I just read the wikipedia article on Olbers' Paradox. What a bunch of nonsense!
The paradox goes like this: The night sky appears dark. Yet when we use magnification to look at any dark area of the sky, it's all full of stars, with dark areas between. When we use even more magnification to look at those dark areas, there are even more stars in there. The statement is then that if we look at the sky at any angle, we'll eventually run into a star. So if there are so many stars, why is it that the sky appears dark and not bright? So then the article goes on to blather about the cosmic background radiation and this being proof for the big bang, and a bunch of other silly explanations.
Olbers' Paradox is one of those things that is only a paradox if you don't quite get the concepts of infinitesimal and relativeness. Darkness is a relative thing. The space between stars is dark because we can't see anything there. Because our eyes (or whatever tool we're using) aren't capable of getting enough photons to trigger a sensor, we record it as dark. That's really the end of the necessary explanation. If we use a more powerful sensor, the threshold changes along with the shrinking field of view, but there's still a minimum. We would still perceive this as a dark sky even if the universe was actually infinite. A star that's too far for whatever sensor we're using would be registered as dark, even if it's actually shining bright.
Zeno's Paradox is another of the same sort of thing. In it, in order to get from A to B, you must first travel halfway. In order to get from A to halfway, you must first get to half halfway. And so on. So if there's an infinite regression of these halfways, then how can we ever get anywhere? Again, the answer is simply that when you split the distance, you also split the time it takes to get there. You can always split time and distance farther. As long as you split them at the same rate, there is no paradox.
(Actually, there is a limit to this sort of splitting, caused by quantum effects. This impacts our sensors at a much larger scale than it impacts reality. It's interesting, but not in any way relevant to either paradox)
28 March 2011
26 March 2011
Morality
I wrote this a week after the Hurricane Katrina disaster. Even though it wasn't widely distributed, I got a lot of mostly positive comments on it, including a few suggested improvements (what I called a corollary is really a derivation)
You can’t get morality from a book. Morality is a skill, just like hitting a baseball. A book can’t give you a skill, but it can teach you how other people have learned the skill, and how other people have practiced. It can offer you suggestions for how you might improve your skill, or teach it to others. The bible is the best of these books. It is full of stories and parables that teach us how to practice the skill of morality.
You can’t get morality from a book. Morality is a skill, just like hitting a baseball. A book can’t give you a skill, but it can teach you how other people have learned the skill, and how other people have practiced. It can offer you suggestions for how you might improve your skill, or teach it to others. The bible is the best of these books. It is full of stories and parables that teach us how to practice the skill of morality.
One of my favorite examples is the parable of the drowning man. What if, asks Jesus, we come upon a drowning man on the Sabbath? The old teachers taught that we are to keep the Sabbath holy, and do no work. Jesus points out that this is a terrible reason to not rescue someone. The man is drowning. We must rescue him. The old rule is still valid, but the drowning man trumps it.
Philosophers call these things “razors”, because they help us cut fine distinctions in the face of complicated or confusing, or even contradictory information. Jesus gave us the best moral razor ever: “Do unto others as you would have them do unto you.” Over the centuries to follow, other philosophers have paraphrased this golden rule into all sorts of corollaries. “The greatest good for the greatest number”. “When considering any act, consider the consequences if everyone were to do that same act.” Corollaries help us think about hard issues, because they express the same ideas in ways that may fit the particular facts better.
About 1800 years after Jesus, a man named Jeremy Bentham figured out something even better than a razor. He figured out a formula for deciding which of a number of alternatives should be taken. It is simply this: When you are comparing alternatives, add up the good things and bad things of each alternative. Which ever gets the best score is the right thing to do. So, for example, what if someone is robbing you? Should you shoot the robber? Using Bentham’s system, you ask: “Do I think he plans to hurt or kill me or my family?” If you think the answer is no, then you should not shoot him. Robbing is bad, but shooting is worse. If you think the answer is yes, then the arithmetic of morality gives us a different answer. “Killing him would be bad”, you would think, “but he was planning to kill me. Moreover, the reason he was going to kill me was bad in itself, and he was going to rob me too. Three to one. I must shoot him”
Bentham’s idea is pure genius. It is one of those solutions that are completely obvious when you see it. But nobody thought of it before. The problem with Bentham’s system is that sometimes these situations come up fast, and you have no time to decide. This is why we must practice the skill of morality every day. Being good at morality is about being able to come up with the right answer fast. Memorizing a bunch of rules can help, but it doesn’t always work. Situations that surprise us happen all the time. That is why we must practice, and study current events, and think about morality all the time.
