Back

@interfluidity avoid a rawlsian " veil of ignorance" interpretation. we aren't talking here about being ignorant of your identity. we're purely focusing on the part about being self-interested.

for instance imagine Alice Bob and Eve are being asked which of several economic regimes they want. to simplify let's just imagine they are voting on how to allocate a sum of cash. Alice is in poverty, Bob is middle class and Eve is a billionaire hedge fund manager or whatever...

@interfluidity of course the ideal policy for each of them is that they are the one who receives 100% of that lump sum of cash. but the other two wouldn't go along with that. they would overpower that single winner. so what we are looking for here is the Nash equilibrium in a self-interested game theory sense.

@interfluidity a great example. a revenue neutral land value tax distributed as a UBI would make 70% of citizens better off. thus a huge majority has an incentive to promote such policy, if they are properly informed.

https://www.ubicenter.org/uk-lvt

this requires no ignorance about your identity.

@cshentrup i think you'll find people who identify as owners of valuable land will be unenthusiastic about the policy, and they'll have some success convincing lots of others! (i'd be for it!)

@interfluidity it doesn't matter if you have valuable land if the corresponding refundable tax credit makes you net ahead. which it would for 70% of the population.

I'm just saying, regardless of the political challenges, that it would be in the rational self-interest of a vast majority. this is the only thing I'm getting at with utilitarian policy. we're just talking about the Nash equilibrium that you would get to if everybody was properly informed.

@cshentrup there are lots of policies that would benefit more than 70% of the population that 70% of the population don't meaningfully support. a UBI financed by an income tax increment, which i think you don't favor, could be set so that more than 70% come out net ahead. that's not on its own dispositive, politically or as a matter of policy.

@cshentrup the thing about Nash Equilibria is that in the most common case, they are not unique. almost anything can be a Nash Equilibrium, under the right circumstances. https://en.wikipedia.org/wiki/Folk_theorem_(game_theory)

@interfluidity That isn't the case with economics because you can compensate people. kaldor-hicks efficiency. I need to write a blog post about this because I research it then forget the details a few times a year.

@cshentrup kaldor-hicks efficiency is incoherent. it doesn't define an ordering. https://www.interfluidity.com/v2/5212.html

@interfluidity it's perfectly coherent, because you can address distributional effects orthogonally.

@interfluidity My point was that there are no condorcet cycles if you can create candidates via redistribution scenarios.

@cshentrup if you actually redistribute it's coherent, but then it's just Pareto, not Kaldo-Hicks (potential Pareto)

@interfluidity Well yes it's Pareto because the redistribution created a new scenario.

the intermediate scenario is certainly not Pareto.

@interfluidity of course this always comes up when you advocate efficient taxes rather than progressive taxes because people are like, oh you're going to hurt the poor. No you moron you can just redistribute the money after the fact via UBI.

@cshentrup dude i've been writing in favor of UBI like forever. i'd prefer an income-tax financed UBI than say a VAT funded UBI, because i think compressing the income and wealth distribution is socially efficient. but almost UBI, however funded or not, is going to be great for the poor. importantly, we want it to be good for the middle class too.

@interfluidity but taxing income or any kind of human produced value is stupid because it creates dead weight loss. I mean, at the very least you want to exhaust all of your pigovian and land value taxes before you go there. some productivity taxes might still be utility efficient but it's a big gamble.

@cshentrup i think a pretty fundamental point of disagreement between us will likely be our views on the relationship between income and production. i think high levels of income (higher even than yours, this isn't personal) derive almost entirely from rents, and so it is efficient wrt to production to tax it. (rents hinder production by diverting resources to rent-seeking.)

@interfluidity this argument simply doesn't work because those taxes can't specifically target the rent seeking component of the wealth and rent-seeking is an incredibly tiny fraction of the wealth generated by rich people. they generate their wealth through capital allocation. just cannot be controversial. You can't tell me Warren Buffett got to be as rich as he is because he just got a lot more government graft.

@cshentrup most rents are not government graft. they derive from market power, the ability to prevent competition. Warren Buffet is famously open about how his wealth derives from businesses with moats.

@interfluidity so you mean a rent in terms of having a monopoly in a country that doesn't sufficiently break up monopolies?

