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To spend is to tax, but spending more != taxing more

Apropos of my continuing thoughts on the merits of how/when to pay for government spending, Brad DeLong has a post up quoting someone making the point that spending now equals taxes later.

The implication, though, is that more spending means a hike in tax rates, rather than simply requiring more money down the road. As I've intimated in my previous posts, I'm not sure that really follows. Read more »


Infinite status dimensions: Pac Man edition

Regarding the back and forth on whether status is polydimensional vs. monodimensional, the Speculist provides evidence for Wilkinson's view contra Farrell- the story of the perfect game of Pac-Man and the pursuit of trivial excellence:

It took almost twenty years [Pac-Man came to the U.S. in 1980], but on July 3, 1999 for the first time ever, a perfect score of 3,333,360 was achieved on Pac-Man by Billy Mitchell at the Funspot Family Fun Center, Weirs Beach, New Hampshire. To achieve this, Billy had to eat every single bonus prize and every possible blue ghost in all 256 levels of the game - a feat which took him over six hours to complete. Not only that but he didn't lose a single life. It was the first ever perfect game of Pac-Man.

That other folk may look down on this achievement as trivial and meaningless is beside the point; it certainly matters quite a bit to Billy Mitchell, far more than being a star football/soccer player or whatnot.

Though it and the post does remind me of Patri's secret,[1] Bond-villainesque reason for developing and unleashing the T-1000 of pokerbots on the world; here is a person who, but for his odd obsession, has the brainpower and skills to be a positive-sum addition to the world, but instead plays Pac-Man. Though unlike with pokerbots ruining online poker and forcing smart folk to get real jobs, I don't think someone can come up with a meaningful equivalent for arcade gamers...

(footnote below) Read more »


Diminishing marginal utility of voters

Greg Mankiw reveals that in 2000, he penned an op-ed voicing the apparently taboo/unpatriotic notion that if you don't know what you're voting for, you probably shouldn't vote.

As Greg makes clear, this isn't an exhortation against voting (he says he's a voter, and he'll do it again) but a reminder that people have limited time to devote to learning about any given subject, so it makes a certain sense to specialize by voting on what you know, and not voting on what you don't. As rational ignorance progresses outward from the special interest voter, there are plenty of people who have no particular knowledge of the question at hand and thus rationally don't vote at all. The flip side to this is that for any given question, it is not obvious that higher turnout either reflects more informed interest or a greater chance at arriving at a 'correct' answer.

Not a large jump from that is to conclude that, more often than not, higher turnout leads to an inferior decision; if people are motivated to vote for tribal reasons (red state/blue state, or shi'a/sunni) versus 'who is the better person for the position' or 'what position is better given the stakes', then ceteris paribus you get worse outcomes with higher turnout.

Thus the low voter participation rate of the US is more likely a *good* thing than a bad thing, and why parties bereft of ideas emphasize turnout, turnout, turnout[1], to swamp out the higher value self-motivated & educated voter with tribal votes. I know I've advocated voting before, but thats also to my friends and intellectual colleagues, who due to selection bias if nothing else are all smarter than me and routinely pwn me in games of Puerto Rico and Settlers. But I doff my hat to those who, being uninterested in the question, don't attempt to answer it.

(footnote below) Read more »


Snobby egalitarianism means less attractive women

Lazy sunday reading brought me Tyler Cowen's simple theory of where women are beautiful:

My simple theory of where the women are attractive has two variables: income inequality, and the willingness of wealthier men to marry beautiful women from the lower income and social classes. Women then compete for lucrative marriage prizes. That puts Cuba (the wealthy men are the tourists) and Brazil near the top of the list, where they belong.

Supposing his theory is true, would it not then mean that you'd expect a paucity or absence of beautiful women if the two variables were reverse? That is, if the incomes were equal and men of higher status/class[1] unwilling to marry lower class women (or vice versa, the direction of the snobbery doesn't matter), would one then logically expect women to generally look frumpalicious?

Probably not, though that would explain a lot of crunchy nut granola gatherings I've been to over the years. I imagine that there is some sort of floor for beauty where the two variables lose effect, and that Tyler's theory is how baseline beauty is affected by the exacerbation of those two variables.

