For all the liberals out there, who think the stimulus (aka the American Recovery and Reinvestment Act) passed by the Democrats and Obama was sound policy, here's some ammunition for your next argument with a Tea Party member.
In short, there's a group (IGM Forum) that polls "distinguished experts with a keen interest in public policy from the major areas of economics," chosen to be "geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars....who are all senior faculty at the most elite research universities in the United States." The goal is to "explore the extent to which economists agree or disagree on major public policy issues."
This time, they asked whether unemployment is lower because of the bill and whether the cost of the bill was worth it. Here's link with the results, but the bottom line is that over 90% think unemployment is down because of ARRA, and only ~15% think that it was not worth the long term cost (~30% are unsure.)
To be honest, I'm a little surprised there was much support for it among the economists polled. I kind of agree with the person who responded "how can anyone imagine that this question is answerable?" But it seems the top economists in the world think it was/is good policy. Here's the link for anyone who is interested to the poll, which has all of the numbers as well as some very brief comments by some of the professors.
http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_cw5O9LNJL1oz4Xi
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Thursday, February 16, 2012
Friday, July 8, 2011
Oh, you're an economist...
One of the unintended consequences that came along with getting a Ph.D. in economics is that every time I mention that to someone, they immediately look serious and asked in a hushed tone, "so what do you think about taxes/the deficit?" I've thought for a while that I should come up with a good answer to that, but never really gotten around to it. But I think after rambling to Jess and Gwen last night about the subject, I'm going to write a rough draft. And I thought that instead of writing it in a journal, I'd write it here. So here goes...
One of the sayings that economists are most fond of is, "there's no such thing as a free lunch." In short, it says that there are trade-offs in everything and that pretty much any policy or decision of interest has both good and bad consequences. There are many examples of this: environmental regulations are obviously good in a number of ways, but they also hurt businesses, often cause job losses, and make products more expensive; me going to D.C. over spring break meant I got to see some of my favorite people, but it also meant that I have less money now to visit again; my decision to spend the summer in Montana means that I get to spend the summer in a beautiful place, but it also means that I'm not spending it with any of you or getting know the Bay area better. Which is the best policy or decision thus depends on a careful weighing of the pros and cons that will result from that decision. (On a side note, I just described microeconomics in a paragraph; I don't know what it says about my discipline that it can be basically described in a paragraph.)
I'm quite confident that the above paragraph would not be considered controversial by any economists, and I think most non-economists would agree with the basic premise as well. What boggles my mind is that when it comes to taxes and the deficit people seem to forget that the trade-off exists. I will 100% agree with the republicans that taxes have negative consequences. They are in general unfair (I've earned this money, why do I have to give it to someone else), don't fully reward hard work (why should someone who competent at her job and made $$ be punished for that), and create a disincentive for people to work (if I'm only working to make money, I'll work less if I'm getting $13 an hour after taxes than if I was was taking home my full $17). I think the statement "taxes have negative consequences" should be one of the most uncontroversial statements around and I personally think less of those Democrats who try to deny that.
But there are also good reasons for taxes. Number one is that they help fund important government programs. Investments in education, public safety (like the department of defense and cops), and transportation all allow the country to prosper and there are legitimate economic arguments for why they should be done by the government. So the adverse effect of taxes on the economy is often more than offset by the benefit to the economy of the investments that these taxes help fund. In this case, the argument for or against taxes is not a theoretical one, or even really a moral/philosophical one... it is mostly an empirical one.
The other reason why taxes can be good is that they can fund a society safety net, which helps those of us most in need. John Rawls and John Harsanyi (an economist!) popularized the idea of the "veil of ignorance" as a way to resolve moral issues. Their basic idea is that moral decisions that effect society should be made from the perspective of someone who is about to enter the society, but does not have any knowledge of who he will come in as; he's equally likely to come in as rich landowner as he is to come in as slave. This line of thinking justifies extreme social redistribution. Just about any redistribution from rich to poor is morally justified, because behind the veil I don't like inequality since I'm equally likely to come in as poor as I am to come in rich. (There's a big caveat here, which boils down your beliefs about why people are poor. If it's because they're lazy and not because they got unlucky with the cards they were dealt, then this argument breaks down. I personally think luck matters a lot more.) This can morally justify unemployment benefits, medicaid, medicare, social security, and a progressive income tax, and even suggests that these should be increased. Yet there's another moral side to the issue. If you work hard, why can't you keep the money you earn. One can legitimately ask, who's the government to force me to give to charity (which is what social security et. al basically are)? So in this sense, the "right" amount of taxes in your mind boils down to an empirical question again (how much to taxes hurt growth), a empirical question/personal belief (who is to blame for the poor, themselves or luck), and a moral/philosophical question (what's a bigger moral issue, helping out the weakest members of society or keeping our freedoms, letting individuals choose their actions, and rewarding hard work).
