I'm still waiting to see a justification for anti-inequality talk other than asserting it as a moral imperative. What is the economic justification for more aggressive taxation?
I'd rather be moderately well off in a society where everyone else is moderately well off than filthy rich in a society where everyone else is poor. There's no point in having a lot of money if everywhere outside your house is a slum.
It looks a lot like the justification for schools: Places with very pronounced inequality tend to have a lot of societal problems (up to and including the massive underclass deciding to behead members of the upper class). I suppose if you want to get really nihilistic, you can say that you don't care if society at large goes into the toilet as long as you can achieve short-term monetary gains such as could be obtained by cutting funding to schools, but I think most people agree that maintaining a well-functioning society is a good goal for the government.
If the country is broke, you don't get more money by taxing people without money. If the country needs more money, ask the people who have some to spare.
And even if the country isn't broke, the principle still stands; if you put the tax burden on those who can least afford it, they pay it by cutting back on what they spend on consumer goods and services, which slows the overall performance of the economy.
Furthering on that, by placing the civil burden on those with less income reduces the amount of taxes areas have to deal with, so like any industry, they need to find other sources. Those sources then seem to target the ones in the worst position to be able to afford it. Example: Heavy fines for speeding and other traffic violations in poorer neighborhoods. Look at the state of Ferguson, MO which was just analyzed in great details. Something like an average of 2.7 warrants per person because they don't appear in court to be able to afford fines.
We are making criminals out of vast oceans of people because a few people at the top don't feel much like paying a fair share of the taxes.
Not aggressive taxation, but here's some anti-inequality justification: states that have recently raised minimum wages have also seen greater gains in employment.
correlation not causation. this flies in the face of econ 101. if a company has $100 budget and pay min wage of $8/hr they can have 12 employees. you raise min wage to $12/hr? they can only hire 8 people. you make human capital more expensive? more incentive to automate
Econ 101 provides an extremely limited understanding of economics.
Your assumption is that the company is a closed system -- a fixed pile of money. But in the real world it isn't, it's part of the overall economy. If people are spending more, the overall economy expands, which increases the earnings of our hypothetical business, which leads to them having more than $100.
The benefit of a minimum wage increase is in the way it puts money in the hands of people who will spend it.
Even in Econ 201, my teacher was quick to point out "this assumes perfectly rational actors in working within ideal situations". Which doesn't exist ever.
on another note, most people assume incorrectly that this bottom portion of earners is a fixed group of people year in year out. Simply not true. look at us bureau census data. Over half of people earning minimum wage are under 24. If you don't have skills for a job, you work for min wage, gain skills and experience so you can get better jobs. When the government makes companies pay more for these teenagers they will hire less. these would-be workers will have more difficulty gaining skills/experience.
also citing 4 states that raised min wage and looking at 6 month time window is pretty weak conclusion imo. in the other 9, wage just grew with inflation. more conclusive evidence with whole countries (looking at you europe) over longer periods of time to dispute this articles claims.
This ignores second order effects - increasing the minimum wage increases the amount of disposable income people have superlinearly, which leads to more trade, which creates more employment opportunities.
So we must never question our reading of "econ 101", because it surely reflects some immutable eternal truths, and everything that contradicts it must therefore be wrong.
It flies in the face of Econ 101, but if you made it to Econ 102, you would hear about a concept called price elasticity which would explain why raising wages by 50% doesn't necessarily lead to a 1 to 1 drop in employment.
One big reason is that people who don't have much money tend to spend what they have. The very rich tend to invest their money, frequently overseas. So by redistributing wealth you give a direct boost to the economy by transferring money from people who won't spend it to people who do.
Taxation in the States is at an all time low, and a handful of decades ago the US has much higher taxes at the top and much bigger growth. So there's also plenty of historical evidence supporting the case for redistribution.
There are also a number of moral arguments (which I think are much stronger).
> The marginal value of a tax dollar is greater to someone who makes less than I do than it is to me.
Perhaps you mean marginal utility? Strictly in terms of value, the wealthy tend to trade that dollar for assets rather than consumption. Marginal value of any dollar is higher when it generates a return.
If you do mean marginal utility, there is a strong philosophical position that interpersonal utility comparisons are not meaningful. Diminishing marginal utility holds for any one person, but subjective preference and merely ordinal (rather than cardinal) preference confounds any attempt at interpersonal comparison.
