An Empirical Question

by Don Boudreaux on July 3, 2011

in Taxes, Trade

I pose an empirical question, namely -

How many people today – especially professional pundits, professors, and politicians – believe simultaneously in both of the following propositions: (1) raising taxes on imports reduces the amount of importing activity significantly enough to cause noticeable increases in activities that are substitutes for importing (such as producing more of the high-tariffed goods domestically); and (2) raising taxes on incomes does not reduce the amount of income-earning activity significantly enough to cause noticeable increases in activities that are substitutes for income-earning activity (such as taking more leisure)?

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{ 141 comments }

Johnny July 3, 2011 at 6:00 pm

Every progressive, most Democrats, a lot of Republicans and not a single reasonable person.

jjoxman July 3, 2011 at 6:06 pm

Second.

Ashton July 3, 2011 at 6:34 pm

Third.

Methinks1776 July 3, 2011 at 7:58 pm

Not to be repetitive, but….fourth

Frank33328 July 3, 2011 at 8:24 pm

Another: How many people today believe simultaneously in both of the following propositions: (1) low wage countries like China, India and Mexico are stealing US jobs; and (2) raising the minimum wage will not cause unemployment?

Krishnan July 3, 2011 at 11:50 pm

Some nobel prize winners whose name starts with a K and ends with “man”

tdp July 4, 2011 at 3:42 pm

I wonder how many million “educated” people there are with ridiculous ideas like Krugduck’s versus how many people like us there are.

Daniel Kuehn July 5, 2011 at 10:03 am

He’s on record disagreeing with the first, and I’m not sure he’s ever commented on the second.

Why are you thinking he’d agree with them?

tdp July 5, 2011 at 11:15 pm

Krugman wrote an entire book dedicated to raging against income inequality and how the rich are greedy and exploitative and need to be stopped.

SMV July 4, 2011 at 8:17 pm

All you need is to believe in a fixed pie world. The rich got that way not by being productive but by stealing from the rest of us and of course there is a fixed number of jobs so other countries are stealing those as well.

The belief about the rich is not that hard to understand. Until a couple of hundred years ago the rich made money through taxing everyone else and many still achieve their fortunes through help from politicians.

Methinks1776 July 4, 2011 at 8:59 pm

The belief about the rich is not that hard to understand. Until a couple of hundred years ago the rich made money through taxing everyone else and many still achieve their fortunes through help from politicians.

It’s no easier for me to understand than the fixed number of jobs idea. Wealth creation and job creation are inexorably linked.

Not a single person alive today can remember what happened 250 years ago and few Americans know much history – especially those who subscribe to the fallacy. So, I don’t understand why it’s easy for a modern American, surrounded by innovators, to subscribe to the lump of wealth fallacy. Some people achieve their fortunes by rent seeking, but the vast majority don’t.

Mark Zuckerberg, Bill Gates, Jeff Yass, Warren Buffet, John Griffin, Jeff Bezos, Michael Dell, A.P. Giannini, Carnegie, Rockefeller, and the guy who invented the weed whacker all came from modest backgrounds and created an enormous amount of wealth. Some of these names you know and a couple are billionaires I doubt you’ve heard of. And this is just the beginning of a very long list. I personally know many many more people who came here as impoverished immigrants and Americans from very humble backgrounds (including those who never went to college and those who are biochemists from poor families) became wealthy through entrepreneurship (four in my own tiny family) – and none of them did so through rent seeking. None through extortion. How can anyone be surrounded by this much evidence and still subscribe to such a fallacy? It is incomprehensible to me.

jjoxman July 4, 2011 at 9:05 pm

Those with a rent-seeking agenda either do or like to push the fallacy anyway. Further, those who are disinclined to work for a living find it easy to buy into the fallacy that if X wasn’t so rich, I wouldn’t be so poor.

It’s lazy thinking, but then public schools train lazy thinkers. Or non-thinkers, more likely.

SMV July 4, 2011 at 10:08 pm

Current third world countries would be another example that is more relevant.

No matter how the come to their assumptions. I have had little luck trying to change it using logic.

Methinks1776 July 4, 2011 at 10:36 pm

God, that’s depressing.

hayseed July 4, 2011 at 11:13 pm

How can anyone be surrounded by this much evidence and still subscribe to such a fallacy? It is incomprehensible to me.

This is a flaw that you should work on. When these facts of life become comprehensible to you, you will be better able to present your positions to those who disagree with you..

Methinks1776 July 4, 2011 at 11:29 pm

Really? It is a flaw to embrace facts and reject fallacy?

People who do are not reasonable, so reasoning with them won’t work. Fallacy means a break in logic, so it stands to reason that the illogical do not respond to logical explanations no matter how they are presented to them.

