John Vandivier Comments for 11/19 Readings

Quote 1: “The mistake here is to confuse the legislation’s stated purpose with its likely effects.” Landsburg, Steven E. (2007-11-01). The Armchair Economist (revised and updated May 2012): Economics & Everyday Life (p. 144). Free Press. Kindle Edition.

  • This really points to the difference between revealed preference and stated preference, which is a key component of economics and in fact sociology in general.
  • I was very happy with the author for taking the article and reversing the bias in the language, and then showing what a more neutral position would be.I appreciate the author’s focus on the importance of prices and his criticism of the Kinsley Tax Plan.

Quote 2: “Because the substitution and income effects work in opposite directions, the net effect of interest taxation on savings is uncertain.” Gruber, Jonathan (2012-12-01). Public Finance and Public Policy (Page 653). Worth Publishers. Kindle Edition.

  • I agree that the net effect is uncertain, but certainty is hard to find regarding any facet of economics. It seems to me that there is substantial evidence that empirically the substitution effect dominates the income effect.
  • I wonder if it is not considered in economics as a profession that some individuals intentionally underconsume today so that they can consume large amounts downroad. This is a form of the discussed intertemporal choice model, but the author indicates that the foundation of such model is consumption smoothing, which I think is preferred by some individuals but not all.
  • It often annoys me when I hear the term ‘tax incentive’ because I think of an incentive as something which makes an action more desirable compared to the free market. It seems to me that a tax incentive, or tax break, is only a return toward free market activity and not an actual incentive. I realize this is basically a semantic issue and not an important one I’m just venting. It seems to me that we could create two laws and call anything a ‘leg keeping incentive.’ The first law states that Americans will all have their legs broken while the second law states that the President and Congress have graciously given us a waiver. It seems to me that there would be no real change or incentive at all, except to annoy people by the pretense of state graciousness.

Quote 3: “’When it comes to [cutting] the estate tax, there is no case other than selfishness. In terms of substance, this estate tax argument is about as bad as it gets.’” Gruber, Jonathan (2012-12-01). Public Finance and Public Policy (Page 676). Worth Publishers. Kindle Edition.

  • Thankfully this quote, which made me very angry, was not actually from the author, although I suspect a bit of organic unity may be at play. It was actually from Larry Summers, former deputy secretary of the treasury.
  • The reason this quote irritated me is that someone such as myself is interest in accruing a large estate for two reasons. First, to try and maintain a comfortable life for myself. Second, to try and maintain a comfortable life for my family. Once I pass away, the purpose of the estate falls entirely into the second reason. I consider it absurd, in the technical logical usage, to say that wishing a comfortable life for my family is selfish.
  • Thankfully, Gruber goes over the opposing views. While Norquist is hardly my favorite character, I think he has been a great leader in the fight against the death tax.
  • In his own analysis, Gruber is very good on the math and pros/cons of capital gains tax, but he seems to have missed the obvious pro of increased quantity saved and invested across the economy. He mentions entrepeneurs and the effeciency of capital transactions, but these do not specifically address the fact that it’s more about entrepeneurs and pre-existing transactions becoming more effecient, there are entirely new capital transactions as well. Furthermore, he doesn’t seem to discuss the fact that savings differentials have a compounding and permanent benefit to the level of income in the economy.
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