@cshentrup neoliberal models tell a really hopeful story about how markets work under the assumption of a close approximation of perfect competition. in the real world, there are lots of things that prevent such an approximation from holding. some of it is physical — Schumpeter famously pointed out that the corner store thrives due to the market power its proximity to some customers confer. 1/

@interfluidity I think you might be using an intermediate era definition of neoliberal because that doesn't match what the original or the modern day neoliberals believe at all.

https://twitter.com/ne0liberal/status/1665034853643853828?s=20

but regardless, you still can't accurately attribute the component of wealth derived from skilled allocation and value creation versus anti-competitive practices so I think it's mostly a moot point in practice.

@cshentrup we can't have perfect information, but i suspect our very different estimates will lead us to very different conclusions. (i gotta run!)

@interfluidity show me an example where you can even get in the ballpark. like where you could look at a company and say 60% of their profits were rents and 40% actual value creation so if we tax them it will only be "40% inefficient". and again even if you could do that, we already have plenty of untapped pigovian and land value taxes that are NEGATIVE dead weight loss and neutral dead weight loss respectively. I just don't even see a semblance of an argument here. help me out.

@cshentrup i'm not interest in taxing corps. that just encourages bad capstructure, until we also eliminate the tax deductibility of interest. i'm interest in taxing the very wealthy, and am entirely unconcerned that in cohorts among whom money represents score-keeping and zero-sum insurance, changing the baseline of competition by taxing them all equivalent will impair production. concentrated wealth imposes huge costs. taxing the very wealthy is a fiscal positive plus a social gain. win win!

@cshentrup (i do have some interest in taxing corp profits, if we can eliminate the deductibility of interest, because doing so encourages reinvesting in whatever creates an asset that firms can expense, including for example adopting a high-investment rather than high-turnover model of labor relations. but a guy who calls himself "neoliberal" is unlikely to be too enthusiastic about that argument.)

@interfluidity stop the ad hominem fallacies. either you have a valid argument or you don't. you don't want to "incentivize reinvestment". you want people to choose consumption vs investment *rationally*. minimize deadweight loss.

@cshentrup There are more things in heaven and earth, my dear Horatio, than can be drawn as Harberger triangles.

Money and investment are different things. Access to funds flows can sometimes rival rather than support investment. Perfectly rationally, from a shareholders perspective, but not from a social perspective. Those interests are different, and often misaligned.

@interfluidity this is word salad and you sound like an idiot. please speak like an intelligent grown-up. i made a very specific argument about the efficiency of a given tax. what is your ARGUMENT? show your fucking math or shut the hell up.

@cshentrup ok! talk to you later!

@interfluidity so you're admitting you have no actual argument or evidence, just religion. thank you.

@cshentrup it is you, my friend, who has religion.

@interfluidity you've shown NO EVIDENCE for that. i stated an objective fact: a tax on a value that is only partially derived of rents is less efficient than one entirely derived from rents. you are acting like a fucking imbecile.

@interfluidity see the differencee? i claim you are religious and SHOW EVIDENCE. you don't show any evidence.

@cshentrup what's your evidence that whatever social value is incentivized by payments to the very wealthy are larger than the social costs that wealth concentration imposes? you don't show any evidence. you just have priors over what matter more that are, i'd suggest, mistaken.

@interfluidity i made no claim about payments to the wealthy. you're deeply confused. i stated a trivial fact: that your proposed tax, even if it is in LARGE PART rents, is still less than 100% rents, whereas LVT is 100% rents. what part of this do you dispute?

@cshentrup i don't care what fraction of the money derives from rents. i care about the taxes effect on behavior.

@interfluidity the whole point of taxing rents is that it has NO DEADWEIGHT LOSS, i.e. it has NO EFFECT ON BEHAVIOR, you dummy.

@cshentrup taxing rents absolutely affects behavior. that's a good thing! the theory of a land value tax is that you don't have to worry about discouraging land production. but, for example, we do want to discourage the production of lawyers who file patent troll lawsuits. taxing the wages of that kind of activity — rent-seeking — certainly will affect the behavior!

@cshentrup that's a large part of why we want to do it! people get paid money for a lot of activities that are not socially useful, but that are a negative social contribution. we want to tax those flows, so that people do less of it. we want to tax the production of bads, which includes activities like exploiting pricing power rather than expanding production to increase profits.

@interfluidity you have a lot of ideas with a semblance of rationality to them, but they are severely muddled and fuzzy and you absolutely have no skill at clearly articulating them using precise language.

@cshentrup nice of you to say!

@interfluidity a rational way of combating a market failure is to try to fix the market failure. break up a monopoly for instance. if you indiscriminately tax across the board in order to stop some negative externalities, You also cause a huge amount of dead weight loss amongst the entire economy. this is incredibly stupid. this is not even serious.