I'm curious what the philosophical position is that says that $1,000 is not worth meaningfully more in value or utility to a poor person than an equity fund manager, and why that position would be described as "strong".
There is no known measurement of utils and good reason to believe there never will be. Our strongest insight into subjective preference is revealed preference. Without action, preference is not revealed, and where preference is revealed by action, we can only know that one preference is higher than another -- ordinal. We cannot determine that one preference is, say, 10x higher than another. These are the limitations of utility analysis for a single person.
Diminishing marginal utility holds for a single person, and it ought to hold for interpersonal comparisons ceteris paribus, but of course ceteris paribus is a logical impossibility for interpersonal comparison given subjective preference. To hold ceteris paribus for two people is to assert they are the same person, and we're back to diminishing marginal utility for a single person.
Our only guide to interpersonal utility comparison is intuition, which is easily confounded. There is no way to say that my number one preference has more utility than yours, and we have even less reason to say anything meaningful about my number X preference compared to your number Y preference.
I don't think there are many people suggesting that a poor man's dollar has 9.7438393 times more utility to him than does a rich person's. The question is one of more or less not how much more or less. Trying to frame it that way is a distraction, if not a straw man.
So, to clarify your position: absent some specific ratio, is a single dollar worth more to a person of modest means than it is to someone wealthy? Or is even that degree of comparison meaningless in your estimation?
I'm afraid you've misunderstood. I said that we cannot even determine more or less:
> There is no way to say that my number one preference has more utility than yours
== Ninja edit in response to clarification ninja edit: ==
That is correct. We have no reason, other than intuition, to believe that a dollar is "worth more" to a poor person than a rich person. I can easily give some counterexamples:
* Poor person is a monk
* Poor person believes in barter rather than purchase
* Poor person has no counterparties that accept dollars
* Poor person has material needs satisfied
* Poor person has wacky preferences
Even if you want to try to hold external circumstances equal, several of these examples show the dollar to be equally worthless to both parties. Separately, the fact of internal circumstances being subjective -- unable to be held equal -- confounds attempts at comparison.
All of your counterexamples seem to me to be speciously unlikely, and so under-representative of reality that I honestly find myself wondering whether you're trolling.
Let me ask the question even more pointedly: to whom would the unexpected receipt of $1000 be more beneficial, a single, paycheck-to-paycheck mother who drives a '90s Accord, or the scion of a squillionaire tycoon, trying to decide between different colors of leather for his new Ferrari?
Do you still maintain those things can't be compared?
> Do you still maintain those things can't be compared?
Only intuition tells us they can be compared. Utility theory given subjective preference gives us no tools to make the comparison nor any way of verifying it. We have only the pretense of knowledge. Compare to e.g. diminishing marginal utility for a single person, which has a clear theoretical and verifiable basis.
Here is why intuition is misleading: we can easily intuit the fact of our own diminishing marginal utility. Then we can say: if I was poorer, diminishing marginal utility makes the marginal dollar worth more to me. However, this does not hold across a different set of subjective preferences. Our intuition is strongly biased against the full recognition of subjective preference because it operates by injecting our own subjective preference onto others. When we imagine how some other person lives, we really imagine ourselves in that position. Unfortunately, we can only know others' preferences via revealed preference. Intuition is a poor guide.
Furthermore, for any specific (and particularly extreme) example, our intuition might be strong enough to dismiss theoretical concerns. However, this does not generalize. Finally, if the mother prefers to spend the $1000 on crack, then any choice of leather is more beneficial.
There's an inherently subjective aspect to money anyway, though. The whole basis of capitalism is that people trade because it's worth it to both parties, and that value is created out of thin air due to the trading. It seems specious to object to progressive taxation on the grounds of "subjective value", while still defending capitalism itself.
As you noted, one of the wonders of capitalism (or free trade, or the right to transact, or the right to refuse to transact) is that every voluntary trade increases net wealth. Only when both parties are made better off does voluntary trade occur. This concept is very mysterious without the understanding of subjective preference.
My objection is only to the specific justification of progressive taxation based on interpersonal utility comparisons. There are other justifications of progressive taxation not subject to my objection.
