tag:blogger.com,1999:blog-582368152716771238.post7848867427501118721..comments2024-03-18T07:59:05.430-05:00Comments on The Grumpy Economist: Krugman on optimal taxesJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger60125tag:blogger.com,1999:blog-582368152716771238.post-25679964615971834172019-07-25T12:49:26.485-05:002019-07-25T12:49:26.485-05:00Are you hiring, David?Are you hiring, David?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-24913766561685576032019-02-02T14:51:22.404-06:002019-02-02T14:51:22.404-06:00Personally, I like how Krugman writes when he stic...Personally, I like how Krugman writes when he sticks to the internal logic and empirical validity of economic theories. It's always concise, clear and a good way to boil down otherwise technical material, though we can all disagree about how he borrows from the literature.<br /><br />On the other hand, his policy discussions seldom are as captivating. He knows one story: rich people rig the system in their favors. That rent seeking exists and that you can't assume blue colar Joe to be lobbying for high end tax cuts is obvious. Yet, the world is not solely a hobbesian field pitting groups of people against each other based on income, let alone skin or gender. One fundamental reason is that 'the rich' is a vague term and, no matter how you cut the income or wealth scales, membership changes. Another reason is that we vary on a plethora of dimensions (as individuals, we are unique) and we should always keep in mind any bundling is bound to be approximately correct at best.<br /><br />And I say this as someone who is not very libertarian ideals, so it is not exactly political dissonance that makes me critical of Krugman.<br /><br />By the way, professor Cochrane, it is refreshing to see someone do some justice to the people whose idea they criticize. It gives me some hope that education and a genuine interest in talking about problems can get us somewhere.Stéphane Surprenanthttps://www.blogger.com/profile/12323914156735134263noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-77840040100892268162019-01-18T15:43:38.436-06:002019-01-18T15:43:38.436-06:00I would say his characterization of people who fav...I would say his characterization of people who favor a lower tax rate on the rich as frauds whose opinions are refuted by all the data suggests that he believes the putative 'optimal tax rate' is indeed an empirically demonstrated fact, rather than something that depends on one's preferred social welfare function.Anti-social scientisthttps://www.blogger.com/profile/17967800262908083204noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-88914033333916567222019-01-17T10:58:19.963-06:002019-01-17T10:58:19.963-06:00"It's ridiculous for Krugman to refer to ..."It's ridiculous for Krugman to refer to the 70% "optimal" rate like it were an empirically demonstrated conclusion."<br /><br />Did he? I read Krugman as asserting that 70% was not wrong (or stupid or crazy). That's very different from asserting that 70% is right.<br /><br />Cochrane asserts that the jury is out on 70% and I think he and Krugman actually are in agreement on this.<br /><br />JZhttps://www.blogger.com/profile/12994372644670111315noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-80296734823255733202019-01-16T21:35:29.606-06:002019-01-16T21:35:29.606-06:00Diamond and Saez's conclusions - any conclusio...Diamond and Saez's conclusions - any conclusions meant to optimize 'utility' - rest on the highly subjective choice of a 'social welfare function.' You can get a wide range of results that are all equally scientifically valid based on what parameters you decide you like. It's ridiculous for Krugman to refer to the 70% "optimal" rate like it were an empirically demonstrated conclusion. It's not. There's a huge value judgment baked into it that largely predetermines the outcome. Indeed, if rich people really do derive no utility from their own marginal income, as is assumed by Diamond and Saez, why are they - as Krugman speculates - fighting so hard to keep it?Anti-social scientisthttps://www.blogger.com/profile/17967800262908083204noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-46273025289690440412019-01-16T21:25:32.521-06:002019-01-16T21:25:32.521-06:00Specialization increasing productivity makes it a ...Specialization increasing productivity makes it a positive sum game.Anti-social scientisthttps://www.blogger.com/profile/17967800262908083204noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-16207277783570048192019-01-16T21:20:25.449-06:002019-01-16T21:20:25.449-06:00Welfare given to poor people is given to them eith...Welfare given to poor people is given to them either regardless of how much they work or given precisely because they *aren't* working. Money "given" to rich people in the form of tax cuts is "given" to them for working.