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I tend to be in favor of free trade, skeptical of unions (particular public service unions), opposed to excessive regulations, and a number of other positions that would likely be seen as right of center or at least centrist.

But it's generally because I believe that taxing winners and using that revenue to fund a high level of public services for all is a better way to achieve social goals. I would significantly increase the current level of taxes in the U.S. and use those resources to make our public services and safety net better.

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Need my “Higher taxes and less regulation!” Bumper stickers.

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In this house, we believe:

Eliminating parking minimums matters

Fewer housing veto points are a human right

Carbon and land value taxes are necessary

Deadweight loss is real

Public order is good

Energy abundance is everything

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based.

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“Modern transit construction in the US should be outsourced to the Japanese”

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"Higher and Pigou taxes, Cost-benefit including externalities based regulation."

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"I support taxes on carbon and land value, combined with a reduction in veto points for housing and public-works projects."

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Tax Baby, Drill!

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"Team Pigou" might be a good bumper sticker.

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I just want more public trash cans and for them to be emptied more frequently. That and a massive expansion of dedicated bicycle infrastructure.

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And the library should be open on Sunday (& later in the evening at least a few days of the week)

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This is what I thought was the uncontroversial point of "neoliberalism." Somehow the word got associated with lower taxes on the rich and greater hostility to transfers to the poor.

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“Liberal” has long been a synonym for “laissez-faire” outside the US.

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Yes, it's economic liberal, as opposed to socialist/central planner.

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Aug 3, 2023·edited Aug 3, 2023

I generally feel the same, but when I feel like being a bit self critical this is the thought I have: at the present moment in time, significant tax increases on my particular level on the income strata are pretty unlikely due to various political forces. On the other hand, support for free trade is strong, unions are on the decline, and the regulatory state is, in many ways at least, being dismantled.

So am I, somewhat cynically, in favor of things that are both good for me economically and also politically achievable while at the same time claiming to be for something that would be against my economic interests but aren't really politically achievable.

Is that latter position just a costless cover for my other views?

Maybe.

When Joe Biden asserts no new taxes for anyone making less than 400k/yr, is that part of an economic project that has been extremely successful at advancing the material interests of the PMC while maintaining a certain virtuous facade of caring about egalitarianism? I think there is a good argument that the answer to this question is yes.

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Heh. Fair point. In my case (and I'm guessing yours), I feel very certain it's a genuinely held belief.

Having said that, the politics of today do mean that I'm more open to (and often supportive of) things that I would likely oppose in an ideal world (unionization efforts come first to mind).

Meanwhile, I would push back on one point in your premise: the idea that the regulatory state is being dismantled. That's not what I'm generally seeing.

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Aug 3, 2023·edited Aug 3, 2023

On the regulatory state I think it depends on the timescale that you examine. If you compare today to, say, 40 years ago there has been a lot of progress! If you compare today to 10 years ago, then maybe not so much.

So perhaps there was a moment of progress that has now passed? Hard to say.

As a YIMBY, however, I have high hopes for progress on dismantling some very impactful land use regulations! This could be an incredibly valuable area of reform.

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I'm not an expert in this area so I certainly could be persuaded that I'm wrong. But what I was really thinking about was the ability to build things in America, whether it's subways and bridges, factories, or housing. Is that easier than it was 40 years ago? My sense is no. Bu t again, I'm not an expert, and could certainly be convinced my sense is wrong.

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Ezra Klein had a good piece on all the veto points in the US (Canada too) on building stuff.

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founding

40 years ago might have already been in the new hard-to-build situation.

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I'm thinking about Reagan era deregulation which I guess was mostly about the labor market.

I definitely agree that it is far too hard to build things!

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The California HSR project ate 6B dollars for nothing, and the CHIPS Act is laden with pork and NEPA hurdles that all but ensure a semiconductor industry will never happen in the US. I think it's harder to build than ever.

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The Jones act doesn't really even benefit ship workers in the US. Its not like the US shipbuilding industry is booming because of it. They would be much better of redirecting their energy into becoming competitive internationally and not needing the subsidy.

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The US Navy supposedly is in favor of keeping it on the theory it preserves a larger US Merchant Marine than otherwise...I suspect that it doesn't, actually, but that is the thinking.

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"As of 31 December 2016, the United States merchant fleet had 175 privately owned, oceangoing, self-propelled vessels of 1,000 gross register tons and above that carry cargo from port to port. One hundred fourteen (114) were dry cargo ships, and 61 were tankers. Ninety seven (97) were Jones Act eligible, and 78 were non-Jones Act eligible. MARAD deemed 152 of the 175 vessels "militarily useful"

Doesn't seem like the Jones act is carrying its weight here.

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The whole concept of a "U.S. Ship" is mostly silly. Where a ship is registered is just a piece of paper that says what rules the operators are electing to follow. It's like incorporating your company in Delaware. Liberia and Panama would be the world's naval superpowers if registration actually meant anything.

If a war actually broke out, the only thing that would matter is who has the ability to seize ships, either in port on the high seas. (E.g., all "German" ships that weren't in German ports when war broke out were seized or stranded in neutral ports in WWI and WWII).

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founding

It’s probably larger than it would be otherwise - but is it large enough to be relevant?

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I tend to agree with some of that, public sector unions imo are egregious, in that public school teachers, sanitation workers, nurses, police officers already hold an immense amount of clout by being able to grind society to a halt, by denying what are considered essential services, if they were to leave the job, and worker power functions as a consequence of how easy it is replace you if you were fired. Free trade is a misnomer imo, because there's an inherent disparity in power, between capital and labor, which leads to workers being excluded from the decision making process of corporate boards, which leads to great outcomes for companies(outsourcing, lower labor costs), but terrible outcomes for local communities(drug addiction, alcoholism, failing schools, deaths of despair), that companies are able to wash their hands of and not worry about once they leave. I know the conventional wisdom is that everyone will benefit from lower prices, but clearly good jobs provide a sense of meaning and purpose and social connection to people beyond just a wage. It's part of the reason why I'm so skeptical about UBI.

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In nursing it’s good, even when it’s a public hospital - the interests of nurses AND patients are against the interest of interests of hospitals on the “do more with less” train, and the tendency of unions to reward seniority over achievement of metrics isn’t so bad for nursing bc years of experience, especially on the same unit, is a really good proxy for value in nursing (it’s what hospitals base pay on anyway, but a union means they won’t be able to fire their experienced nurses without cause bc they’re too expensive).

