Today on Greg Mankiw's Blog, he links to a series of articles discussing the point at which economics and ethics diverge. Here is the link: http://gregmankiw.blogspot.com/2012/11/michael-sandel-and-his-critics.html The arguments included are worth reading because they deal with a fundamental aspect of public policy, namely that market economics drives social outcomes that are not based on moral principles. What I mean is that free markets are mostly concerned with creating the largest possible bill of goods, but it distributes those goods according to ability to pay which not everyone believes is a morally justifiable outcome. This bothers many ethicists, and specifically bothers Michael Sandel (the author of the first article linked by Prof. Mankiw).
In Sandel's article, and in a book that he has written, he argues that economics text books and the study of economics should be rewritten to include moral discussions of market outcomes. His first example is that of organ trafficking. Namely, imagine a free market society where there is a market for human organs. People can exchange their organs for goods and services at a market determined price. His argument is this is not a moral outcome because the desperation that would lead someone to sell a kidney is coercion and not a free exchange. I.E. only the most desperate would sell a kidney, and that desperation is what makes the exchange unfair. It is this idea of a person's situation in life causing them to be coerced into making bad decisions that supervenes in this article and makes him want to include ethical discussions into economic text books.
Prof. Mankiw's second link is to an article reviewing Mr. Sandel's book (which the first article summarizes) in which the above debate is fleshed out to a greater degree. The review, by Deirdre McCloskey, who summarizes this view as: "His moral thoughts in fact are two only, and thin versions even of
these: that equality is good; and that the sacred can be corrupted by
the profane." What McCloskey means by sacred and profane is essentially the argument that we have listed above, that market pressures and poverty can make people do things for money that can be viewed as immoral (i.e. selling organs or prostitution). McCloskey answers this charge by discussing the actual history of global market economics and how, historically speaking, it has been the single most effective means for increasing social welfare for the abjectly poor. The criticism is that this fact is not adequately addressed by Sandel.
The last article Prof. Mankiw links to takes a different approach and instead attacks the reasoning that leads Sandel to believe that selling some things are truly immoral. This article, by Jodi Beggs, is made in the form of a dialogue between Mr. Sandel and a variety of famous economists. One of the most poignant criticisms from this article comes when Beggs imagines a retort by economist Al Roth which states: "So I can go work in a coal mine to support my family but I can’t sell a
kidney? I have a feeling I’m going to be pretty pissed off when I look
up the rates of negative outcomes for those two cases. Also, by
Sandel’s logic, I am coerced to go to work every day, so somebody has
really got to step in and protect me from that." The point being that all economic decisions are coerced in some way by the human condition. I.E. that our need for food, water, shelter and companionship make us do things like go to work, earn a living and participate in a market economy. What makes the organ trafficking and prostitution immoral but makes going to work everyday moral? This question goes unanswered.
So, despite Sandel's best efforts, the problem remains as to how to incorporate moral ethics into market economics. This question implies that market outcomes are inherently amoral or immoral. I.E. if Sandel thinks that we need to incorporate ethics into economic reasoning, it implies that he thinks ethical reasoning is absent from such decisions. This though I believe is a false reading of basic economics. Economics believes at its base that all people act to maximize their perceived benefit from any given transaction. It also believes that since all people are different, they will value things differently, and that they are the best judges of their own situation. Thus, at its basis, economics assumes that people will make their own moral and ethical judgments about economic activities and make decisions accordingly. It is true though that in order for this to work out perfectly you need perfect information (something which does not exist in the real world) and many a bad decision has been made by not knowing all the facts. That does not make the decision immoral though, just misinformed.