This has nothing to do with interpersonal utility comparisons. It has everything to do with the very real, undebatable fact that ratios with smaller denominators are larger than ratios with larger denominators provided that the numerators are the same.
> It has everything to do with the very real, undebatable fact that ratios with smaller denominators are larger than ratios with larger denominators provided that the numerators are the same.
Tautologies are true, and identities necessarily hold. You are saying that a single dollar is a larger portion of a smaller net worth than that of a larger net worth, I gather. Of course this is true. The relevance remains unclear. It's the next step that is treacherous.
Generally speaking, though, I don't think most of us who are concerned about inequality think that our tax system is the only, or even the most important, thing that needs to be addressed. The fact that I could work 40 hour weeks and still be eligible for food assistance, Medicaid, and other poverty bandaids tells me that we don't properly value work in this country... and that's a cultural problem.
How is this a cultural problem? It seems strictly like an economic problem. Teachers are highly valued in our culture (or at least, valued much more than they are in our economy). We DO value work, and that's precisely why people are concerned. The economy doesn't value work as much as our culture does.
I don't disagree with your wording... However, economics _is_ culture. If I pay my workers less than the cost of living I can justify it by the logic of the market, but it is still my choice. The "greed is good" mantra allows too many of us to rationalize away our economic choices as as different from our values. They're not, they're one and the same.
I think I understand where you're coming from, economics is a form of culture, but I was trying to distinguish the cold economic price of low-skilled labor from the non-economic value we place on it (sorry I don't know a better way to express this). Hard work is generally considered very important and valuable in our culture, but excess supply and low demand drives down the economic value. I value water very highly (non-economically), more than gold, but the economy disagrees.
You could say employers are greedy and hoard excess profits while keeping wages low, or you could say that they generously provide much needed jobs to a struggling low-skill labor market. Both are true. It would be nice if low-skilled labor drew higher wages, but wages above the economic rate are just another form of charity. You don't compromise your value of hard work by choosing to pay low wages, you just lack charity.
I understand the distinction. To clarify, I initially intended "properly value work" to refer to economic value, not moral value. The fact that employers benefit from low wage workers who are productive because they are healthy, partially thanks to food stamps and Medicaid, demonstrates they're not paying the real cost of that labor. However, I believe both ways of talking about "proper value" is correct (moral and economic).
In regards to your comment that "You don't compromise your value of hard work by choosing to pay low wages, you just lack charity." Perhaps to a business owner in a competitive market, paying more than prevailing rate would feel that way. But on a broad societal level, it's not charity to hold that everyone who works full-time should at least earn a lower middle class subsistence. If this were polled, broad majorities of progressives, conservatives, and libertarians would agree that work should be enough to raise one out of poverty. Nonetheless, we lack the political will to enact any kind of reform to realize that, because we worship "wealth creators" and the "invisible hand," and, for instance, raising the minimum wage is hence off the table.
If we really truly valued work in more than a symbolic manner, this wouldn't be the case; the libertarian right would be providing concrete policy proposals that would actually address the problem in a way they consider non-coercive. Instead, we hear post-facto justifications for our inequality, or even arguments that it's a good thing. Hence, I stand by the idea that we don't "value," as in moral value, work, no matter what we claim our values are.
> Teachers are highly valued in our culture (or at least, valued much more than they are in our economy).
Teachers are primarily public servants in the US (before college, and probably even the majority of college professors though I won't make a wager on that). Their pay is directly determined by our culture as reflected by who we elect and how we vote on referendums. Clearly, our culture does not value teachers if me choose to pay them poorly with respect to their scope of responsibilities and the time required to perform their jobs. Along with 6-8 hours of instruction and student interaction each day, their primary time for prep and grading is outside of those school hours. Pair that with having to sponsor clubs or coach athletics to earn a little more money to make ends meet (especially if they're the primary or sole earner or have children) they have to commit to 12-16 hour workdays throughout the school year. And then we require them to maintain certifications and professional education (not bad things on their own) that require spending losing many evenings and weekends to satisfy (and sometimes money spent from their own pocket just to be allowed to stay in their job).
You're right that teachers are a bad example. Their pay is heavily affected by our culture through politics (although our political system responds to many other incentives too). Private tutors make great money.
Most people get the economics of teachers' pay wrong.
They say teachers are highly competent, qualified people who work hard and deserve more pay.