(footnote below) Read more »


Sunday Funnies

For Tim Worstall

(for Tim and to remind people to read British newspapers/magazines.)


Slightly Mad Science and AnteTerraforming collide

Speaking of "everyone talks about the weather but no one ever does anything about it", University of Arizona professor proposes throwing 16 trillion ~2 foot translucent discs into Lagrangian orbits to help block part of the Sun's light and thus cool the globe.


All pose and no substance

Kevin Drum crows that the experience of Oregon's indexed yearly minimum wage increases vindicates the pro-minimum-wage-increase position:

Read the whole thing. Deborah Solomon provides both sides of the story, but it's worth noting that virtually all the evidence on the anti-minimum wage side is either anecdotal or theoretical. The evidence on the pro-minimum wage side is concrete and statistical. You can decide for yourself which kind of evidence to believe.

There is a lot that needs to be unpacked here. First, in part of the WSJ article that he quotes, it is not clear what the 8% increase in nonfarm payrolls has to do with the minimum wage in the first place. Is this an 8% increase in minimum wage nonfarm payrolls? If it isn't, then the orthodox position on minimum wages is hardly challenged, as the point is that the margin (the wage floor) will see the bulk of the effect. Further, this growth in higher-than-minimum wage jobs is meaningless to the people who are supposed to be helped by a higher minimum wage, since if they could only command sub- minimum wage jobs before and minimum now, the higher wage jobs were never an option for them. So that statistic is fairly irrelevant.

Job growth in industries that have minimum wage positions is a bit closer to the mark, but still doesn't tell us much. The 5.4% unemployment rate tells us a bit more; its 1 point higher than the national average. I'm not going to be as quick as Kevin to infer causation from correlation here either, but it doesn't seem like much of a positive spin to say that a rate of unemployment that's 25% higher than the national average is good because it happened to be 7.2% back in 2002...

Also, the quote seems seriously confused that there is a meaningful distinction (in this case) between the theoretical and statistical (what else would employment economists use in their theory?). Despite that confusion, David Neumark (mentioned in the WSJ article) does lay out a fairly comprehensive, concrete, statistical study of minimum wage laws and their effects here, among other things showing that for whatever else a minimum wage does, the effect is primarily among the teenaged to those in their early 20s, the sign is negative, and in the long run negative if a minimum wage prevents a teen or young adult from gaining employment and more importantly not gaining the habits of employment.

Further evidence of the this kind is summarized by Alex Tabarrok here, whereby he relates studies showing that 25% of the folk on the mininum wage (nationall) are teenagers, and 50% of all minimum wage earners are aged 25 and younger. These are people, Alex notes, that with age and experience will likely soon earn more than minimum wage anyway, thus as an antipoverty tool it's fairly weak.

Alex's coblogger comes in for a more damning analysis that I shall quote extensively:

If minimum wages go up, I expect some mix of two scenarios:

1. The employer restores the previous net wage by worsening working conditions.

2. The employer upgrades the quality of job and thus marginal products, to meet the new level of minimum wage.

Now #1 is not much of an argument for boosting the minimum wage. But is #2?

It sounds good but the employer had decided in the first place not to create those higher productivity jobs. So those jobs must cost more and we should expect a negative effect on employment, albeit perhaps a slight one.

It is also the case that those jobs will go to the "most easily upgradable" workers among the low-wage working set. I suspect those are the low-wage workers with relatively high human capital and high levels of adaptability. Among the class of low-wage workers, the effects are probably anti-egalitarian. That again does not make the minimum wage sound so great, even though the employment effects could be small or perhaps even zero. I might add this also explains why the most articulate low-wage workers probably, for reasons of self-interest, favor increases in the minimum wage.

Emphasis added. This is indeed what one owner noted, that he had to make the jobs a combination of crappier and more demanding (#1 and #2) to square the circle. Granted this is mere 'anecdote', but still thicker soup than the supposedly concrete examples of benefit to the toiling class that Kevin touts.