Here, I believe, Sandel would step in and say, how do you explain why people choose to sell their kidneys, engage in prostitution or do a variety of other immoral activities. After all, while they may not have perfect information, they surely know that such actions are morally wrong. The problem here is that he is substituting his own judgment for that of the individuals. Because he views these outcomes as immoral, he believes that the people were not properly weighing the costs and benefits of their actions and making poor choices. Of course, this is still subject to the Beggs/Roth response that these outcomes are no different, or perhaps even preferable, to working in a coal mine or many other equally dangerous and unhealthy jobs. But the real problem is that, in substituting his own judgment, Sandel would remove an option from the very poor. In artificially restricting the market, he is restricting their choices and distorting the outcome. An outcome he might be happier with, but the individuals involved might not be. In fact, market analysis has shown that restricting market options makes the remaining options more expensive and thus puts the poor in an even worse situation than they were before.
In the end Sandel is merely trying to substitute market coercion with Government regulation. But this seems to beg the underlying question, namely, is government intrusion a more moral way to allocate resources than market economics. The problem here is he does not analyze this question. He takes it as a mater of fact that such interventions are in everyone's benefit. Without making a cogent argument that this is in fact the case, he is unlikely to win over many people who did not already favor market intervention (again, along the same lines as the McCloskey criticism).
Tuesday, November 27, 2012
Friday, November 23, 2012
The Fiscal Cliff Dilema
In the US, the biggest concern in politics is the looming fiscal cliff. If you are not aware of what this is, I will explain. During previous budgetary battles, a deal was struck that allowed the borrowing limit to be increased as long as the joint committee on debt reduction agreed on $1.2 trillion in budget cuts. If it did not, automatic spending cuts split between domestic and defense spending would take place. This committee failed to reach a consensus, so automatic cuts will happen in January. On top of this, January will see the expiration of the bush tax cuts as well as the imposition of the new Affordable Care Act tax increases. The combination will be a large increase on taxes across the income spectrum and a decent sized budget reduction. Or instant austerity (as the Europeans have been using the term) in the US.
This is a problem for the US because, ever since the so called "Great Recession" of 2007 and 2008, the US has been suffering under tepid growth and high unemployment. It is widely believed that the higher taxes and shrinking federal expenditures will combine to shrink economic output enough to throw the country back into recession. This is similar to the problem that Europe has been dealing with recently (though the causes of each of these problems are different), i.e. that budget cuts and tax increases have pushed the whole region (even areas not imposing austerity measures) into recession. This possible recession has global implications as the developing world, one of the few bright spots in economic growth, is heavily dependent on US and European consumption. With Europe and the US in recession the developing world is likely to follow.
So this brings us back to the problem at hand. What can be done to avert this likely catastrophe? Currently, Obama and the Democrats have refused any compromise that does not involve tax increases and Grover Norquist and the Republicans are standing by their no tax increases pledge. With the legislature divided between the parties (with the Senate controlled by Democrats and the House controlled by Republicans) there is a distinct chance that no compromise is possible. Worse, there are strategists on both sides of the debate who believe that compromise is not even desirable. Democrats thinks that going over the cliff will give them the higher taxes they want with the ability to blame Republicans for the budget cuts, Republicans that going over the cliff will prove they mean it when they say they will fight to shrink government and keep tax rates low.
Neither of these positions is likely to be true. Worse, the market turmoil such political wrangling will cause will result in many of the negative economic outcomes listed above simply due to people hedging their finances against uncertainty (i.e. assuming the worst and cutting consumption regardless of the final political outcome). Worse still, Republicans and Democrats will each share the blame for the political failures resulting in a repeat of the 2010 mid term elections where incumbents from both parties were voted out of office by the electorate. While I am not opposed to throwing out the bums in congress, I am not comfortable with the damage this brinksmanship will cause to the global economy.
The solution is that both sides are going to have to suck it up and work on creating consensus. That means that the Democrats will have to accept that they will not be able to further raise tax rates and Republicans that they will have to be willing to allow net tax revenue to increase somewhat by extinguishing tax loopholes or capping write-offs. Otherwise, the consequences to the global economy could be dire.
