Monopsony power, and thus the argument for minimum wage, is actually weakest among employers of unskilled labor in large cities due to the fact that there are likely to be many employers of unskilled labor in any given part of the city. Monopsony power is stronger in sparsely populated areas, and for workers with highly specialized skills.
Naturally, the strictest minimum wage laws are found in large cities and are binding primarily for unskilled workers, exactly the subset of jobs for which the argument for regulating wages is weakest.
Most of the Western Nations in the World look at the USA aghast at the way freedom is equated to unrestrained market forces.
The argument for and against a higher minimum wage is best discussed in the context of why other Nations such as Australia are not collapsing in economic ruin with high unemployment. Australia has a minimum wage based on a week of 38 ordinary hours ($23.23 per hour) as a base rate for adult employees in the national system who are award/agreement free. This equates to about USD 15.56 at current exchange rates.
Juniors (under 21 YO) get a percentage of an adult rate. As best I can determine for this example, a 16 YO Casual, working in the Fast Food Industry at the lowest rung would be paid $15.45 (USD 10.35).
Guess what!
The Hospitality Industry is always wanting more staff and this includes restaurants, bars and generally relies on tourists here in Australia on a Working Visa to fill many of the jobs.
A living wage is considered a minimum requirement (I do also realize that even Australia doesn't get it right all the time and we still have pockets of poverty).
Why should I, living well in retirement (but previously a well paid Civil Engineer) expect to go out and be served by a waiter earning USD 2.35 (where tipping is available). The employer should pay a 'proper' wage, raise his prices to a 'real' cost and cut out the insidious expectation of a surly waiter if you don't tip adequately (now in the USA a minimum of 15% but an expectation of 18% and even 20% all pre-calculated on your bill). Whatever happened to the good old 10% (now sneered at).
When travelling in the USA in 2018, I would almost have a heart attack each time in restaurants when I had calculated in my mind, say USD 65 for a nice but simple meal with a glass of wine or a beer but after provincial taxes, city taxes, which way the wind is blowing taxes (kidding) and then feeling obliged to choose at least 15% so that I was not abused on the way out (never happened but that is the perceived pressure) to find the bill with tip was say USD 85.
We get quite good service at restaurants in Australia (where serving is not a National Past-time as everyone is considered equal) not because of an expectation of a good tip but because they won't last in their job if the employer sees the waiter being disrespectful to the customer. Gee, someone in the Hospitality Industry being hospitable. Isn't that a first.
Come on guys. Just come into the 21st Century and stop treating your 'lowest' in your country as virtual slaves. Stop saying, 'They should be grateful they have a job because I deign to do this or that'. They should not have to work 2 or 3 jobs and still not scrape together enough to live a half decent life.
Economists would agree that a higher minimum wage is necessary if 'they' depended on it.
Choose compassion (the necessity to work but not struggle) over compulsion (the necessity to work and still struggle).
You seem to think that the argument is about the overall unemployment rate. It isn't. Minimum wage workers are about 1.4% of the labor force, so an increase in their unemployment rate has a very small effect on the national unemployment effect. Further, one effect of raising the cost of unskilled labor is to substitute skilled labor, so increase its employment.
Your whole comment misses the point of the argument which is not that the cost of a higher minimum wage hurts consumers but that it hurts workers by pricing them off the market.
I guess my point is that in the rest of the Western World, unskilled labor is employed at a higher wage than in the USA and our societies don't fall apart.
If, as you say that unskilled labor is only 1.4% of the labor force then your employed 'skilled' labor force can afford the increases in prices to better enable the unskilled labor to have a chance at a better life.
The USA seems to be an outlier in the Western World, although that is not surprising since there are a number of areas that set the USA apart.
Healthcare would be another example where anything approaching a universal healthcare is slammed as 'commie' or at least socialist (although in the USA these are often conflated).
Staying on healthcare, the USA spends about 17% of its GDP compared to many countries such as again Australia at about 8%. Our system is certainly not perfect but I would rather have our system than the USA. Your system has been described as 'Islands of excellence in a sea of mediocrity'. Great if you have the money or a health insurance but hell if you don't which is why the USA has the highest medical bankruptcies in the World. The uninsured in the USA is about 25 million or 8% of the population. This granted is at its lowest and is still trending down which may be a reflection of your low employment rate (or Obamacare).
I emphasize again that a little extra compassion in your society towards your unskilled by being prepared to guarantee a higher minimum wage would only seem 'fair'. Unfortunately you all need a whole new mindset by getting rid of tipping which is an invidious system which is just getting worse. Once 10%, now 15%, 18% no wait 20%. When does it stop? Do the employees share it all and how or do they share it with the employer?
The point isn't that the skilled labor can't afford it or that the society will fall apart. That's a straw man, an argument you attribute to someone else because it's easy to refute even though it isn't their argument.
The argument is that raising the minimum wage results in fewer job opportunities for unskilled labor making them worse off. We can afford a higher minimum wage — it will only make us a little poorer. The people who can't afford it are the unskilled workers who have fewer job opportunities as a result.
Sorry, David. I respect your opinion and enjoy your substack but I believe your argument is a 'red herring'.
The rest of the Western World seems to get by just fine. It is only in the USA (that I am aware of) that this argument goes on and on.
Sure. There may be a period of adjustment for the USA but I cannot expect that others struggle to survive having to work 2-3 jobs just to barely make a living.
Remember paying 'fair' wages will lift the whole economy as 'they' will be able to lift their standard of living paying more taxes and purchasing goods that goes round and round in the economy. Even reducing the call on welfare for a percentage.
Has there been a study of a State where a minimum wage has been introduced compared to a similar State without one? Or before and after that you can quote? Let us make this discussion based on data.
It's not fair towards disfavored workers to force employers to pay them as much as favored workers, thus removing the strongest method for overcoming their disfavor.
The minimum wage was created by evil people for evil ends, and has evil results. It should be abolished.
Hmm. I wonder who these 'evil' people are that you refer to.
Must be a lot of evil people in Australia then as we expect our Government to give people an opportunity to get off the 'bottom' rung or an opportunity for teenagers starting work to get a fair wage for their work without being exploited by unscrupulous employers.
In Australia we believe in what is referred to as 'a fair go'. We try to not get bogged down in saying that 'they' don't deserve better because 'they' deserve their problems because 'they' are lazy so and so's and won't get off their fat arses to help themselves. Many people are where they are because of family issues and should not be penalized because of what their parents did or not did. Sure, many parents are the pits but their children should inherit their 'sins'.
Have some compassion. You or your children might be needing some, some day.
They are not compelled to pay more, but rather forbidden to pay less. This is an important distinction, because while in some cases the employer will choose to pay more, in others, he will instead choose to pay nothing.
Compassion was meant to be that I exhibit compassion by paying higher prices to a restaurant owner so that he pays more to his workers.
I am sure that you expect a high salary when you work and don't expect to have to rely on tips from the customers of your IT firm or business firm you work for because you did something for them that 'they' appreciated.
That isn't you exhibiting compassion, it's you paying the price you find you have to pay for dinner. To exhibit compassion you have to have a choice of how much to pay, which you do when you are tipping.
When that Waiter is paid a 'fair' wage for his effort, tipping is unnecessary except in particularly good circumstances. The compassion is that they are getting a 'fair' wage.
In Australia tipping is not expected and if given it is more of a rounding off rather than a real tip and is not common. In Australia I round off taxi fares for example because I pay cash rather than card and I don't want to be held up dealing with loose change.