When we need to balance various good and bad things against each other, we call it relativism. Relativism is neither a good thing nor a bad thing, but it is a necessary part of the skill we need when we are practicing morality.
Last week the federal and state governments dithered until public outcry became so loud that they finally brought their forces to bear. Whether this happened because they didn’t understand how serious the problem was until they heard the public outcry, or because they didn’t realize that every weatherman in the country screaming a hysterical warning was something that merited their full attention, is at this point immaterial. They needed to understand that a city with half a million people below both the poverty line and the water line, with fully a fifth of them having no access to a car whatsoever, needed help evacuating, before the hurricane hit. For either reason that they failed to understand this, it was a failure of morality. People died, perhaps thousands, because these administrations made the mistake of thinking that reading the book was enough. You can learn a lot about morality from a book, but you have to practice and study other things, every day, things like current events and science, to get good at it.
Right now, these distinctions don’t matter. Right now we need to finish the rescue and recovery, and start the rebuilding. When it will be important is when we are trying to figure out who should get extra training, and who to punish. Harry Truman had a little sign on his desk which said “The buck stops here”. That is as good a moral razor as any.
08 Sept 2005
21 March 2011
Redistribution
So here are the household income quintiles for 2009 (the latest year US Census reports) plus, the top 5%. There were 117,538,000 households in the US.
mean upper limit percentage
11,552 20,453 3.4
29,257 38,550 8.6
49,534 61,801 14.6
78,694 100,000 23.2
170,844 180,001 50.3
295,388 21.7 (these guys are counted twice)
What would happen if we redistributed income from the top earners and gave it to the bottom 60%? Let's take 10% from the top 20% and split it evenly: (17K/3=5694.8)
11,552+5694.8= 17,246.8
29,257+5694.8= 34,951.8
49,534+5694.8= 55,228.8
78,694+0= 78,964
170,884-17,088.4= 153,624.6
That's actually a pretty good deal for everybody...the folks on the bottom get a huge boost to their income--enough to cover a big expense, like medical insurance, and the folks on the top don't really lose that much. The rich don't become poor, they become only slightly less rich. The poor get a lot richer though.
How about if we took 20% from the top 5%, and split it evenly to the bottom 60%: (59K/4/3=4923.1)
11,552+4923.1=16,475.1
29,257+4923.1=34,180.1
49,534+4923.1=54,457.1
78,684+0= 78,684
170,884+0= 170,884
295,388-59077.6= 236,310.4
That's almost as good. The top guys don't feel it much more than they felt 10%. Note that 20% of average income in the top 5% is pretty close to the total income of the the 60th percentile.
The graduated income tax structure is intended to do something like this in the name of taxing equally. The ideal would be to subtract "living expenses" from everybody's income and tax all the rest at the same percentage for everybody. For the bottom 60%, "living expenses" are nearly all their income. For the rich, they're a much smaller fraction, even though actual dollars spent is much higher. Consequently, a simple deduction like this doesn't get it right. I think living expenses top out at something like $70K: food, transportation, housing, medical. Living richer than that is luxury. So another way to do it would be to subtract $70K from every household's income and then have one rate for everything above that.
mean upper limit percentage
11,552 20,453 3.4
29,257 38,550 8.6
49,534 61,801 14.6
78,694 100,000 23.2
170,844 180,001 50.3
295,388 21.7 (these guys are counted twice)
What would happen if we redistributed income from the top earners and gave it to the bottom 60%? Let's take 10% from the top 20% and split it evenly: (17K/3=5694.8)
11,552+5694.8= 17,246.8
29,257+5694.8= 34,951.8
49,534+5694.8= 55,228.8
78,694+0= 78,964
170,884-17,088.4= 153,624.6
That's actually a pretty good deal for everybody...the folks on the bottom get a huge boost to their income--enough to cover a big expense, like medical insurance, and the folks on the top don't really lose that much. The rich don't become poor, they become only slightly less rich. The poor get a lot richer though.
