Wednesday, June 26, 2013

Some Questions on Henderson re Atkinson/Krugman

Here Henderson gives his two cents on the debate between Krugman and Atkinson regarding taxes and wealth. While I am neither a friend of Krugman nor Atkinson and not even halfway aligned with any thought. I think that the number of 60 to 75% is really high in percent of income terms. I also find it baffeling how they arrive at exactly these numbers. Is it guess-work or is this rooted in deeper optimization of tax numbers. Did they do a general partial differential equation that yielded these values? If yes, what where the differences in variables and coefficients?

I am not surprised that Krugman didn't come out against wealthy men not having earned their wealth, because he himself is not a member of the poverty club. Atkinson is even less willing to join this club.

Remarkable however was Krugmans answer to whether there is a financial innovation that was unambigiously good. Well, is there ANY innovation where nobody could find fault and negative consequences. The automobile displaced horse carriages, certainly a drawback for them, and uses up fossil fuels. The train wastes uranium, nature or steel, depending on your views on energy creation.

In my view there no pareto-optimal inventions, neither in the financial sector, nor in any other. There are always some that lose, although it might be better overall for a lot of people by default (because they opt for it!). I still think that commodity options and futures are important financial instruments that have yielded more good than bad (not so much HFT imo, but this is mostly because of people and not much more).

Krugman advocates an international tax cartel (of course, he doesn't use that term) of governments to coordinate their attempts to raise marginal tax rates so that high-income people have few ways out.

Yeah, I think all leftists and even some rightists favor a world-wide tax cartel to punish the evil evaders. I wonder whether they thought that through and based it on more than jealousy. What if the rich would forgoe extra economic activity due to shielded income? What if they would change their mind and stop investing and earning money, because in the end the extra buck is not worth the time-spent?

I believe this is not the world, we would want to live in, especially not in the US or in Europe. It would mean that the rich would stop buy luxury items and those items are the bread and parcel of most of Europe's and USes high tech industry. What if Bill & Melinda Gates would stop funding their charities, I doubt that would be a pleasant outcome; especially for the poor.

Krugman jokes that we could get Congress to go along with higher tax rates if we got the Cincinnati office of the IRS involved. Interestingly, when he gets little audience reaction, he says, "Sorry. That's a little bit too topical." My guess is that the audience felt uncomfortable admitting what the IRS did. This is actually one of the few things about Krugman that I like: he will sometimes "go off the reservation" and admit certain things that "his side" doesn't like to admit. Of course, in this case--and here's what I don't like--Krugman seemed to approve of what the IRS did.

I concur and imo, this is frightening. He actually believes that a government body should use ideology to hunt down its enemies. This is an indication that for the "bastardized" US liberalism, he would advocate an autocracy as better than a democracy.

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