Avi's Economics Thread

[Revoltingest]

And that's what elections have become here in the US. It's not who the "best candidate" is, it's who will do the least damage, or who has the better haircut. It's ridiculous.

Break the mold!
Vote 3rd party.
It won't work, but you'll feel better.

 

[freethinker44]

Any support for the underlined claim? (I'm skeptical)

If we only pay consumption taxes nearly all taxes paid will come from consumers. The taxes business will have to pay from their production costs will be shifted onto consumers, and the vast majority of consumers are middle-class, therefore the vast majority of a consumption tax will not be paid by businesses or rich people.

 

[ions]

So far it's 3 expecting de-valuation, and none against. Does anyone see a trend ?

I would see the US$ strengthen in the short term (i.e. 2014). The Fed's tapering quantitative easing, while there is still a lack of fundamental growth in the economy, means a volatile, rocky year. Some are even equating it to 1929. While this may spell bad news for the US economy and the global economy as a whole, US$ (and yen) are considered safe-haven currencies. Therefore as people unwind carry trades, or choose to park assets in safer 'currencies', the US dollar will strengthen. This is known as flight to safety. We have seen this already in Jan. That being said, if US economy does not rekindle fundamental growth, eventually the world markets will find an alternative 'safe' currency. Euro? I don't think so. Maybe it will be Gold.

 

[Revoltingest]

If we only pay consumption taxes nearly all taxes paid will come from consumers. The taxes business will have to pay from their production costs will be shifted onto consumers, and the vast majority of consumers are middle-class, therefore the vast majority of a consumption tax will not be paid by businesses or rich people.

Since they also consume more, this means quantitative analysis would be necessary to predict the effect.
Moreover, it could be progressivized by selective taxing & perhaps other means. Such things would certainly
be addressed if it ever were seriously considered & discussed.

 

[freethinker44]

Since they also consume more, this means quantitative analysis would be necessary to predict the effect.
Moreover, it could be progressivized by selective taxing & perhaps other means. Such things would certainly
be addressed if it ever were seriously considered & discussed.

Maybe, but I still don't see the point in adopting a new system to fix the old if the new system isn't going to do anything better and is going to have the same problem as the old one. It all boils down to: rich people need to pay more. We can't make the people holding less than 20% of the nations wealth pay most of the nations taxes, and expect to prosper as a nation.

Another option I like, which Finland implements, is not only implement progressive taxes, but progressive penalties for crimes and infractions. The wealthier you are, the bigger your fine is.
Finnish Drivers Don't Mind Sliding Scale, But Instant Calculation Gets Low Marks - WSJ.com

 

[Sunstone]

No, but I'm an astrologer. However, I generally find both fields to operate according to the same principles, and to have about the same predictive accuracy: if you don't get the prediction you like, find another one who will tell you the prediction you want to hear.

To be sure, some economists have much better track records predicting things than other economists. For instance, those economists who predicted a very drawn out, slow recovery from the Great Recession have been demonstrated to have been substantially correct. People ignore the varying track records of individual economists at their own peril.

 

[BlandOatmeal]

Did you ever wonder what determines the value of the US dollar ? Probably not. But if you did, it makes you a nerd, like me ....

I guess I'm not a nerd. Maybe I was in junior high, but now my wife thinks I'm a plugger.

I didn't read the links, so please fill me in. When you talk about the US dollar "losing value", I assume you mean that it will be able to buy fewer goods and services. In order to determine that, you have to assign values to those goods and services.

Let me make a stab at how these values have done historically.

Item: When I was growing up, we had a 78 rpm phonograph AND AM radio receiver, in one unit! How's that for progress? Both were housed in a handsome piece of furniture, made of real wood and probably laquered by hand. How much would that victrola be worth today? If it were preserved in its 1950s condition, it would probably fetch well over $100. Functionally, the machine played scratchy records and received crackly music and information over the airwaves. I imagine that today, we have hand-held devices that can do that and more, yet cost much less. Which device would be used, in comparing the early-1950s dollar with the dollar of 2014? The victrola? or the hand-held thingy?

