After Scott Sumner surveyed, with aghast, the uselessness of the leather-bound backgammon sets and other luxury goods on the FT’s HowtoSpendit website, he couldn’t help but post an argument for progressive consumption taxes. Sadly, his argument overlooks the most valuable aspect of “luxury” goods—their motivational effect. Talented people can earn a living with less work and entrepreneurial risk-taking—two things that grow the economy and increase employment. ... Read More
Piketty Overlooks the Circumstantial Nature of Economics
Despite the implausible economic theory underlying Capital in the Twenty-First Century (as addressed here, here, here, and here), Thomas Piketty nevertheless makes a valuable contribution by questioning Simon Kuznets' theory that income becomes more equally distributed as economies grow more prosperous. Instead, growing income equality (and inequality) appears to be highly circumstantial. When the U.S. economy prospered in the 1950s and ‘60s by educating its ... Read More
Scott Sumner makes a noteworthy point about taxes
“You cannot put the burden of a tax on someone unless you cut into his or her consumption. If the Obama tax increases did not cause Gates and Buffett to tighten their belts, then they paid precisely 0% of that tax increase. Someone else paid, even if they wrote the check. If they invested less due to the tax, then workers might have received lower wages. If they gave less to charity then very poor African's [SIC] paid the tax. I have no idea who paid, but I'm pretty sure ... Read More