The awful practice of tipping is becoming the rod for your back in the USA and I think you will come to regret it (if you aren't already in some places from the stories I read).
Tipping is meant for rewarding great service, not for just having an average meal and being served by someone who EXPECTS a tip even if just giving lip service so to speak. When a bill comes with pre-calculated 15%, 18% and 20%, you the customer don't have much of a choice. It used to be 10%. When will it stop. 25%?
You are again ignoring the argument in order to use it as an excuse for your attack on tipping. Do you think it demonstrates your compassion when you pay a high price at a restaurant, knowing that doing so is the only way you can get them to serve you dinner? If you didn't have compassion for the waiters what would you do — starve?
If I go to a top end restaurant, I expect to pay a commensurate price for that quality. Tipping in that situation is irrelevant.
Situation One:
The prices on the menu are 'X' and being an Australian and unused to tipping and all your crazy inefficient taxes (unlike a VAT as in Britain or GST in Australia but let's not go off on a tangent about US taxes that vary by State, County and Town) I kept getting caught out for the first few days.
Situation Two:
A decent minimum wage is paid to the Waiters and reflected in the menu prices so I don't have to concern myself with tipping (unless I am really impressed with the restaurant and/or the Wait Staff).
Guess what!!
Same price or at least similar. So I don't have to starve. Worst scenario if I can't get the restaurant to serve me is I go to a (ugh) Fast Food joint (where I don't need to tip) or fast for the night which is not a bad strategy for one's health or so it is claimed by some health 'experts'.
By the way, while travelling around the US for 7 weeks in 2018, my routine was a simple breakfast of say coffee and fruit or biscuit (cookie) and either a good meal at lunch and fruit or 'health' bar and coffee for dinner or vice versa depending on where, when and how I wanted to eat that day.
Tipping only gets caught up in this 'discussion' because of the refusal by many Americans (including clearly you) who cannot show empathy towards people at the 'bottom rung' of society by paying a decent wage (minimum wage). You seem to claim empathy and compassion by believing you are helping unskilled labor in at 'least' having a job that doesn't pay a livable wage anyway so even with 2-3 jobs they barely scratch a living.
As I said previously, I am a 'friend' of the US and thoroughly enjoyed my time travelling there. I felt and was impressed with what I would describe as the 'raw' power of the country.
I also saw the scab that sits on the wound that is just below the surface of your society that is harsh and uncaring for those in need.
I remarked previously that I wonder if it doesn't reflect a dark psyche that has yet to be reconciled by American society.
Australia is going through a process of reconciliation with its Indigenous Peoples and trying to find a balance between 'thrashing' ourselves for supposed past guilt and claiming with pride the good that European society has brought to this country. The recent Referendum was rightly rejected by some 60% of the population because the Referendum was seen as going too far to the 'thrashing' part.
Previously I referred to what Australians believe is that everyone deserves a 'fair go' and that everyone black, white and brindle, rich and poor are equal and those that are at risk of slipping through the 'cracks' deserve a helping hand.
As still the largest economy in the World and one of the richest perhaps the US can afford to stretch out a hand to its poor.
Have you heard about what's been happening with tip culture runaway in America? Some kind of normative dam broke and what was once a cultural institution for which expectations remained stable for generations suddenly got more insistent, obnoxious, demanding, and involuntary and seems to be continuing to get worse.
Yes. Have read some horrendous stories and watched some entitled people complaining about tips left.
As I stated above in my reply to David:
"Unfortunately you all need a whole new mindset by getting rid of tipping which is an invidious system which is just getting worse. Once 10%, now 15%, 18% no wait 20%. When does it stop? Do the employees share it all and how or do they share it with the employer?"
A system that expects a 'good' tip is no longer the original system based on great service. I believe it is just a way of keeping wages down for the Employer where it is then up to Employees to 'strong arm' customers or face the wrath of waitstaff on the way out.
I don't "expect a high salary". I expect the salary I agreed to when I took the job. I don't work in a job where I rely on or expect tips. When I was young, I took jobs that were very low paid and that were not tipped. (In the case of delivering newspapers, maybe a few people would tip once a year.) Compassion has to be voluntary or else it's not compassion, it's compulsion. Virtues are voluntary expressions.
A Society can show compassion by ensuring that their lowest paid get a wage which enables them to at least have a chance of making a decent living without for instance having to work 2-3 jobs.
It didn't have to be compassionate but that Society chose to. Therefore a Society that has a fair Minimum Wage has met your requirement in it doing a voluntary act.
I don't understand (and I guess that sets me and most Australians apart from Americans) why there is this pervasive attitude towards unskilled labor that a low wage is all they are entitled to.
Is it because of an historic idiosyncratic situation where the USA has had a lot of illegal immigrants from Mexico and Latin America who have been exploited in the past. Interestingly, I have heard it described that the USA can't function without these immigrants being paid a low wage and without them the agricultural harvest of fruit would not be picked. The availability of this cheap labor has probably been the reason why there is less mechanization in your agricultural fruit picking industry.
I quote from an article in the Australian Farm Institute from a couple of years ago about differences in US and Australian farming:
" In the US, many of the more intensive agriculture industries (pork, poultry, horticulture) utilise labour at pay rates starting at around $8 per hour, compared to minimum rates in Australia in excess of $20 per hour. It also seems that in the US, there are much less onerous regulations around the provision of ‘benefits’ such as superannuation and health care, and a significant amount of the labour employed in some regions is immigrant labour that may not even be receiving the minimum award rates".
These rates are in AUD. The $20 is now AUD 23.23 minimum wage but in the Fruit Picking Industry a casual adult worker is guaranteed from 01 July 2023 a minimum of $28.26 per hour. On top of their wage ALL employees in Australia are paid 11% extra by their employer on the wage they earn which is for superannuation and must be paid into an accredited fund. This superannuation is for their retirement. The rate will increase to 12% from
01 July 2025.
If Australia as a modern Nation in the Western World can pay these rates and still compete on the World markets for its produce (with mechanization where appropriate), why can't the US do the same?
Does any of this reveal a dark side of the American psyche that you have yet to reconcile from your past?
A compulsory minimum wage is not a voluntary act! Society is not a thing. Individuals can show compassion, not societies. Outsourcing your compassion to the government which forces employers to pay a certain amount under threat of imprisonment is not compassion. The inability of so many people to comprehend this is part of why our society is decaying.
That is why other Western Nations look aghast at the United States for all the opportunities it presents.
Oscar Wilde after his tour in 1882 remarked that 'the United States was the only country that had gone from barbarism to decadence without ever passing through civilization'.
I am also reminded of another quote unattributed:
The United States is the only country to have gone from infancy to senility without ever passing through maturity'.
How you can quibble over the Society that I referred to? A Society is made up of individuals that decided collectively to show compassion.
No one is imprisoned for not obeying a minimum wage payment (perhaps some should if they repeatedly cheat their workers). Certainly fined in addition to making good the unpaid wages and benefits.
Australia is not perfect. Far from it. We still have to 'whack a mole' every now and then particularly those who think that they can 'cheat' foreign students working in the retail industry because they fear speaking up or lack the knowledge of what they should be paid or tourists on Working Visas.
Evil people know no nationality. Greed lives everywhere.
Don't prove it by continuing to argue that unskilled labor doesn't deserve better treatment than the scraps thrown to them by an uncaring society pious in their belief that they are helping the unskilled labor while tut-tutting that at least they have a job and should be thankful for what they get.