This is a problem for the US because, ever since the so called "Great Recession" of 2007 and 2008, the US has been suffering under tepid growth and high unemployment. It is widely believed that the higher taxes and shrinking federal expenditures will combine to shrink economic output enough to throw the country back into recession. This is similar to the problem that Europe has been dealing with recently (though the causes of each of these problems are different), i.e. that budget cuts and tax increases have pushed the whole region (even areas not imposing austerity measures) into recession. This possible recession has global implications as the developing world, one of the few bright spots in economic growth, is heavily dependent on US and European consumption. With Europe and the US in recession the developing world is likely to follow.
So this brings us back to the problem at hand. What can be done to avert this likely catastrophe? Currently, Obama and the Democrats have refused any compromise that does not involve tax increases and Grover Norquist and the Republicans are standing by their no tax increases pledge. With the legislature divided between the parties (with the Senate controlled by Democrats and the House controlled by Republicans) there is a distinct chance that no compromise is possible. Worse, there are strategists on both sides of the debate who believe that compromise is not even desirable. Democrats thinks that going over the cliff will give them the higher taxes they want with the ability to blame Republicans for the budget cuts, Republicans that going over the cliff will prove they mean it when they say they will fight to shrink government and keep tax rates low.
Neither of these positions is likely to be true. Worse, the market turmoil such political wrangling will cause will result in many of the negative economic outcomes listed above simply due to people hedging their finances against uncertainty (i.e. assuming the worst and cutting consumption regardless of the final political outcome). Worse still, Republicans and Democrats will each share the blame for the political failures resulting in a repeat of the 2010 mid term elections where incumbents from both parties were voted out of office by the electorate. While I am not opposed to throwing out the bums in congress, I am not comfortable with the damage this brinksmanship will cause to the global economy.
The solution is that both sides are going to have to suck it up and work on creating consensus. That means that the Democrats will have to accept that they will not be able to further raise tax rates and Republicans that they will have to be willing to allow net tax revenue to increase somewhat by extinguishing tax loopholes or capping write-offs. Otherwise, the consequences to the global economy could be dire.
Tuesday, November 20, 2012
Ethical Overview
Ethics is moral philosophy. It deals with reasoning from ethical principals to create a means of acting morally in a social setting. It is also one of the few areas of philosophy that has everyday practical applications. Examples of this are sports ethics and business ethics (i.e. applied ethics). These subjects are frequent areas of public and legal policy debate. While saying something is ethical or unethical is common, it should also come as no surprise that there is great debate over what one means by making such a statement. So, the purpose of this blog post is to briefly review what such a statement means.
First thing to discuss is the purpose of ethics from a social standpoint. When humans get together in large numbers, we have a bad habit of getting on each others nerves (and as I am writing this right before the Thanksgiving holiday, you may well be more acutely aware of this than at other times of the year). Inevitably, as people got together and created societies in prehistory codes of conduct were created to avoid the kinds of hostilities that result when people get on each others nerves. These codes of conduct are the origins of what is now ethical reasoning.
In ancient Greek philosophy, most ethics revolved around reasoning from first principles. This usually involved defining ideal virtues, like justice and self determination, and using that as a basis for how one should properly conduct themselves in society. Later, in more modern times, philosophers put forward ideals about how the results of an ethical decision should drive the outcome of that decision. Examples of this are utilitarianism or consequentialism, both of which are concerned with creating the most societal happiness or utility or the greatest benefit to society (depending on the theory). These views contrast with another major branch of ethical thinking, that of theologically based ethics. This system being one from which the principles of ethical action are either laid down in the holy books of the religion or deduced from the actions of its patron saints (or other holy figures).
Now it is worth pointing out that not all codes of social conduct are, strictly speaking, ethics. Manners are one such codes of conduct. While none would doubt the value of being mannerly it is unlikely to rise to the level of ethical behavior. After all, whether you say please and thank you or eat daintily are unlikely to affect societal happiness (at most you might disgust the people around you). Similarly, societal laws are not ethics, even though when you act illegally, you are frequently acting immorally. What I mean is that while one can safely argue that breaking a criminal law is likely unethical, it is not as clear that a business not having an independent auditor or audit committee (as is required by various corporate and securities laws) is unethical (though, in the case of Enron, it did result in the company making many unethical decisions).