Dan J July 5, 2011 at 2:00 am

The pie method has the ‘unproductive’ in America stealing more shares than the productive. By ‘unproductive’, I refer to those trading votes for entitlements.

vikingvista July 3, 2011 at 6:06 pm

Yet another great litmus test.

tdp July 3, 2011 at 6:08 pm

Every politician (except Ron Paul, Paul Ryan, and a couple of others) believes this because raising taxes on imports gives government more power and raising taxes on incomes gives government more power. The only thing that matters to a politician is power=good, people living their lives without my interference=bad.

scott July 4, 2011 at 10:20 am

Incommensurate beliefs are commonplace- and we should not expect logic to reform those beliefs. Politicos want power, and they will pay lip service to economic incentives when it supports higher taxes (tariffs), and actively denigrate economic incentives when it does not support higher taxes (Obama and Krugman blast on corportate jet owners). They are fully aware of the inconsistencies and focused on their own ambitions, following a clear path of economic incentives. – something we should applaud.
The surprise is that we might expect consistent actions from our government. The commercial world is full of inconsistencies and deceit. Academics is rife with empire building- not empirical truth. Why should we expect logical consistency from government policy?
To answer Don’s question directly, a majority of people (90%+) have inconsistent views on tariffs and taxes because their beliefs are shaped by their incentives, not a foundation of logic.

tdp July 5, 2011 at 11:17 pm

By far the most reasonable and least power hungry politicians among the two major parties are those in the Republican Liberty Caucus. Look at how many statements in their platform apply to Libertarians:
http://www.rlc.org/about/statement-of-principles/#7

Mark M. July 3, 2011 at 6:09 pm

For 1), a more common example could be the widely-held belief that raising taxes on tobacco and alcohol products reduces consumption of those products.

Don Boudreaux July 3, 2011 at 6:11 pm

Yes. Excellent point.

Peter McIlhon July 4, 2011 at 3:11 am

I’ve always been curious as to why this isn’t the case.

Preston Speed July 4, 2011 at 7:33 am

Mark, can you elaborate? Why wouldn’t those taxes reduce consumption? Lack of substitutes?

John July 4, 2011 at 8:42 am

I suspect it’s a combination of no good alternatives and a highly inelastic demand. In the extreme you can think of the demand curve as a vertical line.

I do suspect that this is a more of a static equilibrium result than a dynamic equilibrium one. I suspect that as taxes increase fewer new smokers start smoking resulting in an overall decline.

Kendall July 5, 2011 at 3:35 pm

Years ago I read about a study which found tobacco use by young men (I don’t remember the exact age range) decreased more as the price went up than it did for women. The theory was men always bought their own tobacco but many women were provided tobacco by their boy friends and so didn’t care what the price was.

kyle8 July 4, 2011 at 11:17 am

I think they do lower the consumption. It would be interesting to see how much the use went up if the various vice taxes were ended.

Mark M. July 4, 2011 at 3:58 pm

I was suggesting that it is a widely-held (and also, in my opinion, correct, all else constant) belief that taxes on tobacco and alcohol do reduce consumption of those products – there isn’t really any partisan disagreement around this (whether or not the government ought to engage in selective taxation to influence individual behavior is a separate issue). Tobacco and alcohol taxes seem to be a more common policy discussion than the imposition of new tariffs, so I was just suggesting a potential alternative for point 1) in getting to the essence of the proposed empirical question.

Also while there is the additional issue of inelasticity with addictive products, I wasn’t referring to that in the comment.

Preston Speed July 4, 2011 at 10:55 pm

Thanks. Just wanted to make sure I understood :)

muirgeo July 3, 2011 at 6:29 pm

Yeah, I believe that it is situationally possible for both those to be true.
Look back 50 to 60 years ago we had higher tariffs, higher taxes and higher GDP… and I think even more vacation time… and we were the worlds leading economy and were still rising.

Emil July 3, 2011 at 6:41 pm

Muirgeo,

“Look back 50 to 60 years ago we had higher tariffs, higher taxes and higher GDP”

Even you beat yourself in this post.

1) The US GDP per capita in real terms was USD15 660 in 1960 and USD42 700 in 2011 (http://www.measuringworth.com/datasets/usgdp/result.php)

2) I would not be very convinced by the statement about vacation time either

3) Who cares if the US is / was the worlds leading economy or not, what is important is the wealth and wellbeing of the people living in the country… You really hate foreigners don’t you?

muirgeo July 3, 2011 at 6:54 pm

No cherry picking!!!

And then you say, “…what is important is the wealth and wellbeing of the people living in the country…” You take yourself seriously, do you? Like we are doing so well now. Again, where does reality come into play when you guys do your analysis of things. Does it matter? Is it just an option second to theory and ideology?

Nick July 3, 2011 at 6:59 pm

GDP and its growth are different. In your first post you said GDP. Isn’t what matters most neither of those, but GDP per person.

muirgeo July 3, 2011 at 7:29 pm

Put it this way. If you had GDP growth rates of the 80′s, 90′s and 00′s back in the 50′s,60′s and 70′s our GDP per person would now be much lower than it is. Even if you plugged in the good growth rates of the earlier period to the latter 3 decade period.

Emil July 4, 2011 at 5:27 am

muirgeo,

have you ever heard of the law of diminishing returns?

It is completely meaningless to compare the GDP growth from one period with that from another without putting it in some sort of context

Kirby July 4, 2011 at 3:01 pm

I believe what muirgeo meant was that reducing incentive to produce gave us a competitive advantage. *snickers*.

Subhi Andrews July 3, 2011 at 7:01 pm

@George,

I responded to your productivity graph here. In that chart, the inflection happened around 1970. In this one, the inflection happened in 1960. So what happened in 1960?

I am willing to grant yo the benefit of doubt. It might be an honest mistake rather than cherry picking.

