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BadEconomics Discussion Thread, 20 October 2015 (self.badeconomics)

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[–]wumbotarianKeynesian-on-a-cob 0ポイント1ポイント  (0子コメント)

THE ONLY GOOD ECONOMICS YOU WILL EVER NEED

I am SO PUMPED holy shit

[–]irondeepbicycleI got 99 problems but technological unemployment ain't one 1ポイント2ポイント  (2子コメント)

Can I highlight something cool my city is doing/did? I know we're all probably fans of Heckman-style pre-k, and personally I'm a fan of social impact bonding as a funding mechanism.

[–]wumbotarianKeynesian-on-a-cob 1ポイント2ポイント  (0子コメント)

Wait, Wall Street casino capitalists are giving money to fund pre-K?

But I thought the wealthy didn't care about education?!?!?!?!

[–]piyochamaGoldman schill 1ポイント2ポイント  (0子コメント)

New financial innovation is always cool!!

[–]prillin101Fiat currency has a 27 year lifespan 2ポイント3ポイント  (1子コメント)

Three questions!

1.) I read a comment on a Krugman piece about debt (Comments sections on news sites are never a good idea), and it separated government debt into two areas. One, is good and is used to pay for hospitals, schools, etc.

The other is bad and pays for non-producing things like pensions.

He then argued that saying the government can take on more debt isn't true because the government may took up debt that is bad and non-producing. Is this true? When people say it's good for the government to have debt, is it true that the positives only surface when the debt is from "good" debt?

2.) Could the capital gains tax be used as a tool for recessions? Whenever the capital gains tax is lowered, it temporarily generates more cash than before because "locked in capital" (Capital that isn't sold simply because of capital gains) is quickly sold and this generates a lot of asset sales. Isn't this good for the economy in the short term, and if so couldn't it be used during recessions to help ease them? Maybe they should be lowered in general because they are highly distortionary, but could they be kept at a percentage in the teens that is then dropped during recessions?

3.) One of the major problems currently is slow wage growth, and slow compensation growth in the wake of 2008 in general. How could this be solved? What policies could the government take up to help try and speed wage growth?

I know an obvious answer is abolishment of employer healthcare tax deductions, as the money there would then probably be transferred into wages, but what else is there that can be done, in the short term specifically?

[–]ZenerDiod 0ポイント1ポイント  (0子コメント)

He then argued that saying the government can take on more debt isn't true because the government may took up debt that is bad and non-producing. Is this true? When people say it's good for the government to have debt, is it true that the positives only surface when the debt is from "good" debt?

I haven't read his piece but he's probably arguing that some government debt is good because it's an investment in the country that provides increases in productivity who gain exceed the interest paid on the debt.

I think pensions are an odd example, because they're simply another form of wages, which could be taken as an investment in productivity as well. You're right, comment sections are bad.

Whenever the capital gains tax is lowered, it temporarily generates more cash than before because "locked in capital" (Capital that isn't sold simply because of capital gains) is quickly sold and this generates a lot of asset sales.

You're ignoring that if it's "sold" that means someone is purchasing it, so I fail to see the net increase liquidity unless they're being purchased by the fed. Reducing capital gains could encourages investment, which would have a stimulating effect, but almost any tax cut would.

One of the major problems currently is slow wage growth, and slow compensation growth in the wake of 2008 in general. How could this be solved? What policies could the government take up to help try and speed wage growth?

What proof do you have of slowing of real wage growth? Most estimates that are flawed in that they rely on CPI, a poor measure of inflation, and they measure household income, ignoring that households have gotten smaller and younger over time. They almost always fail to taken into account to government benefits as well.

[–]the_shitpost_king 3ポイント4ポイント  (1子コメント)

Absolute layman here. Something I have wondered about is why running a sovereign deficit is good economics. I understand that as long as it can be paid back, there shouldn't be an issue - but, all else being equal - wouldn't it be better to generate a surplus, as to minimize interest payments to bond holders and maximize domestic spending on infrastructure, education, healthcare etc?

[–]CutlasssI am the Lord your Gold 3ポイント4ポイント  (0子コメント)

Debt is a tool. Like any tool, it can be used well, or it can be used badly. It's normal for companies to use debt to fund investments. Why shouldn't government do the same?

Individuals, households, companies, and governments all run debt for the same ultimate reason, and that is that the value of what they are getting with the debt is greater than the cost of interest and repaying the debt.

[–]TheDesertFox929 2ポイント3ポイント  (10子コメント)

I've seen this many on this sub be against most of the Republican candidates even the moderate ones, could someone explain this to me? I mean, Jeb Bush's, Marco Rubio's, and John Kasich's economic plans don't seem that bad except their support for a balanced budget amendment that will never happen anyway.

[–]CutlasssI am the Lord your Gold 3ポイント4ポイント  (1子コメント)

All of them have tax plans that will drive the deficit through the roof. There are aspects of their plans that may be good. But none that will generate the growth they are projecting. And other aspects of their programs suck beyond belief.