In the US, young (unskilled) blacks are unemployed at 2X the rate of similar whites. In Australia, with a higher minimum wage, Aboriginals are unemployed at 3X the rate of similar whites.
Unfortunately you have ignored cultural problems that have yet to be addressed by the Indigenous Community in spite of funds being poured at the problem. Many are simply in locations where there is no employment possible being in remote (like no where near employment locations) communities in the Outback of Australia.
In Carnarvon which is a town of 5,000 people in NW Western Australia (900 kms or about 560 miles) from Perth (Capital of Western Australia) from personal experience in general the young Indigenous would not work preferring to draw social welfare.
One third of people who identify as Indigenous live in Major Cities. Roughly 25% in Inner Regional Areas and about one third live in Remote and very Remote Communities.
The question “should I publish” is answered by the same thinking as;
Should I donate to charity?
Should I be polite to my jacka** neighbor?
Should I vote?
They are all value judgements with powerful ethical arguments in favor but also some against. The decision to potentially alter outcomes in what you perceive as a negative way must be a decision reached between you and your conscience. There can be no universal “right” answer.
In general, I am on the side of transparency and truth in most matters and would publish. Let the market sort it out.
In answering this question my mind immediately goes to the elections of 2016 and 2020.
James Comey had negative information on Hillary Clinton, or at least information that would be interpreted as negative. He made an attempt at transparency and revealed the FBI was reopening an investigation into Clinton’s use of an email server. The results were clear and ultimately decisive as her polling numbers significantly declined immediately afterwards. It very likely pushed Trump over the top. Comey chose to publish.
In 2020 the FBI had information on Hunter Biden’s laptop that was negative or would be interpreted as negative to Joe Biden’s re-election. Jack Dorsey (among others) chose not to publish. It may have secured Biden’s election.
I suppose my point is a person can’t really win in this ethical quandary. Both circumstances (published and not published) resulted in negative consequences to someone, positive consequences for someone else. Both men were heavily criticized for their decisions and would have received criticism if they did the opposite.
Human nature makes the “publish” question impossible to answer correctly.
The trouble is any minimum wage analysis is that they uniformly ignore race, and you see weak results. Young blacks are unemployed at 2X the rate of young whites. The minimum wage was established by eugenicists to deny blacks employment. These three facts mitigate against publishing ANY minimum wage study unless it includes race. As far as I know, Card and Kreuger made no attempt to measure black vs white unemployment between NJ and PA.
I doubt they could have measured employment by race.
What is the evidence for your claim about eugenicists? The closest case I know of is equal pay for equal work being supported by the South African Nationalists to price black workers, generally less educated and skilled than white workers, out of the market, keep them from competing by being willing to work for less.
"Leonard’s work shows that some advocates of the minimum wage, including many giants of the early days of the economics profession, such as John R. Commons and Richard T. Ely, understood exactly what minimum wage laws would do and liked it. In addition, various Progressives and socialists who were not economists, such as Eugene Debs and Beatrice and Sidney Webb, also supported minimum wage laws and other interventions into the labor market precisely because they would weed out those who were deemed too stupid or lazy to compete in a market economy—in particular, women, immigrants, and blacks.
No disagreement here in principle and I don't know enough economics to opine on the minimum wage debate. Would add the distinction between whether we should try to publish versus will we be published. Example: I published a progressive non-empirical practice model in a reputable psychology journal 30 years ago. If I had tried to publish further negative experience with said model, the journal would have rejected it, even then. It wasn't worth trying. As for the IQ debate, there's little chance of reasonable debate for the lay public, as we saw with the publication of the Bell Curve. I happen to be a culturalist and find, for example, Richard Lynn's assertion of an average IQ of 59 for the bushmen of the Kalahari unpersuasive and have to wonder who might rescue his European fanny if he ever got lost there. Certainly not people who have such cognitive impairment that it meaningfully corresponds to an IQ of 59 as measured in a Western consulting room. At the same time, I don't see why it's not possible for higher IQ to have been selected for among East Asians or Ashkenazi Jews compared to Europeans etc.
Does it matter how contentious the debate is, how evenly matched the number of contenders?
The climate debate -- and I'm among those who agree there IS debate -- claims that 97 of every 100 researchers agree with the concept. Judith Curry, (famously among the 3 others) retired from the debate, asserting that not only her own career was now limited, but any of her students, research assistants, and associates were tainted by proximity. Should she, therefore, give up publishing even if she finds a novel theory and test?
The so-called "Reading Wars" are now older than Sputnik, and still divide fairly evenly, 50 / 50, between supporters of phonics and supporters of "whole language" instruction. It's as much political as anything. If a hardcore party advocate finds a theory and experiment that supports "the other side" -- a famous Democrat who could prove GW Bush's side of the debate correct, for example -- should she give "the enemy" rhetorical and political support?
Most wealthy persons sneer at proposals for a "wealth tax". It's not clear to me how taxing unrealized gains in ownership of stocks, bonds, or business activity differs from owning real estate, which is already taxed. Increasing property value appraisals, even if perfectly estimated, do nothing to increase the owners' ability to pay property tax. If a novel method of making a billionaire's net worth visible and more liquid could be theoretically established, (given that there are millions of voters other than billionaires) should the method be publicized?
The claim might be true, depending on how strongly you define the concept, but it isn't supported by Cook et. al. 2013, which is the source usually cited for it.
Taxing unrealized gains isn't a wealth tax, although it may sometimes be called that. One effect would be to decrease charitable donations, since if I give appreciated stock away neither I nor the recipient has to pay capital gains tax. Another, along similar lines, would be to decrease the incentive to leave your appreciated stock to your heirs.
I appreciate any response. This response however focuses on the flaws (which I admit, confess, and apologize for introducing) of the examples rather than the question.
Does the numerical composition, the demographic, the majority "identity" of the community into which a new idea might be introduced strongly influence the decision to publish. If the new idea upsets a tiny "fringe", isn't it a no-brainer? If the new idea upsets the cartel presently in charge, uhm... might be a no-brainer IMPERATIVE to publish, provided one has the courage. But in mid-range cases? A sufficiently large but not majority fraction/faction might be upset ... is an "in-your-face" demonstration of error the best approach?
Are you asking what is the best policy to make the world better or to benefit yourself? For the latter purpose it's usually a mistake to publish something against the current orthodoxy, although sometimes not if you are able enough and the evidence for your position is good enough. Probably a higher chance of a Nobel prize but a lower chance of tenure or a job.
For personal betterment, I suppose, it might better the world as well to chip away at the consensus and orthodoxy rather than attempt to take it all down at once.
Suppose one had a novel concept and experiment to demonstrate -- against all contrary experience -- that Rent Control actually worked? Or that general import tariffs were no more harmful to consumers than, say, domestic excise taxes? Or that commodity-based currencies reduced market volatility? Maybe such "one" should move from Virginia to Illinois, first, and THEN publish?
I think David's premise is that it does not matter. The point is not "should you publish?" but "will others publish?" The answer is that it is less likely someone will publish work that goes against their own personal views. Its simply a systemic type of bias we should expect in this world when we do things like count up the number of papers that conclude X Y Z and make conclusions based on that number.
> It's not clear to me how taxing unrealized gains in ownership of stocks, bonds, or business activity differs from owning real estate
I would suggest that if we didn't already have a tax real estate, the wealthy (and many others) would very much balk at the thought of introducing one. Who would have thought that people don't like the idea of people taking their wealth?