<br /><br />What happens when you pay someone not to work? Probably they'll work less. What happens when you pay someone to work more? They'll probably work more. So no, there is nothing funny about the conclusion you're mocking at all. It's basic logic.Anti-social scientisthttps://www.blogger.com/profile/17967800262908083204noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-46967830325624675662019-01-14T11:17:38.859-06:002019-01-14T11:17:38.859-06:00There's another subpoint to be made under Coch...There's another subpoint to be made under Cochrane's third point, which is the US taxes marginally at a household level and with the rise in dual income families along with persistent increases in assortative mating, high marginal tax rates for high earning couples could have a larger economic impact than forecast because these structural economic and family-unit changes took place during a period of comparatively low marginal tax rates and weren't empirically tested during the 70% or 91% marginal tax regimes.m.jednoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-22122021465067852512019-01-13T15:10:36.917-06:002019-01-13T15:10:36.917-06:00This is a fight about values, with Cochrane recapp...This is a fight about values, with Cochrane recapping his here:<br /><br /> "If, in particular, you look at the world circa 1850, or even in Krugman's cherished 1950, and you look at how amazingly better off we all are today, and you conclude that the government's job is to foster economic growth as fast as possible, then all bets are off."<br /><br />Astonishing reductionism. Is growth always and everywhere what matters most?<br /><br />I applaud Krugman for challenging the right about values (although I do think he is mistaken when he suggests nefarious motives).<br />JZhttps://www.blogger.com/profile/12994372644670111315noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-49286496534011918142019-01-13T13:19:22.194-06:002019-01-13T13:19:22.194-06:00Exactly. I'm a professional software engineer ...Exactly. I'm a professional software engineer in Silicon Valley, but also a history PhD with a focus on economic history. In my assessment, the disciplines from easiest to hardest rank this way: computer science, economics, ... [big gap] ... history. At least that's how I perceived it as a student who took course work pretty seriously. (If my goal had been to skate by with minimum effort, perhaps things would have looked different.)<br /><br />Especially if your goals are merely career-oriented, computer programming is damn simple for anyone who is at home with basic logic and ordinary algebra.<br /><br />Angushttps://www.blogger.com/profile/05105047658675931450noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-67759409975388230912019-01-11T14:27:03.576-06:002019-01-11T14:27:03.576-06:00Cochrane cites Mankiw et al. (2009) as his counter...Cochrane cites Mankiw et al. (2009) as his counter to the authority of Diamond and Saez (2011), cited by Krugman.<br /><br />The Diamond paper came later, and so might be expected to discuss and rebut the prior Mankiw work. And it does, in "Appendix: Comparison with Mankiw, Weinzierl, and Yagan (2009)". <br /><br />Cochrane cites heavily from Mankiw but does not mention Diamond's rebuttal. <br /><br />Does the Mankiw paper really remain standing after Diamond? Or, do the two authorities simply cancel each other, leaving a sense of "no decision"? <br /><br />Perhaps Cochrane himself could elaborate.JZhttps://www.blogger.com/profile/12994372644670111315noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-76581924326686937822019-01-10T16:44:26.321-06:002019-01-10T16:44:26.321-06:00I like 50%, on the principle that beyond that, the...I like 50%, on the principle that beyond that, the government is taking home more than you are, and that feels unfair. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-52507814173927473412019-01-10T16:35:08.389-06:002019-01-10T16:35:08.389-06:00You make a good argument for exempting art, and ot...You make a good argument for exempting art, and other assets whose value is extremely subjective, from such a scheme. But there are plenty of other assets whose value can be determined and/or predicted within a fairly narrow range that can be taxed on the minimum expected value. And there are already mechanisms in the law for claiming credits in later years if the value changes unexpectedly. <br /><br />But the principle is sound. Progressive taxation recognizes that the first dollars one earns are less disposable than the last ones, and therefore seeks to equalize the burden among all taxpayers.<br />If I have no money in the bank and I somehow earn my first million$ this year, should I pay tax on that at the same rate as Bill Gates's 1500th million$ of increase in his net worth?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-13529767343394228492019-01-10T16:18:19.087-06:002019-01-10T16:18:19.087-06:00I have always thought the Republicans' views o...I have always thought the Republicans' views of incentives to be "bass-ackwards" as well. rmshttps://www.blogger.com/profile/00696441741561338604noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-35104037350661955802019-01-10T10:43:28.757-06:002019-01-10T10:43:28.757-06:00Development of surplus. Specialization. Development of surplus. Specialization. Mykel G. Larsonhttps://www.blogger.com/profile/17128735421035292909noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-82461763549358330702019-01-10T05:08:35.967-06:002019-01-10T05:08:35.967-06:00For those who think that the economy is a zero-sum...For those who think that the economy is a zero-sum game, how do they explain the difference in standard of living between the modern man and the caveman?