If it is true that teachers are generally good, then they are paid appropriately to attract highly competent, qualified, hard working people to do the job.
Ironically, it is because teachers are so highly valued by our culture that they are not highly economically compensated.
Apparently, there are non-economic incentives to work as a teacher.
If you think a lot of teachers are complete clowns, then teachers are probably not compensated appropriately.
So, if teachers aren't paid enough then a lot of teachers should be fired and replaced with superior candidates.
Not to mention the marginal value of dollars to the hyper rich is substantially lower.
The wealth/income distribution we have now looks very different than it did even 10 years ago, so it is worth discussing as a society what the 'correct' distribution should be. Hedge fund managers now are no better than the managers of 10-20 years ago, the system has evolved to favor them more.
We can argue about whether they 'deserve' said wealth, but research shows that the wealthy need a given dollars less than the impoverished and growth can benefit when the distribution is more equal as well.
In what sense "more efficient"? There is nothing that says that just because some people have become better at making money the market as a whole is working better.
1) In a society whose economy is driven by sales of consumer goods, having wealth spread more broadly results in greater sales of consumer goods, which means more economic activity and a higher standard of living for everybody. (Concentrating wealth in a small strata of very wealthy people doesn't have the same effect, because once people get past a certain level of wealth they don't spend money they earn beyond that on consumer goods; they put it in the bank or the stock market.)
I think your first point is a pretty good summary of where the US economy is. Plenty of dollars chasing investments, but fewer looking to consume products. High price/earning ratios reflect this.
Thanks for posting something reasonable. Most of the rest of this thread is people assuming they are qualified economists. I think that people assumed I was asking the original question in bad faith. I'm actually curious about this question.
> Besides the fact that you arguably can't dismiss morality out of hand
I've always thought that libertarians and free-market extremists are some sort of outliers on the morality spectrum - probably sitting near the extreme low end of the axis. That's just how their brains are wired. Then the rational mind starts spinning reasons, trying to justify the givens of their intuition.
> I've always thought that libertarians and free-market extremists are some sort of outliers on the morality spectrum - probably sitting near the extreme low end of the axis
That's funny, because I'd think it the exact opposite. The linchpin of most libertarians, the non-aggression principle (NAP), is pretty much all about morality. It might not be correct, especially with the sticky issue of defining property rights and whatnot, but it certainly aspires to be a moral framework.
A libertarian would say it's not moral for you to take resources from the "haves" by force and redistribute it to the "have-nots" just because you think it's for the greater good; morality is achieved by voluntary cooperation. Basically this: http://i.imgur.com/vmMrN6O.png
You can argue about whether something constitutes a moral imperative, but to dismiss moral imperative entirely means you're excluding yourself from humane discussion.
Furthermore, most of Krugman's argument seems to be an appeal to envy. Without envy, what reason should anyone have to begrudge Steve Jobs or Bill Gates their enormous financial success. Wealth is not a zero sum game, and these men have contributed untold amounts of wealth to society, in several important forms:
* Iphones in the hands of welfare moms
* Lavish consumption habits which distribute cash throughout the goods and services economy
* Massive amounts of investment yielding better technology and higher productivity and efficiency
* Charitable giving and other altruistic endeavors
It is not at all obvious, even if 90% would vote to do so, that taking resources from those who have earned them and putting them under government control and distribution would put them to better use. Leaving aside the moral concerns of taking justly acquired property from individuals, and the undermining of private property as an institution, there is great reason to believe that government distribution puts resources to lower use rather than higher. Positive sum games are always to be preferred over zero or negative sum games.
Your argument is predicated on the assumption that the rich use their wealth only for the "important forms" you mention. What you don't mention is how they are able to influence the political arena with their wealth. The influence of politics by a few is a very natural consequence of massive inequality, and is a zero-sum game. More political influence of the wealthy means less political influence of the poor.
The last paragraph of that section strongly implies that the US fiscal multiplier is zero. Keep in mind that the multiplier needs to be greater than one for a positive effect.
> More recently three economists with the NBER and IMF have published a working paper examining economic features that impact fiscal multipliers. They found that the output effect of an increase in government consumption is larger in industrial than in developing countries, the fiscal multiplier is relatively large in economies operating under predetermined exchange rate but zero in economies operating under flexible exchange rates; fiscal multipliers in open economies are lower than in closed economies and fiscal multipliers in high-debt countries are also zero.