Another difference is one of externalities. Taxing someone's land resolves a type of externality - one where the land absorbs value from the community (ie if the community grows and flourishes, an empty lot will be valued more than it was before despite the lot itself not changing at all). Since property tax incorporates a tax on land, its a better tax than others that don't solve an externality (and instead create one).
So I'd suggest you don't spend your time working on how to make other people's wealth more visible against their will. Seems like there are more beneficial things to work on.
How does property tax solve an externality? If I do something to increase the value of my property, say build a shopping center on it, that is more likely to raise the value of surrounding properties than to lower it, so a positive externality. If you only tax the site value, not improvements, then things other people do raise my value, but taxing me on the increase solves the externality only if you give the money to them.
> If I do something to increase the value of my property .. that is more likely to raise the value of surrounding properties than to lower it, so a positive externality
Agreed.
> If you only tax the site value, not improvements, then things other people do raise my value
Perhaps I'm misunderstanding, but if you tax the site-value of a property, my understanding is that other things people do will raise the value of your property *less* than without such a tax. No?
> taxing me on the increase solves the externality only if you give the money to them.
I should be more precise. A tax on the site value (not the actual land or improvements) can solve *part* of an externality. There are two sides to every externality. The one creating the externality, and the one receiving it. Solving only one side is always only a half-solution - better than nothing perhaps, but not a complete solution. An example would be your neighbors beautiful garden. Without any solution, beatiful gardens are underproduced. With a government solution where tax money is spent to compensate gardens of significant beauty for the value they provide the community, beatiful gardens should no longer be underproduced. However, there is still the deadweight loss from the other end - many who pay for the beatiful gardens don't receive much of their value (perhaps they're in the bad part of town) and therefore there are also many who underpay and receive outsized benefits from those gardens. The money taken from those who don't benfit is a deadweight loss. The value received by those underpaying are illgotten gains (economic rent). The predictable economic rent of land leads to other deadweight losses in society - overspeculation and underdevelopment of land.
A solution to the receipt of externalities is a land value tax. Or actually, I like your term better: site-value tax. I like that term better because unlike traditional georgists, I don't think the land itself (its natural resources, etc) should be taxed. What should be taxed is the value of its site - all the value that comes onto that site from outside the property line.
I'm sure you're well versed in this already, but if you'd like to read my writing on this, here's the article I wrote: https://governology.substack.com/p/land-value-tax . I'm not a professional economist so I'm sure I made plenty of errors and I'd love to be corrected.
" The money taken from those who don't benfit is a deadweight loss."
It's a transfer. A deadweight loss is something where there is a cost but no benefit, such as where a tax results in something not getting produced, bringing in no tax money but making the people who would have produced and consumed it worse off.
Indeed. It is a transfer. I should have said "results in" vs "is". Transfers from the creator of value to someone who provides no transactional value generaly results in deadweight losses, no? This is how negative externalities work. One party transfers their costs onto others, lowering their incentive to reduce those costs. Similarly for a positive externality, one party transfers their created value to others, lowering their incentive to produce that value. Thus underdevelopment of land and other things that produce positive externalities. This is a cost. Not a physical cost, but rather an opportunity cost.
"It's not clear to me how taxing unrealized gains in ownership of stocks, bonds, or business activity differs from owning real estate" and
>I would suggest that if we didn't already have a tax real estate, the wealthy (and many others) would very much balk at the thought of introducing one.<
Oh, agreed. MANY others
I'm not following the discussion about externalities, at least as related to wealth that is NOT land, and the taxability of such wealth.
Consider Bill and Ted (The most excellent! Gates and Turner, I suppose) Bill puts his billions into land, and pays property taxes. Land values go up and down, and Bill pays property tax every year. (On the rare years that the crops and livestock on the land turn a profit, Bill ALSO pays income tax.) Ted puts his billions into a blended mutual fund of stocks and bonds. Every year the values fluctuate. (The banks and firms pay corporate taxes) But at present, Ted is only taxed on gains -- if any -- at the time he sells. We have no idea, really, whether the sum of annual property taxes is more or less than the one-time capital gains tax. We neglect the prospect of either ever paying an inheritance tax. It is proposed that taxing billionaires on their wealth -- both Bill AND Ted, and Elon and Jeff and all, and however their wealth may be invested. Advocates of the proposal claim it is (a) more "fair" to billionaires and (b) more fair to everyone with less wealth than some floor value like a billion -- and we solemnly promise a wealth tax will never apply to those ordinary voters and (c) will raise revenues for the public purse.
I'm not advocating a wealth tax but I still am not able to point to the flaws in the claims that advocates are making.
If I COULD show such flaws, should I publish a scholarly paper about it?
> We have no idea, really, whether the sum of annual property taxes is more or less than the one-time capital gains tax.
I'm sure it depends very much on the state.
> more "fair" to billionaires
Perhaps.
> we solemnly promise a wealth tax will never apply to those ordinary voters
A flaw with that is that such solemn promises made by the politicians who make them and enact laws like this, tend very much to be broken sooner rather than later.
> will raise revenues for the public purse
A flaw here is that we shouldn't want to increase public revenues. One can argue philosophy about what the appropriate level of funding should be (based on the sizes of appropriate uses of funds), but I think the vast majority of people would agree that the current amount of tax money governments collect is too much - ie that it should be able to fund all the programs any given person thinks it should fund and quite a bit then some.
The vast majority of taxes result in substantial deadweight losses - to the tune of 30% of what's collected. So on average, each increase in government revenue results in a corresponding decrease in economic wellbeing.
I find myself drawn into interesting discussions about the examples instead of discussing the concepts around publishing. I reluctantly abandon the current questions about wealth taxes, climate, etc, to pick a "settled" example:
At one time the prevailing wisdom around the US colonial/revolutionary period was that most households were armed. This wisdom was challenged by Michael Bellesiles, professor of history from Emory University. He earned celebrity status claiming that period-contemporary actual census, probate, militia, etc records, correctly analyzed, showed that households were generally NOT in possession of firearms. He published both academic papers and a mass market book touting his claims and analysis.
A researcher, Clayton Cramer, published rebuttals not in the academic literature but primarily on his and other blogs. Bellesiles, Cramer charged, was basically falsifying his sources.
Academics COULD have issued similar rebuttals in the journals of their professions. They, for the most part, did not. They could have attempted to replicate Bellesiles's work -- (find the inheritance records, etc). Again, for the most part, they did not.
Seems to me there ARE pressures and incentives about "challenging the prevailing wisdom" but those push the challenge in a progressive or revolutionary direction -- claiming new territory in the academic landscape. The same social forces push BACK if the prevailing wisdom has already claimed for progress in the academic landscape and a traditional, reactionary, challenge is offered. Mann can publish against Hubert Lamb. McIntyre can't (easily) publish against Mann. Elizabeth Warren can publish regarding a "wealth" tax, but even Nobel winner Paul Krugman can't firmly push back against the idea. ( https://www.nytimes.com/2021/06/03/opinion/biden-taxation-rich.html ) The lesson for a young researcher with a good idea and means to test it is: set up a blog. A substack. A private platform. Because otherwise the academic publishing apparatus will close you out.
Monopsony power, and thus the argument for minimum wage, is actually weakest among employers of unskilled labor in large cities due to the fact that there are likely to be many employers of unskilled labor in any given part of the city. Monopsony power is stronger in sparsely populated areas, and for workers with highly specialized skills.
Naturally, the strictest minimum wage laws are found in large cities and are binding primarily for unskilled workers, exactly the subset of jobs for which the argument for regulating wages is weakest.
