Tuesday, May 23, 2006

50 state economic freedom index

http://taxprof.typepad.com/taxprof_blog/2006/05/50state_economi.html

I'm kind of wondering just how good a measure this "economic freedom index" is...considering the top 10 and the bottom 10

Top 10:

Kansas
Colorado
Virginia
Idaho
Utah
Oklahoma
New Hampshire
Delaware
Wyoming
Missouri

Bottom 10:

Massachusetts
New Jersey
Ohio
Minnesota
Pennsylvania
Illinois
Rhode Island
Conneticut
California
New York



Notice that two of the largest economies in the U.S. are at the bottom of the list, and two of the smallest at top.

Saturday, May 13, 2006

Lessons learned from this semester

1.) Do not take classes 5 days a week while working full time. Thou shalt instead compress classes into 2 or 3 days. I do not get sleep anymore. I am under full burnout. I'm getting C's in most of my classes this semester. This is not good.

2.) Never, under any circumstances take an online math class. Especially in conjunction with above. It's not as if in actuality its that difficult for me to learn the material without an instructor. The main difficulty is getting screwed up because of interface problems. Like when it marks an answer wrong because it wants fractions and not decimals. Or when (Frequently) there are no correct answers listed, or the graphic or java applet needed to solve the problem does not load correctly. And then when in combination with #1, a complete failure to get any work in on time.

To note, last semester I took math, econ 1&2, and Wing Chun Kung Fu. This semester I am taking Math, English, Spanish, And Wing Chun. Last Semester: 4.0's all around. This semester: At least 3 classes with a C....despite the fact that I usually get A's on the assignments (I've been missing class or handing in work late, etc.)

This Sucks.

Thursday, April 13, 2006

A way to increase savings without radically changing the tax system

First I shall explain the a few of the problems I have with "flat tax" proposals.

1.) They are highly, highly, and I repeat, highly regressive. They will in effect place much of the tax burden of the country on the middle class, and the poor, while giving the rich a free ride to get much much richer.

2.) Many of the proposals are unworkable, and would require a tax system even larger and more invasive than todays. For instance one idea of having no consumption tax for those who are poor, which would require proving they are poor at every point of sale transaction, not to mention no taxes on second hand goods, which would create a glistening black market in goods that "fell off the back of the truck", not to mention a shitload of paperwork to "prove" you are selling used goods. And then there's pre-bating people under a certain amount of income with free income, which would require a load of federal outlays with much paperwork.

3.) It leaves no discretion to utilize tax incentives. Which is both a good and a bad thing, it means you cannot subsudize pork-barrel projects, but you can also not subsidize infant industries, environmentally or socially healthy products, it would also mean you couldn't write off charitable contributions or the interest on buying a new house (which is something I'm not alltogether entirely against).

Honestly I think much of the bloated aid systems could be done away with by utilizing a combination of a Basic Income Guarantee and a Negative Income Tax Credit.

But if the goal is merely to increase savings (as it is for many economists) I would also warn them that policies which too heavily favor savings are likely to both a.) Increase inequality and b.) Slow growth. For an example of the former: See Third world Tax havens. For an example of the latter: See Japan.

I am wholly sympathetic with simplifying our current tax system, however I think I have a proposal for increasing savings which may work out very well.

The proposal is simple, require everyone that makes some percentage above the poverty line to save a small portion of their income in private savings for a short period of time. For our example we'll say everyone who makes 300% of the poverty line for their family size, and 5% of their income, after deductions. The period would be for two years. Every two years they could draw out the amount they had put in two years prior, plus its interest. It would be a private account, and subject to long term capital gains taxes, unless wholly invested in tax free investments of course. The trick here is that it would be in private accounts, and could be any risk level, rather than the low risk low yeild federally mandated private accounts as proposed by the bush administration.