The other problem, of course, is the quick slight of hand from "whats good for Oregon" to "its good for Everyone"; costs of living and doing business vary geographically (as does the functional meaning of poverty and being working poor) and it makes little to negative sense to impose a uniform wage floor across a continent's worth of particular circumstances of time and space. On more conspiracist sites, I've heard it said (persuasively) that efforts to raise the Federal minimum wage are efforts to screw lower wage regions (who have concomitant lower costs of living) and reduce competition with high cost of living (and wage) regions.[1] Certainly, if Oregon's experience tells us anything its that these decisions should be made state-by-state; Oregon's agriculture industry will either have to increase its productivity through capital or leave, and other states can look at Oregon and see if the new shift and share of industries is worth it.

But ultimately my biggest problem with all of this is as Alex said in his post- 'Minimum wage hike' is rhetoric that doesn't do much other than make some upper class left-liberals feel happy/smug about themselves. Its a particularly bad antipoverty tool, it has non-trivial effects on the structure of employment within and across industries, and has possible non-trivial long term negative effects on low-skill individuals' abilities to stay employed and to increase their own productivity and standards of living. All of the things it purports to want to do can be done by much more targeted, efficient, and effective policy tools.[2]

'Liberals' of America, please, I beg of you: save your breath for policies that actually help poor Americans, eh? And it you won't do it for me, can you do it for the children...?

(Footnotes below) Read more »


Rich and fighting back, or poor and take your chances?

Keeping with the "growth is good" thread, Ron Bailey illustrates again how a little drag on growth gives outsized consequences in the long run:

Stern makes his case by combining worst case climate model predictions with worst case economic model predictions. The predictable result is disaster 100 years hence. For his economic analysis Stern essentially uses the A2 storyline from the Third Assessment Report, issued in 2001 by U.N.'s Intergovernmental Panel on Climate Change. That storyline supposes relatively slow economic growth (2 percent per year), global economic autarky, continued population growth, and retarded technological progress. The result is that world GDP by 2100 would be only $243 trillion while world population reaches 15 billion. Today, GDP per capita is almost $7000, although unevenly distributed. In this scenario, world per capita GDP would rise to just over $16,000 by 2100.

But there are other IPCC scenarios. For example, the A1 scenarios foresee stronger economic growth (3.5 percent per year), global economic integration, population peaking then falling to 7 billion, and a lot of technological progress. The result is global GDP of $550 billion and a per capita income of nearly $80,000 by 2100. Quite a bit of difference. Surely it is reasonable to argue that if one wants to help future generations deal with climate change, the best policies would be those that encouraged economic growth. This would endow future generations with the wealth and superior technologies that could be used to handle whatever comes at them including climate change. In other words, responsible policy makers will select courses of action that move humanity from a slow growth trajectory to a high growth trajectory.

Interesting that the Stern report depends on a storyline that, plausibly, describes what the world would be like if radical environmentalists/leftists had their preferred vision of the world (autarkic, precuationary-principle retardation of technology, low economic growth). Snark aside, Ron is (again) right that growth now means more resources later to tackle problems that come up. Even if you presume the rosier scenario is the one where nothing is done now (and thus has 20% of world GDP as a cost per year due to Global Warming), you still end up an order of magnitude richer (worldwide), or roughly 5 times better off than under the nasty pessimistic scenario.

In any case, any proposed scenario for mitigating climate change should take very, very seriously negative effects on economic growth- blithe hand waving that "we just have to accept less" simply won't do- richer countries will be able to deal with adverse climate change better than poorer ones, and as countries get richer, they invariably get cleaner and more efficient (e.g. if China's plans to build a plethora of nuclear plants succeeds, its grotesque coal-fired emissions will at least level if not decline simply due to the substitution) and more capable of dealing with rising sea levels or whatnot. Active climate change (to reverse the effects and 'anteterraform' the Earth back to some pre-industrial level of CO2, etc) and mitigation also requires an advanced worldwide industrial division of labor.[1] Let's not de-industrialize and then cross our fingers that 'Gaia' will see fit to let some miserable remnant of us survive...

(footnote below) Read more »


Who is Jane Galt?