Most of the Western Nations in the World look at the USA aghast at the way freedom is equated to unrestrained market forces.
The argument for and against a higher minimum wage is best discussed in the context of why other Nations such as Australia are not collapsing in economic ruin with high unemployment. Australia has a minimum wage based on a week of 38 ordinary hours ($23.23 per hour) as a base rate for adult employees in the national system who are award/agreement free. This equates to about USD 15.56 at current exchange rates.
Juniors (under 21 YO) get a percentage of an adult rate. As best I can determine for this example, a 16 YO Casual, working in the Fast Food Industry at the lowest rung would be paid $15.45 (USD 10.35).
Guess what!
The Hospitality Industry is always wanting more staff and this includes restaurants, bars and generally relies on tourists here in Australia on a Working Visa to fill many of the jobs.
A living wage is considered a minimum requirement (I do also realize that even Australia doesn't get it right all the time and we still have pockets of poverty).
Why should I, living well in retirement (but previously a well paid Civil Engineer) expect to go out and be served by a waiter earning USD 2.35 (where tipping is available). The employer should pay a 'proper' wage, raise his prices to a 'real' cost and cut out the insidious expectation of a surly waiter if you don't tip adequately (now in the USA a minimum of 15% but an expectation of 18% and even 20% all pre-calculated on your bill). Whatever happened to the good old 10% (now sneered at).
When travelling in the USA in 2018, I would almost have a heart attack each time in restaurants when I had calculated in my mind, say USD 65 for a nice but simple meal with a glass of wine or a beer but after provincial taxes, city taxes, which way the wind is blowing taxes (kidding) and then feeling obliged to choose at least 15% so that I was not abused on the way out (never happened but that is the perceived pressure) to find the bill with tip was say USD 85.
We get quite good service at restaurants in Australia (where serving is not a National Past-time as everyone is considered equal) not because of an expectation of a good tip but because they won't last in their job if the employer sees the waiter being disrespectful to the customer. Gee, someone in the Hospitality Industry being hospitable. Isn't that a first.
Come on guys. Just come into the 21st Century and stop treating your 'lowest' in your country as virtual slaves. Stop saying, 'They should be grateful they have a job because I deign to do this or that'. They should not have to work 2 or 3 jobs and still not scrape together enough to live a half decent life.
Economists would agree that a higher minimum wage is necessary if 'they' depended on it.
Choose compassion (the necessity to work but not struggle) over compulsion (the necessity to work and still struggle).
You seem to think that the argument is about the overall unemployment rate. It isn't. Minimum wage workers are about 1.4% of the labor force, so an increase in their unemployment rate has a very small effect on the national unemployment effect. Further, one effect of raising the cost of unskilled labor is to substitute skilled labor, so increase its employment.
Your whole comment misses the point of the argument which is not that the cost of a higher minimum wage hurts consumers but that it hurts workers by pricing them off the market.
David.
I guess my point is that in the rest of the Western World, unskilled labor is employed at a higher wage than in the USA and our societies don't fall apart.
If, as you say that unskilled labor is only 1.4% of the labor force then your employed 'skilled' labor force can afford the increases in prices to better enable the unskilled labor to have a chance at a better life.
The USA seems to be an outlier in the Western World, although that is not surprising since there are a number of areas that set the USA apart.
Healthcare would be another example where anything approaching a universal healthcare is slammed as 'commie' or at least socialist (although in the USA these are often conflated).
Staying on healthcare, the USA spends about 17% of its GDP compared to many countries such as again Australia at about 8%. Our system is certainly not perfect but I would rather have our system than the USA. Your system has been described as 'Islands of excellence in a sea of mediocrity'. Great if you have the money or a health insurance but hell if you don't which is why the USA has the highest medical bankruptcies in the World. The uninsured in the USA is about 25 million or 8% of the population. This granted is at its lowest and is still trending down which may be a reflection of your low employment rate (or Obamacare).
I emphasize again that a little extra compassion in your society towards your unskilled by being prepared to guarantee a higher minimum wage would only seem 'fair'. Unfortunately you all need a whole new mindset by getting rid of tipping which is an invidious system which is just getting worse. Once 10%, now 15%, 18% no wait 20%. When does it stop? Do the employees share it all and how or do they share it with the employer?
You are still ignoring the argument.
The point isn't that the skilled labor can't afford it or that the society will fall apart. That's a straw man, an argument you attribute to someone else because it's easy to refute even though it isn't their argument.
The argument is that raising the minimum wage results in fewer job opportunities for unskilled labor making them worse off. We can afford a higher minimum wage — it will only make us a little poorer. The people who can't afford it are the unskilled workers who have fewer job opportunities as a result.
Sorry, David. I respect your opinion and enjoy your substack but I believe your argument is a 'red herring'.
The rest of the Western World seems to get by just fine. It is only in the USA (that I am aware of) that this argument goes on and on.
Sure. There may be a period of adjustment for the USA but I cannot expect that others struggle to survive having to work 2-3 jobs just to barely make a living.
Remember paying 'fair' wages will lift the whole economy as 'they' will be able to lift their standard of living paying more taxes and purchasing goods that goes round and round in the economy. Even reducing the call on welfare for a percentage.
Has there been a study of a State where a minimum wage has been introduced compared to a similar State without one? Or before and after that you can quote? Let us make this discussion based on data.
It's not fair towards disfavored workers to force employers to pay them as much as favored workers, thus removing the strongest method for overcoming their disfavor.
The minimum wage was created by evil people for evil ends, and has evil results. It should be abolished.
Hmm. I wonder who these 'evil' people are that you refer to.
Must be a lot of evil people in Australia then as we expect our Government to give people an opportunity to get off the 'bottom' rung or an opportunity for teenagers starting work to get a fair wage for their work without being exploited by unscrupulous employers.
In Australia we believe in what is referred to as 'a fair go'. We try to not get bogged down in saying that 'they' don't deserve better because 'they' deserve their problems because 'they' are lazy so and so's and won't get off their fat arses to help themselves. Many people are where they are because of family issues and should not be penalized because of what their parents did or not did. Sure, many parents are the pits but their children should inherit their 'sins'.
Have some compassion. You or your children might be needing some, some day.
By "compassion" you mean compel employers to pay more.
They are not compelled to pay more, but rather forbidden to pay less. This is an important distinction, because while in some cases the employer will choose to pay more, in others, he will instead choose to pay nothing.
If that is how you interpret compassion.
Compassion was meant to be that I exhibit compassion by paying higher prices to a restaurant owner so that he pays more to his workers.
I am sure that you expect a high salary when you work and don't expect to have to rely on tips from the customers of your IT firm or business firm you work for because you did something for them that 'they' appreciated.
That isn't you exhibiting compassion, it's you paying the price you find you have to pay for dinner. To exhibit compassion you have to have a choice of how much to pay, which you do when you are tipping.
When that Waiter is paid a 'fair' wage for his effort, tipping is unnecessary except in particularly good circumstances. The compassion is that they are getting a 'fair' wage.
In Australia tipping is not expected and if given it is more of a rounding off rather than a real tip and is not common. In Australia I round off taxi fares for example because I pay cash rather than card and I don't want to be held up dealing with loose change.
The awful practice of tipping is becoming the rod for your back in the USA and I think you will come to regret it (if you aren't already in some places from the stories I read).
Tipping is meant for rewarding great service, not for just having an average meal and being served by someone who EXPECTS a tip even if just giving lip service so to speak. When a bill comes with pre-calculated 15%, 18% and 20%, you the customer don't have much of a choice. It used to be 10%. When will it stop. 25%?