I don’t think that nurses should be able to strike during a genuine crisis, though not a manmade crisis such as a public hospital’s bottom line

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I think the difference here is the nurses have an ability to provoke and create a crisis of their own making through striking, which results in an outcome of patients dying that society rightly says is unacceptable. If you go at strike at Wal-Mart or Starbucks, the worst outcome is customers have to buy their products somewhere else. For nurses, it usually results in hospitals settling and agreeing to their contract demands, but many of these hospitals in the years to come will not be able to fulfill these contract demands, and ultimately may have to close. The profit margin in healthcare is not very large, and hospitals can't just raise prices by thousands of dollars per procedure or operation to cover operating expenses. Due to oversaturation of the nursing field, I believe that many hospitals now think that they can find someone else if nurses burn out, and the aging of the Boomers means they'll be a steady stream of patients. The simplest solution would be to invest in technology that allows nurses to care for 15 or 20 patients, whereas previously they used to only be able to care for 5 or 10, but because the field is so labor intensive, unlike manufacturing or information technology, and the technology dosen't exist, it's a tough nut to crack.

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I walked a similar path to you: Republican when younger because my parents were, Libertarian from about ages 16-28 as a result of dislike for organized religion and the Iraq/Afghanistan wars, now have become much more technocratically oriented due to concerns about climate change, education, and reading Lee Kuan Yew.

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Nobody is really pro-free trade these days

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Get back to me when “free trade” actually encompasses a mechanism for holding to account mercantilist powers which employ the full power of the state to hold workers’ income share down relative to productivity.

When the rules encompass and can be used to prevent such situations we can discuss again.

In the meantime, “comparative advantage” often boils down to “implicit and explicit supply-side transfer.”

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founding

Those mercantilist policies, though, harm the people in the nation that uses them much, much more than those who trade with that country.

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Aug 4, 2023·edited Aug 4, 2023

Hard disagree. The run up of large debts in the US, Italy, and UK on one side and in Japan, China, and to a lesser extent Germany on the other are perfect mirror images of one another which cannot occur except in tandem.

The former have open capital accounts and high structural wages relative to productivity; the latter have borderline closed accounts and low wages relative to productivity. Inevitably, the latter simultaneously cannot consume a large fraction of what they produce because of low working and middle class incomes, and have a great demand for savings vehicles because of high capital-owning class incomes (private in Japan or Germany, SOE and local government in China).

Thus, structurally it becomes virtually inevitable that the former “export” savings vehicles like Treasuries which bid up their currency in exchange for goods, and the latter export goods, of which they have vast surpluses, in exchange. And whenever there’s the least bit of weakness in export markets, the latter have little choice but to resort to capital formation, namely public-sector capital construction, to keep up growth given that their citizenry cannot consume more than a small fraction of what it produces, let alone enough foreign produce to balance the current account without debt.

Your theory as to who bears the worst of it holds up only on a cursory look at the US, which is so fabulously wealthy, large, and insulated from international trade that it’s simply impossible to really stab at the counterfactual of what our economy looks like if the post-war trade regime didn’t permit Germany, the Netherlands, Japan, South Korea, Taiwan, China, and now Vietnam to do this for so long and at such scale.

If you want to understand what the effects on the open capital account economies are, Italy is your go-to example because it makes clear what the unadulterated outcome is: near-total deindustrialization leading to economic stagnation, unsustainable explosion in public debts, youth unemployment spikes and attendant vast falls in fertility.

Of course, Japan makes clear the flip side: an immense gap between wages and productivity, leading to economic stagnation, unsustainable explosion in public debts, youth wage declines and attendant vast falls in fertility.

As is, the US is slowly drifting toward the former situation and China careening toward the latter.

I would rather the US burn the global trade regime to the ground and be damned to your and my current (paper) standard of living than allow China to do to us what Germany has done to Italy, Spain, and Greece.

Ricardo’s work simply doesn’t apply in the current environment and it is patently delusional to pretend that it does. Doing so would destroy (is destroying!) us even if the CCP weren’t an authoritarian, revisionist nightmare. Since they are, we have no choice except to break the current form of the global trade regime and reconstitute it on lines which don’t permit that model of competitiveness and growth to exist past the point where rising productivity and wages no longer justify it.

I do not delude myself into believing this to be without cost, but it is necessary that we bear it, and in the long run we will all genuinely be better off for it.

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David, can you help provide an example for those of us who don't know as much about economics? My sense is that internal national policies prop up wages in various industries in the short run, and that relaxing those policies generally produces more labor competition and thus lower wages in the short run.

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deletedAug 3, 2023·edited Aug 3, 2023
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“They keep selling me patent medicine so I’d best not pursue chemotherapy either.”

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It’s true that earnings are not based on merit. But they are based on generating value for other people. And that seems pretty fair to me.

The utilitarian case for higher taxes is very strong. But the justice case is pretty weak - largely rich people do deserve their money.

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the entire notion of desert is incoherent. we don’t deserve our parents, intellect, good health or educational opportunities. we dont deserve any of the correlates of wealth.

it’s true that permitting people to keep most of the value they create produces beneficent incentives, but that’s as far as “merit” goes.

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Every child who has been assigned a group project knows desert in their bones. There’s always the kid who doesn’t do anything, because they know you will & they’ll share in the grade anyway. We could say the real problem is the damage to that kid’s education, but that’s missing the point. He is doing wrong against you, you are being exploited, and the system is encouraging it. The idea that we should seek to replicate this dynamic in the grown-up economy seems straight-up evil to me.

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What would it mean to replicate the group-work dynamic in the grown-up economy? That would be, what, ensuring that everyone gets the same amount of money ("grade") provided by a top-down authority? To find supporters of that view I think you have to go pretty far out into the fringes, certainly beyond viewpoints that anyone here espouses.

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That's what it would mean to eliminate income inequality, right? No matter what kind of work you do, at what level of seniority or performance, and perhaps even whether or not you work at all, you would have the same (or approximately the same) income as everyone else.

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Is someone advocating for that? It certainly isn't stated or even implicit in David's comment you replied to.

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The group project analogy doesn’t track. If the US economy is the group project, the “grade” is the national product. Nobody is saying that’s going to be shared equally - that everybody in the group gets the same grade. Someone gets to take their share first and it’s a lot larger than the other kids’ - and Matt says he’s okay with that. Even in Denmark there’s a lot of income inequality.