US has an open economy, high debt, and flexible exchange rate.
It really depends on when the money is spent and what the money is spent on.
>They start by looking at multipliers for government consumption... In developed countries, they find that the long-run multiplier is 0.66.
but then
>However, government investment—things like infrastructure building—results in higher multipliers. Here, the long-run multiplier was 1.5 for developed countries
So that shows that the "what" matters. Here's the "when":
>They examined several European countries and showed that fiscal multipliers are substantially higher than previously assumed. Previous IMF studies had assumed multipliers of roughly 0.5. In other words, a €1 injection of government money into the economy would only have a net benefit of 50 centimes. By contrast, Messrs Blanchard and Leigh found that the actual multipliers in the early years of the crisis were “substantially above 1”.
That being based on a 2013 study by the IMF, later than the 2011 study quoted on Wikipedia.
5 days ago Paul Krugman said the problem was that our rich were flaunting their wealth.[1] Barely a week later, the problem is that the rich are invisible.
Because he and NYTimes do not wish to actually discuss the issues. To wit, yesterday's Sunday Times had a full court press vilification spread on Putin and his friends. Do not recall seeing the same treatment for related matter in this USA. Same with front page treatment of protests in Cairo vs. complete silence Washington DC (post 2001).
So the reasonable question is why do you expect consistency from an apparatus of the power elite beyond consistently covering their own dirty tracks?
If Putin is indeed immensely rich then it's difficult to see how he could accumulate such wealth other than by corrruption. If corruption is responsible for some folk's wealth in the US, the appropropriate agencies should get to work and nail them and one has a reasonable expectation that due process will occur. Dream on with Putin. Isn't that the difference between Russia and the US?
It only looks inconsistent if you only read the headlines. Krugman has had a consistent position on income inequality for years. He never says "the problem was that our rich were flaunting their wealth."
You should read the article you linked to more carefully. Krugman does not criticize the flaunting of wealth at all. He is responding to an article from David Brooks who criticized the flaunting of wealth.
Krugman's point is that David Brooks' criticism of the flaunting of wealth does not jibe with Brooks opposition of progressive taxation.
Whatever else you may think of Krugman, he is a pretty smart guy and if you want to try to find flaws in his arguments you should try to pay careful attention to what he actually says.
The rich flaunt their wealth among other rich people. A lot of this really is invisible to regular folks. People watch celebrities and think that lifestyle is "rich". But the 20 hedge fund managers who each take home a billion a year make celebrities look like peons. The truly rich really are invisible.
The articles don't really disagree with each other but let's assume they do. You realize that differing opinions are a sign you're probably reading a good source of information right?
There are plenty of brilliant Nobel prize laureates who make elementary mistakes on a regular basis. Tyler Cowen and Milton Friedman to name two. So it's not inconceivable that Krugman made a basic mistake here. (He didn't in this case, but not because he's too smart to make mistakes.)
For whatever reason Krugman chose to highlight the article by MacDonald. The part of the article that had the most impact was bringing attention of Michael Harrington's book, "The Other America" to President Kennedy. That book, for better or worse was largely the impetus for LBJ's Great Society.
I was hoping this article was going to provide some insight into the "private" rich -- people who are rich but don't report their income publicly -- which would have been far more interesting.
It's important to remember that if someone's taking home a billion dollars in pay - and they're not on the public payroll or run a monopoly/oligopoly enabled by legislation (like, ooh, banking?) - then said person has almost certainly contributed a staggering amount to a nation's GDP. These rich people aren't the enemy, they're national treasures.
If you are cool with the morality or utility argument that you need to take from the haves within a country to help the have-nots/increase velocity of money/etc., it seems to me you should at least be pre-disposed to do the same on a world-wide basis where the inequality/need is much greater. And if you are reading this in the US, the rich is you. Roughly $32k a year in income makes you a one-percenter on a worldwide basis.
92 comments
[ 2.6 ms ] story [ 181 ms ] threadWe are making criminals out of vast oceans of people because a few people at the top don't feel much like paying a fair share of the taxes.
http://www.cepr.net/index.php/blogs/cepr-blog/2014-job-creat...
