These are a number of great points, as an economics graduate student I would add:
The importance of understanding economic reasoning, logic, theory, and arguements so that you are not mystified when right-wingers/libertarians use clever-sounding economism logic for what are essentially ideological preferences ( especially when it comes to minimum wages, deficit spending,and social spending). Basically, be able to look past the appeal to economics that used to justify so much awful bullshit.
As the economist Joan Robinson said: "The purpose of studying economics is to learn how to avoid being deceived by the economists."
> I do not have time to write a textbook, a lot of it will not be self-explanatory, and will likely require further reading.
Dude, that's a tragedy. Because if you did write such a textbook, in a plain language accessible form packaged together with succinct relevant background where needed to understand it... maybe with parts of it as a graphic novel in the style of XKCD or SMBC...
If you did this thing, I would argue that it could have massive positive impact by enabling progressives to win in a domain that right now they just cede with no contest. And, it would give them something far more useful and constructive than identity politics to focus their energy on. Maybe Biden and Harris could have run a more effective campaign. He'll, maybe Bernie could have run a more effective campaign.
I only started reading your blog, I know nothing about you, for all I know you don't consider yourself qualified for such a task. But consider this: your bare bones post has already given me more new thoughts than the last ten years of reading news and punditry. So you *are* more qualified than the average bear.
"Dividend and buyback taxes are a great way to prevent money from leaving a corporation and returning to its owners, while rewarding reinvestment."
This is bad, though! We want capital to be invested efficiently, and the corporations that are most profitable may not be the corporations that can use additional capital most efficiently.
Dividend and buyback taxes create a lock-in effect, where returning profits to investors so that they can reallocate capital to other corporations is penalized. This also encourages corporations to become inefficiently large, which is ironic, because most of the people leading the moral panic over buybacks also claim to be concerned about excessive concentration.
CEOs probably already have an incentive (empire building) to reinvest profits internally even when it could they could be more productively reinvested by shareholders in other companies. The tax system shouldn't exacerbate this.
To encourage efficient reinvestment, we want to eliminate taxation on reallocation of capital, and instead tax consumption.
Point 26. I strongly agree. Everyone should be given a basic education in economics. It should be compulsory at school. I’ve just taken a few papers since retiring, and I’ve gained so much understanding of how the world works. If only I’d known this earlier.
This is really good. One thing I’d add is the importance of distinguishing between rent seeking and value creation, and how much more important (and beneficial) it is to tax the former before the latter.
You mentioned taxing land, which is obviously the big one. But I think a lot of left-wing animus towards capitalism is about organisations who are making money just by owning things rather than creating things. That extends not just to land and natural resources but to a bunch of other stuff.
Many professions wish the public was better informed about the discipline. Not going to happen. It is very easy for professional people to forget how ignorant they were before a decade of training, hence they tend to over-estimate how much non-specialists will learn or are willing to learn.
The YT channel Shredded Sports Science comically and bitingly calls out all the supplement nonsense that permeats the health field; especially in gyms. He doesn't go down rabbit holes just calls out the BS.
Gary has a masters in econ. from Oxford Uni and made millions as a trader. He now hosts Garys Economics and doesn't seek to educate people about the finer details of economics, he points the injustices of the current framework and that growing inequality is an inevitable consequence.
When it comes to disciplines outside of a person's interests or training most people choose an authority figure to trust. We don't demand people became familiar with biomedicine so they can understand doctors or learn C++ etc etc. The problem for economists is that the media is owned by right wing interests which promote right wing economists. I don't know how to solve that problem but social media presents opportunities and if the data is to be trusted younger generations are abandoning traditional MSM outlets and relying on social media.
Another point on reducing taxes on innovators: Couldn't that lead them to retire earlier and thus produce fewer positive externalities? I'm curious if there's any economic theory about this.
1. It is impossible to believe in the basic tenants of modern economic theory that valorize free market transactions without also believing in the existence of market failures.
