Economics

Links From Around the Consortium

Brandon Christensen Current Events, Economics, History, Links , , , , , , , , , ,

Brian Gothberg’s piece on whaling and property rights deserves another look, as he channels Nobel laureate Ronald Coase:

According to a simple version of the Coase (1960) theorem, if the costs of transacting were very low, it would not much matter for the allocation of resources how stock rights were initially assigned. Trading ensures that rights would be put to their highest-valued uses, whatever they might be. If particular whales have more value as a source of pizza toppings than as the subject of a tourist?s photo session, whale-watching companies would be encouraged to sell any rights that they might have to whalers. If, on the other hand, particular whales have great value simply as magnificent creatures whose existence is to be nurtured and cherished, conservation groups would tend to end up with the rights to those whales.

Reality is not always simple, however. Transaction costs are sometimes high. In particular, there is a free-rider problem […]

Co-editor Fred Foldvary opines on how deregulation hurts the economy.  This is perhaps the best piece I have found on regulation and its effects on the economy at large.

I found this piece by Jeffrey Rogers Hummel on President Martin van Buren, whom he calls the ‘American Gladstone’.  If you’re itching for some historical information on one of the American republic’s little known presidents, I recommend you grab a cup of coffee and enjoy.

And, not to be outdone, Jacques Delacroix asks if the French have it better.  He is specifically referring to the debt-to-GDP ratios of France and the U.S.  The whole thing is good throughout, more so because Delacroix professes to hate the French.

Some Possible Consequences of a U.S. Government Default

Jeffrey Rogers Hummel Economics, History, Politics , ,

My Econ Journal Watch article on Treasury default is now available online. It appears in a special issue that is devoted to various articles with differing perspectives on the probability and consequences of a U.S. government default.

Releasing Income Taxes

foldvary Economics, Politics

Disgusting!  is my reaction to calls to candidates to release their income tax returns.

First of all, income tax records are supposed to be able to be kept private.

I can understand wanting to know candidates’ special-interest connections, but these usually do not show up in tax records.

Also, criticism of the low tax rates paid by some candidates is unwarranted. It is not a crime to seek to minimize one’s taxes. Moreover, given an income tax, there are good reasons why dividends and capital gains have lower tax rates. Dividends are already taxed by the corporate income tax. Long-term capital gains have already been taxed by inflation.

Ron Paul said regarding his taxes that his income was low compared to other candidates. What he should have said is, “my taxes are none of your business!” Moreover, the income tax should be abolished. Calls to reveal income tax forms imply approval of income taxation.

Disgusting!

A Libertarian sales-tax party?

foldvary Economics, Politics , , , ,

Is the Libertarian Party becoming a sales tax party?  The past several LP candidates for president have favored excise taxes.  I don’t recall any of them declaring, “Taxation is Theft!”  Now we have former New Mexico governor Gary Johnson as a leading candidate for the LP nomination for president, having abandoned the quest for the Republican Party nomination.  His tax plan as a Republican was a national sales tax, and that remains his tax plan as a Libertarian.

The main organization pushing for a national sales tax calls it a “Fair Tax.”  That is excellent propaganda, but a sales tax is no more fair or just than a tax on wages.  A sales tax violates free trade, makes products more expensive, and indirectly taxes wages and other incomes.  The advocates claim that a shift from income to sales taxes would not raise prices, since the income tax already raises prices, but they are wrong, because much of the burden of a tax on wages is on labor.  A sales tax has about the same excess burden or deadweight loss as an income tax.  Income taxes punish savings, but sales taxes punish borrowing, and there is no logical reason to favor savings over borrowing.  Savings and borrowing should be voluntary individual choices not skewed by taxes or subsidies.

The “Fair Tax” plan exempts business purchases, putting the burden on households.  That invites massive tax evasion, as folks would claim to be buying stuff for a business.  The response of government would be a sales tax gestapo.  If you did not have a receipt for your purchase and could not prove it was for business, you could go to prison.

If the Libertarian Party becomes a sales tax party, it will be unpopular and get little support.  Historically, sales tax advocacy has been a political loser.  This may well be why Gary Johnson got so little support as a Republican candidate for president.  If the LP nominates a sales taxer, I for one will promote the Free Earth Party (http://free-earth.foldvary.net/) as a truly libertarian alternative.

Austrian Economics and the Left

Brandon Christensen Current Events, Economics, History , , , ,

Matt Yglesias has a post up over at Slate.com on Ron Paul and Austrian Economics.  I won’t get into the details of what he got right and wrong about his largely honest attempt to explain the Austrian School to Leftists (the word “crank” was only used once!  A new high for the Left).  Instead, what I’d like to do is hone in on this whopper:

Many of the original Austrians found their business cycle ideas discredited by the Great Depression, in which the bust was clearly not self-correcting […]

Has Yglesias conveniently forgotten about Hoover’s attempts to prop up wages and his signing of the protectionist Smoot-Hawley tariff?

Why don’t Hoover’s policies get more attention by economists and journalists trying to understand and explain the Great Depression, or am I missing something?