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-32601621236208512092019-01-10T03:36:44.753-06:002019-01-10T03:36:44.753-06:00I agree.I agree.Cokerhttps://www.blogger.com/profile/02631288439451432057noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-18599007843388073182019-01-09T16:47:40.181-06:002019-01-09T16:47:40.181-06:00Arguments about the marginal income tax rate are a...Arguments about the marginal income tax rate are academic in the absence of a specification of the taxable income bracket that the marginal tax rate applies to. <br /><br />Consider a marginal tax rate of 80% applied to the highest taxable-income bracket under two scenarios. The marginal income tax rates are: 10%, 20%, 30%, 50%, and 80% (a Fibonacci series). Under Scenario A, the income brackets (in thousands) are 15, 30, 45, 75, and 120, respectively. Under Scenario B, the income brackets (in thousands) are 15, 45, 105, 255, and 615, respectively. Taxable income less than or equal to 15,000 is exempt from tax (marginal rate = 0%). <br /><br />A taxpayer reporting $1 million in taxable income for the year experiences a marginal tax rate of 80% in either scenario, but experiences an average tax rate of 74% under Scenario A, versus an average tax rate of 54.8% under Scenario B. The taxpayer's after-tax income is $260,000 under Scenario A versus $452,000 under Scenario B.<br /><br />The top marginal income tax rate is not the whole story. <br />Old Eagle Eyehttps://www.blogger.com/profile/05270080708077871311noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-13010676640512652082019-01-08T17:50:20.531-06:002019-01-08T17:50:20.531-06:00The world currently is a dramatically negative-sum...The world currently is a dramatically negative-sum game. It is just physics, so much energy in, so much energy out. In the last few decades we have burned around fifty cubic miles of diesel equivalent. That is about one million gallons per cubic mile and in approximate dollars value about 100 trillion dollars. Value as energy "infinite". As in Southpark " .... and it's gone". There is no diesel cycle.<br /><br />Most of that energy was borrowed from the future using enormous amounts of credit. Maybe we are taxing the rich in the next generation.<br /><br />And, from the Jones article, what do we have to show for it: Walmart, Uber and Amazon!<br /><br />We will eventually get back to energy balance but not with this economy.Jim and Linda Kelleyhttps://www.blogger.com/profile/16837860762554929164noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-42251365418989169882019-01-08T11:52:00.397-06:002019-01-08T11:52:00.397-06:00No, the world is not a static, zero-sum game, in w...No, the world is not a static, zero-sum game, in which we fleece the rich one just enough to keep him [or her, John, please!] playing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-38975117467861185052019-01-08T11:40:24.821-06:002019-01-08T11:40:24.821-06:00MD's are probably a poor example because the l...MD's are probably a poor example because the licensing of MD's is absurdly restrictive in the USA.JWOhttps://www.blogger.com/profile/00004178958481335795noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-6599302884903858682019-01-08T11:21:07.247-06:002019-01-08T11:21:07.247-06:00When Steve Jobs worked hard and sold us all Iphone...<em>When Steve Jobs worked hard and sold us all Iphones, he made a ton of money, and apple made a huge profit.</em><br /><br />I find Steve Jobs a bad example, I think that he loved what he did and he would have done it for far less, but the guy running the paper mill that makes great toilet paper in probably driven mostly by profit, or a high paid wife with a higher paid husband.JWOhttps://www.blogger.com/profile/00004178958481335795noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-67152620838057260942019-01-08T11:05:24.352-06:002019-01-08T11:05:24.352-06:00And, correctly, I think, this literature by and la...<em>And, correctly, I think, this literature by and large agrees with the labor supply literature that once people have found jobs and careers, they tend to work about 40 hours a week or so even at pretty high tax rates.</em><br /><br />Does that include wives and more so wives who are mothers?<br /><br />"The majority of women with children prefer homemaking role" <br />https://news.gallup.com/poll/186050/children-key-factor-women-desire-work-outside-home.aspxJWOhttps://www.blogger.com/profile/00004178958481335795noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-25820616221096075752019-01-08T10:21:32.685-06:002019-01-08T10:21:32.685-06:00Quote "If a rich man works an extra hour, add...Quote "If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change,..." End quote.<br />That's not correct. The value to both parties is the same. Everyone else receives the work from him and that is their income raised, he spends the money and receives the work from them and that is his income raised.<br /> Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-65947564083392478562019-01-08T09:09:44.448-06:002019-01-08T09:09:44.448-06:00It should be an over riding principal of social we...It should be an over riding principal of social welfare policy design that the highest effective marginal "tax" rate from the withdrawal of benefits (through means testing etc) is no higher than the top marginal tax rate on earned income. :-)<br /><br />Personally I expect that the maximum should be about 50%. Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.com