2. There are obvious counterexamples to the claim that solutions to market failures are always worse than the problem (e.g., a pigouvian tax on carbon with an intentionally conservative estimate of the social cost of carbon).
3. Nobody actually believes it is impossible to make interpersonal utility comparisons (have you never done something you didn't really want to do for a friend because "it matters more to them than it does to me"?).
4. Kaldor-Hicks efficiency is a poor proxy for utility maximization.
5. Nobody actually believes that the marginal utility of income is constant rather than declining; all the real debates instead involve how steeply it declines and what the downsides of redistribution are.
6. Collective action problems exist (easily accepted when it comes to issues like military spending; less easily accepted when it comes to issues like climate change).
Edit:
The emergence of the new/Trumpian right complicates this - for them, I might say stuff like:
1. Comparative advantage exists.
2. Immigrants increase labor demand in addition to labor supply.
3. (Kinda a more general form of the above two, but worth emphasizing in its own right) Nonzero sum games exist.
The whole reason speculation is undesirable is that it diverts resources away from productive investments; diverting those resources into luxury consumption instead is no better.
With regards to the impacts of speculation on the housing market for example that is in fact not my biggest concern. And I really wouldn't want, say, water or grain to get the tulip-bitcoin treatment either.
which probably is unsalable and would have no readers, because we live in a crap timeline in which market socialism gets ~no discursive traction for reasons orthogonal to how much object-level sense it makes
Many good points, but a small list of points for consideration:
#23 "We do not want the rich to consume their surplus on luxury goods, as they often do, we wish to keep them in a cycle of reinvestment."
Neither do we want them to use their wealth to inflate the value of pre-existing assets by speculation.
#26 "The importance of a general education in economics." Definitely not in current mode. Economics as currently taught, in particular "the basics" is a quasi-religion. It defies scientific methodology, it defies system dynamics, it very much serves a 'business as usual' approach to all the big questions.
#28 No socialist was ever an inventor of Neoclassical economics. Keynes is usually considered a neoclassical and is often presumed / slandered by by neolibs to be a socialist, but, as a member of the upper-middle class, his concern was always the effective management of capitalism in order to prevent the rise of 'full socialism'.
Actually, it's not that complicated. We know from past experience that you get a better result for most people if you run a capitalist economy under the stakeholder culture as we did over 1942-73, than under the shareholder primacy culture as we have since around 1980.
The sticky wicket is you get a better result for the top 10% under shareholder primacy. And since this group comprises the policy-making elite, they prefer things the way they are, so nothing changes, polarization just keeps rising until, presumably, it gets violent. But this hasn't happened yet and with an aging society it may not ever happen, so the status quo may just continue on until the system collapses under its own weight, but that could be decades from now.
Agree with another John's citation of Joan Robinson "The purpose of studying economics is to learn how to avoid being deceived by the economists."
One thing that has proved to be a blind alley is the attempt to find fundamental logical flaws that will invalidate mainstream economics. As with capitalism more generally, mainstream economics has shown a great capacity to absorb what is useful in critiques of this kind, while discarding the rest. For example, the useful content of Modern Monetary Theory can be derived from Lerner's concept of functional finance, while the claim to have discovered something fundamental about money turns out to be pointless (true of a long series of theories about money).
These are a number of great points, as an economics graduate student I would add:
The importance of understanding economic reasoning, logic, theory, and arguements so that you are not mystified when right-wingers/libertarians use clever-sounding economism logic for what are essentially ideological preferences ( especially when it comes to minimum wages, deficit spending,and social spending). Basically, be able to look past the appeal to economics that used to justify so much awful bullshit.
As the economist Joan Robinson said: "The purpose of studying economics is to learn how to avoid being deceived by the economists."
> I do not have time to write a textbook, a lot of it will not be self-explanatory, and will likely require further reading.
Dude, that's a tragedy. Because if you did write such a textbook, in a plain language accessible form packaged together with succinct relevant background where needed to understand it... maybe with parts of it as a graphic novel in the style of XKCD or SMBC...