Or, rather, "which one is by Jane Galt?" will soon be a number of people's favorite pastime reading the new Economist blog written in part (and, for the nonce, anonymously) by the lovely and talented Megan McArdle. The game should be fairly easy, as there is a city byline, and thus far just two; London and New York.

Hmmm....

Go read, share, and enjoy anyway.


Static Job Cling

Tyler Cowen takes on the leftosphere meme du jour, stronger unions[1], by pointing out some inconvenient truths: Read more »


Buying out inefficient industry

Alex Tabarrok has the goods with the salaciously titled "How to Use a Condom Optimally", which touches on a concept dear to me, which is simply paying off the employees of obsolete industries to quit and do something (anything) else rather than screwing the nation with protectionism or favoritism. Obviously this isn't a case as egregious as the steel tariffs (6 jobs lost for every job retained, I think it was) but $13.5 million a year adds up to real money after a while...


Reducing growth now is bad juju

Apropos of the comment left by Glen Whitman of Agoraphilia below[1], I link to Tyler Cowen's entry over at Crooked Timber's recent symposium on Social Democracy, er The Primacy of Politics.

In the course of eulogizing the European Social Model, Tyler says:

The importance of economic growth is obvious, but rarely are the long-range implications of lower growth taken seriously.

If a country grows at two percent per annum, rather than one percent, the difference in wealth or welfare in a single year is relatively small. Over time the difference becomes very large. For instance, had America grown one percentage point less per year, between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990.

Growth laggards fall behind. If we compare a one percentage point differential in the growth rate, and start at real income parity, we need a time horizon of 110.4 years to establish a 3:1 ratio of superiority of per capita income. If we are comparing a two percentage point boost in the growth rate we need a time horizon of only 55.5 years to establish a 3:1 superiority in per capita national income.

Nobel Laureate economist Robert E. Lucas put it succinctly: “…the consequences for human welfare involved in questions like these are staggering: once one starts to think about [exponential growth], it is hard to think about anything else.”

That is part of my rationale for favoring Borrow and Spend (and leaving a constant tax rate) versus Tax and Spend, when the question in both cases is 'More Spending, how do you finance it'. My bet is that for the same reason Tyler gives, that so long as economic growth is maintained, the future output will be higher than the principle plus interest of the additional debt. Or, conversely, you pay more in lost economic growth due to extra taxation than you save in interest. That's the bet anyway, and given industrial society, I think its a good one.

Comments, reasoning, and theories debunking my view are much welcome. :)

(footnote below) Read more »


Red Pond, Blue Fish; Blue Pond, Red Fish

And now, a brief political interlude (off the cuff, with all that entails):

On my way home from work today, I flipped to C-SPAN radio[1] and happened to catch part of the Cardin-Steele debate, fortuitously right in the middle of the Iraq war portion.

Apologies in advance for the foul language, but the response from Cardin was the most weaselly, diarrheic bullshit I've heard since the 2004 Kerry campaign was in full swing saying everything and nothing at once. Cardin's position in a nutshell- Step 1 - Leave Iraq. Step 2 - ???. Step 3 - the 'international community' will rush in and save Christmas and Eid and everything will be better, honest, promise. Offers a completely arbitrary timetable, then denies its a timetable, then waves his hands furiously saying "if we leave, it'll show to the international community that we're not occupiers," which is of course an incredible, unbelievably irrelevant non-sequitur that only serves to underline how unserious Cardin is about the Iraq war (other than 'I'm agin it!!').

I mention that only because that bit had me swearing loudly in my car as I creeped slowly down the beltway, not to get into the finer points of his (non) positions. The salient point of what I did get to hear (roughly 30 minutes or so) is that in the Maryland Senate race, much like the Virginia one, it is clear that one candidate is so much more deserving of and suited for the position than the other. And by that I mean Webb over Allen, and Steele over Cardin. Its not even close in either race; their opponents are both loyal stooges of their party's apparatus and when asked to jump will first do it and then ask 'oh, how high?' The unfortunate bit is that while one can do the popular bit (among libertarians and independents) and vote for Webb in Virginia, the deserving candidate across the river is saddled with the crimson R and thus will likely, ultimately be defeated in favor of Ben Cardin (D - Douchebag).