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I don’t understand the “no one is saying” games being played here. Equality is equality. Do you think when people identify equality as a goal or inequality as an evil that they only mean it within the same role, hours worked, skill level?

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The money flows upward to the top regardless. What transfers — including wages — do is keep it churning upwards rather than allowing to accrete. And that churn is the nation’s economic heartbeat, and in my opinion the goal of policy makers should be to increase its volume until we get to the descending edge of the Laffer curve, which we are far from.

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No one’s was advocating for that, just a UBI, a national health service, and services like transit and pools.

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It’s pretty weird to say the government has more of a right to my intellect etc. than I myself do.

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In what sense does the government claim any right to your intellect, let alone more than you do?

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How else should I interpret “permitting people to keep most of the value they create”? The implication is that the government has the right to do what they want with the value that I create.

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But I thought your whole point was that your intellect or other merits doesn’t have inherent value but just what people will pay you for them. Since that value is so contingent, why should your right to it be absolute? On the other hand, your right to your intellect *is* absolute; the government can’t make you go into cancer research or writing pro-government propaganda or whatever.

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For that matter, you also have an absolute right to any products of your intellect: if you write a book or a software program, you can sell publication rights to the highest bidder, or publish it yourself, or hide it away from the world forever. What the government has a right to is some amount of the proceeds from any sale you make, and as we've already established, the value of that sale isn't wholly created by you.

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I think this is basically restating Jonathan's main point "The utilitarian case for higher taxes is very strong".

Philosophically you're right, but I think most people's intuitions - and common sense use of language - agree that someone that's made people's lives better "deserves" to be compensated by the terms agreed on by both parties.

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policy based upon the implications of language is severely conservative. language is the key link in the value transmission chain.

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This is exactly right. The only thing that ultimately matters is happiness, and justice only matters insofar as it promotes happiness / prevents misery.

Justice can sometimes be a useful heuristic to community happiness / well-being, but it's a mistake (and a mistake that I think a large majority of people grow up believing) to think that justice or merit are valuable for their own sake - rather than just for how they might promote happiness.

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No, no, no. Following this logic, it can good to punish an innocent man to make a large, angry mob happy. Utilitarianism is overflowing with moral traps like this. Justice is good for its own sake and this kind of thinking is incredibly dangerous.

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You should really read “The Meritocracy Trap.” I went in with a similar mindset as you and it changed my mind.

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I probably had a mindset similar to your when I was your age. But all my experiences in life and work over the past 20 years have shown me that what Jonathan said is closer to the truth.

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I don’t recall what I thought 20 years ago, but as someone who got a PhD from a good program and then struggled to get a full-time job for five years--finally getting one not in my specialty--I certainly think “deserve” is, let’s say, the wrong way to put it. Not that the rich don’t deserve a lot of their money, but I think the justice of taxing them a lot is pretty patent.

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Sure there's are elements of luck and compounding good fortune that justify progressive taxation. And it keeps the bottom from falling out for people who are struggling for whatever reason. Plus, I think it's just as important that it "works" ie society tolerates and or welcomes it.

The part I focused on most clearly in the OPs comment was the first part about "providing value", which isn't directly about "deserving" or "justice". Earned incomes of various sorts have a strong correlation with generating value. Sometimes there are major elements of lottery ticket winnings thrown in, being. an early employee at Google instead of Yahoo for example (or whatever).

But when I look around at people I went to high school or college with, almost everyone who had something of a plan and was willing to work and focus on it is doing fairly well, whether they went to college, joined the military, went straight to working at an auto shop, whatever. Sometimes it took 5 or 10 years for something to click or stick, but it came together eventually. But people who got into drugs, were strongly disliked by all their coworkers, or played in a band for 10 years before finally half-assing a job as a landscapre or something are sometimes struggling 20 years on.

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I agree that providing value isn't directly about justice, which is why I'm confused why he said that there isn't a good justice case for higher taxes.

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True - I think we were focusing on different parts of JPs statement and the reactions to it. I'd agree the justice argument is by the weakest.

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It might be the framing?

"The rich people don't deserve to be rich, it's only just to tax them more"

vs.

"Plenty of poor people didn't do anything to 'deserve' being poor - it's just to try to help them out"

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I don't think it's an accident that a lot of the criticism of meritocracy comes from academia, where it seems to hold a lot less than almost anywhere else in American society.

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That assumes that the way rich people got their money is entirely on merit. In modern times, a lot of fortunes don’t happen without changes to tax structure made by Reagan including tax treatment of debt, without relative low inheritance tax or as Dean Baker will tell you, our screwed up patent system. Or just a number of other policies that government has implemented that puts the thumb on the scale so to speak.

And then maybe most egregiously of all, the biggest source of wealth in the 20th century, housing wealth which was systematically denied to African Americans through racist policies in the early and mid 20th century (by the way. The forgotten and real conceit of “The Case for Reparations”).

Now some of the practical solutions proposed to address this state of affairs are impractical or unworkable. (Like reparations. Something Coates actually acknowledges in his famous Atlantic article). But I think you are overstating the case as to how much of wealth is “deserved”

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"the biggest source of wealth in the 20th century"

Housing is largely a store of wealth, not a source of wealth, and that's a major difference wrt the point you're trying to make. In any case, total value of all residential real estate in the USA is 45 trillion. The total value of all income reported to the IRS, annually, is 15 trillion. So the biggest *store* of wealth is eclipsed every 3 years by the biggest "source" of wealth.

That means if we go back to slavery, or jim crow or redlining or whatever time period you think it pertinent, personal incomes have grown exceeded the total value of the housing by many multiples (not to mention homes require upkeep: new roofs, insurance, etc.)

In any case, you're writing as if Black people were only able to own property quite recently. Inn 1970, around the time that redlining practices ended, the Black homeownership rate was 41%, only 2% lower than what it is now. Redlining may have been discriminatory but the way it's impact is so overstated by many people is really wild.

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"Housing is largely a store of wealth, not a source of wealth". This is some angels on a headpin stuff here. My larger point remains the same regardless of whether we call it store of wealth or source of wealth. A house that appreciates 1,000% in value is a an asset that can be sold for huge profit at the end of the day.