The beauty of this is, it does not lock people into savings that they will "never see", so it will appeal to their short term time horizons, while still encouraging savings. Likewise, if they so choose (and I think on average many people will) they can learn to play the market. In otherwords it will encourage average people to take active roles in their investments. And if they choose not to, they can just pick a "lifestyle" mutual fund and do nothing else with it. The net effect will be a vast increase in the proportion of private savings, without dramatically lowering consumption. And since the time horizon is low, it will keep people from doing stupid things like they do now with very long time horizon investments like IRA's and 401k's, emptying it out with a tax penalty everytime they change jobs or want a new toy. Now they can have their windfall every couple of years while increasing national savings on average. And without a tax penalty.

Now, my own proposal goes slightly further; everyone that makes 150% of the poverty line or less should get a "credit" equal to 10% of their income invested for them. Those that make between 151% and 299% would recieve no credit, but would also not be required to put any of their money in such an account. The hope is, that by giving the poor a credit, and allowing them to choose how they invest it, they would on average still choose to invest at least part of their income as they move up the economic ladder.

I think much of the problem with savings is not so much involved in tax schemes, in so much as it is involved in ignorance at how savings works. Most people I know consider savings to be their bank savings account. Their 401k (if any) is usually something that they select from a limited number of funds allowed by their employer, by checking a box, and then never pay attention to.

Another thing we could do to dramatically improve savings is to make money management and rudimentary personal economics a required class in all highschools. I maintain that it is not primarily a problem of of the tax system in so far as it is a problem of information. When many economists wonder why people do not behave in a manner compatible with their best economic interests...perhaps the first thought that should pop into their head is that they may not be aware of it. Most specifically they may not know how to manage their finances in accordance to their best economic interests.

Tuesday, March 28, 2006

Thoughts on externalities

An interesting idea hit me. Negative externalities of some marginal amount are present in all capitalist transactions, and indeed in all industrial production, but rightly of course the general consensus is that on average the private gains outweight the (average) social cost.

Or restated, though making a TV causes pollution, we'd rather have a TV than no pollution.

What struck me though, is to use the classical/neo-classical emphasis on the long run. Though the gains made from the short run production of widget X outweigh its short-run externalities, if externalities are the rule rather than the exception, then the long run consequences are disasterous.

Just an interesting thought, perhaps to bring up the next time I hear someone say "Yes but the long run equilibrium..."


Another thought struck me about classical labor pricing models, and how they don't seem to make much sense. The classic model basically posits marginal productivity * market rate, with emphasis on short run costs, and productivity. Yet what this implicitly states is that it is not primarily the market rate that sets labor pricing, but the capital of the employer. Whenever the employer improves his capital the marginal productivity of all employees increases. This also sets up an interesting conflict whereby you'd expect an employer to increase wages every time he purchased a new piece of machinery, which is pretty much false on the face of it. Also you'd expect an employer with ever increasing capital intensive production to hire ever more labor, while at the same time raising wages, to compound the marginal productivity. This conflicts with the fact that capital intensive production lowers concentration (and indeed sometimes the total amount) of labor. Macro-case in point: France has some of the most capital intensive production in the world, and 12%+ unemployment, though if you only count those that work they are the most productive workers in the world.

The key insight here is that employers pocket some portion of the extra marginal productivity difference when they utilize new capital, and that often new capital is used to replace labor.

But still, this basically says that wages are set by the capital investment of the employer, as ultimately that will reflect both how much labor they will use, how much they will pay, and the marginal productivity of the workers themselves.

Friday, March 10, 2006

Geopolitical "realpolitik" from a Jihadist

Found this bit of salient wisdom by Abu Bakr Naji:

"The jihadi movement had been unsucessful in the past because the superpowers propped up these proxy governments and convinced the masses through the media that they were invincible. The solution, says Naji, is to provoke a superpower into invading the Middle East directly. This will result in a great propoganda victory for the jihadis because the people will 1.) be impressed that the jihadis are directly fighting a superpower, 2.) be outraged over the invasion of a foreign power, 3.) be disabused of the notion that the superpower is invincible the longer the war goes on, and, 4.) be angry with the proxy governments allied with the invading superpower. Moreover, he argues, it will bleed the superpower's economy and military. This will lead to social unrest at home and the ultimate defeat of the superpower.

