eurotaxramble

(8 comments)
May 15, 2009

My friend, an old high school buddy, with the Nome de Web JacquesDemain, runs a small private forums. It runs a bit libertarian, and someone posted the following link to a big PDF paper... this is my long winded and rambling response, and I welcome any feedback here as well.

bladwintm wrote:
As for the Europe thing: I'd much rather have American Taxation than European Taxation. (see http://www.timbro.se/bokhandel/pdf/9175665646.pdf to see why.)
So I read through the paper. Here are my thoughts as I went through it....
"GDP is the commonest way of measuring material prosperity and the only criterion for which there is widespread consensus and co-ordination regarding the measuring procedure to be followed."
Translation: GDP is easy to measure, so we're going to measure it. To their credit, and a bit of my surprise, they do address the criticisms of this yardstick on the next page but their fundamental course is set. Jumping ahead, they feel free to inflate the importance of this metric into statements like "Connecticut, for instance, has almost twice the material prosperity of old European great powers like France and the UK." But of course in that same graph, Washington DC is LITERALLY OFF THE CHART in material prosperity, over twice the nearest state. Strangely, Weirdly, the authors, who go to HUGE lengths about the importance of a 20% difference in GDP between the USA, and explaining that Luxembourg fits between Delaware and Connecticut (all the foregin capital) are silent about this elephant in the room. So clearly we want every city to look like Washington DC, don't we? That gunfire in the background is probably gunfire of CELEBRATION!
"various indexes aimed at measuring other aspects than GDP alone. These indexes also factor in equality, for example, in a calculation of total national wellbeing. The obvious problem about them is that they are extremely sensitive to the choice and weighting of the variables included. In other words, these indexes are extremely arbitrary. In Sweden, for example, an index of this kind presented recently by a statistician of left-wing persuas- ions showed Bulgaria coming higher than the USA in terms of wellbeing. Such methods and indexes are patently absurd."
I honestly don't know much about day to day life in Bulgaria, but this sounds suspiciously like condemning the methodology in large part because they don't like the result.
"So much for GDP comparisons. Private consumption is another important welfare indi- cator. Basically this is a question of people deciding their consumption for themselves, the possibility of riding in a new, roadworthy car, the food we eat, the number of pleasant and time-saving restaurant visits, the possibility of experiencing creative leisure, and so on. Access to the new products of technical progress is every bit as important today as it ever has been. Take, for example, the importance of having access to a computer and the Internet, or being able to 'buy time' by consuming good precooked food or services."
So, in this viewpoint, TV dinners and "time-saving restaurant visits" are automatically the signifier of prosperity. Clearly, we all eat like this because we wish to make time for our productive leisure activities, and that a quick run down to the 24-hour Taco Bell after work bodes better than taking the time to cook and make a nice meal with our loved ones.

This was made in 2004, before the latest "OMG economapocalypse!" (which I'm hoping was a bit over-stated, but we ain't outta the woods yet) One of the takeaways from this downturn was hey, maybe we shouldn't be collectively running our credit cards 'til the numbers wear flat to live like this. I'm reading on, wondering if the authors will address the big debts folks in the USA carry, or how in this time so many of us were apparently banking on house prices going UP UP UP! (to my meager credit, I heeded the murmurings of a bubble and got my butt out of home onwership the instance my life circumstances changed and a home wasn't where I actually wanted to, you know, live.)

Also, I'm wondering if this paper will take on income distributions. I'm still wondering about the giant spike of Washington DC on that chart... if the USA's averages are dragged up my a small number of supermegahyperconsumers, with F.U. money to burn, do I really care, does that really form a metric that makes USA me certain I'm better off than poor ol' EuroKirk?
"The higher level of retail consumption means that the Americans have more 'gizmos' than Europeans"
(Better Living Through Gadgery! My favorite part of that chart, besides the obviously dated ~1.2% penetration rate for cellphones in the USA, is that while every country has a mid-90s or better % of households with TVs, "TVs per 1000", USA dominates all comers. IF A TV IN EVERY ROOM AIN'T LIVIN, I DONT KNOW WHAT IS)
"For several centuries Europe led the world in terms of prosperity and progress. As little as a hundred years ago, much of the American continent was virgin wilder- ness. Today, a hundred years later, the USA has completely overtaken Europe to become the unrivalled leader of the world economy. Most Americans have a standard of living which the majority of Europeans will never come any where near. The really prosperous American regions have nearly twice the affluence of Europe. It is worth reminding our- selves what this means. In these regions the average American can get exactly twice as much of everything as the average European. Which goes to show the importance of an economic policy to stimulate growth"
HAHA, Wow. At first I was going to put "In these regions the average American can get exactly twice as much of everything as the average European." right after that "gizmos" line as pointing out the crazy bias of this kind of research, but... jeez, do you think maybe BEING a virgin wilderness, and having tons of natural resource to exploit, rather than having supported centuries of relatively crowded growth, might actually be a net plus when it comes to making a century of economic progress? Or maybe having relatively docile neighbors and big wide oceans and not getting bombed nightly in giant World Wars?