And redlining is overstated in its impact? I mean yikes dude. You do know that redlining means that the house you own in a segregated neighborhood is way way less valuable than it should be if you were allowed to buy in different neighborhood. I mean if you don't believe me, please read from this radical website known as US Dept. of Treasury website. https://home.treasury.gov/news/featured-stories/racial-differences-in-economic-security-housing

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The point is "did your parents own a house in 1963?" is not a major determinant of who is wealthy in America in 2023. If it were, we wouldn't see so many immigrants being so damn successful or middle class. Instead they would all be poor. But since 20x more wealth has been generated by incomes than is stored in housing, a family that arrived in 1980 can easily be all but "caught up" with people whose family came during the Irish Potato Famine.

Yes, you're overstating the impact of redlining, a set of practices that ended at least 50 years ago, on wealth today. Nothing in the treasury article makes a case that the housing situation of 50 years ago is a major determinant of today's wealth gaps. It hand waves at that, saying "it's a contributing factor" but it does no work to show if it's a large factor.

And it's really not. Both my parents lived in redlined neighborhoods. My mom moved to a "yellow-lined" neighborhood when she was in elementary school. Today the redlined house is worth far more than the yellow-lined one she moved into. Even if they had stayed in the more valuable redlined one, they were a family of 5 kids so inheritance isn't exactly a huge factor.

If you're interested in Black-White wealth gaps, less than 25% of Black mothers are married when giving birth versus over 70% of white mothers. Around 30% of Black mothers have no other parent in the picture, vs <10% white mothers. Statistics on crime and education are similarly dire and have very little to do with inherited wealth

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Number of years of homeownership is the leading factor when looking at the racial wealth gap: https://heller.brandeis.edu/iere/pdfs/racial-wealth-equity/racial-wealth-gap/roots-widening-racial-wealth-gap.pdf

Housing is, and as far as I can tell, has always been a huge factor, and redlining (along with stuff lack of access to credit) are obviously big part of that.

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No offense, but this is the kind of "just so" research that makes Twains "lies, dam lies and statistics" more true today than it every was. It's very hard to read this and come away with any reliable takeaways, since it's the kind of data analysis that seems constructed with the answers determined before the questions.

That stat, "Number of years of homeownership" is a great example. They found it was statistically significant for Black families, but not significant for white families. Do you trust that sort of result? ie the number of years that a black family owns a home is a good predictor of (median) wealth, but the number of years that a white family owns a home is not?

Median wealth is another good example: that seems to be their sole or at least principle measure of a wealth gap. It seems like the mean and some measure of the tails is also of considerable interest, especially as the right tail shifted notably during the time period under study for America at large.

Two other big examples of motivated sloppiness: they mention almost offhandedly that when adjusted for starting wealth, many of these gaps in wealth accumulation "narrow considerably". But at the same time they confidently assume that every gap in wealth accumulation is due to discrimination. But if the trajectories are close to the same given the same starting point, that sort of belies their discrimination assumption.

In any case, I can't imagine there are any two ethnic groups whose cultures differ in any meaningful sense who make completely equal wealth generating decisions. So starting with the assumption that it's all discrimination seems quite silly.

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Im on board with inheritance taxes, hate the patent system, and think the exclusion of Black Americans from housing wealth is a gross blight on our history.

I think you're 90% right here, but can't bring myself to upvote because I don't think it's replying to the point Jonathan made. It's not a question of personal merit, but rather that, inheritance aside, most rich people get rich by providing value to others, which is terrific.

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I agree it’s not “entirely”, but I think it is “largely”.

I agree inheritance taxes should be much higher. And surely there’s a lot the government can and should do to try and make sure people can only make money by generating value for other people. But its already mostly true.

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These arguments would be much easier to accept if inheritance and gift taxes actually were much higher, and early childhood was more egalitarian. I think inherited wealth inequality should be a much higher priority than the “injustice” of taxes on labor wages

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“…wealth which was systematically denied to African Americans through racist policies in the early and mid 20th century”

Presumably you are referring to redlining, which mostly affected whites.

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Eh, that's sort of a misleading claim. It's only by dint of the population simply being mostly white. As a percentage of population, it affected vastly more Black folks than white folks; if you were Black, the odds of it impacting you were vastly higher than if you were white, etc etc.

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I see the recognition of the less than meritorious source of some wealth not so much an argument FOR redistribution as an argument AGAINST opposition to redistribution because the "makers" deserve it.

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IMO there's a pretty big distance between, "generating value" and "deserve", which requires at least some effort to bridge before your conclusion can be justified. Matt does a pretty good job of illustrating how his particular skill set generates more value than another similar one these days in a way that it wouldn't have 30 years ago. Why do you believe he's now more deserving today than he would have been if he'd been born 30 years ago?

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Because he’s entertaining and informing more people. I pay Matt for these columns because it improves my life, not to reward him for being a good writer. If he makes my life better, it seems fair that I should make his life better too.

To me this consequentialist account of “deserve” is more appealing than a virtue-based one. Having particular skill sets doesn’t matter. Improving other people’s lives does.

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But a good social worker improves peoples' lives much more than a good securities trader.

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But how do you define value? When my brother, an attorney, returned to New Orleans after Katrina, he remarked that daycare workers, delivery people, and trash collectors were much more valuable than attorneys (his job) because it was impossible for the city to function in any sort of way for others to do their jobs without those three.

And after visiting a Starbucks across from a hospital/medical school complex last week, I might even assert that doctors can't do their work without those baristas. The baristas were hustling and there were 5 of them, which was more than could comfortably fit in the space, but there were still 27 orders to come up before mine was ready.

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“How much someone will pay you to do it” is a pretty good approximation of value.

It’s better than your approximation because you’re only taking into account demand not supply. It’s true that trash collectors are more important than lawyers, but there’s also a lot more people who could switch to trash collecting than who could switch to lawyering.

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Just seems circular to me. The fact that what people will pay for is not correlated with importance to society seems like a strong argument for the government (which is charged with protecting the public welfare) to collect more taxes so that what’s important to society is well-funded.

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I think that's taking the argument off-track a bit. It's not about people being willing to pay for what's important or not, it's about supply and demand.

Demand reflects value - it's not perfectly correlated with value, but it's, not uncorrelated. Software engineers command higher salaries then personal trainers, for example, because their work generates more $s. But the price can't be set without the other half of the equation, which is supply. Supply is probably less correlated with value, although it is correlated with ability.

Anyways - the point of this econ 101 is the S&D is a pretty good way to distribute resources and incentivize people doing would other people need. It's not perfectly fair but it's not illegitimately unfair, either. At the end of the day trying to pay doctors the same as trash collectors or baristas seems rather foolish. Countries like Cuba and the USSR have tried that with somewhat dubious results.