How about if we took 20% from the top 5%, and split it evenly to the bottom 60%: (59K/4/3=4923.1)
11,552+4923.1=16,475.1
29,257+4923.1=34,180.1
49,534+4923.1=54,457.1
78,684+0= 78,684
170,884+0= 170,884
295,388-59077.6= 236,310.4
That's almost as good. The top guys don't feel it much more than they felt 10%. Note that 20% of average income in the top 5% is pretty close to the total income of the the 60th percentile.
The graduated income tax structure is intended to do something like this in the name of taxing equally. The ideal would be to subtract "living expenses" from everybody's income and tax all the rest at the same percentage for everybody. For the bottom 60%, "living expenses" are nearly all their income. For the rich, they're a much smaller fraction, even though actual dollars spent is much higher. Consequently, a simple deduction like this doesn't get it right. I think living expenses top out at something like $70K: food, transportation, housing, medical. Living richer than that is luxury. So another way to do it would be to subtract $70K from every household's income and then have one rate for everything above that.
14 March 2011
Driving to Reduce Congestion
Nearly everybody has noticed that the roads are getting more and more congested. There's a reason for this: we quit building new roads during the 1970s, but we didn't quit making new cars or people driving them. US population has grown about 50% (more than doubled where I live, near Puget Sound in Washington State), while very few new high capacity roads have been built (no new ones here since the 1960s, although a few have been widened a little).
Congestion is not just annoying. It wastes fuel, it wastes time, and it causes accidents. People drive more aggressively when they're frustrated. I wonder how many people have died because their ambulance or fire truck was slowed by traffic. We might solve these problems by building more roads, or by building alternatives like rail (or better alternatives like Personal Rapid Transit), but efforts to do this have been stymied by anti-tax crusaders. (I'm of the opinion that if you don't want to pay for infrastructure, you should probably refrain from using it. This means you, Tim Eyeman.)
Since it looks like we won't be getting better roads, we should probably try to modify our behavior to improve the capacity of the ones we have. This can be boiled down to two simple rules:
Some may argue that if you're going the speed limit, then you shouldn't go any faster. Ok then, if the right lane is going the speed limit too, you won't be hurt by joining them. There's someone behind you who is trying to get by. Even though he/she would be breaking the law, let them. If they're determined to speed, you should want them to be as far from you as possible lest you get caught up in their accident.
It's already illegal to delay 5 or more cars in Washington. (in California it's 3). Driving in the left lane other than to pass is also illegal. I think the cops should announce that they're going on a campaign to ticket aggressively for this and cite drivers who are pacing for both offenses.
Another way to block traffic is in right turn lanes. At traffic lights, it's legal to turn right against the red after having stopped to check for cross traffic. But if there's a car going straight in front of you, that's not possible. Suppose 25% of the cars going your way would like to turn right. If you let them go, you speed up travel time for them the full light cycle, and since they're not part of the crowd waiting for the light anymore, you've reduced the number of cars waiting for the light by 25%--speeding up travel for people going straight too.
For some reason Washington State traffic engineers don't like dedicated right turn lanes. It seems to me that they're safer and more efficient (for example the free right occurs when pedestrians can't cross), yet there are a number of places they've actually been removed.
Just a reminder: Don't pace. Get out of the left lane if you're not going faster than the cars in the right lane.
