I want to clarify, since there's a lot of confusion around this point, that the peak of the Laffer curve is not at all where we want to be. The peak of the Laffer curve is where you can't raise any additional tax revenues by raising tax rates, but maximizing tax revenues at all costs is a terrible idea. To get to that point, you have to pass through the part of the curve where you're destroying several dollars worth of private wealth to get one extra dollar of tax revenue. We don't want to be anywhere near the peak.
There's also the issue of the short-term versus long-term Laffer curve. There's a portion of the curve where raising tax rates will increase revenues in the current year, but will destroy enough private wealth to impede growth of the tax base, resulting in lower tax yields along all points of the curve in future years.
The right side of the Laffer curve was interesting in the pre-Reagan era, when it was relevant, but there are a lot of underappreciated subtleties to the left side, as well.
That's a feature. "We should only have the regulations which improve on laissez-faire" is a statement even many libertarians could endorse. It's not, however, consistent with the reality of how our system of government works.
First, the U.S. effectively subsidizes pharmaceuticals for the rest of the world, because those countries bargain through their national health care systems for lower prices on drugs.
I really don't understand why this isn't a major diplomatic issue. Americans are literally dying so that Europeans can avoid paying their fair share of R&D costs.
Okay, I think I see what I got wrong here. Allowing the landlord to deduct mortgage interest and depreciate the principal is needed to prevent double taxation. The tenants still pay the mortgage payment and then some (profit) with no deduction, but since they're already taxed on that income, only the "and then some," which is the landlord's value added, should be taxed. So the landlord's deductions don't create a distortion in favor of renting, and the personal mortgage interest deduction does create a distortion in favor of buying.
Barring language in the rental agreement explicitly allowing this, a reasonable default rule is that making these kinds of modifications should be considered a breach of contract by the landlord due to the fact that this is not something one would reasonably expect in an apartment. The tenant would be entitled to collect damages and/or to get a court order preventing the installation. Assuming that the tenant was notified in advance, of course---doing it secretly would probably fall afoul of some criminal voyeurism laws, and rightly so.
On the other hand, if the landlord wanted to make accepting the cameras a condition of leasing the apartment, at the time of signing the initial release or renewing, then that would be within his rights, since it's his property, and he's under no obligation to rent it all. I'm not actually aware of any laws forbidding this now---though I could be wrong---I think it's just something that people don't do, because the value to the landlord of having the cameras is less than what most tenants would require in terms of rent reduction to accept them.
I think Bryan Caplan would disagree, at least if the tenant were female.
There's no evidence that Bryan Caplan favors legal discrimination between men and women. This game of yours of substituting snark and innuendo for intelligent commentary is getting old. If I were feeling more charitable, I'd say this was beneath you, but frankly, I doubt it.
Basically, politics makes people stupid, whereas markets make people smart. So we should aim to move as many decisions as possible out of the realm of politics and into the realm of markets, except where the benefits of a political approach are so overwhelming that they swamp the political stultification effect.
The libertarian, it seems to me, relies too much on institutional rationality for this view to be practical.
This is actually one of the main libertarian critiques of leftism. See, for example, the idea that the failure of laissez-faire markets to produce perfectly optimal outcomes necessarily justifies government intervention. Or the idea that behavioral economics is necessarily a justification for government intervention. Actually, that's a subset of the first one. Come to think of it, they all come down to some variation on the first one.
One of the key observations supporting skepticism of government interventions is that people tend to be more rational when making market decisions than when making political decisions, because they directly, and usually relatively quickly, reap the benefits and bear the costs of their market decisions, whereas the costs and benefits of political decisions tend to be uncertain (a single vote is rarely decisive), widely dispersed, and often far removed in time from the point of decision-making. You might as well flip a coin, for all the difference it will make to you, personally.
In the US, you literally can't be poor if you're working full time and have no dependents. The minimum wage puts you at around 130% of the poverty line. It's also really easy to get a job that pays more than minimum wage. Not right now, perhaps, but in virtually any circumstances other than a once-in-a-lifetime recession.
To be poor, you either have to be unable to hold down a job, or to have more dependents than your income can support. Acting in a way that results in you being unable to hold down a job: Bad decision. Having children you can't support: Bad decision. QED.
This? This is why I hate leftists. The "Inexplicable Poverty Fallacy." It can happen to anyone! At any time! For no reason whatsoever!
In the first world, poverty is generally attributable to personal fish-ups. There are exceptions, of course---severe disabilities, mostly---but they are the exception, rather than the rule. Any sane approach to dealing with first-world poverty needs to account for the fact that the poor as a rule have a track record of making bad decisions. And you're not doing them any favors by playing dumb.
If we sent everyone in the US a voucher that could only be used on mortgage interest, it would have the same practical effect.
No, not really. If the government sends me a mortgage interest voucher, I can take out a mortgage whose annual interest payment is equal to the value of the voucher and get the house (or money) interest-free. With the deduction, I have to pay (100 minus my marginal tax rate)% of the interest out of pocket.
He's talking about tax deductions for personal expenses. As far as I know, there's virtually unanimous support for tax deductions for business expenses.
