Monthly Archive for September, 2016

Homer Nods

mankiwBetween his blog, his New York Times columns and his textbooks, Greg Mankiw has probably contributed more than anyone else alive to the cause of economic literacy. But his most recent column is, I think, a rare miss.

The thrust of the column is that the estate tax is a bad idea because it violates the principle of horizontal equity by imposing substantially different tax burdens on substantially similar people:

Consider the story of two couples. Both start family businesses when they are young. They work hard, and their businesses prosper beyond anything they expected. When they reach retirement age, both couples sell their businesses. After paying taxes on the sale, they are each left with a sizable nest egg of, say, $20 million, which they plan to enjoy during their golden years.

Then the stories diverge. One couple, whom I’ll call the Frugals, live modestly. Mr. and Mrs. Frugal don’t scrimp, but they watch their spending. They recognize how lucky they have been, and they want to share their success with their children, grandchildren, nephews and nieces.

The other couple, whom I’ll call the Profligates, have a different view of their wealth. They earned it, and they want to enjoy every penny of it themselves. Mr. and Mrs. Profligate eat at top restaurants, drink rare wines, drive flashy cars and maintain several homes. They spend their time sailing the Caribbean in their opulent yacht and flying their private jet from one luxury resort to the next.

So here’s the question: How should the tax burdens of the two couples compare? Under an income tax, the couples would pay the same, because they earned the same income. Under a consumption tax, Mr. and Mrs. Profligate would pay more because of their lavish living (though the Frugals’ descendants would also pay when they spend their inheritance). But under our current system, which combines an income tax and an estate tax, the Frugal family has the higher tax burden. To me, this does not seem right.

The problem with this argument is that it’s not an argument against the estate tax. It’s an argument against any tax (other than a pure $X-per-person-per-year head tax). Try it:

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That Debate


They were both so dreadful in so many ways that I don’t have the heart to review it all.

But just because it came near the very end, this is what sticks in my mind.

I am paraphrasing from memory here, but I believe that Mrs. Clinton “accused” Mr. Trump of having said that:

  1. Pregnancy is inconvenient to employers.
  2. When a female employee is less productive than a male employee, it is reasonable for that female employee to be paid less.

Quite independent of the question of whether Mr. Trump did or did not say these things, in what sense are these accusations? Specifically:

  1. Does Mrs. Clinton actually not understand that pregnancy is frequently inconvenient for employers? If not, she is so thoroughly out of touch with the realities of running a business that this alone would be a good reason not to vote for her.
  2. Does Mrs. Clinton actually not understand that it’s a good thing for more effective employees to be paid more than less effective employees — not least because this sends a signal to those less effective employees that they might be more socially useful doing something different? If so, she is so thoroughly out of touch with how markets work (and should work), and so thoroughly oblivious to the importance of efficient resource allocation, that it should be almost unthinkable to vote for her.

Evolution in Action?

From researchers at Harvard, here is stunning time-lapse photography of something that (as far as I can see) might or might not be evolution. A bacteria colony spreads out across a giant Petri dish, hits an area with a high concentration of antibiotics, appears to be stopped in its tracks, but then slowly breaches the boundary in a limited area and is soon spreading as before until it reaches an area with an even higher concentration of antibiotics, and the story repeats:

According to the narrator, the barrier is being breached by a small number of antibiotic-resistant mutants, which then reproduce like crazy, at least until they come into competition with other mutants, etc. In other words, evolution.

Now I’m sure this is an extremely naive question, but I hope someone can offer an answer that will leave me less naive: How do we know this is evolution as opposed to learned behavior?

Continue reading ‘Evolution in Action?’

College Students: Do Not Give Your Credit Card to the Wall Street Journal

With the new school year underway, and mindful of the fact that many economics students read this blog, let me repeat this periodic warning: Your econ profs are likely to offer you an “opportunity” to subscribe to the Wall Street Journal under the newly renamed Wall Street Journal University program. (I like to think, but of course do not know, that the renaming had something to do with the repeated warnings on this blog and elsewhere regarding the old Journal-in-Education program.)

I realize it’s implausible that a well-established institution like the Wall Street Journal would be running a credit card scam. Nevertheless, they are. When I subscribed through the old “Journal-in-Education” program, they tacked an extra $900 in phony charges onto my credit card bill. I called them repeatedly, they repeatedly acknowledged the “error” and promised to fix it, and, repeatedly, nothing happened. After a year, I got a refund for $450. After another year — and countless hours on the phone — I got an additional refund, still short of the entire amount. Most audaciously of all, they told me I could have the remainder of my refund if I agreed to attend a marketing event. They still have my money.

I am a long-time subscriber to the Journal and have never had these problems with subscriptions bought in the ordinary way. The Journal-in-Education, or Wall Street Journal University, or WSJ-Prof, or whatever else they’re calling it, program seems to be a separate entity that plays by its own tawdry rules. Don’t get mixed up with them.

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