Marginal tax rates being high is a great idea. I'd be with you if people with high salaries spent all, or virtually all, of their salary. But they don't.
In this economy we need more money being spent. When things are doing well again, you could try to make a case for the rich being richer, but it's a strange cause to take up.
They're also exceptionally low, currently. There are no rates above 35%, whereas they used to be above 70% back in the Eisenhower/Kennedy/Johnson/Ford/Carter/early-Reagan days. But I suppose which rates and which kinds of incentives count as too high / too low is always relative and subjective...
Actually, under Eisenhower and Kennedy the top marginal rate was always between 91% and 95%. Then it was 70% until the early 1980s when it went down to 50%.
That's just federal, not including state and city income taxes.
Economic activity is not economic productivity. Spending money doesn't make us richer. Producing does.
Encouraging people to work more would help the economy; encouraging to people to spend more would only help to the extent that it stimulates people to produce stuff for sale.
Actually, you are both wrong. Production and consumption by themselves do not yield productivity. Both producers and consumers play equal roles in economic productivity. Without active consumption, producers would be completely unproductive, regardless of efficiency. Productivity comes when people are able to increase their economic leverage through efficiencies, but also able to complete transactions in the market. For instance, despite all of the hate of partial-reserve fiat banking systems by pseudo-economists, they are extremely efficient at getting the most productive value out of the money supply. This is also why the Internet creates economic value, because it's able to more efficiently pair producers and consumers.
I'm down with what you suggest. The problem with the economy now though is that we have excess capacity. I'm down with going around and blow up factories to solve this (only kidding fbi) but I think it would be easier if we could stimulate demand.
>This is also why the Internet creates economic value, because it's able to more efficiently pair producers and consumers.
I would say that is one reason why but I whole heartily agree.
Sure it does. If I buy good A for $X, I must value having good A a least _slightly_ more than having $X in my pocket. Similarly, the seller values $X in his pocket more than having good A in his inventory.
Hence, we have completed a transaction where the wealth of both parties has increased. This is the essence of why capitalism works.
Trade makes us richer if it's motivated by both parties coming out ahead in their judgment. Spending for the sake of spending, or for the sake of "stimulating the economy", doesn't help anything.
People who say "In this economy we need more money being spent" are not capitalists advocating efficient trade, they're Keynesians or something.
If someone thought he would benefit from a purchase, he would do it without encouragement. So what meaning can the encouragement to spend have...?
Conceivably it could mean (but this guy did not mean) that there's lower hanging fruit to be found by looking for more trades that should happen but aren't than by producing more. But it's far from obvious how/why that would be true "in this economy". In economic slowdowns, you need to make more stuff, not divvy up the too-little stuff more perfectly. It's when the economy is booming and production is very high that there might more plausibly be a neglect of the efficiency of trading.
>not capitalists advocating efficient trade, they're Keynesians or something.
Keynesians are capitalists and I've never heard of them being opposed to efficient trade.
One thing that inspires people to spend money is feeling that they won't be laid off. People do not have that feeling right now. Should we just wait for that to happen? Producing while people aren't buying leads to inventory gluts which leads to deflation.
Fascinating definitions but this has more than a whiff of crack pottery. Few things encourage economic activity (and productivity) like a rich person coming with an open wallet.
How are people to work more when there's not money to pay them?
You are ignorant of libertarian economic views. You are also ignorant that they are common place here, and held by Paul Graham. It's rude to intrude on a community and call status quo views "crack pottery" just because you've never learned anything about them.
It is your view that people can't produce things of value unless there's enough money being spent that is truly bizarre. New markets can be created. Value drives circulation of money, not vice versa. Money is just pieces of paper or numbers in a computer for the purpose of conveniently facilitating trade.
Ultimately I'm going to produce value in order to use it myself, for fun, or in some way get something useful for it (i.e., I don't want pieces of paper -- those are just temporary -- I want someone to make something useful for me like an iPhone. The more useful products there are, the more I will want to work hard, and the more money I will spend).
Libertarians are here, sure. However, I'd love to see how many people would really march in lockstep with doctrinaire libertarianism.
I'm not ignorant of libertarian views. Nor, am I unused to tantrums such as your own. I'll leave the vocabulary boot camps to you and Richard Stallman. I have that freedom.
Societies don't get wealthy by consuming. They do by producing. As a rule, if something is taxed there will be less of it. High marginal taxes decreases high value work. It is a terrible idea. Immoral too.
I think it's immoral to steal and kill etc., but that won't get me far arguing with you I guess?
> These things are complicated. But if you've already got it figured out, no need to discuss it I guess.