Regards,

muirgeo July 3, 2011 at 8:29 pm

I’d look at this graph again. The drop in GDP is in the 70′s not the 60′s. Look at the BEA tables and you’lll see the GDP fall off was more in the 70′sand 80′s.

In the 70′s you had rising oil prices, war debt, inflation, rising interest ratres and a coming off the gold standard and a stagnant minimum wage. But the real structural changes that promoted income inequality and stagnant wages occured with Reagan and Thatcher.

Subhi Andrews July 3, 2011 at 8:43 pm

@George,
In the 70′s you had rising oil prices, war debt, inflation, rising interest ratres and a coming off the gold standard

Exactly! 7 decades of progressive policies and the results were clear. Wouldn’t you say?

The blue line already was topping of by early to mid 60s, and it crossed the redline in the mid to late 1960s. Was it because of the highest real minimum wage ever?

Thanks,

Mao_Dung July 4, 2011 at 6:28 am

Murigeo

There is nothing wrong with hating foreigners. Hell, I hate dark skinned people. For all I’m concerned they aren’t people and they deserve any rights. However, I do believe the monarch butterfly has more intrinsic value than those goddamn niggers.

Craig July 4, 2011 at 11:44 am

muirego, look at your own chart, the decline in GDP began in the 1960′s. You are classic “progressive” that always wants to live in the past.

“Like we are doing so well now”

And the no cherry picking rule applies to you to, your level of intellectual dishonesty is rather staggering, but not surprising for someone of your political stripe. To assume some current economic indicators mean overall we are worse off and that those conditions will remain permanent is the height of confirmation bias. Because it will reach 100 degrees where I live today, does not mean it will be that hot 3 months from now.

The well being of everyone in the US today is much better than it was 40, 50, 60 years ago. To deny that is to deny reality.

tdp July 4, 2011 at 3:41 pm

You would rather we earn $15,000 a year than $43,000 per capita, then?

Steve_0 July 4, 2011 at 4:03 pm

How much did an MRI scan cost in 1961?
How much did a DBS implant cost in 1961?
How long did DNA evidence take to process in 1961?
What was the rate of heart disease death then vs now?
What was the availability of Herceptin and TyKerb?
What was the size of scar, and effects of recovery from kidney, gall bladder, and appendix surgery in 1950-1960 vs now?

GDP doesn’t measure everything. The cost of products and even the products in demand constantly change. The cost of anti-lock brakes, GPS, cell phones, HPV vaccine, tPA drugs, and laptop computers was in-effect, infinite.

The richest person on the planet in 1961 could not afford active functional MRI and DBS implantation to treat Parkinsons or essential tremor.

Methinks1776 July 3, 2011 at 8:04 pm

3) Who cares if the US is / was the worlds leading economy or not, what is important is the wealth and wellbeing of the people living in the country… You really hate foreigners don’t you?

Exactly. And there’s little comfort in living in a shiny city on a Ponzi hill.

Observer_Guy1 July 3, 2011 at 6:45 pm

Not IF we tax the higher earners (which are relatively few) and redistribute that wealth to the poor (which are many), or so says the Center for American Progress.

Mao_Dung July 4, 2011 at 11:08 am

You are a worthless, racist troll, who should be banned. You should also be jailed for identity theft. You are criminal.

Observer_Guy1 July 4, 2011 at 11:15 am

You’re correct. I am a worthless, racist troll. I have no business on this blog or on this planet for that matter. I am pure white libertarian trash, like so many others around here. Where is the nearest trash compactor, so I can get rid of my horrible self. I will no doubt stink up the place even after I’m dead and fully compacted, but that is your problem not mine.

W.E.Heasley July 3, 2011 at 7:13 pm

I pose an empirical question, namely – Dr. Boudreaux

An empirical question regarding notional propositions?!? Ah, the evil of it all!

Methinks1776 July 3, 2011 at 8:07 pm

Mr. Methinks’ response is that he hopes Don understands that the people he’s asking have no f**king clue what he just asked them.

NotSure July 3, 2011 at 7:38 pm

muirgeo, what is it with you and your xenophobia, yes lowered tariffs have improved the wealth of non Americans, but so has the wealth of Americans.

I have no doubt that you are typing your nationalist comments on a computer with parts made from all over the world (an irony you will always fail to see), something that would have been too expensive to afford had your government enforced laws that mandated everything was to be made in America.

muirgeo July 3, 2011 at 8:03 pm

And I am not sure why a supposed free market capitalist is a supporter of trade with communist and other dictators. There is no irony or hypocrisy here on my part. I am the one that says government and policy matters. You get reidered for that:

” The great multinationals are unwilling to face the moral and economic contradictions of their own behavior – producing in low-wage dictatorships and selling to high-wage democracies. Indeed, the striking quality about global enterprises is how easily free-market capitalism puts aside its supposed values in order to do business. The conditions of human freedom do not matter to them so long as the market demand is robust. The absence of freedom, if anything, lends order and efficiency to their operations.”
William Greider, journalist and author

Methinks1776 July 3, 2011 at 8:11 pm

Why do capitalists trade with Communists? Why do Muslims trade with Christians? Why do Blacks trade with Whites? Why do women trade with men? Why do smart people trade with idiots like you (well, besides the obvious)?

Because trade is good. For everybody. Not trading is bad. For everybody.

