Quotes of the day

Back in the 1970s at Chicago we were taught that you needed to use income compensated supply and demand curves when examining tax policy. I just assumed that everyone knew that when government collected taxes, the money was injected back into the economy through various means. I guess this insight only recently reached certain segments of the profession. Now of course the progressives that favor high taxes can always argue that the government expenditures go to activities that are so worthless that society is impoverished. In that case people keep working hard for the same reason Bangladeshis work hard. But I’m going to assume they don’t want to make that argument. ... It’s theoretically possible that we could have high tax rates and continue to have high levels of hours worked. But where are the successful examples of such a model? Where are the countries that have European tax rates and US levels of productivity and hours worked? If there are no such examples among the 200 countries in the world, then it is hardly “scientific” to claim we can choose such a model as casually as picking an item off a menu. The truly scientific approach would be to assume everything is endogenous.--Scott Sumner

Well, guess where we have a market that is (1) leveraged and opaque, that is (2) very big and tied to the credit markets; and is (3) viewed by investors as being diversifiable by holding a geographically broad-based portfolio; with (4) huge portfolios where assets and liabilities are apparently matched; and with (5) questionable analysis by rating agencies; and where (6) there are many entities, entities that may not approach default with business-like dispatch, and that have already mortgaged sources of revenue that are thought to support their liabilities Answer: The municipal market.--Rick Brookstaber

I am not claiming that children are worst off when their parents divorce if their parents were fighting a lot, or if they had abusive fathers. Rather, it appears that up to a significant point, children are better off in intact families even when their families are not ideal. If correct, this suggests a considerable gain not from encouraging marriage per se, but from policies that encourage families to stay together. One approach is for governments to subsidize intact families, whatever their income levels, rather than just subsidizing families with only one parent because they have lower incomes. Other approaches may be better, but the effects of single parenting on the development of children is a far more important question than the question of who can call themselves “married”, and other family issues that preoccupy the attention of many politicians and others.--Gary Becker