tag:blogger.com,1999:blog-8764541874043694159.post267087632962954758..comments2024-03-28T12:23:39.665+00:00Comments on Coppola Comment: Laffer and the Loch Ness MonsterFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-8764541874043694159.post-91046263387559814502014-04-08T13:07:00.455+01:002014-04-08T13:07:00.455+01:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/08307301450488766339noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-61467891452616691922014-02-06T23:57:25.897+00:002014-02-06T23:57:25.897+00:00I'm not at all sure that your obnoxious rant i...I'm not at all sure that your obnoxious rant is really worth wasting time replying to. But I will none the less make a few points.<br /><br />1. As the whole point of the Laffer curve is finding the revenue-maximising tax rate, your comment that "revenue maximizing should never be the aim" is redundant. <br /><br />2. You have never heard of Pigouvian taxation, then? And you have the nerve to talk to me about economics? <br /><br />3. "And there is still no real argument that inequality is bad". So you want to see the rich remain rich and the poor remain poor, then? Everyone in their place? How positively charming. Personally I have no desire to see the poor remain poor, let alone become poorer, and I only wish to see the rich less rich if it means the poor can be less poor. <br /><br />4. To add to your economic ignorance, you don't seem to know what a principal/agent problem is. What on earth makes you think that shareholders pay executives their real worth?<br /><br />5. The standard argument in favour of inequality is that only the rich generate enough savings for productive investment. Do keep up. <br /><br />7. Incentives matter. Yes, indeed they do. I never said they did not. But financial rewards are not the only incentive. Go and read some Maslow. <br /><br />Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-1900121806498451582014-02-06T15:39:38.648+00:002014-02-06T15:39:38.648+00:00Fantastic column, goes through nearly every leftis...Fantastic column, goes through nearly every leftist idiocy possible. It's greatest failing is ignoring incentives. I only have time to rage over a few points, so...<br /><br />"Why should revenue-maximising be the primary aim for the very rich but not for anyone else?" Revenue maximizing should never be the aim. The tax system should raise what is needed.<br /><br />"Whatever happened to taxation as an influence on behaviour?" Disgusting. Behavior is either criminal or legal and who the fuck are you to discourage legal behaviour? Prodnose.<br /><br />"Indeed, high taxation of the rich has been proposed by several economists, not only to improve public finances but to reduce inequality". And there is still no real argument that inequality is bad. To paraphrase the immortal Thatcher you people would prefer the poor were poorer if it also made the rich less rich.<br /><br />"...to improve the behaviour of corporate executives. If they cannot keep excessive rewards .." Who gave you the right to tell shareholders that what they propose to pay executives is excessive? First you make me pay excessive minimum wages to pig ignorant losers then you won't let me pay high wages to the best of the best.<br /><br />" ... income inequality is essential for growth, because only the rich generate enough savings for there to be productive investment." That is not the argument at all. It is essential for growth because many people will only work very, very hard and take great risks if they have a chance to get rich. INCENTIVES MATTER.Fred Znoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-32839565575906019872014-02-04T17:00:42.334+00:002014-02-04T17:00:42.334+00:00 Brick Says.
I tend to agree except for thinki... Brick Says.<br /><br /> I tend to agree except for thinking that one particular point needs exploring further. Namely.<br /><br />It is often stated that the State is unable to assess risk properly or make rational investment decisions, and that therefore any investments the State makes are likely to be inefficient relative to private sector investments.Frankly I think this is questionable: after all, the State uses the same management consultancies to advise it on investment projects as the private sector does, engages the same contractors as the private sector uses and recruits people from the private sector.<br /><br /> For me the question is not whether the government is better or worse at investment than the private sector, since both seem to make monumentally bad investments decisions on occasions, probably precisely because they do use management consultancies, but whether investment is long or short term (as far as the next election or CEO) and whether decisions have a political element. The money wasted on failed government IT and defense projects could have paid for a lot of free college education, or could have been used to reduce taxes on the poor.Longer term financing (bypassing bond and treasury markets if that is the fear and using banks) could be used for social housing especially considering the queues for housing and the guaranteed income streams, but it does not happen for political reasons. I am not arguing that government should cut spending, in fact just the opposite. I think there needs to be additional policies for the government to structurally change thinking on many things for the long term based on how we want society to work now, otherwise those changes may be more difficult to achieve in the future as society fragments and decays.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-47871444463995879812014-02-03T20:09:37.921+00:002014-02-03T20:09:37.921+00:00Actually I picked up that paper from a link you po...Actually I picked up that paper from a link you posted on WCI. Many thanks, and I apologise for not crediting you in the post. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-80229607085163711302014-02-03T19:37:44.735+00:002014-02-03T19:37:44.735+00:00"A vast number of poor-ish saving a little ca..."A vast number of poor-ish saving a little can add up to as much or more than a small number of rich saving a lot. So IN AGGREGATE, in most countries, it is by no means certain that the rich save more than the poor. They could save much less. Indeed, this paper by Schmidt-Hebble and Servern found no relationship between income inequality and aggregate saving."<br /><br />I love it when people question assumptions and consult the empirical evidence. Excellent post. Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-58078276185808824672014-02-03T18:33:10.216+00:002014-02-03T18:33:10.216+00:00Anders, that's a very good point! Thanks.Anders, that's a very good point! Thanks.