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I'm not talking about paying doctors (or even athletes) the same as trash collectors; you're right that supply and demand makes it silly to complain about how we pay millions of dollars for someone to put a ball in a net. But we weren't talking about equalizing salaries, but about taxes—the parent comment says that the justice case for higher taxes is really weak, because of supply and demand. To me the fact that the people who do the most essential work are often not well-served by the marketplace *is* the justice case for higher taxes, since facilitating that essential work is one of the government's most important jobs.

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"We" don't pay basketball players as a collective, the way "we" pay taxes. This are two different sets.

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We don’t need the government to make sure trash collection is well-funded. It’s important so people would fund it anyway. It’s just that - fortunately for us non-trash-collectors - the cost of good trash collection isn’t that high. Even though it’s important, it’s relatively easy to do adequately.

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Aug 3, 2023·edited Aug 3, 2023

What people pay for is important by definition: it's a revealed preference. It might not be important to who or what you define as 'society', but politics is all about how many people define society in different ways. It seems like you're skipping over the hard part and hand waving what is and isn't important to people, because people want different things.

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I don't think I am skipping over that, I just think it's handled democratically. To take an extreme example, there are people willing to pay a lot of money for a hit man, but there are many many more people who don't think they should be allowed to, so the interests of contract killers and their prospective clients are tossed aside, or deemed unimportant if you prefer. Matt is trying to persuade people to take the provision of public services funded by taxes as important, and hence to persuade them to pay more in taxes. It's true that I took it as a given that certain basic services (mentioned here have been trash collection, medicine, and education) are important enough to pay for, but one could dispute that premise if one chose; mainly I think the argument is over how broad a range of services should be covered.

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A basic problem is that some people have more money than others and so might pay a higher price for X good or service that is less valuable to them than Y good or service is to a poorer person.

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Is that a feature or a bug? Maybe we should weight the interests of people who are producing more value higher - that’s their reward for doing more.

(Personally I think a mix of equal-wright and contribution-weight is appropriate. And of course there is the problem that wealth is not a perfect proxy for contribution)

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Aug 3, 2023·edited Aug 3, 2023

Can you please explain how your argument doesn’t amount to “it’s this way now ergo it must be correct and just “?

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I think that’s a good starting point; it’s that way now for a reason! But it’s only a starting point.

IMO a main goal of the government should be to make this approximation more true.

But of course not all ways of making money are good. To take a somewhat controversial example, selling cigarettes seems to make people’s lives worse rather than better (even though they are willing to pay you for them).

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I think that market-based economic mechanisms that allow some people to get very rich are good for utilitarian reasons (price signals make it possible to solve otherwise-intractable coordination problems), but I think that the “justice” argument is a bit dubious for a few reasons:

1– Pretty much every sort of economic activity that people in modern developed countries do incorporates public goods as factors of production. The sort of value creation we do would be impossible without rule of law, a whole bunch of infrastructure, a whole bunch of accumulated scientific knowledge, etc. In general, the more you make, the more value they derive from those things.

2– As any B-school grad or professional investor could tell you, value creation and value capture are separate things, and being great at the latter is much more important for making money than the former.

3– It’s not uncommon for people to get rich while actually creating negative net value for society— you just have to externalize your costs well.

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I think the thing we all collectively need to start realizing is that happiness is more important than justice. You're right that the justice case is weak. But the fact is, the justice argument is not important.

That said, meritocratic-based justice can indeed be a strategy for encouraging people to provide value for their community, which in turn can increase overall happiness. But such justice is always only valuable insofar as it generates happiness for the community.

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I think both are important, and I think most people agree. (Which is why you see so many arguments that rich people don’t deserve their wealth - people have an intuitive sense that fairness is important, and want to justify higher taxes on fairness grounds)

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You're right that most people agree. But most people are confused.

Happiness is the rule, while justice is just the rule of thumb. Justice is only important insofar as it helps promote happiness.

It's like in chess. The goal is to capture the opponent's king. A good strategy for capturing the king is to capture the opponent's pieces. But capturing their pieces is only valuable insofar as it helps you capture the king.

Happiness is like capturing the king, while justice is like capturing a single piece. It can be a useful heuristic or strategy, but it's not the final goal, and should never be confused with the final goal.

The problem is, a lot of people grow up believing that justice is a goal in its own right. And that misconception causes a lot of problems in society. Debunking that misconception is a very important step in moving our society forward.

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I’m not confused I just disagree with you :) being fair is an important end in itself, not just a means to happiness.

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It's hard for me to understand why you think that. Your second sentence, that is ;)

"fair" has no inherent value, but happiness does. Sure, if you are treated unfairly, that might make you unhappy, but again, the measure is happiness. The only way to know whether something is good or bad is by whether it moves you towards happiness or towards unhappiness.

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Aug 3, 2023·edited Aug 3, 2023

To believe this is to ignore huge swathes of influence that luck has had on their results. Just someone’s genetic and childhood circumstances alone make or break someone’s ability to end up wealthy. Then there is educational opportunities, mentors, physical and mental health, personality traits…

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"largely rich people do deserve their money" -- with notably rare exceptions, I completely agree. But by the same token, most poor people also do deserve more money. That's the justice case.

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What’s the argument for why most poor people deserve more money? (I mostly don’t think this is true. Even though I think we should give most poor people more money for utilitarian reasons)

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Because most poor people work hard. A lot of really tough jobs (including stay-at-home parent) don't pay very well.

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“Earnings are … not based on merit…. That seems fair to me…. Rich people do deserve their money”. If it’s not merited how is it deserved or fair? I feel like we are not speaking the same language…

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By “merit”, I meant something based on the individual, like a particular skill set or a strong work ethic or being honest or intelligent or whatever. Like Matt’s point that he isn’t necessarily the best writer; the type of writing he does just happens to be more valued right now.

My point is that earnings are based on improving other people’s lives, rather than any of these individual factors. And that that actually seems like a better system to me than something like trying to figure out who’s the “best” writer and making sure that person gets paid more than any other writers.

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So, Worthington's Law?

https://youtu.be/gbU4VRs2rro

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Aug 3, 2023·edited Aug 3, 2023

The discussion is about earnings, not personal worth?

(Edited to remove slightly inflammatory speculation.)

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founding

Even for those who don't invest their money directly on something useful, the banking system -- or wherever they park their money -- does it for them.