As for where the deficit falls in to all of this. Unless it gets so big that it effects the economy as a whole (or Republics are dumbasses and let us default before it gets too big out of stupidity, greed, and blinded hate of Obama), all the deficit does is cause an inter-generational transfer from the future generation to the current generation. Although, being from a future generation, I'm not a huge fan of that, I was lucky enough to be born in an age with internet, good medication for my epilepsy, and the Red Sox winning World Serieses (plural!), so I can't complain too much. And if you really want to help us out, do us a favor: increase the deficit right now and use it fund the research and other needed investments that will let us best mitigate climate change.
One of the sayings that economists are most fond of is, "there's no such thing as a free lunch." In short, it says that there are trade-offs in everything and that pretty much any policy or decision of interest has both good and bad consequences. There are many examples of this: environmental regulations are obviously good in a number of ways, but they also hurt businesses, often cause job losses, and make products more expensive; me going to D.C. over spring break meant I got to see some of my favorite people, but it also meant that I have less money now to visit again; my decision to spend the summer in Montana means that I get to spend the summer in a beautiful place, but it also means that I'm not spending it with any of you or getting know the Bay area better. Which is the best policy or decision thus depends on a careful weighing of the pros and cons that will result from that decision. (On a side note, I just described microeconomics in a paragraph; I don't know what it says about my discipline that it can be basically described in a paragraph.)
I'm quite confident that the above paragraph would not be considered controversial by any economists, and I think most non-economists would agree with the basic premise as well. What boggles my mind is that when it comes to taxes and the deficit people seem to forget that the trade-off exists. I will 100% agree with the republicans that taxes have negative consequences. They are in general unfair (I've earned this money, why do I have to give it to someone else), don't fully reward hard work (why should someone who competent at her job and made $$ be punished for that), and create a disincentive for people to work (if I'm only working to make money, I'll work less if I'm getting $13 an hour after taxes than if I was was taking home my full $17). I think the statement "taxes have negative consequences" should be one of the most uncontroversial statements around and I personally think less of those Democrats who try to deny that.
But there are also good reasons for taxes. Number one is that they help fund important government programs. Investments in education, public safety (like the department of defense and cops), and transportation all allow the country to prosper and there are legitimate economic arguments for why they should be done by the government. So the adverse effect of taxes on the economy is often more than offset by the benefit to the economy of the investments that these taxes help fund. In this case, the argument for or against taxes is not a theoretical one, or even really a moral/philosophical one... it is mostly an empirical one.
The other reason why taxes can be good is that they can fund a society safety net, which helps those of us most in need. John Rawls and John Harsanyi (an economist!) popularized the idea of the "veil of ignorance" as a way to resolve moral issues. Their basic idea is that moral decisions that effect society should be made from the perspective of someone who is about to enter the society, but does not have any knowledge of who he will come in as; he's equally likely to come in as rich landowner as he is to come in as slave. This line of thinking justifies extreme social redistribution. Just about any redistribution from rich to poor is morally justified, because behind the veil I don't like inequality since I'm equally likely to come in as poor as I am to come in rich. (There's a big caveat here, which boils down your beliefs about why people are poor. If it's because they're lazy and not because they got unlucky with the cards they were dealt, then this argument breaks down. I personally think luck matters a lot more.) This can morally justify unemployment benefits, medicaid, medicare, social security, and a progressive income tax, and even suggests that these should be increased. Yet there's another moral side to the issue. If you work hard, why can't you keep the money you earn. One can legitimately ask, who's the government to force me to give to charity (which is what social security et. al basically are)? So in this sense, the "right" amount of taxes in your mind boils down to an empirical question again (how much to taxes hurt growth), a empirical question/personal belief (who is to blame for the poor, themselves or luck), and a moral/philosophical question (what's a bigger moral issue, helping out the weakest members of society or keeping our freedoms, letting individuals choose their actions, and rewarding hard work).
As for where the deficit falls in to all of this. Unless it gets so big that it effects the economy as a whole (or Republics are dumbasses and let us default before it gets too big out of stupidity, greed, and blinded hate of Obama), all the deficit does is cause an inter-generational transfer from the future generation to the current generation. Although, being from a future generation, I'm not a huge fan of that, I was lucky enough to be born in an age with internet, good medication for my epilepsy, and the Red Sox winning World Serieses (plural!), so I can't complain too much. And if you really want to help us out, do us a favor: increase the deficit right now and use it fund the research and other needed investments that will let us best mitigate climate change.
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