One of the worst traffic offenses I can think of is using a smoothly flowing lane of traffic to bypass a long line of slow-moving cars, and then when you get to the front of the line, forcing your way in. This slows the formerly smooth traffic to the speed of the blockage. I call this "intentionally causing a traffic jam" and I think it should be ticketed as such, with the same consequences to your driving record as being found at fault in an injury accident. (Most people who do this are assholes and know exactly what they're doing. But it's possible you didn't realize this long line was waiting for your exit. When you do realize, try to find a place to get in as soon as possible and wait your turn, but don't block traffic in your lane. If it's not possible without slowing down your lane, go to the next exit. This is often a good strategy anyway. In all the cases where this happens regularly that I know about, the next exit is less than a mile farther along and it's a better route than waiting 20 minutes)
Did I mention that I think eliminating pacing is one of the best ways to improve the capacity of our roads that there is?
Now we get to tailgating. Worldwide, highway engineers have found that when traffic gets denser than 1800 vehicles per hour per lane, the capacity of the road suddenly drops. One traffic engineer I spoke with calls this phenomenon "falling off the cliff". It varies a little due to factors like lane width, curvature, and weather, but basically, if highway volume is lower than the threshold, the little perturbations that occur are quickly damped by gaps in the traffic. If traffic gets denser than the threshold, there aren't enough gaps and a little perturbation becomes a big stoppage and the capacity of the road goes to 500/hr or less. 1800 vehicles per hour works out to 2 seconds apart, which is (not coincidentally) just exactly what your drivers training instructor told you when you were learning to drive. There's no point in driving closer than 2 seconds behind the car in front. If you tailgate, you might be the one to cause the jam (or worse). If demand for the road is higher than 1800/lane/hr, you aren't going to get where you're going at the speed limit anyway.
And one last thing: don't pace.
Congestion is not just annoying. It wastes fuel, it wastes time, and it causes accidents. People drive more aggressively when they're frustrated. I wonder how many people have died because their ambulance or fire truck was slowed by traffic. We might solve these problems by building more roads, or by building alternatives like rail (or better alternatives like Personal Rapid Transit), but efforts to do this have been stymied by anti-tax crusaders. (I'm of the opinion that if you don't want to pay for infrastructure, you should probably refrain from using it. This means you, Tim Eyeman.)
Since it looks like we won't be getting better roads, we should probably try to modify our behavior to improve the capacity of the ones we have. This can be boiled down to two simple rules:
- Don't block traffic, and
- Don't drive too close.
Some may argue that if you're going the speed limit, then you shouldn't go any faster. Ok then, if the right lane is going the speed limit too, you won't be hurt by joining them. There's someone behind you who is trying to get by. Even though he/she would be breaking the law, let them. If they're determined to speed, you should want them to be as far from you as possible lest you get caught up in their accident.
It's already illegal to delay 5 or more cars in Washington. (in California it's 3). Driving in the left lane other than to pass is also illegal. I think the cops should announce that they're going on a campaign to ticket aggressively for this and cite drivers who are pacing for both offenses.
Another way to block traffic is in right turn lanes. At traffic lights, it's legal to turn right against the red after having stopped to check for cross traffic. But if there's a car going straight in front of you, that's not possible. Suppose 25% of the cars going your way would like to turn right. If you let them go, you speed up travel time for them the full light cycle, and since they're not part of the crowd waiting for the light anymore, you've reduced the number of cars waiting for the light by 25%--speeding up travel for people going straight too.
For some reason Washington State traffic engineers don't like dedicated right turn lanes. It seems to me that they're safer and more efficient (for example the free right occurs when pedestrians can't cross), yet there are a number of places they've actually been removed.
Just a reminder: Don't pace. Get out of the left lane if you're not going faster than the cars in the right lane.
One of the worst traffic offenses I can think of is using a smoothly flowing lane of traffic to bypass a long line of slow-moving cars, and then when you get to the front of the line, forcing your way in. This slows the formerly smooth traffic to the speed of the blockage. I call this "intentionally causing a traffic jam" and I think it should be ticketed as such, with the same consequences to your driving record as being found at fault in an injury accident. (Most people who do this are assholes and know exactly what they're doing. But it's possible you didn't realize this long line was waiting for your exit. When you do realize, try to find a place to get in as soon as possible and wait your turn, but don't block traffic in your lane. If it's not possible without slowing down your lane, go to the next exit. This is often a good strategy anyway. In all the cases where this happens regularly that I know about, the next exit is less than a mile farther along and it's a better route than waiting 20 minutes)
Did I mention that I think eliminating pacing is one of the best ways to improve the capacity of our roads that there is?