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That depends on two things:

1. The ground rules which make the market.

And

2. Sufficiency of aggregate demand.

Without 1, you get Bitcoin and other forms of financialized navel-gazing which never touch the real economy.

Without 2, you get whatever the fuck Silicon Valley was doing 2009-2021.

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That’s why we have tax deductions, right?

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"In Denmark, the actual gap in living standards between the bottom and top deciles is much smaller. You can’t do anything about the fact that some people are better at certain things than other people or that some skills are more lucrative than other skills."

The real question is what is the gap between the Danish bottom decile and the US bottom decile. I.E how much of the US gap is because the top decile is in the stratosphere compared to Denmark?

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I mostly agree that comparing absolute values is the way to go. I tried to Google it but no immediate results.

But even if you compare net income (so after taxes & transfers), you still don't take into account a lot of the stuff Matt talks about in this post: universal health care, free education, public infrastructure, etc.

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Why do Dems like using 400k threshold on not raising anyone’s taxes?

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Politics.

While personally, I would be supportive of increasing taxes further down the income ladder, if the only way to win an election is to start by limiting tax increases to those making $400k or more, it's better than the alternative of an administration that will keep taxes on the wealthy low.

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I always respected Bernie Sanders for refusing to hold to this pledge.

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I think the idea came out of the 2011 cauldron of stupidity in Zuccotti Park: Occupy Wall Street. “The 1%” was a good slogan, and in 2011 you’d need a gross income of about $400K to be in the 1%.

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Professional-class households that make slightly under that number and don't feel rich because they live in old, small houses/apartments in NYC, SF, Boston (insert housing supply-constrained city here) are a major part of the Democratic coalition now.

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Big mistake, even technically if taken literally. Many tax reforms just don't have a neat lower income threshold. Take converting deductions to partial tax credits. Unless very specifically crafted this could result in some <$ X incomes being taxed more. So what?

Besides, and more important, I don't think there is enough income above 400k to reduce deficits to near zero and expand transfers without marginal rates that DO start to have dead weight losses.

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Well the Speaker of the House and Senate Majority Leader both make $193,400, so if Nancy and Mitch were to get hitched, they could still claim to be middle class-ish.

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Mitch is the Minority Leader!

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That's their Gov salary. How much do they actually earn in excess of that?

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Taxes alone don't create what Matt wants. Taxes plus functional government produces it. Raising taxes before fixing government will only undermine support for Matt's preferred outcomes.

To use an example, France has high taxes and uses that money to build quite a bit of rail (both subway and traditional trains) at (reasonably) low cost. People feel the pain of the tax but they get something quite valuable in return.

But as Matt has pointed out many times, our system doesn't allow for large-scale construction at reasonable cost. Our rail projects very literally cost ten to twenty times as much as French ones. If you raise taxes to build rail, people will feel the pain of increased taxes but they will see little to no benefit in terms of more rail service.

How do we fix that? I'm not sure. But you can't get European results w/o governments that function at European levels. Places with high taxes and non-functional governments don't have great public amenities. The money just disappears into the ether.

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Yes, government needs to build credibility first instead of just asking the public to trust the process. In an alternate world where the USG efficiently builds infrastructure and treats tax dollars carefully, there would be more widespread support for higher taxes.

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Aug 3, 2023·edited Aug 3, 2023

I think I fundamentally disagree with the premise in the sense that I don't really think compressing the range of material distribution is a good in and of itself. What's good is maximizing the average productive capacity of individuals. The more capacity available on a per person basis the more sustainable life is, the more choices people have, the more opportunities for flourishing exist. To the extent unequal distribution is a problem it's essentially a political one.

I understand the need to put a floor on certain material needs for a society to function, but even that is kind of problematic because it creates need for like immigration control and things. Minimum wages create barriers to market entry for untrained workers. Stuff like that. The urge to compress the wealth distribution within a closed economic bubble inevitably caps innovation with one hand and excludes categories of people and goods on bases I typically don't subscribe to with the other.

Even beyond that, the provision of services like a swimming pool is like the worst possible use of all but the most local of government entities. This is not an efficient provision of a needs based welfare floor for the purposes of a stable pubic order. This is bread and circuses territory. Way too much "egalitarian" rhetoric rapidly devolves into class and status envy where redistribution really does devolve into the equal sharing of poverty.

None of this is to say I'm embracing some delusional an-cap fantasy. Something like a carbon tax funding productive universally accessible infrastructure is a great idea. School funding is good. Alleviating childhood poverty is good. Hell I'm even open to sorts of UBI ideas. Taxes are necessary to pay for all those things.

The problem is people like to do taxation like we're Robinhood. Stealing from the rich to give to the needy like there's big Scrooge McDuck style piles of gold out their and we just have to hand everyone their one coin to make things "fair". That's not how wealth exists in the economy. Taking money from one sector and putting it in another via taxes creates dead weight loss. To the extent government provides these type of society wide services they should have really universal benefits, not simply be transfers for the sake on wealth compression, and the tax burden should be spread as widely as possible to avoid distorting the efficient functioning of the market.

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“…the provision of services like a swimming pool is like the worst possible use of all but the most local of government entities”

I think one of the largest and most obvious flaws of American progressivism is the insistence on everything being funded and controlled at the federal level. Can you imagine what a clusterfuck a national department of parks and recreation would be?

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Looking at things through a philosophical rather than economic lens, I think you can find three ways to argue for a flatter (if not neccesarily perfectly flat) distribution of material resources. If you're a utilitarian, the diminishing marginal utility of money, I think, provides a pretty straightforward answer for flattening inequality. Not completely, because diminishing utility implies that eventually the marginal benefit (to the poor perosn) of redistribution exceeds the marginal cost (to the rich person).

I haven't read Rawls but what they taught us in intro micro is that Rawl's veil of ignorance implies that we should prioritize the worst-off in society and therefore a Rawlsian social planner would go for complete equality.

My read of what Kant says in the "Grounding" is that we are all fundmentally equal as rational beings, and so it follows (in my reading) that we are all equally entitled to the material resources that allow us to fully realize our rational capacity. I think you could also argue that the categorical imperative means you should favor equality because to do otherwise is to hold yourself to a standard that you could not or would not universalize. But I don't know that either implies a need for perfect equality; I think you could argue that everyone should be guaranteed some base level of material resources to realize their rational capacity, and above that level we don't need perfect equality.

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Aug 3, 2023·edited Aug 3, 2023

Under the veil of ignorance, I’m just as concerned about being an above-average contributor held down to equality as I am optimistic about being a below-average contributor lifted up to equality.

