The Wedge Between Output and Employment Growth: Ar…

The Wedge Between Output and Employment Growth: Archive Entry From Brad DeLong’s Webjournal

Seem’s pretty straight forward. The economy grows because of productivity improvements. Each worker can produce more stuff. Also, if the unemployment rate goes up, the economy shrinks. Less workers to produce the stuff. So employment and productivity are substitutes for each other.

Well, today we have a situation were productivity and the economy are rising but unemployment is rising, too. This is easy to explain by saying that income gains from productivity increases are outstripping the income losses from unemployment.

Question: is there a causal relationship between productivity and unemployment or are they really perfect substitutes? I mean, is there some future economy that has such high productivity that it only takes one worker to produce all the output. Two follow-ups: First, what happens if productivity goes to infinity? No workers required and 100% unemployment? Second, is it ‘bad’ for productivity to replace employment?

Thomas Sowell: Who’s Rich Sowell points out tha…

Thomas Sowell: Who’s Rich

Sowell points out that there is often confusion between wealth and income. He claims that rich people may have insignificant income as its their wealth that makes them rich. He would have you conclude that discussions about taxing the rich are misplaced because rich people are wealthy and don’t necessarily have high incomes. Futhermore, when you ‘unfairly’ tax high income earners, you’re punishing folks that are making high contributions to the economy. You punish those folks, you punish the economy. Which means you punish us all.

I suppose this is correct in terms of income derived from labor, but what about investment income… I agree that there should be low(ish) taxes on income derived from labor, but this is not an argument for low taxes on investment income or on wealth in general.

It doesn’t seem fair to tax income based on work performed. A virtuous tax policy would have low tax on income from salary. It does seem just to tax wealth and income derived from wealth.

On a completely different note: why are there no aggregate wealth statistics that are widely reported? I mean you hear about GDP everyday it seems in one article or another. It seems that the health of the economy, as businesses, can be judged by looking at income AND the balance sheet (which I take to mean wealth).

Three Pillars of Learning – Depth; What ideas are…

Three Pillars of Learning

– Depth; What ideas are important?

– Breadth; What connections are there between ideas?

– Process; How do people think about things? Models.

These pillars work with each other in a virtuous cycle of learning. Models of how the world works help you to understand it. Those models help to build deep understanding of a particular idea. The deep understanding means that you understand the model further, you generalize and then apply the model to other areas or fields. Because no model is perfect in a more general setting, applying the model more generally forces you to reevaluate the model and improve it or scrape it. The outcome is a better model and the cycle continues.

Graduate school is a social environment that allows this cycle to continue unhindered.

Questions To Ask When Thinking About Pursuing a Ph…

Questions To Ask When Thinking About Pursuing a PhD

“Research shows that up to half of the students who begin doctoral study never receive the Ph.D. One culprit in attrition is a poor match. Doctoral study may be a poor choice in the first place, or there may be a poor fit between the student and the program.”

Questions that need an answer:

1. Why a PhD?

2. Why economics?

3. Why Berkeley?

4. What advisors at Berkeley? Why?

EconLog, High income and Wealth: Library of Econom…

EconLog, High income and Wealth: Library of Economics and Liberty

I like this one… I’ll come back to it. Basically, what would be a just distribution of wealth? What would a virtuous distribution look like? Assume each, justice and virtue, are mutually exclusive (I’m not sure if that’s the right term… in other words, justice plus virture adds up to 100% of your morals, I guess). Square the virtuous and just models of wealth distribution with their respective importance.

Also, I want to look into the ‘Survey of Consumer Finances’ more… For my personal financial planning if nothing else…

Len Burman et al. on the Alternative Minimum Tax …

Len Burman et al. on the Alternative Minimum Tax

Interesting the politics of tax policy. You hear raise taxes, lower taxes, but in reality revenue needs to be had and services need to be paid for (especially new, expense entitlement programs, cough cough perscription drugs). This article talks about the AMT. If the politicians do nothing, more and more folks will be subject to the alternate tax and the politicians, in effect, have raised taxes and nobody can hold them responsible.

Another example is the hullabaloo regarding expensing stock options. Stock gains (aka capital gains) are taxed at a famous maximum of 15%. Income is taxed upwards of 35%. Assume the policy change encourages companies to switch from stock options to straight salary compensation and you’re talking a 20% tax increase on the margin!

Even better, wages are subject to workers comp whereas stock option compensation is not.

In any case, they’ve risen taxes with impunity. What a deal!

War Overview

War Overview

Good one!

Mr. Clueless reviews the arguments for war. His presentation seems a bit like post-rationalization, but its also probable that such a case would not have enjoyed so much political success… Side note: its strange that an argument made before a war is so much different then a case after and that these differences seem politically necessary. Point being: we would not have been able to go to war under the auspices of ‘rearchitecting the middle east’. It took the ‘they are going to kill us with bad weapons’ argument to get folks behind the war.

In the Bush administration and the larger neocon movement, am I witness to great leadership or to a Machiavellian political agenda to rule the world? The answer seems to depend on my mood more than the arguments one side or another makes! Most likely, this is due to the fact that both sides are right.