality before one’s face — that is a fault we, I, have — but one wishes these guys would get out of their Marxist/Hegelian cloud once in a while and stop messing with everybody’s rice bowl. Even we who are not hedge fund managers still might have saved for our retirement, and it is an unpleasant thought to see it all go to Hell. I am shocked! to find Paul Krugman coming up with a marginal rate that is the same as the one back in the days of Jimmy Carter. That did not work; we were going down the drain. How can one be wistful of that time, unless you did not live through it?

    Comment 2.

    I remember reading an essay entitled, “Philosophers as Writers”.

    I will Google the author and post it later, but the point of the essay was that many philosophers are poor writers. They write long half-boiled sentences, paragraphs, chapters, and books. This criticism may be a bit unfair to the philosophers, since often the densest are English translations from the German, where forty-letter-words are, well, ubiquitous. However, the philosophical community will not be accused of making a simple idea easy.

    The same can be said of economists in general. I sympathasize with both Wintercow and his students who have to wade through roundabout, fuzzy, illogical, time-wasting BS.

    I would contrast this with reading Bastiat or Hayek, where the prose may be awkward at times, but where they get to the point. At least they thought things through and edited their words.

    Actually, I would put Milton Friedman at the top of my list, along with the late Robert Bartley.

  2. Rod says:

    At one end of the philosophic pantheon is logic and the foundations of mathematics, where elegance — the shortest path to the end of the argument — is prized. At the other end is linguistic philosophy, where clarity, and along with it, reality, is lost in the fog. It’s a sad state of affairs for a field of inquiry that is supposed to seek the truth.

    I have to wonder who the philosophers are now. There is no Pennsylvania State Board of Ontologists or a philosopher’s bar association at a bar somewhere. Certainly the academics who teach philosophy are not really philosophers themselves, although they have a university professors’ union. They gain tenure by writing for scholarly journals published by their peers, most of them vegans and Democrats.

  3. Harry says:

    Rod and Wintercow, my shot at philosophers as writers was an aside.

    Let the government economists be complicated about it.
    Even if marginal rates of 70% did maximize federal revenues, the point is not to collect all that maximized total. Suppose that Paul Krugman is right that the government would collect more — in effect, that we are on the western side of the Laffer Curve.

    Is the point of life to maximize government revenue? At all levels? Do we live to serve Caesar, his governors, tribunes, and the families of his tax collectors?

    Please do not infer that I imply any disagreement about Caesar, or Paul Krugman.

    Suppose that socialism provided everybody with a reasonably comfortable life, including six weeks paid vacation on the Riviera, French or Spanish. Is that preferable to being poor and free?

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