That said, it seems to me that allowing deduction of business expenses but not similar personal expenses creates distortions against doing stuff yourself. For example, if you buy landscaping equipment for personal use, you can't deduct those. But the owner of a landscaping service can, and this creates a distortion in favor of hiring a landscaping service instead of doing it yourself.
I'm fairly certain that this is a myth. If a skilled worker starts a business and it doesn't work out, he doesn't go on welfare---he just gets another job.
You’re right. It’s not simply that the government likes control; in many cases, the voters like controlling the lives of the poor as well. But this is hardly an endorsement.
What's wrong with this? Paternalism is inappropriate for most of the population, but the poor are for the most part a self-selected sample. They're poor because they've done a bad job of managing their own lives. We tried letting them call the shots and it didn't work. It's not clear that paternalism is a worse solution than handing them money with no strings attached.
apart from talk about ‘getting the incentives right’ (which a liberal would be entirely amenable to!)
Except you're not. Leftism is very explicitly about getting the incentives wrong and increasing the amount of moral hazard in society. If you screw up, we'll bail you out. If you succeed, we'll make you pay. You have your reasons, granted, but blunting incentives is what you're all about.
This is kind of tangential, but is it actually true that homeowners pay less than renters, assuming dwellings of equal value? Someone who owns his own home can deduct his mortgage interest, but a landlord can deduct his mortgage interest as a business expense---on top of depreciation of the principal, I believe---which results in lower rents. If anything, it seems like the tax code slightly favors renting, due to depreciation.
I could be wrong about this, since it seems to be pretty much universally agreed that the mortgage interest deduction is a distortion favoring ownership, but if I am, I don't know why.
Our government did temporarily cut payroll taxes. Of course, they cut the employee side instead of the employer side. Because they're serious about looking like they're solving problems.
*Comment archive for non-registered commenters assembled by email address as provided.
On “Addressing Income Inequality”
I want to clarify, since there's a lot of confusion around this point, that the peak of the Laffer curve is not at all where we want to be. The peak of the Laffer curve is where you can't raise any additional tax revenues by raising tax rates, but maximizing tax revenues at all costs is a terrible idea. To get to that point, you have to pass through the part of the curve where you're destroying several dollars worth of private wealth to get one extra dollar of tax revenue. We don't want to be anywhere near the peak.
There's also the issue of the short-term versus long-term Laffer curve. There's a portion of the curve where raising tax rates will increase revenues in the current year, but will destroy enough private wealth to impede growth of the tax base, resulting in lower tax yields along all points of the curve in future years.
The right side of the Laffer curve was interesting in the pre-Reagan era, when it was relevant, but there are a lot of underappreciated subtleties to the left side, as well.
On “The Zen of Twee”
Why are you subbing in for Megan McArdle under a different name?
On “Testing ideology”
That's a feature. "We should only have the regulations which improve on laissez-faire" is a statement even many libertarians could endorse. It's not, however, consistent with the reality of how our system of government works.
"
As an actual liberal, I endorse your use of the term "social democrat."
On “Addressing Income Inequality”
First, the U.S. effectively subsidizes pharmaceuticals for the rest of the world, because those countries bargain through their national health care systems for lower prices on drugs.
I really don't understand why this isn't a major diplomatic issue. Americans are literally dying so that Europeans can avoid paying their fair share of R&D costs.
"
Government spending in the Truman/Eisenhower era was tilted much more heavily towards military and away from domestic welfare spending than it is now.
"
Well, for one, PPP-adjusted median income in France is 63% of what it is in the US. Sweden is doing a bit better, at 74%.
On “Tax Credits and Subsidies”
Okay, I think I see what I got wrong here. Allowing the landlord to deduct mortgage interest and depreciate the principal is needed to prevent double taxation. The tenants still pay the mortgage payment and then some (profit) with no deduction, but since they're already taxed on that income, only the "and then some," which is the landlord's value added, should be taxed. So the landlord's deductions don't create a distortion in favor of renting, and the personal mortgage interest deduction does create a distortion in favor of buying.
"
Q: What do a libertarian landlord and a left-wing tenant have in common?
A: A strong sense of entitlement to the landlord's property.
"
Barring language in the rental agreement explicitly allowing this, a reasonable default rule is that making these kinds of modifications should be considered a breach of contract by the landlord due to the fact that this is not something one would reasonably expect in an apartment. The tenant would be entitled to collect damages and/or to get a court order preventing the installation. Assuming that the tenant was notified in advance, of course---doing it secretly would probably fall afoul of some criminal voyeurism laws, and rightly so.
On the other hand, if the landlord wanted to make accepting the cameras a condition of leasing the apartment, at the time of signing the initial release or renewing, then that would be within his rights, since it's his property, and he's under no obligation to rent it all. I'm not actually aware of any laws forbidding this now---though I could be wrong---I think it's just something that people don't do, because the value to the landlord of having the cameras is less than what most tenants would require in terms of rent reduction to accept them.
I think Bryan Caplan would disagree, at least if the tenant were female.