Econ 101 provides an extremely limited understanding of economics.
Your assumption is that the company is a closed system -- a fixed pile of money. But in the real world it isn't, it's part of the overall economy. If people are spending more, the overall economy expands, which increases the earnings of our hypothetical business, which leads to them having more than $100.
The benefit of a minimum wage increase is in the way it puts money in the hands of people who will spend it.
on another note, most people assume incorrectly that this bottom portion of earners is a fixed group of people year in year out. Simply not true. look at us bureau census data. Over half of people earning minimum wage are under 24. If you don't have skills for a job, you work for min wage, gain skills and experience so you can get better jobs. When the government makes companies pay more for these teenagers they will hire less. these would-be workers will have more difficulty gaining skills/experience.
So we must never question our reading of "econ 101", because it surely reflects some immutable eternal truths, and everything that contradicts it must therefore be wrong.
/s
Taxation in the States is at an all time low, and a handful of decades ago the US has much higher taxes at the top and much bigger growth. So there's also plenty of historical evidence supporting the case for redistribution.
There are also a number of moral arguments (which I think are much stronger).
Not true in 2014.
Obama raised a number of taxes for the top bracket: Ordinary income: 35% -> 39.6% Capital gains: 15% -> 20% Medicare tax: 1.45% -> 2.35%
Meanwhile in California: 10.3% -> 13.3%
Marginal taxes and the top for residents of California are: 39.6+2.35+13.3 = 55.25% The number is similar for New York City.
You have to go back to the Reagan's first term to find higher tax rates.
Now all we have to do is wait for the growth.
EDIT: s/value/utility/
Perhaps you mean marginal utility? Strictly in terms of value, the wealthy tend to trade that dollar for assets rather than consumption. Marginal value of any dollar is higher when it generates a return.
If you do mean marginal utility, there is a strong philosophical position that interpersonal utility comparisons are not meaningful. Diminishing marginal utility holds for any one person, but subjective preference and merely ordinal (rather than cardinal) preference confounds any attempt at interpersonal comparison.
I think it's going to take rather more than a "strong philosophical position" to convince me that 1/100000 is somehow not bigger than 1/100000000.
Diminishing marginal utility holds for a single person, and it ought to hold for interpersonal comparisons ceteris paribus, but of course ceteris paribus is a logical impossibility for interpersonal comparison given subjective preference. To hold ceteris paribus for two people is to assert they are the same person, and we're back to diminishing marginal utility for a single person.
Our only guide to interpersonal utility comparison is intuition, which is easily confounded. There is no way to say that my number one preference has more utility than yours, and we have even less reason to say anything meaningful about my number X preference compared to your number Y preference.
So, to clarify your position: absent some specific ratio, is a single dollar worth more to a person of modest means than it is to someone wealthy? Or is even that degree of comparison meaningless in your estimation?
> There is no way to say that my number one preference has more utility than yours
== Ninja edit in response to clarification ninja edit: ==
That is correct. We have no reason, other than intuition, to believe that a dollar is "worth more" to a poor person than a rich person. I can easily give some counterexamples:
Even if you want to try to hold external circumstances equal, several of these examples show the dollar to be equally worthless to both parties. Separately, the fact of internal circumstances being subjective -- unable to be held equal -- confounds attempts at comparison.Let me ask the question even more pointedly: to whom would the unexpected receipt of $1000 be more beneficial, a single, paycheck-to-paycheck mother who drives a '90s Accord, or the scion of a squillionaire tycoon, trying to decide between different colors of leather for his new Ferrari?
Do you still maintain those things can't be compared?
Only intuition tells us they can be compared. Utility theory given subjective preference gives us no tools to make the comparison nor any way of verifying it. We have only the pretense of knowledge. Compare to e.g. diminishing marginal utility for a single person, which has a clear theoretical and verifiable basis.
Here is why intuition is misleading: we can easily intuit the fact of our own diminishing marginal utility. Then we can say: if I was poorer, diminishing marginal utility makes the marginal dollar worth more to me. However, this does not hold across a different set of subjective preferences. Our intuition is strongly biased against the full recognition of subjective preference because it operates by injecting our own subjective preference onto others. When we imagine how some other person lives, we really imagine ourselves in that position. Unfortunately, we can only know others' preferences via revealed preference. Intuition is a poor guide.