Now we get to tailgating. Worldwide, highway engineers have found that when traffic gets denser than 1800 vehicles per hour per lane, the capacity of the road suddenly drops. One traffic engineer I spoke with calls this phenomenon "falling off the cliff". It varies a little due to factors like lane width, curvature, and weather, but basically, if highway volume is lower than the threshold, the little perturbations that occur are quickly damped by gaps in the traffic. If traffic gets denser than the threshold, there aren't enough gaps and a little perturbation becomes a big stoppage and the capacity of the road goes to 500/hr or less. 1800 vehicles per hour works out to 2 seconds apart, which is (not coincidentally) just exactly what your drivers training instructor told you when you were learning to drive. There's no point in driving closer than 2 seconds behind the car in front. If you tailgate, you might be the one to cause the jam (or worse). If demand for the road is higher than 1800/lane/hr, you aren't going to get where you're going at the speed limit anyway.
And one last thing: don't pace.
08 March 2011
Recharging while driving.
Electric cars are here! They have many advantages over fossil-fuel powered cars, but they don't have much range. If I want to go to my father's house in California in my gasoline car, it's about a 14 hour trip and it takes 3 fill ups--and a night in a motel somewhere Oregon. That's a lot of gas and a lot of driving. The electric cars we have today just can't do it. Even the best batteries would require about 10 rechargings for that trip, and each recharge requires several hours of waiting. Hydrogen has similar range, although with slightly faster rechargings. It's up against some laws of physics that probably prevent it from getting much better.
Plug-in Hybrids like the Chevy Volt are a step in the right direction: it carries a small engine that runs in a narrow, hence efficient, power range to recharge the battery while driving. It gets much higher mileage for a trip like mine. But for daily driving, it can run almost entirely from the electric grid.
Battery replacement is also appealing, but batteries are very expensive and in order to make it practical, BetterPlace has to subsidize replacement with very much higher prices on recharging.
There's another option that I haven't seen discussed much. That is to recharge the battery while you're driving. The way this would work is a power rail, something like the third rail we're familiar with for subways, would be built into or alongside the freeway. The car would have an attachment to pickup power from the rail. If you're doing a long drive, you'd tie into the power rail and your electric car would be recharged.
I think the way to do this is to build the rails into a lane of the interstate highways. This has almost exactly the right usage characteristics: they connect all our urban areas and many suburban and rural areas between. The electric car has plenty of range within the urban area, and if not, it will probably pass through one of our special roads en route.
I have several ideas for how this would work. For example, a gizmo could be added to the bottom of an electric car such that when it detects the rail beneath, it drops a thing that would make contact with the rail. when you leave the special lane, it disconnects and withdraws. It would be entirely automatic. Billing could easily be handled through the same sort of automated system in use on many toll roads today.
Another idea would be to have the vehicle go into auto-drive mode. The driver would surrender control of the vehicle and the vehicle would engage the rail and drive itself. This has some appealing advantages: The driver could sleep or read during the trip. Because the vehicle can know exactly what the vehicle just ahead is doing, it could safely tailgate, which would significantly reduce energy use. This would also allow much higher speeds. My 14 hour trip could probably be done in 8. But there are some problems too. Most people are still pretty uncomfortable with robocars. Teaching people how to engage and disengage safely could be tricky, especially if the pack is moving at over 100mph. Because all of the vehicles will be following exactly the same track, wear on the pavement will be concentrated along that track rather than spread out as it is today.
This second version is essentially the same as an idea called Dual-Mode . One big difference is that existing dual mode designs require a special vehicle. I'm just proposing a special gizmo on an otherwise normal electric car.
There are lots of issues to be worked out: the design of the rail so that they're safe (imagine a car dragging a muffler causing a short between the power rails). The design of the interface. Convincing the highway departments to do it. Etc.