There's no evidence that Bryan Caplan favors legal discrimination between men and women. This game of yours of substituting snark and innuendo for intelligent commentary is getting old. If I were feeling more charitable, I'd say this was beneath you, but frankly, I doubt it.
"
That name is a bit misleading. It's actually a sophomore-level class.
"
Basically, politics makes people stupid, whereas markets make people smart. So we should aim to move as many decisions as possible out of the realm of politics and into the realm of markets, except where the benefits of a political approach are so overwhelming that they swamp the political stultification effect.
"
The libertarian, it seems to me, relies too much on institutional rationality for this view to be practical.
This is actually one of the main libertarian critiques of leftism. See, for example, the idea that the failure of laissez-faire markets to produce perfectly optimal outcomes necessarily justifies government intervention. Or the idea that behavioral economics is necessarily a justification for government intervention. Actually, that's a subset of the first one. Come to think of it, they all come down to some variation on the first one.
One of the key observations supporting skepticism of government interventions is that people tend to be more rational when making market decisions than when making political decisions, because they directly, and usually relatively quickly, reap the benefits and bear the costs of their market decisions, whereas the costs and benefits of political decisions tend to be uncertain (a single vote is rarely decisive), widely dispersed, and often far removed in time from the point of decision-making. You might as well flip a coin, for all the difference it will make to you, personally.
"
I only respond to Brandon’s comment to highlight it, not counter it.
From each according to his ability, I guess.
"
In the US, you literally can't be poor if you're working full time and have no dependents. The minimum wage puts you at around 130% of the poverty line. It's also really easy to get a job that pays more than minimum wage. Not right now, perhaps, but in virtually any circumstances other than a once-in-a-lifetime recession.
To be poor, you either have to be unable to hold down a job, or to have more dependents than your income can support. Acting in a way that results in you being unable to hold down a job: Bad decision. Having children you can't support: Bad decision. QED.
"
This? This is why I hate leftists. The "Inexplicable Poverty Fallacy." It can happen to anyone! At any time! For no reason whatsoever!
In the first world, poverty is generally attributable to personal fish-ups. There are exceptions, of course---severe disabilities, mostly---but they are the exception, rather than the rule. Any sane approach to dealing with first-world poverty needs to account for the fact that the poor as a rule have a track record of making bad decisions. And you're not doing them any favors by playing dumb.
"
It's not a fallacy if the glassmaking industry donated money to your campaign fund!
"
If we sent everyone in the US a voucher that could only be used on mortgage interest, it would have the same practical effect.
No, not really. If the government sends me a mortgage interest voucher, I can take out a mortgage whose annual interest payment is equal to the value of the voucher and get the house (or money) interest-free. With the deduction, I have to pay (100 minus my marginal tax rate)% of the interest out of pocket.
"
He's talking about tax deductions for personal expenses. As far as I know, there's virtually unanimous support for tax deductions for business expenses.
That said, it seems to me that allowing deduction of business expenses but not similar personal expenses creates distortions against doing stuff yourself. For example, if you buy landscaping equipment for personal use, you can't deduct those. But the owner of a landscaping service can, and this creates a distortion in favor of hiring a landscaping service instead of doing it yourself.
"
I'm fairly certain that this is a myth. If a skilled worker starts a business and it doesn't work out, he doesn't go on welfare---he just gets another job.
"
You’re right. It’s not simply that the government likes control; in many cases, the voters like controlling the lives of the poor as well. But this is hardly an endorsement.
What's wrong with this? Paternalism is inappropriate for most of the population, but the poor are for the most part a self-selected sample. They're poor because they've done a bad job of managing their own lives. We tried letting them call the shots and it didn't work. It's not clear that paternalism is a worse solution than handing them money with no strings attached.
"
apart from talk about ‘getting the incentives right’ (which a liberal would be entirely amenable to!)
Except you're not. Leftism is very explicitly about getting the incentives wrong and increasing the amount of moral hazard in society. If you screw up, we'll bail you out. If you succeed, we'll make you pay. You have your reasons, granted, but blunting incentives is what you're all about.
"
This is kind of tangential, but is it actually true that homeowners pay less than renters, assuming dwellings of equal value? Someone who owns his own home can deduct his mortgage interest, but a landlord can deduct his mortgage interest as a business expense---on top of depreciation of the principal, I believe---which results in lower rents. If anything, it seems like the tax code slightly favors renting, due to depreciation.
I could be wrong about this, since it seems to be pretty much universally agreed that the mortgage interest deduction is a distortion favoring ownership, but if I am, I don't know why.
On “Troubleshooting Inequality”
(ha ha! you can’t, travel agents don’t exist anymore, thanks to the Internet making it possible for us to do all that work ourselves.)
No, they do exist. Got my tickets to Hong Kong last year from a travel agency in Chinatown. I don't know how, but they manage to get better deals.
"
Our government did temporarily cut payroll taxes. Of course, they cut the employee side instead of the employer side. Because they're serious about looking like they're solving problems.
*Comment archive for non-registered commenters assembled by email address as provided.