Ken July 4, 2011 at 12:32 am

No, no, Methinks, look at how well the economic embargo has worked out in Cuba, North Korea, and Iran. These places are much better off, as are we, since we don’t trade with them. Just ask muirgeo.

Of course, what muirgeo doesn’t understand is that trade empowers those without any political power. And free trade unempowers the government, since they aren’t required for a trade between two individuals. muirgeo completely fails to understand how subversive free trade really is to tyranny. Of course, maybe he understands all too well, which may be the reason he opposes it like a religious zealot.

Regards,
Ken

Dan J July 5, 2011 at 2:12 am

Amazing how communist China, Russia, etc.,… Have been forced to integrate some form of capitalism into their region, less they face revolts or some other demise. Aaand, that capitalism has advanced their economies and societies by decades in just one decade. The trade opens up the minds of their societies and becomes harder and harder for the dictators to manipulate. Only class warfare with arrogant youths or elders who have not shed their sophomoric idealistic ways will aid and abed the marxists.

NotSure July 3, 2011 at 8:28 pm

First of all, America does not only trade with China, that is only a convenient bogeyman to sell your ideology via fear, I doubt that you would support the lowering tariffs with other countries such as India, or support the outsourcing of doctor and software jobs to India. Same goes for Mexico, another bogeyman.

Secondly, if your knew a bit more about China, you would know that the majority of Chinese are capitalists, not communist, even the reigning CCP is more supportive of trade than some American politicians (which should not imply that I stop buying goods btw.)

Third, I am too lazy to give you the link, but if you do a search on US trade with the USSR, you will find the same arguments about trading with evil communists, it was people like Rothbard who argued that not trading with the USSR would be worse, once the Soviet citizens got a taste for the outside world, it was very hard for the government to keep on pretending how much better their closed system was. Which kind of explains why North Korea needs to keep outside contact so tightly contained.

Ken July 3, 2011 at 9:24 pm

“You can’t stop the signal, Mal.” – Mr. Universe

Ken July 4, 2011 at 12:34 am

muirgeo,

Is your claim really that the best way to deal with dictatorships and oppressive governments is to ignore the people being oppressed and isolate them completely from the outside world by refusing to trade with them? Or do you really think that free trade is not between two individuals, but between two governments?

Regards,
Ken

Richard Stands July 4, 2011 at 12:54 pm

In order to answer this question, one must first able and willing to differentiate the idea of a collective and the people who comprise it.

ArrowSmith July 4, 2011 at 12:58 pm

Usually collectives are achieved by murdering everyone who doesn’t want one.

Reuvain Borchardt July 4, 2011 at 5:17 pm

muirgeo:

So for the moment, let’s set aside all the dictatorships and communists and other evil countries. Let’s focus specifically on the countries who have similar value systems to ours (eg. Western Europe): What justification do you have for restricting trade between USA and those countries? or do you agree that we should trade freely with them?

muirgeo July 4, 2011 at 7:19 pm

I agree that trade between nations with similar environmental laws, labor laws and representative democracy absolutely should be free.

The idea that we are trading with China is silly. We are sending capital there and building American factories to take advantage of cheap labor and to skirt the environmental and labor laws that make our society civil and then allowing them to sell their crap back to us and call it trade. It’s NOT trade it’s labor arbitrage.

mitt romney hater July 4, 2011 at 8:25 pm

America’s onerous labor laws do not make it “civil.” It makes goods and services artificially expensive and gives advantages to manufacturing in other countries, such as China… If 2 adults mutually agree on the price one will pay the other for labor, you should not have a right to prohibit that agreement, just cuz you work in a fancy building in Washington. I know you are so concerned about the poor — well guess what: all these labor laws hurt the poor by making their employment costs artificially higher, thus preventing their employment. It is much better to be making a low wage than to be making no wage — which is what happens to many unskilled people when the minimum wage is above their value to their employer

Rudy July 5, 2011 at 12:47 am

Muirdigo, the almighty M-Dreamer at it again. Devising and setting up structures of equality for all, even if workers in other countries are able to realize for themselves what is in their best interest….. That is to either work in a factory for $3 day or rummage through massive trash piles for goods to sell for 50 cents a day. Butt out of other people’s lives!!

Ghengis Khak July 5, 2011 at 1:56 am

Muirgeo — set aside for a moment whether the policies you are suggesting will be beneficial. You think they will be; I don’t. But that is beside the point I’d like to get at.

What is the rationale for the criteria (envrionmental, labor, etc) you picked for similar laws between nations? What about laws of other varieties?

Eg, suppose Europe has lower home ownership rates and that I find this to be an important characteristic *I* want for people *you* get to trade with. Also, a bunch of people in “flyover country”, as you have so humanely put it in previous comments, want the nations you trade with to be inhabited by God-fearing Christians or by countries that don’t recognize same-sex marriage. The guy who grows corn domestically just wants to rent-seek, as does the car manufacturer, etc. The list goes on.

What happens when an administration un-friendly to your way of thinking (eg, the next guy with an (R) after his name) gets into control and institutes a bunch of policies that both you and I agree would be bad (say, the same-sex marriage tariff)?

Do you honestly think that with this control you cede to the federal gov’t, that you are more likely to get good policy than bad? It mostly just creates opportunities for grandstanding by politicians and rent-seeking by those those the politicians serve.