You are again ignoring the argument in order to use it as an excuse for your attack on tipping. Do you think it demonstrates your compassion when you pay a high price at a restaurant, knowing that doing so is the only way you can get them to serve you dinner? If you didn't have compassion for the waiters what would you do — starve?
David.
What a weird reply.
If I go to a top end restaurant, I expect to pay a commensurate price for that quality. Tipping in that situation is irrelevant.
Situation One:
The prices on the menu are 'X' and being an Australian and unused to tipping and all your crazy inefficient taxes (unlike a VAT as in Britain or GST in Australia but let's not go off on a tangent about US taxes that vary by State, County and Town) I kept getting caught out for the first few days.
Situation Two:
A decent minimum wage is paid to the Waiters and reflected in the menu prices so I don't have to concern myself with tipping (unless I am really impressed with the restaurant and/or the Wait Staff).
Guess what!!
Same price or at least similar. So I don't have to starve. Worst scenario if I can't get the restaurant to serve me is I go to a (ugh) Fast Food joint (where I don't need to tip) or fast for the night which is not a bad strategy for one's health or so it is claimed by some health 'experts'.
By the way, while travelling around the US for 7 weeks in 2018, my routine was a simple breakfast of say coffee and fruit or biscuit (cookie) and either a good meal at lunch and fruit or 'health' bar and coffee for dinner or vice versa depending on where, when and how I wanted to eat that day.
Tipping only gets caught up in this 'discussion' because of the refusal by many Americans (including clearly you) who cannot show empathy towards people at the 'bottom rung' of society by paying a decent wage (minimum wage). You seem to claim empathy and compassion by believing you are helping unskilled labor in at 'least' having a job that doesn't pay a livable wage anyway so even with 2-3 jobs they barely scratch a living.
As I said previously, I am a 'friend' of the US and thoroughly enjoyed my time travelling there. I felt and was impressed with what I would describe as the 'raw' power of the country.
I also saw the scab that sits on the wound that is just below the surface of your society that is harsh and uncaring for those in need.
I remarked previously that I wonder if it doesn't reflect a dark psyche that has yet to be reconciled by American society.
Australia is going through a process of reconciliation with its Indigenous Peoples and trying to find a balance between 'thrashing' ourselves for supposed past guilt and claiming with pride the good that European society has brought to this country. The recent Referendum was rightly rejected by some 60% of the population because the Referendum was seen as going too far to the 'thrashing' part.
Previously I referred to what Australians believe is that everyone deserves a 'fair go' and that everyone black, white and brindle, rich and poor are equal and those that are at risk of slipping through the 'cracks' deserve a helping hand.
As still the largest economy in the World and one of the richest perhaps the US can afford to stretch out a hand to its poor.
I have said enough.
Have you heard about what's been happening with tip culture runaway in America? Some kind of normative dam broke and what was once a cultural institution for which expectations remained stable for generations suddenly got more insistent, obnoxious, demanding, and involuntary and seems to be continuing to get worse.
Yes. Have read some horrendous stories and watched some entitled people complaining about tips left.
As I stated above in my reply to David:
"Unfortunately you all need a whole new mindset by getting rid of tipping which is an invidious system which is just getting worse. Once 10%, now 15%, 18% no wait 20%. When does it stop? Do the employees share it all and how or do they share it with the employer?"
A system that expects a 'good' tip is no longer the original system based on great service. I believe it is just a way of keeping wages down for the Employer where it is then up to Employees to 'strong arm' customers or face the wrath of waitstaff on the way out.
I don't "expect a high salary". I expect the salary I agreed to when I took the job. I don't work in a job where I rely on or expect tips. When I was young, I took jobs that were very low paid and that were not tipped. (In the case of delivering newspapers, maybe a few people would tip once a year.) Compassion has to be voluntary or else it's not compassion, it's compulsion. Virtues are voluntary expressions.
A Society can show compassion by ensuring that their lowest paid get a wage which enables them to at least have a chance of making a decent living without for instance having to work 2-3 jobs.
It didn't have to be compassionate but that Society chose to. Therefore a Society that has a fair Minimum Wage has met your requirement in it doing a voluntary act.
I don't understand (and I guess that sets me and most Australians apart from Americans) why there is this pervasive attitude towards unskilled labor that a low wage is all they are entitled to.
Is it because of an historic idiosyncratic situation where the USA has had a lot of illegal immigrants from Mexico and Latin America who have been exploited in the past. Interestingly, I have heard it described that the USA can't function without these immigrants being paid a low wage and without them the agricultural harvest of fruit would not be picked. The availability of this cheap labor has probably been the reason why there is less mechanization in your agricultural fruit picking industry.
I quote from an article in the Australian Farm Institute from a couple of years ago about differences in US and Australian farming:
" In the US, many of the more intensive agriculture industries (pork, poultry, horticulture) utilise labour at pay rates starting at around $8 per hour, compared to minimum rates in Australia in excess of $20 per hour. It also seems that in the US, there are much less onerous regulations around the provision of ‘benefits’ such as superannuation and health care, and a significant amount of the labour employed in some regions is immigrant labour that may not even be receiving the minimum award rates".
These rates are in AUD. The $20 is now AUD 23.23 minimum wage but in the Fruit Picking Industry a casual adult worker is guaranteed from 01 July 2023 a minimum of $28.26 per hour. On top of their wage ALL employees in Australia are paid 11% extra by their employer on the wage they earn which is for superannuation and must be paid into an accredited fund. This superannuation is for their retirement. The rate will increase to 12% from
01 July 2025.
If Australia as a modern Nation in the Western World can pay these rates and still compete on the World markets for its produce (with mechanization where appropriate), why can't the US do the same?
Does any of this reveal a dark side of the American psyche that you have yet to reconcile from your past?
Only saying as a friend of the US!!
A compulsory minimum wage is not a voluntary act! Society is not a thing. Individuals can show compassion, not societies. Outsourcing your compassion to the government which forces employers to pay a certain amount under threat of imprisonment is not compassion. The inability of so many people to comprehend this is part of why our society is decaying.
That is why other Western Nations look aghast at the United States for all the opportunities it presents.
Oscar Wilde after his tour in 1882 remarked that 'the United States was the only country that had gone from barbarism to decadence without ever passing through civilization'.
I am also reminded of another quote unattributed:
The United States is the only country to have gone from infancy to senility without ever passing through maturity'.
How you can quibble over the Society that I referred to? A Society is made up of individuals that decided collectively to show compassion.
No one is imprisoned for not obeying a minimum wage payment (perhaps some should if they repeatedly cheat their workers). Certainly fined in addition to making good the unpaid wages and benefits.
Australia is not perfect. Far from it. We still have to 'whack a mole' every now and then particularly those who think that they can 'cheat' foreign students working in the retail industry because they fear speaking up or lack the knowledge of what they should be paid or tourists on Working Visas.
Evil people know no nationality. Greed lives everywhere.
Don't prove it by continuing to argue that unskilled labor doesn't deserve better treatment than the scraps thrown to them by an uncaring society pious in their belief that they are helping the unskilled labor while tut-tutting that at least they have a job and should be thankful for what they get.
In the US, young (unskilled) blacks are unemployed at 2X the rate of similar whites. In Australia, with a higher minimum wage, Aboriginals are unemployed at 3X the rate of similar whites.
I rest my case.