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Being risk-neutral seems a bit strange!

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The risk of being poor in a highly unequal society with a nevertheless adequate welfare state is basically spiritual. It's not clear to me that the psychic insult of being outperformed by others is more serious than the psychic insult of outperforming and having nothing to show for it.

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philosophy can’t tell us how risk averse to be. however, if one draws a ticket in the natural lottery with negative utility, suicide would be the preferable option. therefore, assuming rational actors, all lives with significantly negative expected utilities are similar.

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It’s not at all clear that the veil of ignorance implies helping the least advantaged first. That would only follow if one is very risk averse. For instance, suppose I could choose to play either 1) a natural lottery where the top 999 get 10 utils and the bottom 1 gets 1 util 2) a natural lottery where the top 999 get 20 utils and the bottom 1 gets 0 utils.

“Helping the least advantaged first” implies the first distribution is better. But that’s officious bullshit, your expected value under the second distribution is almost twice as high and risk is only infinitesimally larger.

The natural lottery is a great thought experiment and serious people should think deeply about it. However, the conclusions I reach are far different from “Rawlsian” ones.

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Your final sentence there is basically where I'm at. I'm very amenable to programs that alleviate childhood poverty/invest in the capacity of young people. I'm far less interested in equalizing the outcomes of people's choices or dictating what is or isn't a virtuous use of a persons efforts. Right now the overwhelming bulk of our tax revenue is dedicated to old age entitlements , which is just almost entirely backwards.

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IMO reading Rawls is not a great use of time given the ideas / page ratio, but it could be argued that I just didn't fully appreciate the depth.

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we are neither rational nor fundamentally equal in our analytical faculties

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I agree with your bottom line, but I'm not sure how that makes a public swimming pool among the worst possible use. It's a service that anyone can use without regard to means, and it can help root out some inefficiency elsewhere. It would be wildly expensive and impractical for me to have my own pool, and most other functions of a gym I can utilize in other manners, but a clean place to swim is not one of them.

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I mean a public pool is very locally contingent and provides lots of value to a fairly small subset of taxpayers who actually use it with fairly marginal benefits to recreation and people learning how to swim all while historically be a a very weirdly fraught flashpoint of race/class/culture. Selecting where should have a pool and what the rules should be and much funding it should get all invite a ton of weird biased actors to involve themselves in the process to manipulate it towards ends government really shouldn't touch with a 1000 foot pole. A public pool isn't like... a bad thing per se, but it invites all the worst impulses in public spending for very minimal return.

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*A* pool is locally contingent; *pools all over the city such that you can be assured of finding somewhere to swim, get swim lessons, etc.* benefit everyone in the city.

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Sure kind of? But how many pools are we building in this world where everyone is equally entitled to public pool access? I pretty sure you get a density gradient thing where in some places you can't possibly build enough pools for everyone who would show up and in others you can't possibly build pools close enough for everyone to access. Are we funding all these pools locally or federally? You're inviting all the problems of like public school funding in cities and rural hospitals all at once for a good that is very far removed from what anyone might consider a core government function. I can't comprehend wanting tax dollars diverted into that mess.

Like I get the specific history about how racists got public pools until they had to integrate so they closed them all. And that's terrible, but the original sin was letting the racists soak up those resources in the first place.

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All I know is I live in LA, there are rec centers with pools every few miles offering free swim lessons and $5 open swim tickets, and as an earlier comment said, these are services that the individual can't replicate. I assume they're funded by a combination of local, state, and federal taxes, in amounts that would be a rounding error. The system works; why should I be mad?

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I mean, I don't get particularly worked up about locally funded municipal recreational facilities that's kind of fine even if I'd probably call it a waste in a lot cases. But like, the LA parks and rec department operates multiple 18hole golf courses in addition to the pools, which really seems outside the scope of what I'd call good government at any scale.

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I don’t think higher inheritance taxes create dead weight loss, and would help achieve some of what Matt laid out

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Aug 3, 2023·edited Aug 3, 2023

I can imagine dead weight loss associated with high inheritance tax in at least two obvious ways. 1. Encouraging excess consumption in older persons who know their assets are going to require liquidation for tax purposes upon their deaths anyways, so they might as well have that cash on hand now. 2. Corporate ownership issues where most of a decedent's inheritance takes the form of ownership shares in a company or illiquid business assets. Unless we're excluding that stuff which basically undermines the whole concept because everything is then getting shielded as investment shares.

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Beyond being skeptical, I don’t think dead weight loss is the correct categorization for either of these potential downsides

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Wait, is this a Freddie deBoar guest post?

Really though I agree that this is terribly under discussed on the left, especially the far left. Most RW types are able to at least talk about the inequality of ability (although I abhor the typical response). But because the libs tend to think that variation in ability is driven by some causal variable that can be fixed, we don’t have a coherent discourse on how to move forward.

As a test, ask your smartest liberal friend how much benefit kids get by doing SAT/ACT prep. I bet they overestimate the effect of test prep by a factor of 10. Also, they will claim that test prep is only available to rich kids, even when they know damn well that the Kaplan test prep book is *in the school library* collecting dust.

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Your last paragraph is a straw man if ever I saw one

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I’m just saying that smart liberals overestimate the value of test prep. Do you disagree?

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Yes

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Fwiw, the data on how much one can improve with text prep is pretty modest. Think about it - if you could spend ~$1000 to help low income kids get into college it would be (easily) the most cost effective intervention we have to help poor kids. This would become the lowest hanging of the lowest hanging fruit that ever existed, to just make it free. The reason it hasn’t been done is because it doesn’t really work all that well.

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Fair enough

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I predict that as the Northern European countries go from relatively homogeneous nations to nations of half refugees, the support for redistributive programs will decline. Income inequality will soar because the magic dirt of Northern Europe will not overcome the norms imported from south of the Med.

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I do get a very good chuckle when someone points to racial/ethnic diversity in the US reducing support for public services/redistribution programs/etc. and some European chimes in to announce, "My country of Finland/Sweden/Denmark/etc. is *very* diverse and we have *excellent* blah, blah, blah!" It's like, no, dude, your country *today* is less diverse than the US was in 1950 and when those programs were mostly set up between the 1890s and 1950s, your country wasn't just literally 97% to 99%+ white, but in many cases had a large majority of a single nationality following a single religion and speaking the same language. Maybe there's enough engrained cultural support for those programs to survive a demographic transition, but it's about 50 years too early to declare success.