Dan J July 5, 2011 at 2:18 am

Labor is the one necessary cost a business has the most control over. Hiring and firing. Govt imposes soo many different costs on a business (tariffs, taxations, regulations, licensing, navigating the 50,000 pages or IRS tax code, etc.,..), that only large sums of campaign donations will remove, so businesses will set up shop where that one controllable cost can be reined in.

SMV July 4, 2011 at 10:14 pm

I do not trade with China. I trade with individuals that happen to live in China.

Trade is the way we interact productivly with people that we do not know. I have no idea if the person that changed the oil on my car was a saint or devil worshiper or worse a liberal. I don’t need to know. It is in there interest to do a good job on my car, otherwise they will go out of business. Our interests match so we can trade profitably.

Ghengis Khak July 4, 2011 at 2:19 am

“I have no doubt that you are typing your nationalist comments on a computer with parts made from all over the world (an irony you will always fail to see)”

This is an excellent comment, and I want to extend it a bit.

Muirgeo — explain how Americans would be better off if an iPod shuffle cost $800 because they were made by local labor getting paid some large sum — say, $40/hour. The actual number doesn’t matter of course, but obviously it is higher than non-local labor. Then go on to explain the even larger benefits of a $1000 iPod + $50/hour local labor.

muirgeo July 4, 2011 at 9:49 am

Why don’t you go explain to the 15 million Americans with out jobs or houses how the $50 ipod shuffle is such a great thing for them and how they should be happy because even though their standard of living is falling at least 100 milliion Chinese people are living a little better under communist rule?

Emil July 4, 2011 at 10:00 am

Well to me it is better that 15 million Americans are a little bit worse off than before if that means that 100 million Chinese are no longer dying of famine. To you apparently the lives of the Chinese do not count at all…

(This should not be seen as me taking any statement or statistic produced by you as being true)

muirgeo July 4, 2011 at 7:28 pm

“Well to me it is better that 15 million Americans are a little bit worse off than before if that means that 100 million Chinese…”

Then you go tell them that to their face… you go tell it to my father who fought against the communist Chinese in Korea you POS. Tell to the vets who have fought communist all around the world while people like you sit in comfort ands safety criticizing the government…saying government doesn’t matter and criticizing the men who made you safe .. selling them out no less.

Why don’t you emigrate to China and go to Tiananmen Square and help them protest for their freedom you narrow minded jerk. You sit their and take advantage of all THIS country has to offer and think you owe nothing in return.

as if libertarians are supposed to be concerned about people outside their circle. Don’t give me that crap because I’ll paint you into a corner with your silly inconsistent illogic.

Methinks1776 July 4, 2011 at 7:41 pm

Why did your father go all the way to Korea to battle Communists when he could have battled Communists in his own home by throttling you?

muirgeo July 4, 2011 at 9:03 pm

methinks,

you’ve joined the ranks of ken, sandre, vidyohs and some others I no longer reply to. Now hurry along back to the 5th grade playground I’m done with you.

Emil July 5, 2011 at 2:45 am

“you go tell it to my father who fought against the communist Chinese in Korea you POS. ”

Confused, what does your father have to do with this? Or any other war veterans. Still, to me the Chinese are people as well and if they are no longer living in absolute poverty due to this free trade thing that is an absolutely positive thing, no?

“Why don’t you emigrate to China and go to Tiananmen Square and help them protest for their freedom you narrow minded jerk. ”

Why should I? I have no pretensions about how the save the world, I’m only pointing out that this free trade things seems to be working better than anything else that has ever been tried.

Gordon Richens July 4, 2011 at 10:33 am

Nice touch. I almost didn’t notice that you failed to answer GK’s question.

Rudy July 5, 2011 at 1:04 am

Murdock,
The US fought Germany and Japan in battle as well. Let’s ban all name brands that have any sort of tie to those countries too!!

Craig July 4, 2011 at 11:55 am

“Why don’t you go explain to the 15 million Americans with out jobs or houses”

There are not 15 million homeless people, the opposite of not owning a house is renting not being homeless. There were far fewer people that owned homes in the 60′s and 70′s, that’s why in the 70′s they passed the CRA to help more people own homes.

“their standard of living is falling at least 100 milliion Chinese people are living a little better under communist rule?”

What marked the increase in China, the imposition of communism or was it when they opened up their economy to trade?

The big problem with you and most elites is all you do is look at charts. If some number is not going up the chart as fast or is not growing as fast as someone else, that it means we are worse off. Unlike politics, economics is not a zero sum game. Of course Chine is growing faster, 30 years ago they were a backwards, impoverished nation. The standard if living in the US is much higher, that’s not even debatable.

muirgeo July 4, 2011 at 7:42 pm

Craig you know you have an FHA 30 year mortgage so shut up already you hypocrite.

Homeownership took off after FDR.

Does it bum you guys out that you can never show such data in my face that supports your claims?

I mean can you imagine the argument you’d have if home ownership was 65% during the Coolidge years and then went down to 45% after FDR. If you guys ever provided me with such evidence I might be able to take you all serious. But instead you’re left constantly explaining away the data and telling me about correlation and causation…. I feel bad for you all.