@cshentrup consider fire insurance. the first best solution is to prevent fires. often we fail. the second best solution is to have sufficient savings to cover eventualities. the third best solution is fire insurance, which creates a lot of deadweight administrative costs relative to the first or second best solution. 1/

@cshentrup yet, we find ourselves unable to reliably prevent fires so certainly we don't need to worry about the, um, risk. most of us are not able to save enough to cover that eventuality from savings. so we choose to bear costs of administration—deadweight costs relative to the first or second best solutions—to pay for fire insurance. is that rational, smart, under the circumstances? it depends on the scale of the costs. if premia were much higher than the expected loss, no. if near, yes. 2/

@cshentrup i agree that it would be much better if we could structure the economy so that there were fewer rents and barriers to competition, rather than tax the result of all that at the back end. i very much support antitrust, IP reform, and other policy that would address those problems. but it may in fact be the case, as a matter if real world politics, that we just cannot prevent the rents up, especially given the incentives created by lightly taxed receipt of them. 3/

@cshentrup if the politics of the second best solution — taxing at the back end, both to limit the damage to the distribution and discourage the behavior — are more tractable than the detailed industry-by-industry work challenged at every turn by better funded, better informed lobbyists, then like fire insurance on the back-end, it might be wise to go for the second best. 4/

@cshentrup note, in both cases, the solutions aren't mutually exclusive, and we should always pursue the first best! have fire extinguishers! support antitrust! 5/

@cshentrup but until we succeed at the first best much more fully than we have thus far, we will need to supplement it with the second best.

as long as the costs of the second-best, the backstop, are reasonable! which is why the question of what behavior in fact different taxes would discourage and encourage is the heart of the question. 6/

@cshentrup if i am right that FDR-style taxation discourages very little that is productive and compensation choices that yield a better income distribution, we should do it!

if i am wrong, and in fact FDR-style taxations would lead to an atlas-shrugged style withdrawal by the best and brightest of our community and an economic catastrophe for all, then we should look for different approaches. 7/

@cshentrup there are controversies here, about politics and human behaviors, that math and supply-and-demand diagrams can't solve. even "evidence" can't definitively resolve it, because no experiment or observational study that is plausible is anything near the full policy intervention. 8/

@cshentrup this is true of UBI too, where i think we mostly agree. people argue over incentives to work, etc. most of the evidence that i know of is pretty positive on these grounds, and the non-increase of an effective tax rate is an argument that's labor supportive. but the other side claims the mere reduction of desperation will harm work incentives.

you can't know for sure until you have some history with it. that's just the nature of social affairs! /fin

@cshentrup it would be better to prevent rent collection in the first place. but as a matter of informational and political problems, we seem unable to do that adequately, leading to very grave social harms. we should continue to improve on preventing rent collections, as best we can, but since we are unable to adequately do that, we should seek second-best backstop solutions to address the problem, if we can find backstops that aren't too costly.

@interfluidity I still don't see you presenting any evidence that such a tax would be more efficient than land value or pigovian taxes however. You also seem to be conflating the profits coming from a moat with the negative externality cost of creating the moat. suppose the moat makes a certain good only 5% or 10% more expensive than it would have been, taxing 20% or more could easily create more dead weight loss than you save. You need immense resources to see if this pencils out.

@cshentrup probably we disagree over just how grave the consequences of economic concentration and the inequitable distribution of wealth and income are. in my view, they are apocalyptic, our society (or at least our liberal, nonauthoritarian version of it) won't long survive and won't prosper if we fail to address them. 1/

@interfluidity Well that's a whole other issue on top of the direct welfare impacts. which is why I co-founded one of the two major electoral reform organizations in the US.

https://www.rangevoting.org/LivesSaved

But again, if your issue is about the political impacts of wealth inequality, that's still in no way an argument for income/wealth taxes. You could do that with holy Trinity of pigovian and land value taxes and UBI.

@cshentrup yes! i'm very with you on your electoral work.

(i thought you were affiliated with https://electionscience.org/ ?)

@interfluidity I'm the one who primarily incorporated it as a 501c3.

@cshentrup are electionscience and rangevoting affiliated?

@interfluidity Well yes I found Warren Smith's website on range voting and worked with him in several other activists for several years starting in 2006 and then we finally incorporated the center for election science in 2010 and got our 501c3 status in 2011.

@cshentrup good to know! i'm glad you do what you do. as i said yesterday, i think adopting approval voting for single-winner elections is perhaps the lowest-hanging social fruit we oughta pick.