If you did this thing, I would argue that it could have massive positive impact by enabling progressives to win in a domain that right now they just cede with no contest. And, it would give them something far more useful and constructive than identity politics to focus their energy on. Maybe Biden and Harris could have run a more effective campaign. He'll, maybe Bernie could have run a more effective campaign.
I only started reading your blog, I know nothing about you, for all I know you don't consider yourself qualified for such a task. But consider this: your bare bones post has already given me more new thoughts than the last ten years of reading news and punditry. So you *are* more qualified than the average bear.
"Dividend and buyback taxes are a great way to prevent money from leaving a corporation and returning to its owners, while rewarding reinvestment."
This is bad, though! We want capital to be invested efficiently, and the corporations that are most profitable may not be the corporations that can use additional capital most efficiently.
Dividend and buyback taxes create a lock-in effect, where returning profits to investors so that they can reallocate capital to other corporations is penalized. This also encourages corporations to become inefficiently large, which is ironic, because most of the people leading the moral panic over buybacks also claim to be concerned about excessive concentration.
CEOs probably already have an incentive (empire building) to reinvest profits internally even when it could they could be more productively reinvested by shareholders in other companies. The tax system shouldn't exacerbate this.
To encourage efficient reinvestment, we want to eliminate taxation on reallocation of capital, and instead tax consumption.
Maybe not a textbook, but I would be interested in something like a reading recommendation list, you already mentioned some here.
Maybe follow up each point with a link to the academic paper(s), an economic journalist article, or a book?
Point 26. I strongly agree. Everyone should be given a basic education in economics. It should be compulsory at school. I’ve just taken a few papers since retiring, and I’ve gained so much understanding of how the world works. If only I’d known this earlier.
This is really good. One thing I’d add is the importance of distinguishing between rent seeking and value creation, and how much more important (and beneficial) it is to tax the former before the latter.
You mentioned taxing land, which is obviously the big one. But I think a lot of left-wing animus towards capitalism is about organisations who are making money just by owning things rather than creating things. That extends not just to land and natural resources but to a bunch of other stuff.
Many professions wish the public was better informed about the discipline. Not going to happen. It is very easy for professional people to forget how ignorant they were before a decade of training, hence they tend to over-estimate how much non-specialists will learn or are willing to learn.
The YT channel Shredded Sports Science comically and bitingly calls out all the supplement nonsense that permeats the health field; especially in gyms. He doesn't go down rabbit holes just calls out the BS.
Gary has a masters in econ. from Oxford Uni and made millions as a trader. He now hosts Garys Economics and doesn't seek to educate people about the finer details of economics, he points the injustices of the current framework and that growing inequality is an inevitable consequence.
https://www.youtube.com/@garyseconomics
When it comes to disciplines outside of a person's interests or training most people choose an authority figure to trust. We don't demand people became familiar with biomedicine so they can understand doctors or learn C++ etc etc. The problem for economists is that the media is owned by right wing interests which promote right wing economists. I don't know how to solve that problem but social media presents opportunities and if the data is to be trusted younger generations are abandoning traditional MSM outlets and relying on social media.
Another point on reducing taxes on innovators: Couldn't that lead them to retire earlier and thus produce fewer positive externalities? I'm curious if there's any economic theory about this.
Very much enjoyed the post - I wonder if you might consider writing something similar for (non-insane) right-wingers.
Off the top of my head:
1. It is impossible to believe in the basic tenants of modern economic theory that valorize free market transactions without also believing in the existence of market failures.
2. There are obvious counterexamples to the claim that solutions to market failures are always worse than the problem (e.g., a pigouvian tax on carbon with an intentionally conservative estimate of the social cost of carbon).
3. Nobody actually believes it is impossible to make interpersonal utility comparisons (have you never done something you didn't really want to do for a friend because "it matters more to them than it does to me"?).
4. Kaldor-Hicks efficiency is a poor proxy for utility maximization.
5. Nobody actually believes that the marginal utility of income is constant rather than declining; all the real debates instead involve how steeply it declines and what the downsides of redistribution are.