Furthermore, for any specific (and particularly extreme) example, our intuition might be strong enough to dismiss theoretical concerns. However, this does not generalize. Finally, if the mother prefers to spend the $1000 on crack, then any choice of leather is more beneficial.
My objection is only to the specific justification of progressive taxation based on interpersonal utility comparisons. There are other justifications of progressive taxation not subject to my objection.
Tautologies are true, and identities necessarily hold. You are saying that a single dollar is a larger portion of a smaller net worth than that of a larger net worth, I gather. Of course this is true. The relevance remains unclear. It's the next step that is treacherous.
Generally speaking, though, I don't think most of us who are concerned about inequality think that our tax system is the only, or even the most important, thing that needs to be addressed. The fact that I could work 40 hour weeks and still be eligible for food assistance, Medicaid, and other poverty bandaids tells me that we don't properly value work in this country... and that's a cultural problem.
You could say employers are greedy and hoard excess profits while keeping wages low, or you could say that they generously provide much needed jobs to a struggling low-skill labor market. Both are true. It would be nice if low-skilled labor drew higher wages, but wages above the economic rate are just another form of charity. You don't compromise your value of hard work by choosing to pay low wages, you just lack charity.
In regards to your comment that "You don't compromise your value of hard work by choosing to pay low wages, you just lack charity." Perhaps to a business owner in a competitive market, paying more than prevailing rate would feel that way. But on a broad societal level, it's not charity to hold that everyone who works full-time should at least earn a lower middle class subsistence. If this were polled, broad majorities of progressives, conservatives, and libertarians would agree that work should be enough to raise one out of poverty. Nonetheless, we lack the political will to enact any kind of reform to realize that, because we worship "wealth creators" and the "invisible hand," and, for instance, raising the minimum wage is hence off the table.
If we really truly valued work in more than a symbolic manner, this wouldn't be the case; the libertarian right would be providing concrete policy proposals that would actually address the problem in a way they consider non-coercive. Instead, we hear post-facto justifications for our inequality, or even arguments that it's a good thing. Hence, I stand by the idea that we don't "value," as in moral value, work, no matter what we claim our values are.
Teachers are primarily public servants in the US (before college, and probably even the majority of college professors though I won't make a wager on that). Their pay is directly determined by our culture as reflected by who we elect and how we vote on referendums. Clearly, our culture does not value teachers if me choose to pay them poorly with respect to their scope of responsibilities and the time required to perform their jobs. Along with 6-8 hours of instruction and student interaction each day, their primary time for prep and grading is outside of those school hours. Pair that with having to sponsor clubs or coach athletics to earn a little more money to make ends meet (especially if they're the primary or sole earner or have children) they have to commit to 12-16 hour workdays throughout the school year. And then we require them to maintain certifications and professional education (not bad things on their own) that require spending losing many evenings and weekends to satisfy (and sometimes money spent from their own pocket just to be allowed to stay in their job).
They say teachers are highly competent, qualified people who work hard and deserve more pay.
If it is true that teachers are generally good, then they are paid appropriately to attract highly competent, qualified, hard working people to do the job.
Ironically, it is because teachers are so highly valued by our culture that they are not highly economically compensated.
Apparently, there are non-economic incentives to work as a teacher.
If you think a lot of teachers are complete clowns, then teachers are probably not compensated appropriately.
So, if teachers aren't paid enough then a lot of teachers should be fired and replaced with superior candidates.
Not to mention the marginal value of dollars to the hyper rich is substantially lower.
The wealth/income distribution we have now looks very different than it did even 10 years ago, so it is worth discussing as a society what the 'correct' distribution should be. Hedge fund managers now are no better than the managers of 10-20 years ago, the system has evolved to favor them more.
We can argue about whether they 'deserve' said wealth, but research shows that the wealthy need a given dollars less than the impoverished and growth can benefit when the distribution is more equal as well.
Don't hedge funds now have better technology and bots etc that boost the productivity of each trader?
1) In a society whose economy is driven by sales of consumer goods, having wealth spread more broadly results in greater sales of consumer goods, which means more economic activity and a higher standard of living for everybody. (Concentrating wealth in a small strata of very wealthy people doesn't have the same effect, because once people get past a certain level of wealth they don't spend money they earn beyond that on consumer goods; they put it in the bank or the stock market.)