Do you see what I mean? It's hard to make these comparisons. Let's just equalize things a bit. In the 1960s, my parents earned a certain income; and we owned a vehicle and a house. Nowadays, my wife and I earn a certain income, much higher than that my parents earned; but we don't own much more or much less: We own a house and TWO vehicles, but our house is worth less than the appraised value of the house my parents owned. We owe money on this house, and they owed money on theirs, and this might complicate things; but let's keep things simple. For all practical purposes, we're living roughly on a par with the way our parents lived; and we, like they, keep a rough balance between income and expenses -- saving up for a nestegg, just as they did. If you wanted to compare the "value of the dollar", then, between now and the 1950s and 1960s, a good approximation would be a comparison of incomes: Incomes have gone up; but what we're able to buy with those incomes has remained roughly the same.

Using the same reasoning, I guess you could roughly guestimate the decrease of the dollar's value as the inverse of our increase in wages. You are guessing that the dollar will devalue about 3%, so you're guessing that average wages will increase about 3%. Without having to sharpen my pencil, I'd say you're pretty much on target.

Shalom shalom

 

[Revoltingest]

Maybe, but I still don't see the point in adopting a new system to fix the old if the new system isn't going to do anything better and is going to have the same problem as the old one. It all boils down to: rich people need to pay more. We can't make the people holding less than 20% of the nations wealth pay most of the nations taxes, and expect to prosper as a nation.

Advantages in consumption based taxation:
- Encourages earning.
- Encourages saving
- Discourages consumption. On this point, I like the idea of reduced economic waste, eg, consumer goods which don't last, homes bigger than necessary. I never liked the public policy of needing an ever expanding economy....not a sustainable model.

Consider the effects of a tax policy which drive business overseas.
In the news...
http://www.nytimes.com/2014/02/15/w...a-set-off-safety-worries.html?ref=health&_r=2

Another option I like, which Finland implements, is not only implement progressive taxes, but progressive penalties for crimes and infractions. The wealthier you are, the bigger your fine is.
Finnish Drivers Don't Mind Sliding Scale, But Instant Calculation Gets Low Marks - WSJ.com

There is merit in this. But I've friends from there who describe how onerous it is for some people. A kid they knew was fined the equivalent of a year's wages for some traffic infraction. (I don't recall what it was.)

 

[freethinker44]

There is merit in this. But I've friends from there who describe how onerous it is for some people. A kid they knew was fined the equivalent of a year's wages for some traffic infraction. (I don't recall what it was.)

It's supposed to be based off of income, can't comment on your friends case, maybe he was given the fine based on his parents income, I don't know, but I think this is a great idea. And it's supposed to be onerous, it's punishment.

 

[Revoltingest]

It's supposed to be based off of income, can't comment on your friends case, maybe he was given the fine based on his parents income, I don't know, but I think this is a great idea. And it's supposed to be onerous, it's punishment.

Well, there is punishment which discourages behavior, & there is punishment which devastates the perp without
commensurate discouragifacation. Lengthy prison sentences for minor drug offenses is an example of the latter.

 

[freethinker44]

Consider the effects of a tax policy which drive business overseas.
In the news...
http://www.nytimes.com/2014/02/15/w...a-set-off-safety-worries.html?ref=health&_r=2

I'm a big fan of tariffs. I would tax the imports so their costs were comparable to domestic goods. No need to sacrifice safety for price that way.

 

[Revoltingest]

I'm a big fan of tariffs. I would tax the imports so their costs were comparable to domestic goods. No need to sacrifice safety for price that way.

Tariffs can mask fundamental problems of discouraging business, can increase
costs, & can reduce trade because of retaliation. I don't like'm in most cases,
since they tend to reduce economic flexibility, & foster inefficiency. Moreover,
they smack of protectionism, & foster corruption.