Plug-in Hybrids like the Chevy Volt are a step in the right direction: it carries a small engine that runs in a narrow, hence efficient, power range to recharge the battery while driving. It gets much higher mileage for a trip like mine. But for daily driving, it can run almost entirely from the electric grid.
Battery replacement is also appealing, but batteries are very expensive and in order to make it practical, BetterPlace has to subsidize replacement with very much higher prices on recharging.
There's another option that I haven't seen discussed much. That is to recharge the battery while you're driving. The way this would work is a power rail, something like the third rail we're familiar with for subways, would be built into or alongside the freeway. The car would have an attachment to pickup power from the rail. If you're doing a long drive, you'd tie into the power rail and your electric car would be recharged.
I think the way to do this is to build the rails into a lane of the interstate highways. This has almost exactly the right usage characteristics: they connect all our urban areas and many suburban and rural areas between. The electric car has plenty of range within the urban area, and if not, it will probably pass through one of our special roads en route.
I have several ideas for how this would work. For example, a gizmo could be added to the bottom of an electric car such that when it detects the rail beneath, it drops a thing that would make contact with the rail. when you leave the special lane, it disconnects and withdraws. It would be entirely automatic. Billing could easily be handled through the same sort of automated system in use on many toll roads today.
Another idea would be to have the vehicle go into auto-drive mode. The driver would surrender control of the vehicle and the vehicle would engage the rail and drive itself. This has some appealing advantages: The driver could sleep or read during the trip. Because the vehicle can know exactly what the vehicle just ahead is doing, it could safely tailgate, which would significantly reduce energy use. This would also allow much higher speeds. My 14 hour trip could probably be done in 8. But there are some problems too. Most people are still pretty uncomfortable with robocars. Teaching people how to engage and disengage safely could be tricky, especially if the pack is moving at over 100mph. Because all of the vehicles will be following exactly the same track, wear on the pavement will be concentrated along that track rather than spread out as it is today.
This second version is essentially the same as an idea called Dual-Mode . One big difference is that existing dual mode designs require a special vehicle. I'm just proposing a special gizmo on an otherwise normal electric car.
There are lots of issues to be worked out: the design of the rail so that they're safe (imagine a car dragging a muffler causing a short between the power rails). The design of the interface. Convincing the highway departments to do it. Etc.
05 March 2011
Why Taxes Don't Matter
We have a big deficit. We have a struggling economy. We have millions of people with no job at all, and just as many who are underemployed. Meanwhile, The very rich are getting richer, and the poor and middle are struggling to get by. Many people think that big cuts to government is somehow the only solution for this. But that's wrong. Government creates millions of jobs and if you take them away, more people won't have jobs. Government spends money to do things the taxpayers can't or won't do. Build and repair roads. Pay police and fire and teachers and social workers. unemployment insurance and medicare and social security. The military. the court and justice systems. fund transcontinental railroads and populate the great plains. fund medical research, drug safety and basic science.
We get a lot for our tax dollars. And here's the amazing thing--the drain on the economy is proportional not to tax rates, but the inequity of those rates. This is the part that's counterintuitive: as long as they're reasonably equitable, tax rates do not affect the economy. Money is just a medium of trade. The only thing that has value in the economy are goods and services--that dollar you spend is just a token representing the labor or goods you sold to earn it. If there is more money in the economy without changing the underlying goods and services, each dollar is worth less. We call that inflation. If the government takes an equitable share from everybody, it doesn't really affect the value of the goods and services, it only makes the money worth that much more--deflation. (Read more about the money illusion)
Where inequity comes in is that the government can stimulate one group or other by giving them an advantage or disadvantage. For example, they can promote home ownership by lowering taxes on real estate interest and subsidizing low interest loans. It can also stimulate financial markets by lowering tax rates on things like capital gains and dividends--and high net worth. To some extent this is healthy--finance is a service, helping businesses get started and expand-- but it's gotten way out of hand. The uber-rich have a large share of the dollars but contribute a very much smaller share to the goods-and-services part of the economy. They need no further incentives to get richer. They need an incentive to spend that money on expanding businesses other than their own. The way to do that is to reduce the incentives for simply being rich and give incentives to actual investments that create business. low tax rates on dividends, stock market capital gains, and high incomes are incentives for being rich--a pointless exercise. Low tax rates on business expenses and capital gains from new investments are incentives for growing businesses.