Unfortunately you have ignored cultural problems that have yet to be addressed by the Indigenous Community in spite of funds being poured at the problem. Many are simply in locations where there is no employment possible being in remote (like no where near employment locations) communities in the Outback of Australia.
In Carnarvon which is a town of 5,000 people in NW Western Australia (900 kms or about 560 miles) from Perth (Capital of Western Australia) from personal experience in general the young Indigenous would not work preferring to draw social welfare.
One third of people who identify as Indigenous live in Major Cities. Roughly 25% in Inner Regional Areas and about one third live in Remote and very Remote Communities.
Enjoyed the sketch of your father. Fenwick Friedman has to have been quite a name to manage.
The question “should I publish” is answered by the same thinking as;
Should I donate to charity?
Should I be polite to my jacka** neighbor?
Should I vote?
They are all value judgements with powerful ethical arguments in favor but also some against. The decision to potentially alter outcomes in what you perceive as a negative way must be a decision reached between you and your conscience. There can be no universal “right” answer.
In general, I am on the side of transparency and truth in most matters and would publish. Let the market sort it out.
In answering this question my mind immediately goes to the elections of 2016 and 2020.
James Comey had negative information on Hillary Clinton, or at least information that would be interpreted as negative. He made an attempt at transparency and revealed the FBI was reopening an investigation into Clinton’s use of an email server. The results were clear and ultimately decisive as her polling numbers significantly declined immediately afterwards. It very likely pushed Trump over the top. Comey chose to publish.
In 2020 the FBI had information on Hunter Biden’s laptop that was negative or would be interpreted as negative to Joe Biden’s re-election. Jack Dorsey (among others) chose not to publish. It may have secured Biden’s election.
I suppose my point is a person can’t really win in this ethical quandary. Both circumstances (published and not published) resulted in negative consequences to someone, positive consequences for someone else. Both men were heavily criticized for their decisions and would have received criticism if they did the opposite.
Human nature makes the “publish” question impossible to answer correctly.
The trouble is any minimum wage analysis is that they uniformly ignore race, and you see weak results. Young blacks are unemployed at 2X the rate of young whites. The minimum wage was established by eugenicists to deny blacks employment. These three facts mitigate against publishing ANY minimum wage study unless it includes race. As far as I know, Card and Kreuger made no attempt to measure black vs white unemployment between NJ and PA.
I doubt they could have measured employment by race.
What is the evidence for your claim about eugenicists? The closest case I know of is equal pay for equal work being supported by the South African Nationalists to price black workers, generally less educated and skilled than white workers, out of the market, keep them from competing by being willing to work for less.
https://fee.org/articles/eugenics-progressivisms-ultimate-social-engineering/
"Leonard’s work shows that some advocates of the minimum wage, including many giants of the early days of the economics profession, such as John R. Commons and Richard T. Ely, understood exactly what minimum wage laws would do and liked it. In addition, various Progressives and socialists who were not economists, such as Eugene Debs and Beatrice and Sidney Webb, also supported minimum wage laws and other interventions into the labor market precisely because they would weed out those who were deemed too stupid or lazy to compete in a market economy—in particular, women, immigrants, and blacks.
Thanks. Interesting.
No disagreement here in principle and I don't know enough economics to opine on the minimum wage debate. Would add the distinction between whether we should try to publish versus will we be published. Example: I published a progressive non-empirical practice model in a reputable psychology journal 30 years ago. If I had tried to publish further negative experience with said model, the journal would have rejected it, even then. It wasn't worth trying. As for the IQ debate, there's little chance of reasonable debate for the lay public, as we saw with the publication of the Bell Curve. I happen to be a culturalist and find, for example, Richard Lynn's assertion of an average IQ of 59 for the bushmen of the Kalahari unpersuasive and have to wonder who might rescue his European fanny if he ever got lost there. Certainly not people who have such cognitive impairment that it meaningfully corresponds to an IQ of 59 as measured in a Western consulting room. At the same time, I don't see why it's not possible for higher IQ to have been selected for among East Asians or Ashkenazi Jews compared to Europeans etc.
Chanda Chisala offers evidence against the claimed low average IQ of Africans, which I discuss at:
https://daviddfriedman.substack.com/p/race-gender-and-iq
Does it matter how contentious the debate is, how evenly matched the number of contenders?
The climate debate -- and I'm among those who agree there IS debate -- claims that 97 of every 100 researchers agree with the concept. Judith Curry, (famously among the 3 others) retired from the debate, asserting that not only her own career was now limited, but any of her students, research assistants, and associates were tainted by proximity. Should she, therefore, give up publishing even if she finds a novel theory and test?
The so-called "Reading Wars" are now older than Sputnik, and still divide fairly evenly, 50 / 50, between supporters of phonics and supporters of "whole language" instruction. It's as much political as anything. If a hardcore party advocate finds a theory and experiment that supports "the other side" -- a famous Democrat who could prove GW Bush's side of the debate correct, for example -- should she give "the enemy" rhetorical and political support?
Most wealthy persons sneer at proposals for a "wealth tax". It's not clear to me how taxing unrealized gains in ownership of stocks, bonds, or business activity differs from owning real estate, which is already taxed. Increasing property value appraisals, even if perfectly estimated, do nothing to increase the owners' ability to pay property tax. If a novel method of making a billionaire's net worth visible and more liquid could be theoretically established, (given that there are millions of voters other than billionaires) should the method be publicized?
The 97% claim as usually made is fraudulent, for reasons I discuss at:
https://daviddfriedman.substack.com/p/a-climate-falsehood-you-can-check
The claim might be true, depending on how strongly you define the concept, but it isn't supported by Cook et. al. 2013, which is the source usually cited for it.
Taxing unrealized gains isn't a wealth tax, although it may sometimes be called that. One effect would be to decrease charitable donations, since if I give appreciated stock away neither I nor the recipient has to pay capital gains tax. Another, along similar lines, would be to decrease the incentive to leave your appreciated stock to your heirs.
I appreciate any response. This response however focuses on the flaws (which I admit, confess, and apologize for introducing) of the examples rather than the question.
Does the numerical composition, the demographic, the majority "identity" of the community into which a new idea might be introduced strongly influence the decision to publish. If the new idea upsets a tiny "fringe", isn't it a no-brainer? If the new idea upsets the cartel presently in charge, uhm... might be a no-brainer IMPERATIVE to publish, provided one has the courage. But in mid-range cases? A sufficiently large but not majority fraction/faction might be upset ... is an "in-your-face" demonstration of error the best approach?
Are you asking what is the best policy to make the world better or to benefit yourself? For the latter purpose it's usually a mistake to publish something against the current orthodoxy, although sometimes not if you are able enough and the evidence for your position is good enough. Probably a higher chance of a Nobel prize but a lower chance of tenure or a job.
https://daviddfriedman.blogspot.com/2013/09/a-record-for-university-of-virginia.html
For personal betterment, I suppose, it might better the world as well to chip away at the consensus and orthodoxy rather than attempt to take it all down at once.
Suppose one had a novel concept and experiment to demonstrate -- against all contrary experience -- that Rent Control actually worked? Or that general import tariffs were no more harmful to consumers than, say, domestic excise taxes? Or that commodity-based currencies reduced market volatility? Maybe such "one" should move from Virginia to Illinois, first, and THEN publish?
I think David's premise is that it does not matter. The point is not "should you publish?" but "will others publish?" The answer is that it is less likely someone will publish work that goes against their own personal views. Its simply a systemic type of bias we should expect in this world when we do things like count up the number of papers that conclude X Y Z and make conclusions based on that number.