I know its popular to want to throw all of the Republicans out of congress (and rightly so in most cases) because of how horrible the GOP has been since 2003. But, not to belabor the point, Democrats are pretty much as equally culpable as a party can get without actually holding the majority reins; after all, most of them voted for Iraq, the TSA was Daschle's idea, USA-PATRIOT is a rehash and repackaging of Clinton administration prosecutor's wish lists, TIA and roving warrantless wiretapping also on Clinton wishlists, the Democrats' counterproposal to the Bush Medicare expansion was to spend even more, and the only time they've filibustered was against minor Federal judges (among which were libertarian judges, to boot), and not against Alito or Roberts when it mattered, nor against the abomination of the Torture Bill. Not once, too, have the Democrats tried to reign in the spending- they just want to tax you more along the way. That, contrary to what many believe, is not fiscal responsibility. To paraphrase, "it's the spending, stupid," not whether you finance it via borrowing now for taxes later or taxes now[2]. So from my view, the national Democratic party must likewise be punished for dereliction of duty and acting as if they were a parliamentary opposition party excused from responsibility for the actions of government. This ties in to the Cardin-Steele race thus:

To punish the Republicans, one or both houses of congress need to change hands. That much is pretty straightforward. But how do we punish Democrats in the process for their dereliction of duty and "me-tooism" these past 6 years? I can think of two ways:

(A) No Incumbents (with rare exception) - Wherever and whoever the incumbent is in your district or state, vote for the challenger. D or R, either way. Assuming everyone votes this way (yes, yes...), this strategy results in a Democratic House of Representatives and will probably deliver the Senate as well[3]. This does so in a way that eliminates all house seniority and eliminates some seniority in the Senate as well. The Democrats responsible for sitting on their hands doing nothing are kicked out, yet the Republicans lose their control in the process. Seems win-win to me. For open seats, make sure the seat changes from the previous party's control to the opposite. This brings about my desired outcome of Steele in MD and Webb in VA. The rare exception is for objectively liberty-philic representatives and Senators, you can still vote for them. (The Ron Paul exception)

or, for those who want a more nuanced plan (and harkening to the title of the post):

(B) Red Pond, Blue Fish; Blue Pond, Red Fish - However your state leans nationally (D or R), vote for the opposite candidate this time around. The most restrained and moderate members of both parties are those who are from states generally opposed to their party; see the DINOs and RINOs of Congress for people unwilling to get too radical one way or the other. Call in the countervailing power theory, where the national party will pull in one direction, but electoral reality will pull in the other, so you get a candidate who might say 'no'. In the senate's case, this would seem to work out the most- Webb is a conservative Democrat, to the extent that he's a Democrat at all, and Steele is a relatively liberal Republican, or at least not a very conservative one. Both would, in any case, need to keep their politics moderated in order to maintain their positions in Congress, which strikes me as a good thing going forward after the past 6 years. A congress full of precariously balanced members is a congress that's unlikely to embark on any grand scheme, which is also a plus. The huge minus staring at me for this is that among many reasons one of the most salient reason the Democrats caved on the Iraq war in the first place was fear of losing elections period; that strikes me as a risk, but one I'm willing to take this session, since again, both parties need to be punished.

I prefer A to B, but at least locally (those of us close to the MD and VA borders, on either side) either leads to what I think is the optimal outcome. If we could have a Democrat majority without Pelosi or any of the other milquetoast D representatives, that would be best of all, but alas...

(footnotes below) Read more »


Population and mutation

While on lunch and catching up on the aggregator, via Mankiw's blog I found that Richard Posner is worried about overpopulation. Among his six reasons is a rebuttal of sorts to the idea that with more people you get more geniuses and positives to society (as Mankiw states in a '98 ECONOMICS article), by saying that its just as likely (or Read more »


Neither a Hoor[1] nor a Goomah be

Oh no! Now the Democrats have done to Jim Henley what the Republicans did to Glenn Reynolds last year. Read more »