[–]zzzzz94Neomercantilist liberal monarchist 0ポイント1ポイント  (0子コメント)

Sometimes I feel like the Republican candidates just pull the marginal rates out of their ass. 15%? Sure why the fuck not. Lets do it!

[–]prillin101Fiat currency has a 27 year lifespan 3ポイント4ポイント  (6子コメント)

The sub seems to mostly think that some parts of their tax plans are good, but holistically are absolutely moronic. That seems to be their thing in general too, they have a good idea here and there and then are completely fucking stupid in other ways.

[–]TheDesertFox929 0ポイント1ポイント  (5子コメント)

Would you mind expanding on this? Are there any specific policies from moderate Republicans that are terrible?

[–]prillin101Fiat currency has a 27 year lifespan 2ポイント3ポイント  (4子コメント)

The main theme is that they're not revenue neutral. While cutting income or corporation taxes are not a good or bad idea, they need to be done in a revenue neutral way, whether it be raising another different tax or creating a new one. None of them do that, they just want to massively cut the size of the government for a vague "government is bad too big" reason.

Well, one point is that all tax plans come with trillions of dollars worth of debt. Jindal, for example, wants to cut government size by 22% and cut revenues by 22%. However, he's justified this by simply splurging about how government is bad and never given specifics.

I presume you've read the articles about the $6.5 trillion in debt that Jeb Bush will cause with his tax plan? Cutting taxes on it's own is not necessarily bad economics, but his is a fair bit excessive and is almost ENTIRELY focused on cutting rates of the wealthy and upper class.

John Kasich's is a little bit more sane, but still comes with its own fair share of problems. He wants to cut the corporation tax (good) without supplementing it for any other tax increases anywhere else (bad), which mostly implies he wants austerity or wants to take on a shitton of debt. He also wants to cut rates for the top income bracket to 28%, which will probably have no major economic affect and cost the government billions.

Rubio, I haven't evaluated but he is the same from what I've heard.

[–]Classically_Liberal2Reactionary Shill 0ポイント1ポイント  (3子コメント)

Rubio's plan lowers the corporate tax to 25%, switches us to a territorial rate, and switches us towards a progressive consumption tax with a bottom rate of 15% and a top rate of 35%, and includes a large EITC expansion, child credit expansion, and a $2k UBI to all those working. Of course this comes with a hefty cost ~ $400bn/yr statically scored. It's still by far my favorite of the GOP proposals, even though I'd probably keep the top rate where it is and use the savings to cut the corporate tax a couple points and reduce the deficit on the plan a bit.

[–]ZenerDiod 0ポイント1ポイント  (0子コメント)

Of course this comes with a hefty cost ~ $400bn/yr statically scored.

Meh, better then the rest of them I guess. How is he taxing consumption?

[–]prillin101Fiat currency has a 27 year lifespan 0ポイント1ポイント  (1子コメント)

His plan seems pretty good actually and I would support it if it didn't cause such a massive deficit.

[–]Classically_Liberal2Reactionary Shill 0ポイント1ポイント  (0子コメント)

Yeah, look at the static scoring graph, the bottom 0-10% are really helped if the Tax Foundations numbers are to be believed (admittedly they are a biased source but I would assume they can't fuck up the static scoring too much). Then again an increase that large seems somewhat implausible so I don't know.

[–]Classically_Liberal2Reactionary Shill 2ポイント3ポイント  (0子コメント)

I think this sub is overall centrist on economics and left leaning on the other issues, so it's going to be overall liberal leaning. Im probably one of the furthest right here and I'm fairly certain most of these candidates won't win me over because of their stances on civil liberties, social issues, and even foreign policy - and I'm no isolationist.

[–]Tree_Gordon_Fiddy 3ポイント4ポイント  (6子コメント)

The issue of science funding is getting a lot of attention in some threads I've been reading due to Canada's election.

In general, how do we know when it's time to scale back on funding science, and what benefits are there to government science funding as opposed to letting the free market "take care" of it?

[–]UpsideVII 0ポイント1ポイント  (0子コメント)

Science funding exhibits positive externalities, meaning that there are benefits to scientific research that are realized by people other than the researcher and whoever paid him to do the research.

As an example, I just read a paper investigating links between children's mental health and macroeconomics indicators funded by a social services department. The researcher benefits from the transaction (he gets paid and gets to publish a paper) and the department benefits (they get info on how to better help children), but any department, organization, or individual interested in children's mental health also benefits from the research, despite not being part of the transaction.

The free market will tend to underprovide goods with positive externalities, so the government can improve welfare by subsidizing them.

[–]piyochamaGoldman schill 0ポイント1ポイント  (0子コメント)

To put a darker twist on a lot of the responses, there's also an element of resource attraction.

Lots of PhDs and highly decorated academic minds is always a good thing for any country. Using public science funding as a means to attract such talent has long been a strategy for tons of countries, the US being leaps and bounds ahead of most just because we have more money to throw around. In that sense, if it is at all possible you should always try to at least maintain, if not increase, those levels of capital.