C'mon! Our unique position in the world is only in part due to economic policy.... and if you're charting our growth over 100 years, maybe you'd do well to see how much of that growth happened after those dirty rotten commies like FDR starting marching us down the road to Socialism,. (Come to think of it, a much more interesting topic would be comparing the USA's path to say, Brazil -- as they self-deprecatingly put it "Brazil is the country of the future, and always will be")

UPDATE: and the more I think about it... "average American" seems to be playing into that fallacy that tends to think of "average" when "median" would be more appropriate! 99 hobos plus Bill Gates is on average a really rich guy, but the median is still "just a bum". What weasel words, especially when framed with a pompous "it is worth reminding ourselves what this means."

I admit I started to glaze over a bit during the next section. Diagram 3:4 is interesting, the one plotting per captia GDP vs % of households of incomes under 25K... it's visibly a looser correlation than some of the other charts, but I can almost see it as the corner of an elbow curve, that % below 25K (and a relatively coarse measure to begin with) isn't gonna sink below 20% no matter what kind of Washington DC-esque rich bastard super-GDPers a state is swamped with.
"The media image of the American poor is that they have great difficulties to contend with, that they are dossers, junkies and in various ways marginalised."
Here there are some more compelling ideas, that it's not so bad being poor in the USA... they might not have health care or retirement but they sure have a car (kind of necessary in a wide open country with generally spotty public transportation) and a *color* tee vee, by gum! (For reals. It's funny that they bother to list "color" even as their chart also makes the distinction of "wide screen") But again, it's telling that thus far, they are setting up "they're poor but not poor like you probably imagine it", and citing a lack of data to explain why they're not doing comparisons against the poor of Europe.
"The average American household has a home that is 80 per cent larger than its average European counterpart. Europeans, in other words, are more crowded in an American perspective."
Gee, it's almost like we're only 100 years away from having been virgin wilderness or something.
"BY ANY METHOD OF MEASUREMENT, EUROPEAN economic development has been relatively poor over the past thirty years, which of course prompts one to ask: Why?"
Again, I think they should insert "that we found convenient to use" at the end of the first clause.

To speak with authority that the numbers they elected to use are therefore proof that the USA has the best model, where I assume they're going with this, is a bit of a stretch.
"This, of course, is because, the higher the tax burden and the larger the public sector become, the greater will be the power of political decision-makers and public bureaucra- cies. Private players, consequently, will have less scope for deploying their in-comes and assets as they themselves wish to. High taxes also generate counter-incentives to work and entrepreneurial initiative."
So, here's where the rubber meets the road, with Conservatist truisms. They're not 100% offbase, but it ain't all gospel.
The liberal, of course, might point out that some decisions made in the public sector are for the benefit of the public, as opposed to the laissez-faire world where decisions are generally made to the benefit of making more money...and hopefully that averages out and does more people good, and we don't get to stuck in tragedy of the commons situations, and people as individuals achieve broader thinking (the sort of thing where, it makes sense to fund a general fire department rather than a subscription based one, since if your neighbor gets cheap and lets his house burn, you're in more danger than otherwise... or we might be building up McMansion ghettos and horrendous schools, but as long as I can send my kid to private school from my gated community, I'll be A-OK")

And then there's the "counter-incentive" argument. "WHY WITH THESE HIGHER TAXES I'LL ONLY MAKE 200K RATHER THAN 300K...DAMN, MAYBE I'LL JUST TAKE IT EASY THEN" This does seem to correlate to a real world. In fact I think you have to at least argue a bit why the opposite isn't true, maybe an entrepreneur has a certain financial goal in mind, a fixed dollar figure that they work even HARDER for because they know a certain larger percentage of their gross is going to be taxed away.
"The further equali- sation goes, the less difference there will be between economically efficient and inefficient behaviour. It is our hypothesis that in large parts of the overripe welfare states of Europe the incentives for choosing behaviour that is good for growth are simply not big enough. This applies, not least, to Sweden."
I still think there's a presumption here that the important difference is absolute cash amounts, and not percentages.... in much the same way people will elect to be poorer but richer than their neighbors than richer but a bit poorer than their neighbors, some common-sense truisms in this field deserve to be challenged, and here they are often taken for granted.

The next section starts talking about "Americans work harder", but the LS ratio seems like an odd duck:
"The LS ratio (labour supply ratio) relates the actual number of hours worked in the economy’s regular employment sector to the number of hours which would be worked if all individuals of adult age (16-64) worked full time, apart from taking five weeks’ holi- day."
Five weeks of Holiday? Man, that sounds practically european in its decadence!

More to the point, I don't know if I trust this metric and its muddling of unemployment with, you know, how many hours and how hard and long Americans vs Europeans are working, and the quality of life is issues that I find most interesting.

In short, Jacques, not too impressed with this paper.
http://www.slate.com/id/2218360/ - Obama as parallel-parker; "pragmatic" and "moderate" are music to my ears.
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Thinking of a September Euro trip. Friends in Switzerland, Germany, Portugal all sound hearteningly psyched about hosting me a bit :-)
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