2) You've heard of the Bastille, I assume?
“a more vibrant middle class… increased long-run economic growth.”
http://www.academia.edu/248659/Does_Income_Distribution_Affe...
I've always thought that libertarians and free-market extremists are some sort of outliers on the morality spectrum - probably sitting near the extreme low end of the axis. That's just how their brains are wired. Then the rational mind starts spinning reasons, trying to justify the givens of their intuition.
That's funny, because I'd think it the exact opposite. The linchpin of most libertarians, the non-aggression principle (NAP), is pretty much all about morality. It might not be correct, especially with the sticky issue of defining property rights and whatnot, but it certainly aspires to be a moral framework.
A libertarian would say it's not moral for you to take resources from the "haves" by force and redistribute it to the "have-nots" just because you think it's for the greater good; morality is achieved by voluntary cooperation. Basically this: http://i.imgur.com/vmMrN6O.png
* Iphones in the hands of welfare moms
* Lavish consumption habits which distribute cash throughout the goods and services economy
* Massive amounts of investment yielding better technology and higher productivity and efficiency
* Charitable giving and other altruistic endeavors
It is not at all obvious, even if 90% would vote to do so, that taking resources from those who have earned them and putting them under government control and distribution would put them to better use. Leaving aside the moral concerns of taking justly acquired property from individuals, and the undermining of private property as an institution, there is great reason to believe that government distribution puts resources to lower use rather than higher. Positive sum games are always to be preferred over zero or negative sum games.
You cannot divorce the economy from politics.
Not exactly true.
https://en.wikipedia.org/wiki/Fiscal_multiplier#United_State...
> More recently three economists with the NBER and IMF have published a working paper examining economic features that impact fiscal multipliers. They found that the output effect of an increase in government consumption is larger in industrial than in developing countries, the fiscal multiplier is relatively large in economies operating under predetermined exchange rate but zero in economies operating under flexible exchange rates; fiscal multipliers in open economies are lower than in closed economies and fiscal multipliers in high-debt countries are also zero.
US has an open economy, high debt, and flexible exchange rate.
>They start by looking at multipliers for government consumption... In developed countries, they find that the long-run multiplier is 0.66.
but then
>However, government investment—things like infrastructure building—results in higher multipliers. Here, the long-run multiplier was 1.5 for developed countries
So that shows that the "what" matters. Here's the "when":
>They examined several European countries and showed that fiscal multipliers are substantially higher than previously assumed. Previous IMF studies had assumed multipliers of roughly 0.5. In other words, a €1 injection of government money into the economy would only have a net benefit of 50 centimes. By contrast, Messrs Blanchard and Leigh found that the actual multipliers in the early years of the crisis were “substantially above 1”.
That being based on a 2013 study by the IMF, later than the 2011 study quoted on Wikipedia.
http://www.economist.com/blogs/freeexchange/2013/08/fiscal-p...
[1] http://krugman.blogs.nytimes.com/2014/09/24/having-it-and-fl...
So the reasonable question is why do you expect consistency from an apparatus of the power elite beyond consistently covering their own dirty tracks?
Krugman's point is that David Brooks' criticism of the flaunting of wealth does not jibe with Brooks opposition of progressive taxation.
Whatever else you may think of Krugman, he is a pretty smart guy and if you want to try to find flaws in his arguments you should try to pay careful attention to what he actually says.
"...for many of the rich flaunting is what it’s all about...So it’s largely about display..."
Then he says:
"...the truly rich are so removed from ordinary people’s lives that we never see what they have."
So I guess Krugman thinks that the rich flaunt their wealth for no reason, since ordinary people never see it.
Krugman is just a ridiculous hack.
Except he didn't say that.
It seems you couldn't be bothered to spend 2 minutes reading ~500 words and decided to compare on headline alone.
Aside from Larry and Sergey, who is making a billion dollars a year and does not fit this exception?
If you are cool with the morality or utility argument that you need to take from the haves within a country to help the have-nots/increase velocity of money/etc., it seems to me you should at least be pre-disposed to do the same on a world-wide basis where the inequality/need is much greater. And if you are reading this in the US, the rich is you. Roughly $32k a year in income makes you a one-percenter on a worldwide basis.