So if that's the case, you might ask, why don't we just raise taxes to some really high rate? Well, we've tried that and it worked just fine. From 1932 to 1981, the top tax bracket paid 70% marginal rate or more, and quite a few years the top rate was over 90%. We remember most of these years (except for the first few) as having had a pretty good economy. Very few people actually paid these rates and every one of them was rich. And even then, all income that was below the (very high) threshold was taxed at a lower marginal rate. Nobody was being made poorer by the high rates. I'm not sure 94% is a good idea, but history shows it's not really harmful. Historically, there's very little correlation between tax rates and any reasonable economic measure--sometimes when you cut rates, GDP goes up, sometimes it goes down. Same thing when you raise rates--sometimes it goes up, sometimes down. Other factors, such as the price of oil, are much more important. There's a slightly positive correlation between tax rates and GDP growth, but that's mainly because government spending tends to foster things that boost GDP. It depends on how government spends the money.
I'm not inventing this notion--My Econ 1 professor said pretty much the same thing in 1974, and proceeded to explain it. But for some reason, nobody in politics is willing to believe it. They're more than willing to take services away from people who desperately need them. A few of them must have taken a course like the one I took in 1974. Either they've forgotten what they learned, or they have some other motive.
We get a lot for our tax dollars. And here's the amazing thing--the drain on the economy is proportional not to tax rates, but the inequity of those rates. This is the part that's counterintuitive: as long as they're reasonably equitable, tax rates do not affect the economy. Money is just a medium of trade. The only thing that has value in the economy are goods and services--that dollar you spend is just a token representing the labor or goods you sold to earn it. If there is more money in the economy without changing the underlying goods and services, each dollar is worth less. We call that inflation. If the government takes an equitable share from everybody, it doesn't really affect the value of the goods and services, it only makes the money worth that much more--deflation. (Read more about the money illusion)
Where inequity comes in is that the government can stimulate one group or other by giving them an advantage or disadvantage. For example, they can promote home ownership by lowering taxes on real estate interest and subsidizing low interest loans. It can also stimulate financial markets by lowering tax rates on things like capital gains and dividends--and high net worth. To some extent this is healthy--finance is a service, helping businesses get started and expand-- but it's gotten way out of hand. The uber-rich have a large share of the dollars but contribute a very much smaller share to the goods-and-services part of the economy. They need no further incentives to get richer. They need an incentive to spend that money on expanding businesses other than their own. The way to do that is to reduce the incentives for simply being rich and give incentives to actual investments that create business. low tax rates on dividends, stock market capital gains, and high incomes are incentives for being rich--a pointless exercise. Low tax rates on business expenses and capital gains from new investments are incentives for growing businesses.
So if that's the case, you might ask, why don't we just raise taxes to some really high rate? Well, we've tried that and it worked just fine. From 1932 to 1981, the top tax bracket paid 70% marginal rate or more, and quite a few years the top rate was over 90%. We remember most of these years (except for the first few) as having had a pretty good economy. Very few people actually paid these rates and every one of them was rich. And even then, all income that was below the (very high) threshold was taxed at a lower marginal rate. Nobody was being made poorer by the high rates. I'm not sure 94% is a good idea, but history shows it's not really harmful. Historically, there's very little correlation between tax rates and any reasonable economic measure--sometimes when you cut rates, GDP goes up, sometimes it goes down. Same thing when you raise rates--sometimes it goes up, sometimes down. Other factors, such as the price of oil, are much more important. There's a slightly positive correlation between tax rates and GDP growth, but that's mainly because government spending tends to foster things that boost GDP. It depends on how government spends the money.
I'm not inventing this notion--My Econ 1 professor said pretty much the same thing in 1974, and proceeded to explain it. But for some reason, nobody in politics is willing to believe it. They're more than willing to take services away from people who desperately need them. A few of them must have taken a course like the one I took in 1974. Either they've forgotten what they learned, or they have some other motive.
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