ArrowSmith July 4, 2011 at 1:00 pm

Contrast that to 315 million Americans who are well fed and sheltered. You can’t have perfection – and I submit that those 15 million are the victim of your socialist policies.

Kirby July 4, 2011 at 3:15 pm

Explain to the 15 million Americans how much better their lives would be if everything cost 200% of what it costs today.

Dan J July 5, 2011 at 2:19 am

The $50 I-Pod then goes up dramatically, and fewer are sold, and less jobs, and less advancement, and etc.,…..

Jim Rose July 3, 2011 at 11:08 pm

Don,
You do not have to go that far from home to make this point.

Those who steadfastly deny significant disincentive effects of high marginal income tax rates readily admit that high marginal abatement rates on welfare benefits reduce the supply of labour and worry that they will cause poverty traps. In-work tax credits and the like all aim to reduce these disincentive effects.

River July 4, 2011 at 12:18 am

Add Greider to the list of genises who believe 1&2 can occur at the same time. Income inequality seems to be a big sticking point for our critics, it appears to me that income equality is a indicator in free market economies of better living standards. A few people are doing something that their friends and neighbors really like and make their lives better, so much better in fact they are willing to buy with their hard earned wages whatever it is those few are selling. Mr. jobs has done such a good job, I buy 100′s of dollars of his stuff. And I don’t really care where he makes it, what he pays to get the job done because if he is not coercing the help, defrauding me or the public or forcing his will in unscrupulous ways he is providing a great service that makes lots of lives better.

Kirby July 4, 2011 at 3:18 pm

If everybody makes the same, it is fair! Despite that one person went to collage and works 20 hours a week more. FAIR!

Dan J July 5, 2011 at 2:21 am

That person went to college… Not fair.
Complete income equality. The guy taking tickets at movie theatre should make same as the firefighter risking his life.

kirby July 5, 2011 at 9:19 am

He gets paid extra for the risk. Not fair.
However, people have paid their way through college.

Dan J July 5, 2011 at 11:00 pm

Paid for college? No way! Should be free. And, paid for, for as long as they want to keep goin. Taken and failed the same Econ class 12 times? Govt should still pay and the student given extra points each time until he/she passes. Subsidize grades.

Leo July 4, 2011 at 2:40 am

Isn’t there a bit of a difference between the two if I have a higher tax rate on my income I might just work harder to increase my income back to where it was. There can’t be an income effect for imports so they are different.
Karl Smith gives a better defence of this claim
http://modeledbehavior.com/2011/05/18/do-taxes-decrease-the-incentive-to-work/

kyle8 July 4, 2011 at 11:37 am

That does not make sense. If tariffs are high then you will purchase less, if marginal tax rates are high then there will be less economic activity.

I know there are people like Ben Stein running around saying that we had much higher rates of growth when our tax rates were higher. But that does not bear up to scrutiny. The truth is that those rates were not the rates that anyone actually paid. Congress, during the forties and fifties, understood that they could not actually make 90% tax rates work, so they wrote (literally) thousands of special cases into the tax code.

What this did was complicate the tax code, create the need for an army of tax attorneys and accountants. And it ended up with several famous cases where corporations made huge profits and paid nearly zero taxes.

Kirby July 4, 2011 at 3:19 pm

You’re right. If I take 95% of what you earn, you will work 20x faster. I want to have YOU at my company!

Leo July 4, 2011 at 6:07 pm

obviously at such high levels of taxation that might happen but at the lower levels that we actually have this effect might mean that people will work harder

Kirby July 4, 2011 at 7:00 pm

Nope. Everybody raises their prices

Peter July 4, 2011 at 2:53 am

I don’t know how many people actually believe both of those things, but my suspicion is that many people (especially in the professions you mentioned) find it beneficial to speak in public, write papers, and / or vote as if they believe both of those things.

Mao_Dung July 4, 2011 at 6:17 am

Muirgeo

I love the stupidity you spout because you make me look smert.

Methinks1776 July 4, 2011 at 4:06 pm

In the arena of stupid, Muirdiot literally has no competition. He is the king of of all morons. It is perhaps his only “achievement”.

Ghengis Khak July 4, 2011 at 6:12 pm

Wow, even Mao_Dung takes a crack at him.

Seriously though, Mao, set your sights a little higher. Being the leper with the most fingers is nothing to be proud of.

Gordon Richens July 4, 2011 at 9:09 am

“How many people today – especially professional pundits, professors, and politicians – believe simultaneously in both of the following propositions:…”
I would guess none. But _that_ isn’t going to stop them.

ArrowSmith July 4, 2011 at 12:57 pm

muirduck forgets that the biggest reason for the 1950s prosperity was that Europe & Japan lay devastated. Do we need another World War?

Kirby July 4, 2011 at 3:21 pm

We should have given all of our money to the other countries, then they wouldn’t be so poor….
oh wait.

hamilton July 4, 2011 at 2:32 pm

Um, they’re not hard positions to hold simultaneously. The claim is merely that the price elasticity of supply for domestic substitutes of imported goods is greater than the price elasticity of labor generally. Since outside the highest income brackets there are empirical estimates of the latter–and they are quite low–I have no problem believing that increasing tariffs would lead to a much larger domestic-supply response than the effect of tax increases on labor supply. General labor supply is quite inelastic, but the price elasticity of many goods is quite high.