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Also, to chime in, social trust seems to decline in more ethnically or racially diverse societies, which is the lifeblood of all public programs, so people aren't resentful about paying taxes and the services going to the "wrong" people. The US of the 1950s and 60s had much higher crime rates, but much higher levels of social trust, so you have a dynamic where people leave their doors unlocked, and aren't fearful of the people in their neighborhood. I think Japan today is probably the closest modern-day parallel to this. People genuinely don't believe you, if you say that crime rates have declined, even with an increase in population. To put it in slang terms, the vibe check is off haha. Increased immigration is good in many ways, but it's hard to build social trust, when many citizens believe that the new people don't share their values. In the early 20th century with Italian and Jewish immigrants, we dealt with that through meditating institutions like churches, synagogues, fraternal orders, taverns, barber shops, social clubs, but the proliferation of different identities and political polarization make that much harder to replicate today.

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One thing I cannot get over after moving back to the US from Denmark is how low the taxes are.

No 25% VAT on all goods and services. Less than the 33% flat rate I paid as a foreigner (it would be closer to 40% otherwise).

But you did get regular and on time bus service in rural locations, litter picked up, and lots of parks (and ducks, so many ducks, obscene numbers of ducks.)

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Ducks are a public good.

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Jerry Coyne has entered the chat.

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We should make some note of the meaning behind Erickson’s comments. While I think Matt tackles the most important part for anyone wishing to play a more constructive political game, we can’t discount the other think Erickson is talking about.

I read Erickson’s tweet as a dog whistle. I think the history of public pools in the US bears that out. When some on the right talk about “entitlements” they are talking about money going to those they consider undeserving. The poor. Blacks.

The reason so many aren’t familiar with public pools (though I doubt Erickson is ignorant of this history) is because they went away in large swathes of country during the 40s-70s as suburbanization, white flight, and backlash to desegregation took hold.

My neighborhood pool growing up in Marietta, Georgia was not public. It felt public because is was open to anyone living in the neighborhood but it was actually private: funded, operated, and maintained by the HOA. So, while most homes in my area did not have pools of their own, every neighborhood had its own private pool for neighborhood residents. It was great. That’s where I learned how to swim. Joined a swim team with other neighbors to compete against other private HOA pools in other neighborhoods. It was a summer jobs program for teens who worked as lifeguards, did pool maintenance, and coached the swim team. But all of this was built on exclusivity. It just didn’t feel like it because all that exclusion was layers deep.

But hey, it was colorblind! Technically nobody was excluded because of their race and all you needed to be able to do was buy a home in that neighborhood. It just seemed to never happen and that it never happened seemed to be the expectation.

When I read Erickson’s tweet, what I see him saying is that liberals want to take your tax dollars and give it to poor black people so they can enjoy the same luxury you have to pay HOA frees for. You’re a winner. You can buy a nice home in a nice neighborhood and pay for a neighborhood pool (along with your similarly successful and probably white neighbors).

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I think there are three separate propositions

1. It will be good for society if for any given job the person hired is the one who could perform it best out of the pool of candidates AND we should aspire to reach the point that all who can and wish to be part of that pool are part of it (my definition of “meritocracy” but not the one commonly used in these discussions).

2. A decent society ought to guarantee minimum standards of living

3. It would be good for democracy and for the health of our civic life and social fabric that the gap between rich and poor doesn’t become too excessive.

These goals seem to me to be mutually reinforcing (and all served well by redistribution and good broad public services) but many here I suspect consider them contradictory and much of the debate stems from that.

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This in many ways of one of Freddie de Boer's main theses: in the process of promoting security and welfare for all people, there's no need for us to pretend that everyone is actually equally capable. And, in fact, pretending that leads to all sorts of weird consequences and partial lies, and probably takes us further away from security and welfare for all people. The layer I think he misses is that we need much better social investment in order to give more people with desire and ambition the kind of opportunities and second and third chances that a talentless rich kid gets.

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The US has the most progressive tax system in the world....we also have the highest avg. household income of the major economies, best GDP growth outside of China for the past 15 years, etc. And yet, most Americans do not pay income tax. In fact, a significant percentage actually have negative taxes in the form of tax credits and wealth transfers (food, housing aid).

The egalitarian societies being compared to the US in the chart are far more regressive in comparison. They have 40-50% payroll taxes AND 16-20% sales taxes. And the universal health care is rationed like crazy. And the EU has had stagnated GDP growth at around 1% for a decade and a half.

This is why people are for higher taxes and services rhetorically until they hear the details.

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Curious to know why you say the US has the most progressive tax system in the world?

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He's saying taxes are low, but progressive in that the rich pay the bulk of the taxes that are collected. He's saying Euro taxes are shifted more towards the lower end of the income spectrum due to high payroll and sales taxes. I don't know how true it is, but it's something I'd now like to see data on.

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Always mention only federal income taxes when talking about progressivity and how many people pay no INCOME tax.

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Pools, libraries, parks, and schools are municipally funded services. I don’t think anyone proposes raising property taxes to mitigate inequality - it’s always federal income tax. The things federal income taxes get spent on are at best quite remote from the taxpayer.

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An interesting point that "lots of Americans currently have their nominal earnings propped up by occupational licensing rules or other weird franchises like the laws that protect car dealership owners and liquor distributors." - these things provide job security in a society where the lack of a secure job is much more of a problem that there is when there is a welfare state.

Big improvements in efficiency can be accessed by allowing innovation, but there are always losers to any sort of big disruptive change. Having a society where there is a good safety net makes it more politically acceptable to push through disruption, which can help keep up innovation and productivity improvements.

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Good points. I think the additional lubricant to assuage disruption and permit reform is rapid overall growth, at least in activities adjacent to the disrupted ones. The disruption from containerization/international communication on many importable goods outputs hit when macroeconomic policies (deficits) had led to low savings/investments and an overvalued exchange rate so goods exports did not take up the slack.

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I don't know Erickson, but the use of the word "entitlement" suggests that he may be more concerned about the pool thing meaning more federal redistribution, not public pools per se. Undoubtedly, if pools were considered a "right" of some sort, this would immediately be transformed into a call for mandatory redistribution to pay for it, even though pools are a quintessentially local matter. And of course then a ton of money would then get stuffed into the pockets of lefty non-profits, activists, and "stakeholders" to ensure that everything having to do with pools was "equitable."

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