6. Collective action problems exist (easily accepted when it comes to issues like military spending; less easily accepted when it comes to issues like climate change).
Edit:
The emergence of the new/Trumpian right complicates this - for them, I might say stuff like:
1. Comparative advantage exists.
2. Immigrants increase labor demand in addition to labor supply.
3. (Kinda a more general form of the above two, but worth emphasizing in its own right) Nonzero sum games exist.
You just repeated more left-wing economic ideas. The commenter was asking for an analogous list of right-wing economic ideas.
I disagree with that interpretation of Philosophy Bear's list and Ananke's comment
Good list except for "Immigrants increase labor demand in addition to labor supply."
I'd replace it with "capital exists, you have to consider the capital/labour ratio when thinking about immigration's effect on wages."
That's a nice list, but I'll join the critique of #23, as I see too many ways to invest capital in bad ways to call it "generally good".
- It can be outright bad like excessive speculation
- It can be a means to achieve market domination with the goal to milk your customers without providing a better service
- It can solidify the wealth gap by increasing the cost for competitors to enter the market
I do think I see your point, but I also believe you could express it better.
The whole reason speculation is undesirable is that it diverts resources away from productive investments; diverting those resources into luxury consumption instead is no better.
With regards to the impacts of speculation on the housing market for example that is in fact not my biggest concern. And I really wouldn't want, say, water or grain to get the tulip-bitcoin treatment either.
this is the outline for a very useful book
which probably is unsalable and would have no readers, because we live in a crap timeline in which market socialism gets ~no discursive traction for reasons orthogonal to how much object-level sense it makes
Look up “Filthy Lucre” by Joe Heath (actually, I think it’s titled “Economics Without Illusions” in the States, assuming you’re American).
Many good points, but a small list of points for consideration:
#23 "We do not want the rich to consume their surplus on luxury goods, as they often do, we wish to keep them in a cycle of reinvestment."
Neither do we want them to use their wealth to inflate the value of pre-existing assets by speculation.
#26 "The importance of a general education in economics." Definitely not in current mode. Economics as currently taught, in particular "the basics" is a quasi-religion. It defies scientific methodology, it defies system dynamics, it very much serves a 'business as usual' approach to all the big questions.
#28 No socialist was ever an inventor of Neoclassical economics. Keynes is usually considered a neoclassical and is often presumed / slandered by by neolibs to be a socialist, but, as a member of the upper-middle class, his concern was always the effective management of capitalism in order to prevent the rise of 'full socialism'.
Keynes was not a neoclassical economist.
Philosophy Bear is likely referring to figures like Walras.
Fair comment. I didn't know about Walras's Fabian background.
Great article! This sums up basically all my frustrations with the Left: basically, not knowing that they don’t know these things
Actually, it's not that complicated. We know from past experience that you get a better result for most people if you run a capitalist economy under the stakeholder culture as we did over 1942-73, than under the shareholder primacy culture as we have since around 1980.
https://mikealexander.substack.com/p/summary-of-concepts-involved-in-addressing
The sticky wicket is you get a better result for the top 10% under shareholder primacy. And since this group comprises the policy-making elite, they prefer things the way they are, so nothing changes, polarization just keeps rising until, presumably, it gets violent. But this hasn't happened yet and with an aging society it may not ever happen, so the status quo may just continue on until the system collapses under its own weight, but that could be decades from now.
https://mikealexander.substack.com/p/winners-and-losers-part-i-what-economic
All of this is pretty much correct.
Agree with another John's citation of Joan Robinson "The purpose of studying economics is to learn how to avoid being deceived by the economists."
One thing that has proved to be a blind alley is the attempt to find fundamental logical flaws that will invalidate mainstream economics. As with capitalism more generally, mainstream economics has shown a great capacity to absorb what is useful in critiques of this kind, while discarding the rest. For example, the useful content of Modern Monetary Theory can be derived from Lerner's concept of functional finance, while the claim to have discovered something fundamental about money turns out to be pointless (true of a long series of theories about money).