Reverend Moon July 4, 2011 at 3:05 pm

Well said Hamilton

Reverend Moon July 4, 2011 at 3:11 pm

Good of you to frame the question in terms of elasticities of the things in question rather than trying to pretend opposites are substitutes.

Reverend Moon July 4, 2011 at 2:39 pm

Don, you really believe that leisure is a substitute for income? I tried to spend some of my leisure on food at the grocery store and they told me they weren’t substitutes. Weird huh? But when I filled up a glass from China and one from the US they both held water. Or when I drove a car from Japan and one from the US they both rolled. Your empirical question isn’t really very intelligently framed or useful to ask. If the absence of a job is the substitute for a job then I guess the absence of electronics from China is a substitute for electronics from China.

Kirby July 4, 2011 at 3:23 pm

You’re right. I should start a 18 hour work day, because there is no substitute for work. If only I didn’t need sleep.

Reverend Moon July 4, 2011 at 5:17 pm

Sleeping doesn’t pay the bills. Do you not understand what I mean? Do you think sleeping and working are similar?

Kirby July 4, 2011 at 5:33 pm

Not sleeping. Sleeping is required. A certain amount of work is required, unless you are born rich or something. However, what I am saying is, people do stuff other than sleep, eat, and work. What they do (sports, music, read, blog) is a substitute for work in that it provides a more or less equal benefit to a person once the work minimum is met.

Reverend Moon July 4, 2011 at 3:02 pm

I thought you guys don’t like numbers or empiricism. This is a philosophic site. Please don’t pretend otherwise.

Jim July 4, 2011 at 3:06 pm

(2) raising taxes on incomes does not reduce the amount of income-earning activity significantly enough to cause noticeable increases in activities that are substitutes for income-earning activity (such as taking more leisure)?

may better read:

(2) raising taxes on incomes does not reduce the amount of income-earning activity significantly enough to cause noticeable increases in activities that are substitutes for income-earning activity (such as off-shoring assets and production, barter, redefining income, and investing in tax free vehicles)?

Even the 18% historic average is wrong, since it assumes the denominator is accurate. Do we actually believe people are that stupid? Bureaucracy is inversely proportionate to corruption and we’re baking a lot of that in lately. Strange how no one is going to jail in the financial mess or the resulting TARP though.

Reverend Moon July 4, 2011 at 3:23 pm

Jim is an excellent substitute for an editor.

Kirby July 4, 2011 at 3:28 pm

Bureaucracy is inversely proportional to corruption. -rubs eyes- The more people we hire to do the same thing, the less money is wasted. Genius. I’ll get right on hiring 15 people to do my job.

Jim July 4, 2011 at 6:06 pm

sorry. bureaucracy and corruption are directly proportional.

Don’t know how I screwed that one up:)

kirby July 5, 2011 at 9:20 am

oh. Thanks.

tdp July 4, 2011 at 3:39 pm

Revenues have fallen partially because of the recession and the disgusting behaviors that led to it and continued in its aftermath, but also because people frequently shift their money and “redefine” their income. The tax code needs to be replaced by either some variant of the FairTax or by a much simpler code with fewer deductions and loopholes.

Kirby July 4, 2011 at 3:58 pm

Agreed.
On that line of thought…. The legal system. Business regulations. And in fact, anything connected with government and bureaucrats needs to be reworked to be simpler. I wonder why.

Dan J July 5, 2011 at 11:07 pm

Simplify tax code……. Absolutely! Low flat rate with only a percentage point ot two for charitable deductions. No deductions for making washing machine that most consumers want, anyway, and that is govt created standard. No deductions for windmills, etc., etc., etc.,…….
Lawyers would be pissed. IRS would be ruined. Sounds great!

tdp July 4, 2011 at 3:32 pm

Democrats love to crow about the economy under Clinton when the real reason America prospered was
1) the effects of NAFTA
2) spending restraint, which is as good for the economy as huge deficits are bad
3) Clinton reduced the capital gains tax, meaning the wealthy shifted their incomes to “capital gains” and more money free.

Also, according to Cato, if we held spending to a 2% annual increase without raising taxes, we could balance the budget by 2021. A spending freeze would balance the budget by 2017.

Steven July 4, 2011 at 3:57 pm

Even as a newby to this forum, I’ve heard about this muirgeo commenter, so I read only her posts here. Which leads me to posit a new query: How many of you both:

i) don’t bother to engage in deep conversations with clearly mentally disturbed homeless people on the streets, and

ii) do reply to muirgeo’s comments.

Kirby July 4, 2011 at 4:02 pm

Muirego is more accessible, more fun, and he hasn’t crashed anything (mostly because you can’t declare income taxes on yourself to encourage yourself to do your own plumbing)

Methinks1776 July 4, 2011 at 4:11 pm

I know it’s tempting to think that something as stupid as Muirdiot must be a woman, but he’s actually a middle-aged man.

Specifically, he is this man:
http://mydoctor.kaiserpermanente.org/ncal/provider/georgebalella

Just in case you have any friends with children living in the Vacaville area. You may want to warn them.

Kirby July 4, 2011 at 4:18 pm

I always hated those people that make stupid jokes and make up names you might hear on the playground of an elementary school. Grow up, and come up with some real insults please.