It's not just something I have figured out, there are economists that have thought about it. If you can explain how societies get wealthy by consuming more and producing less I would like to know.
Bringing murder up to justify a moral scheme that few subscribe to is a bit silly. Everyone finds murder wrong, in most circumstances, hardly everyone finds taxing the rich immoral.
These things are complicated. Wealth can be generated in a variety to ways. The Phoenicians were quite wealthy for their time for establishing a trade network in the Mediterranean.
Apple produces virtually nothing (okay they make software but lets pretend for a minute that we are talking about the hardware. People do rave about the aesthetics of the devices). However, they have plenty of 'wealth' to capture than the manufacturers do for their charging price. They having marketing savvy and they are able to get large numbers of people excited about what they think of.
Facilitating transactions and applying knowledge are not exactly producing but doing these tasks can provide a decent living. If you want to extend 'producing' to mean anything that makes people money, your statement could be a truism but it seems you are using produce in a more traditional sense.
This PG essay is a good refutation of the notion that (progressive or, at least, non-regressive) taxes are a "win" for the poor in a zero sum game:
"The Pie Fallacy
A surprising number of people retain from childhood the idea that there is a fixed amount of wealth in the world. There is, in any normal family, a fixed amount of money at any moment. But that's not the same thing.
When wealth is talked about in this context, it is often described as a pie. "You can't make the pie larger," say politicians. When you're talking about the amount of money in one family's bank account, or the amount available to a government from one year's tax revenue, this is true. If one person gets more, someone else has to get less.
I can remember believing, as a child, that if a few rich people had all the money, it left less for everyone else. Many people seem to continue to believe something like this well into adulthood. This fallacy is usually there in the background when you hear someone talking about how x percent of the population have y percent of the wealth. If you plan to start a startup, then whether you realize it or not, you're planning to disprove the Pie Fallacy.
What leads people astray here is the abstraction of money. Money is not wealth. It's just something we use to move wealth around. So although there may be, in certain specific moments (like your family, this month) a fixed amount of money available to trade with other people for things you want, there is not a fixed amount of wealth in the world. You can make more wealth. Wealth has been getting created and destroyed (but on balance, created) for all of human history.
Suppose you own a beat-up old car. Instead of sitting on your butt next summer, you could spend the time restoring your car to pristine condition. In doing so you create wealth. The world is-- and you specifically are-- one pristine old car the richer. And not just in some metaphorical way. If you sell your car, you'll get more for it.
In restoring your old car you have made yourself richer. You haven't made anyone else poorer. So there is obviously not a fixed pie. And in fact, when you look at it this way, you wonder why anyone would think there was. [5]
Kids know, without knowing they know, that they can create wealth. If you need to give someone a present and don't have any money, you make one. But kids are so bad at making things that they consider home-made presents to be a distinct, inferior, sort of thing to store-bought ones-- a mere expression of the proverbial thought that counts. And indeed, the lumpy ashtrays we made for our parents did not have much of a resale market."
>This PG essay is a good refutation of the notion that (progressive or, at least, non-regressive) taxes are a "win" for the poor in a zero sum game:
This is a straw man. I cannot think of anyone (and I'd love to see you find a progressive or anyone) that would say that economics is a zero sum game.
A lot of this community did form around pg's essays. However, it's a little sickening to think that anyone would take them as gospel. Since the early days of reddit and hn these things have been vigorously debated. pg is at his best when talking about start ups and I think the way he conveys how founders should think is good stuff. However, please do not expect, or treat his writing, like he will win a nobel prize in economics.
However, please do not expect, or treat his writing, like he will win a nobel prize in economics.
Well, here's a somewhat relevant quote from someone who did win a Nobel Prize in economics:
"Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another." ~Milton Friedman
Sounds familiar, no? And while you might not be able to find someone who says that economics is a zero sum game, you can't throw a rock in any direction without hitting someone who is pushing an agenda or ideology that acts as if it is.
>Milton Friedman played three roles in the intellectual life of the twentieth century. There was Friedman the economist’s economist, who wrote technical, more or less apolitical analyses of consumer behavior and inflation. There was Friedman the policy entrepreneur, who spent decades campaigning on behalf of the policy known as monetarism—finally seeing the Federal Reserve and the Bank of England adopt his doctrine at the end of the 1970s, only to abandon it as unworkable a few years later. Finally, there was Friedman the ideologue, the great popularizer of free-market doctrine.
I'd have to suggest that this statement came from the 3rd Friedman. There is sort of an irony here. Friedman saw monetary policy as a zero sum game. I think that was a fallacy.
In this economy we need more money being spent. When things are doing well again, you could try to make a case for the rich being richer, but it's a strange cause to take up.