> It's not clear to me how taxing unrealized gains in ownership of stocks, bonds, or business activity differs from owning real estate
I would suggest that if we didn't already have a tax real estate, the wealthy (and many others) would very much balk at the thought of introducing one. Who would have thought that people don't like the idea of people taking their wealth?
Another difference is one of externalities. Taxing someone's land resolves a type of externality - one where the land absorbs value from the community (ie if the community grows and flourishes, an empty lot will be valued more than it was before despite the lot itself not changing at all). Since property tax incorporates a tax on land, its a better tax than others that don't solve an externality (and instead create one).
So I'd suggest you don't spend your time working on how to make other people's wealth more visible against their will. Seems like there are more beneficial things to work on.
How does property tax solve an externality? If I do something to increase the value of my property, say build a shopping center on it, that is more likely to raise the value of surrounding properties than to lower it, so a positive externality. If you only tax the site value, not improvements, then things other people do raise my value, but taxing me on the increase solves the externality only if you give the money to them.
> If I do something to increase the value of my property .. that is more likely to raise the value of surrounding properties than to lower it, so a positive externality
Agreed.
> If you only tax the site value, not improvements, then things other people do raise my value
Perhaps I'm misunderstanding, but if you tax the site-value of a property, my understanding is that other things people do will raise the value of your property *less* than without such a tax. No?
> taxing me on the increase solves the externality only if you give the money to them.
I should be more precise. A tax on the site value (not the actual land or improvements) can solve *part* of an externality. There are two sides to every externality. The one creating the externality, and the one receiving it. Solving only one side is always only a half-solution - better than nothing perhaps, but not a complete solution. An example would be your neighbors beautiful garden. Without any solution, beatiful gardens are underproduced. With a government solution where tax money is spent to compensate gardens of significant beauty for the value they provide the community, beatiful gardens should no longer be underproduced. However, there is still the deadweight loss from the other end - many who pay for the beatiful gardens don't receive much of their value (perhaps they're in the bad part of town) and therefore there are also many who underpay and receive outsized benefits from those gardens. The money taken from those who don't benfit is a deadweight loss. The value received by those underpaying are illgotten gains (economic rent). The predictable economic rent of land leads to other deadweight losses in society - overspeculation and underdevelopment of land.
A solution to the receipt of externalities is a land value tax. Or actually, I like your term better: site-value tax. I like that term better because unlike traditional georgists, I don't think the land itself (its natural resources, etc) should be taxed. What should be taxed is the value of its site - all the value that comes onto that site from outside the property line.
I'm sure you're well versed in this already, but if you'd like to read my writing on this, here's the article I wrote: https://governology.substack.com/p/land-value-tax . I'm not a professional economist so I'm sure I made plenty of errors and I'd love to be corrected.
" The money taken from those who don't benfit is a deadweight loss."
It's a transfer. A deadweight loss is something where there is a cost but no benefit, such as where a tax results in something not getting produced, bringing in no tax money but making the people who would have produced and consumed it worse off.
Indeed. It is a transfer. I should have said "results in" vs "is". Transfers from the creator of value to someone who provides no transactional value generaly results in deadweight losses, no? This is how negative externalities work. One party transfers their costs onto others, lowering their incentive to reduce those costs. Similarly for a positive externality, one party transfers their created value to others, lowering their incentive to produce that value. Thus underdevelopment of land and other things that produce positive externalities. This is a cost. Not a physical cost, but rather an opportunity cost.
Am I getting something wrong?
No.
"It's not clear to me how taxing unrealized gains in ownership of stocks, bonds, or business activity differs from owning real estate" and
>I would suggest that if we didn't already have a tax real estate, the wealthy (and many others) would very much balk at the thought of introducing one.<
Oh, agreed. MANY others
I'm not following the discussion about externalities, at least as related to wealth that is NOT land, and the taxability of such wealth.
Consider Bill and Ted (The most excellent! Gates and Turner, I suppose) Bill puts his billions into land, and pays property taxes. Land values go up and down, and Bill pays property tax every year. (On the rare years that the crops and livestock on the land turn a profit, Bill ALSO pays income tax.) Ted puts his billions into a blended mutual fund of stocks and bonds. Every year the values fluctuate. (The banks and firms pay corporate taxes) But at present, Ted is only taxed on gains -- if any -- at the time he sells. We have no idea, really, whether the sum of annual property taxes is more or less than the one-time capital gains tax. We neglect the prospect of either ever paying an inheritance tax. It is proposed that taxing billionaires on their wealth -- both Bill AND Ted, and Elon and Jeff and all, and however their wealth may be invested. Advocates of the proposal claim it is (a) more "fair" to billionaires and (b) more fair to everyone with less wealth than some floor value like a billion -- and we solemnly promise a wealth tax will never apply to those ordinary voters and (c) will raise revenues for the public purse.
I'm not advocating a wealth tax but I still am not able to point to the flaws in the claims that advocates are making.
If I COULD show such flaws, should I publish a scholarly paper about it?
> We have no idea, really, whether the sum of annual property taxes is more or less than the one-time capital gains tax.
I'm sure it depends very much on the state.
> more "fair" to billionaires
Perhaps.
> we solemnly promise a wealth tax will never apply to those ordinary voters
A flaw with that is that such solemn promises made by the politicians who make them and enact laws like this, tend very much to be broken sooner rather than later.
> will raise revenues for the public purse
A flaw here is that we shouldn't want to increase public revenues. One can argue philosophy about what the appropriate level of funding should be (based on the sizes of appropriate uses of funds), but I think the vast majority of people would agree that the current amount of tax money governments collect is too much - ie that it should be able to fund all the programs any given person thinks it should fund and quite a bit then some.
The vast majority of taxes result in substantial deadweight losses - to the tune of 30% of what's collected. So on average, each increase in government revenue results in a corresponding decrease in economic wellbeing.
I find myself drawn into interesting discussions about the examples instead of discussing the concepts around publishing. I reluctantly abandon the current questions about wealth taxes, climate, etc, to pick a "settled" example:
At one time the prevailing wisdom around the US colonial/revolutionary period was that most households were armed. This wisdom was challenged by Michael Bellesiles, professor of history from Emory University. He earned celebrity status claiming that period-contemporary actual census, probate, militia, etc records, correctly analyzed, showed that households were generally NOT in possession of firearms. He published both academic papers and a mass market book touting his claims and analysis.
A researcher, Clayton Cramer, published rebuttals not in the academic literature but primarily on his and other blogs. Bellesiles, Cramer charged, was basically falsifying his sources.
Academics COULD have issued similar rebuttals in the journals of their professions. They, for the most part, did not. They could have attempted to replicate Bellesiles's work -- (find the inheritance records, etc). Again, for the most part, they did not.
Seems to me there ARE pressures and incentives about "challenging the prevailing wisdom" but those push the challenge in a progressive or revolutionary direction -- claiming new territory in the academic landscape. The same social forces push BACK if the prevailing wisdom has already claimed for progress in the academic landscape and a traditional, reactionary, challenge is offered. Mann can publish against Hubert Lamb. McIntyre can't (easily) publish against Mann. Elizabeth Warren can publish regarding a "wealth" tax, but even Nobel winner Paul Krugman can't firmly push back against the idea. ( https://www.nytimes.com/2021/06/03/opinion/biden-taxation-rich.html ) The lesson for a young researcher with a good idea and means to test it is: set up a blog. A substack. A private platform. Because otherwise the academic publishing apparatus will close you out.