Methinks1776 July 4, 2011 at 4:53 pm

You must truly despise yourself then, huh?

yet another Dave July 5, 2011 at 12:51 pm

I always hated those people that make stupid jokes and make up names you might hear on the playground of an elementary school.

With your name I’m not surprised. By the way, are you from Cleveland?

RC July 4, 2011 at 5:20 pm

Methinks1776,

I’m amazed that Muirego actually revealed his real-life identity. This is not typical of trolls, you must admit.

Btw, when I saw his picture I could not help myself to bring this up:
http://www.youtube.com/watch?v=Kf6yeH5x9fI

lol

Regards,
RC

Methinks1776 July 4, 2011 at 5:29 pm

RC, that’s a great (if much thinner) likeness! LOL. Muirdiot thinks he’s a genius. Of course he’s revealed his identity.

Kirby July 4, 2011 at 5:34 pm

If he has and you haven’t, he is either braver or stupider than you. Or maybe more honest. Honest people can still be dumb as a post.

Methinks1776 July 4, 2011 at 5:39 pm

How could we have lived for one more second without your deeply irrelevant insights?

vikingvista July 5, 2011 at 12:11 pm

Not divulging personal information makes one dishonest? Does that mean honor obliges me to tell you my penis size? How about a full description of all my moles?

I wonder why you would think personal information is at all relevant to a discussion of ideas.

Kirby July 4, 2011 at 4:55 pm

Don’t quit your day job

mitt romney hater July 4, 2011 at 5:30 pm

Leftists, who generally don’t know jack about economics, love taking a general data point and proving conclusions from them. typical example: “Well, during the Clinton years, marginal income tax rates were higher, and our economy was doing better than it is now. So let’s raise tax rates!” That is, of course, absolutely ridiculous. There were a million and one other things going on during the 90′s besides higher income tax rates, but far be it from a leftist to control for any other factor…. so typical for muirgeo to say something like(and I am paraphrasing): “higher tariffs in Decade X and our economy was better in that decade, therefore let’s have higher tariffs now.” what an idiot. the countries with the greatest prosperity are directly correlated to those with least gov’t interference and freest trade. That is absolute fact, if you wanna look at data sets. and btw, re; your constant whining on “income inequality”: Which one of the following scenarios would you prefer: a) everyone gets $100; or b) 3/4 of people have $200, and 1/4 of the people have $20,000?

If you have half a brain and are not an ardent communist (doubtful), you will choose scenario “b.” Our focus should be on raising EVERYONE’s standard of living, not in equality per se. If one person or group’s standard rises faster than another’s, that is not a bad thing; if everyone’s is rising, that is good…. so stop focusing so much on “inequality.” the issue should be if everyone’s lives are improving. if yes, good. if no, bad. but whether mine is improving RELATIVE TO YOURS is irrelevant. that is nothing but jealousy

Kirby July 4, 2011 at 5:35 pm
Kirby July 4, 2011 at 7:00 pm

i am retarded

kirby July 5, 2011 at 9:22 am

That’s poor grammar. I was going to ask that we stop the flame war, but if you enjoy unproductive things you can just go work in government.

Methinks1776 July 5, 2011 at 10:51 am

Who are you talking to? You’ve started a few flame wars.

kirby July 5, 2011 at 11:03 am

Name one where I have been the first to namecall. In fact, name one where I have called you a name at all? Directly, not metaphorically.

Methinks1776 July 5, 2011 at 12:00 pm

Is there a reason you’re not answering the question?

steve July 4, 2011 at 9:23 pm

In the end, the laws of economics always win. Scarcity can not be eliminated by decree.

I think believing the above practically disqualifies one from office. For the simple reason that those who promise something for nothing will win more frequently then those who don’t.

Harmoniate July 5, 2011 at 2:21 am

IMHO this site has the best comments of any sites in its genre. For whatever reason, there is very little eristic rhetoric to be found here but rather a competition to win followers of ones ideas. The mantle of F A Hayek lives on, not in any individual, but rather in the spontaneous assembly of rational deliberate like-minded souls on sites like this.

Slappy McFee July 5, 2011 at 10:47 am

After discussing point #2 many, many, many times with numerous collectivists, I have decided that they believe that even if Rich Person decides the incentives to produce no longer exist and they choose leisure, that this will allow others to produce in their place. And by encouraging Rich Person to quit, another Rich Person can be created out of whole cloth, who then quits earlier, and so on and so forth. Eventually, the money earned be Original Rich Person are now earned by ‘next in line’ Rich Person who works one day and retires. Soon, no one can work and we can all live the life of luxury. It is the Rich Person, and his/hers willingness to continue working that is keeping the rest of the classes downtrodden.

This point was eluded to in your post regarding the invention of the weedwacker. If George Ballas had not invented the weedwacker, then ‘someone’ would have, thereby negating the contribution of Mr Ballas.

kirby July 5, 2011 at 11:06 am

When I read that, I saw in my mind a black hole with little spirals of thought being crushed into an oblivion.

kirby July 5, 2011 at 11:20 pm

Hhhmmmmm……. Black holes….. I like glory holes, too.

Dan J July 5, 2011 at 11:37 pm

Isn’t Leisure is what we work towards? If sustenance is already provided, than leisure is likely to be experienced more. This has been the case for those receiving entitlements.

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