 

[freethinker44]

Well, there is punishment which discourages behavior, & there is punishment which devastates the perp without
commensurate discouragifacation. Lengthy prison sentences for minor drug offenses is an example of the latter.

True, but having a flat fine set for everyone devastates some while for others who could easily afford it may as well just be immune to the law. For example, as a full-time college student with two kids, a simple speeding ticket is pretty bad to me, especially in NY where I will probably pay around $200. And drunk driving? Forget about it, completely devastating to me, you might as well be fining me trillions of dollars, either way I can't pay it. Now take someone on the higher end of the income scale, do you think they care as much about breaking those laws as I do? Maybe, but I am willing to bet they are not persuaded by the fine.

 

[Revoltingest]

True, but having a flat fine set for everyone devastates some while for others who could easily afford it may as well just be immune to the law. For example, as a full-time college student with two kids, a simple speeding ticket is pretty bad to me, especially in NY where I will probably pay around $200. And drunk driving? Forget about it, completely devastating to me, you might as well be fining me trillions of dollars, either way I can't pay it. Now take someone on the higher end of the income scale, do you think they care as much about breaking those laws as I do? Maybe, but I am willing to bet they are not persuaded by the fine.

We weren't disagreeing on this aspect, so you needn't try so hard to convince me.

 

[freethinker44]

Tariffs can mask fundamental problems of discouraging business, can increase
costs, & can reduce trade because of retaliation. I don't like'm in most cases,
since they tend to reduce economic flexibility, & foster inefficiency.

But we're trying to discourage businesses that go over seas and sell us unsafe products. If we want businesses to keep their production domestic and if we want consumers to buy domestic, I don't see a problem with a system that does exactly that.

 

[freethinker44]

We weren't disagreeing on this aspect, so you needn't try so hard to convince me.

I see.

 

[Avi1001]

No, but I'm an astrologer. However, I generally find both fields to operate according to the same principles, and to have about the same predictive accuracy: if you don't get the prediction you like, find another one who will tell you the prediction you want to hear.

Hehe, good one !

But I think a better analogy is between an economist and a cosmologist. Both deal quantitatively with highly complex systems and there is as likely a chance of modeling the economy as the Big Bang .

 

[Revoltingest]

But we're trying to discourage businesses that go over seas and sell us unsafe products. If we want businesses to keep their production domestic and if we want consumers to buy domestic, I don't see a problem with a system that does exactly that.

Multiple approaches can have the same goal. The question is which is best, not just identifying one which works. If companies are driven overseas by safety standards which apply to domestic companies, but not to overseas ones, then tis best to address this difference. If tariffs are used, then the affected country might retaliate with tariffs of their own, which has a balkanizing effect on the world economy. I prefer taxation & regulation which are most compatible with economic liberty...so everyone wins.

 

[freethinker44]

Multiple approaches can have the same goal. The question is which is best, not just identifying one which works. If companies are driven overseas by safety standards which apply to domestic companies, but not to overseas ones, then tis best to address this difference. If tariffs are used, then the affected country might retaliate with tariffs of their own, which has a balkanizing effect on the world economy. I prefer taxation & regulation which are most compatible with economic liberty...so everyone wins.

Whatever works I guess. I was just thinking we could use taxes and tariffs to discourage them from going overseas and at the same time make up lost revenue with taxes on those who do. As long as it solves the problem I'm happy.

 

[Revoltingest]

Whatever works I guess. I was just thinking we could use taxes and tariffs to discourage them from going overseas and at the same time make up lost revenue with taxes on those who do. As long as it solves the problem I'm happy.

The important thing is to never focus solely on solving a problem.
Rather, tis best to optimize everything affected by a policy.
This is how it worked when I was a design engineer:
To solve a problem, one should find a solution which minimizes creation of new
problems, while solving the problem, & also improving other problem areas.
Unanticipated consequences are the horror show one wants to avoid.