Naji does not suffer under the illusion that the jihadis can defeat the United States in a direct military confrontation; rather the clash with the United States is more important for propoganda victories in the short term, and the political defeat of the United States in the long term, as its society fractures and its economy is further strained. Naji observes that this strategy was used with great effect against the Soviet Union and that it will work against the United States. Indeed it may work better against the United States because it does not have the ruthlessness or resolve of the Soviet Union."

From the West Point counter terrorist center, in the body of the research document here: http://www.ctc.usma.edu/Stealing%20Al-Qai%27da%27s%20Playbook%20--%20CTC.pdf

Its called "stealing Al Qaida's playbook" but really I think Al Qaida is likely using the strategy of "Many eyes make all bugs small" in reguards to their strategic doctrine.

Thursday, February 16, 2006

A short essay I did for class

I liked it, the writing is solid, so I figured I'd put it here. It's referring to this picture

On Sex and Illusions


See how easily the ad man pulls at your desires; so easily can he eroticize something even as mundane as a dress shoe. Everything in his art is programmed for maximum affect and nothing in its design is left to chance. He works to burn images into your mind using the best possible emotional appeal. Often the most effective and easiest way is to appeal to man’s greatest biological imperative: Sex.
Some subjects have an easier time using this technique as they are actually involved in the mating or courting process. Products like lingerie, cosmetics, etc. all have a very easy time using sex to sell their products, and more over the connection is casual and intuitive to the viewer. This picture is doing something a little different: It is trying to sell you sex itself.
Therefore, it is imposing the trans-substitution of values, what Marx would have called “Commodity fetishism”, the confusion of the symbol for the thing itself. The shoe here is not specifically related to the sex act, nor even necessarily to the courting ritual. Rather it seeks to pay to your erotic impulse and appeal to your sense of visual gratification. It is actually trying to sell you the sex, to use the consumer impulse as a release valve for repressed desire like a wicker man burned in effigy of Eros.
This effigy in particular is the compulsion to make you salivate, to create a reward association with the brand of shoe. It is to become an erotic icon, if not a sexual one, though it uses blatant sexual imagery. The ad itself cannot actually strive to make the product a sexual product, but rather a symbolic gesture to the viewer’s mind, to entice and tease his ego and lust. Notice also that the shoe is a dress shoe and it advertises itself as a shoe for gentlemen. We see here the implication of money and power, that like a king wears a crown to signify he is king and a peacock uses his feather bouquet to signify his virility this too is a signal to others of the suave and sexy.
Indeed more often than not, people rely on these signaling devices to put off an aura of desired qualities that they often lack. This advertisement is directly designed to pull toward those emotional insecurities. The contrasting black and white and suggestive leer of the tongue of the shoe is designed to actually stimulate the other senses subconsciously. The ad man wants you to smell the musk of sex and taste sweat on the body, to make you salivate and to weaken your ability to tell the symbol from the actual thing.
Through this substitution we are strung tight by our own physiological responses and lead along to believe that the qualities expressed can be ours if only we have the “right” commodities. We become men like paper tigers, plastered with the corporate logos professing things we wish we were. Moreover, our own desires may be kept in check and subliminated through avid consumption of their commodity simulacrums. This is done in a constant and ever-changing cycle so that the merchant may always have it thus:

That the Emperor indeed does have new clothes.

Monday, February 06, 2006

Toss up...

While it's still some time yet as to when I'll end up going to a four year college, I am doing well so far and I've selected two colleges I'd like to attend. Either Berkely or University of Chicago. I'm fairly certain I can probably get accepted to either one. My only real concern is whether or not I can afford either one....but most especially the latter. Hopefully yes, by the time I finish @ college of the Desert, I should be about 24 years old or nearly so, so I should be able for financial aid @ University of Chicago.

Chicago of course has the most widely respected economics department in the U.S., my only problem is it also tends to be staffed with ideologues. Particularly, ones whom I will likely find contentious.