[–]MaliciousMalus 2ポイント3ポイント  (1子コメント)

I'm a physicist so I can answer the second question at least as it relates to my field. There are some projects that are simply too expensive or difficult for a private investor to even consider touching. Examples of this are the LHC, the SSC, any of the super fancy telescopes we've either put in space or are considering lobbing up there, and some of the dark matter or gravity wave detectors here on Earth. It also means that certain fields will be totally unrepresented in funding, an example of which might be the field I work in (mathematical physics).

[–]Tree_Gordon_Fiddy 1ポイント2ポイント  (0子コメント)

Thanks for the detailed response!

I don't mean to sound rude or ignorant, but economically speaking, how do we know/measure whether such projects are "worth it?" Even though it's probably hard to calculate the social benefit, since you don't know whether your discoveries will be useless or lead to technological developments that increase everybody's quality of life. This is also important because the trade-offs of spending on a large scientific project include spending on different scientific projects, welfare, etc.

[–]CutlasssI am the Lord your Gold 1ポイント2ポイント  (1子コメント)

Public science funding means more science funding. And that means more growth in the long run.

[–]wumbotarianKeynesian-on-a-cob 1ポイント2ポイント  (0子コメント)

Only if that science funding increases TFP.

[–]CatFortuneにゃんぱす! | Only understands simple explanations 3ポイント4ポイント  (9子コメント)

What was the last major change of mind you’ve had regarding anything economics related? Tell us why you believed what you did before, and about the argument, evidence, etc., that changed your mind.

As a bonus, I will share a picture to everyone who responds which closest matches my mental image of you if I have one. I have to see your name a bunch and probably interact with you for it to happen, so it’s not a guarantee. Also, they can be pretty absurd.

[–]wumbotarianKeynesian-on-a-cob 1ポイント2ポイント  (1子コメント)

Multipliers probably above 1 (multiplier is probably (1,1.5) ) during recessions. Monetary policy > fiscal policy still.

[–]CatFortuneにゃんぱす! | Only understands simple explanations 0ポイント1ポイント  (0子コメント)

Jesus, man! Except in a grey sweatshirt and khaki shorts.

[–]LordBufo 1ポイント2ポイント  (1子コメント)

Hmm... I used to hate Cobb-Douglas because I thought they just used it because it was mathematically easy but this morning I read about how well it fits / forecasts the data, so I guess it was wrong. (OK that's not really that major, I just want a picture sue me...)

[–]CatFortuneにゃんぱす! | Only understands simple explanations 0ポイント1ポイント  (0子コメント)

At first I just pictured you as a generic king, but now I know you are the TRUE king.

[–]prillin101Fiat currency has a 27 year lifespan 2ポイント3ポイント  (2子コメント)

I thought the Rothschilds ruled the planet and controlled the Federal Reserve and was a socialist. But I was not socialist because I hated capitalism (Thought I kinda did), I believed in a vaguely defined notion of a "resource based economy". I was a socialist because I thought there was an incoming automation revolution and the means of production should be controlled by the government that would then provide free goods to the people (I also seemed to think automation would bring us post-scarcity). However, I thought that for the general administering of the country people would be needed, so people had to volunteer for 2 months of the year to work in government.

Next, I became a fan of something I called "controlled capitalism". Basically, capitalism with a shitton of regulation. Like, stupid amounts of regulation. While regulation is not necessarily bad, I supported like, again, stupid amounts of regulation. I believed in the petrodollar and that the dollar was debt-based and going to collapse soon (As would America within the next 100 years). I also supported protectionism (Specifically for Africa, I thought the Rothschild's were engaging in neo-colonialism and taking all the goods from Africa) and thought countries should nationalize the weak industries in their nation, build them up and increase their output, then denationalize them (I don't really have an opinion on that type of nationalization anymore, it seems like an ok idea for developing countries if they do it right but I don't swing either way).

Now? I lean a bit libertarian on economic issues but also support a lot of economic policies that would be considered squarely leftern. I am not a fiscal conservative by any means and while I don't think the Nordic Model is perfect, I think trying to accomplish something near it is a good idea (Except use more free market type policies to accomplish it, like an rent vouchers instead of public housing). For civil liberty type stuff, I'm a complete social libertarian.

[–]CatFortuneにゃんぱす! | Only understands simple explanations 2ポイント3ポイント  (1子コメント)

Awesome, that's pretty far out. Do you ever wonder to yourself, given your old, wild ideas, that you might be full of shit about something right now? Sometimes I do, but I make far fewer positive statements than I used to, at least with respect to economics.

Anyways, here's you.

[–]prillin101Fiat currency has a 27 year lifespan 2ポイント3ポイント  (0子コメント)

That's true. Back then I thought I was right about everything, now I don't think that but I do think I'm right about some things- and those things could be completely full of shit!

Also, Fuck Krillin!

[–]Tree_Gordon_Fiddy 4ポイント5ポイント  (1子コメント)

I used to be a Rothbardian Marxist, but converted to Friedmanism so you guys would play with me at recess.

[–]CatFortuneにゃんぱす! | Only understands simple explanations 2ポイント3ポイント  (0子コメント)

You're a cross between a generic tree monster and Scuzzlebutt, because of the South Park reference.