Wednesday, August 03, 2011

Quotes of the day

It is easy to see the utilitarian argument for progressive taxation: rich people don't value $1 as much as the poor, so they should be taxed more on that final dollar, but there is a powerful countervailing force which is less obvious. Given income earning opportunities are lognormally distributed, the highest earners generate much more wealth than the middle income earners. Thus, under most parameterizations you find that lower tax rates on the high earners are better because these earners are wealth-producing machines. Higher tax rates on the most productive people affects these people first, which is the exact opposite of what you want, which is to affect them the least--as far as maximizing total wealth created. I find this literature compelling because I'm a libertarian, which is really just a dynamic utilitarian: I like to count up happiness over time in a world where people choose their actions in anticipation of certain payoffs, unlike simple utilitarians that assume output is given. Further, we tend to take for granted the unintended benefits of wealth in terms of science, art, and general human camaraderie; Marx's 'idiocy of rural life' comes from never having time to think. Unfortunately, I think the problem is worsened by the practical fact that people are more concerned with relative than absolute income; we are more envious than we are greedy.--Eric Falkenstein

Loathe them though everyone does, reliance on the credit rating agencies turns out to be a terrible habit that almost no one is willing to break.--

We spend a lot of time focusing on things that we can do that will have a positive affect on people's lives. And specifically on their economic lives. And so markets go up, markets go down. It's not for me to judge why.--Jay Carney, White House press secretary

Did you watch Tuesday’s Rose Garden talk about the debt-ceiling bill? The president was sullen, quietly desperate. He knows the economy stinks and that a double-dip recession might finish off his presidency. But, strangely, the more I watched him, the more his dire, downer mien gave me comfort to invest. Yes, he offered up his standard “tax the rich and corporations” shtick, but it lacked bite and conviction. The president now knows he’s run out of government-driven options for the economy – and that’s a very good thing for stocks. In the coming months, he’ll be forced to adopt a U.S. Chamber of Commerce-style plan for hiring and prove Steve “Obama is destroying America” Wynn wrong. In the end, no jobs, no re-election.--Evan Newmark

In the US the period of growth of government started at least as far back as 1887 (the ICC) and continued until 1977, after which deregulation, free trade agreements, and MTR cuts kicked in. In other countries one saw MTR cuts, deregulation and privatization. During the statism megatrend, the term ‘reform’ implicitly meant bigger government. That’s how governments reacted to crises. During the current (neoliberalism) megatrend, the tern ‘reform’ implicitly means less government. In the US this pattern has recently been hidden by health care, which is one aspect of the welfare state that was never completed in the statist era (although it was completed in all other developed countries.) During the megatrends, there are periods of consolidation, which are falsely viewed as countertrends. They are not countertrends. The trend is still intact. In the US the 1920s and 1950s were falsely viewed as countertrends. Don’t be fooled, we are only 1/3 of the way through the neoliberalism megatrend.--Scott Sumner

There is simply no other market that makes a plausible substitute for US securities. China is big enough, but its capital markets are primitive, and subject to heavy government intervention. Japan has lost its AAA, and has a massive debt overhang, to boot. None of the other AAA countries--or even all of them together--are big enough, and debt-hungry enough, to absorb the amount of capital flowing into the United States. Ultimately, some of the world's investors are going to have to wean themselves off of the illusory security of AAA debt, because obviously, we cannot keep issuing a trillion worth of AAA debt every year. Either we'll issue less debt, or we'll lose our AAA. The good news is that slowing down our issuance will raise the premium paid for the AAA that's left. So as we start putting our finances back in order, we'll enjoy lower interest rates that will help us do it.--Megan McArdle

Perhaps Wall Street banking is suboptimal utilization of Dartmouth minds, but I'm suspecting that finance is more efficient a space than media, government, or academia. So where should graduates go?--Cav

Let’s suppose that either of two acts of persuasion has occurred in that arena: a former moral absolutist is now a relativist of some kind, or a former relativist is now a confirmed believer in moral absolutes. What exactly will have changed when one set of philosophical views has been swapped for another? Almost nothing. To be sure you will now give different answers than you once would have when you are asked about moral facts, objective truths, irrefutable evidence and so on; but when you are engaged in trying to decide what is the right thing to do in a particular situation, none of the answers you might give to these deep questions will have any bearing on your decision.--Stanley Fish

Before [Carl] Lewis, after Lewis, no man had ever won long jump gold medals at TWO Olympics. The sport simply features too many variables and demands too many things to go right to repeat. Carl Lewis won FOUR STRAIGHT long jump golds. It is like painting the Sistine Chapel at least twice. Precision is the reason. It was Lewis' meaning. While other amazing jumpers could not make consistently legal jumps -- they would often foul by the smallest margins -- Lewis was almost freakish in his exactness. ... what if Carl Lewis' jump in Indianapolis had counted. Thirty feet. Some people who saw it swear it was 30 feet. "I know it was way past the world record," Lewis says. "But 30 feet? People say that. They say it was 30. But I don't know that. We'll never know." No. We'll never know. Still, it's something to think about. Thirty feet. That is like jumping from the 10 yard line into the end zone. It is like dunking from the three-point line. It pushes the imagination … which, after all, is what the greatest sports achievements do. That 30 foot-jump might be the greatest thing Carl Lewis ever did. It might be the greatest thing any athlete ever did. And, like the outline his feet and body left in the Indianapolis sand, it is gone.--Joe Posnanski
Photo links here and here.

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