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-33373933850210483312014-02-03T08:52:55.130+00:002014-02-03T08:52:55.130+00:00Another heroic assumption in the Loch Ness Monster...Another heroic assumption in the Loch Ness Monster argument, Frances, is that corporate UK _wants_ external funds (ie from household saving) in order to finance investment at all. <br /><br />The evidence from national accounts is that aggregate corporate fixed capital formation is internally funded. Corporate UK has been a structural net lender to the rest of the economy since 2001 or so. So whether it's rich or poor households that are the greater savers, or how saving would be impacted by a change in taxation, is in fact irrelevant.Andersnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-61060184851924302862014-02-03T08:05:06.038+00:002014-02-03T08:05:06.038+00:00Are indirect taxes regressive? The TV licenses and...Are indirect taxes regressive? The TV licenses and certain sin taxes might be, but not overall based on household expenditure:<br />http://www.ons.gov.uk/ons/rel/household-income/how-indirect-taxes-can-be-regressive-and-progressive/2001-02---2008-09/art-regressive-and-progressive-taxes.pdf<br /><br />They appear regressive based on household income because many households with low incomes spend more than they earn by using savings or by borrowing e.g. the 1.6 million early retirees in the UK, students, the temporarily out of work. Many of the lowest income households have had or will have higher incomes at different stages of their lives.<br /><br />I am not disagreeing in general with anything you have said but just pointing out this quirk.<br /><br />It is probably also worth mentioning that the published statistics on household incomes and indirect taxes count employer NIC as an indirect tax on consumers rather than a direct tax on employment.Garyhttps://www.blogger.com/profile/00336978563033128001noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-11799472860042585112014-02-02T22:23:31.907+00:002014-02-02T22:23:31.907+00:00I deliberately did not say "banks". Most...I deliberately did not say "banks". Most of the savings of the less-well-off are actually in pension funds - which do operate a loanable funds model. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-57932866778704910832014-02-02T22:03:46.365+00:002014-02-02T22:03:46.365+00:00"We are reliant on financial intermediaries w..."We are reliant on financial intermediaries who invest the savings of those on low to middle incomes." Invest the savings ? A loanable funds model ? Sounds a bit Austrian... ;)RafaĆ Hirschhttps://www.blogger.com/profile/13320674741988413006noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-42847376749252746262014-02-02T11:58:23.462+00:002014-02-02T11:58:23.462+00:00Frances
Sigh. Just reading this post is tiring.
...Frances<br /><br />Sigh. Just reading this post is tiring.<br /><br />I have some (better imo) questions.<br /><br />What should be the purpose of tax collection? Should the goal be to maximize tax revenues? On what should taxes be spent? Define the moral justification for taxation as an influence on behavior? <br /><br />"If this is the case, there would be at least as strong an argument for reducing taxation at low to middle incomes as there is for reducing taxes on the rich."<br /><br />Fwiw, I do not make the argument that taxes should only be lowered for the rich.<br /><br />"If the poor save primarily by stuffing mattresses or buying gold, then we would indeed rely mainly on the savings of the rich for investment."<br /><br />Buying gold as a form of savings is not unhealthy for productive investment. If all capital is forced into production, then there is bound to be a lot of malinvestment. With another avenue of savings available, malinvestment ( unproductive investment) is curbed, as only productive investment will offer yields high enough to coax savings from gold (assuming reliable and non-manipulated market metrics). <br /><br />"I won't get into philosophical and political debates about the role of the State, but it is fundamentally illogical to assume a) that all private sector investment is necessarily productive and b) that all public sector investment is necessarily unproductive."<br /><br />This is correct. However. a) the current system forces unproductive investment to try and search for yield to compensate for inflation. b) Would you argue that all public sector investment is optimally productive? <br /><br />I would say a small percentage of it may be, a larger percentage not too wasteful, and the rest very wasteful. I would say the arguments for why this is so have been made exhaustively, and that there is no reason to repeat this argument. <br /><br />"The private sector invests a considerable amount of its untaxed income in government bonds. If all government expenditure is unproductive, then this is unproductive investment."<br /><br />So shall we simply ignore the elephant in the room which is regulatory capture of private sector funds by law?<br /><br />It is possible that the private sector may choose to invest some funds in government bonds, if they had free choice. However. I would say the volume of such would be much smaller if there were not regulatory force involved.<br /><br />"Frankly I think this is questionable: after all, the State uses the same management consultancies to advise it on investment projects as the private sector does, engages the same contractors as the private sector uses and recruits people from the private sector."<br /><br />Sure. But the goals of private and public investment are dissimilar. In simple terms private investment is about profit whereas public investment is about buying votes and creating popular public sentiment. And let's not even go to cronyism and government tender systems which are completely ruled by political connections, and not at all about efficient use of funds, but rather kickbacks and helping politicians friends and family get rich at taxpayer expense.<br /><br />"Bureaucratic inefficiency is certainly not a public sector specialism."<br /><br />Sure, but in a free market, private sector companies are punished for this, whereas public sector bureaucratic inefficiency is rewarded by more allocation of public funds. <br /><br />"there may well be more efficient ways of providing them than the current arrangements, but that does not mean that the State is necessarily a worse provider than the private sector would be."<br /><br />Now does it mean that the State is necessarily a better provider than the private sector would be. And given the comments above on incentives and inefficiencies of governments in general, it is certainly arguable that the private sector would ( and do) do a better job. <br /><br />Motley FoolMotley Foolhttps://www.blogger.com/profile/06902761012772262091noreply@blogger.com