So what can we deduce from all this? That when someone says a certain action is unethical or immoral, that in order to really understand what they mean we need to know what school of thought their judgment derives from. Do they mean that the action violated an ideal of justice, was the action not designed to maximize societal happiness, did it violate a theological principal for right action? You don't know. At best you know that they don't approve of that action. Just be careful in asking them to explain, not everyone reacts positively to having their ethical judgments questioned.
So, having run through the above, hopefully when future discussions run towards applied ethics, you will have a little more insight into what people are talking about.
First thing to discuss is the purpose of ethics from a social standpoint. When humans get together in large numbers, we have a bad habit of getting on each others nerves (and as I am writing this right before the Thanksgiving holiday, you may well be more acutely aware of this than at other times of the year). Inevitably, as people got together and created societies in prehistory codes of conduct were created to avoid the kinds of hostilities that result when people get on each others nerves. These codes of conduct are the origins of what is now ethical reasoning.
In ancient Greek philosophy, most ethics revolved around reasoning from first principles. This usually involved defining ideal virtues, like justice and self determination, and using that as a basis for how one should properly conduct themselves in society. Later, in more modern times, philosophers put forward ideals about how the results of an ethical decision should drive the outcome of that decision. Examples of this are utilitarianism or consequentialism, both of which are concerned with creating the most societal happiness or utility or the greatest benefit to society (depending on the theory). These views contrast with another major branch of ethical thinking, that of theologically based ethics. This system being one from which the principles of ethical action are either laid down in the holy books of the religion or deduced from the actions of its patron saints (or other holy figures).
Now it is worth pointing out that not all codes of social conduct are, strictly speaking, ethics. Manners are one such codes of conduct. While none would doubt the value of being mannerly it is unlikely to rise to the level of ethical behavior. After all, whether you say please and thank you or eat daintily are unlikely to affect societal happiness (at most you might disgust the people around you). Similarly, societal laws are not ethics, even though when you act illegally, you are frequently acting immorally. What I mean is that while one can safely argue that breaking a criminal law is likely unethical, it is not as clear that a business not having an independent auditor or audit committee (as is required by various corporate and securities laws) is unethical (though, in the case of Enron, it did result in the company making many unethical decisions).
So what can we deduce from all this? That when someone says a certain action is unethical or immoral, that in order to really understand what they mean we need to know what school of thought their judgment derives from. Do they mean that the action violated an ideal of justice, was the action not designed to maximize societal happiness, did it violate a theological principal for right action? You don't know. At best you know that they don't approve of that action. Just be careful in asking them to explain, not everyone reacts positively to having their ethical judgments questioned.
So, having run through the above, hopefully when future discussions run towards applied ethics, you will have a little more insight into what people are talking about.
Sunday, November 18, 2012
Theory of Knowledge (aka Epistemology)
Epistemology, the theory of knowledge, is an area of philosophical inquiry concerned with what we mean when we say we have knowledge of something. It is concerned with what knowledge is, how knowledge is acquired and what the limitations in our ability to know anything are. As with almost all areas of philosophical inquiry it is subject to much debate.
Why I am bringing this up in a blog post is not to run through a history of epistemological thought. Others have already written about that far more cogently than I can in a blog post after doing far more research than I am willing to do to write a blog post. Instead, the purpose of this blog post is to better explain my views on the subject as it will underlie a great deal of any further philosophical discussions on this blog.
So let us start the discussion with the question "what is knowledge?". I posit that knowledge is a theory about a particular aspect of the universe in which we exist that is well supported by observations and logical review. So, what do I mean this? By this I mean that in our lives, we are constantly making observations about the world around us. These observations are then reviewed as to whether they stand up to intellectual scrutiny (whether they make any logical sense and fit in with our other theories without creating any obvious contradictions or paradoxes) and whether the observations that led to the theory are repeatable and reliable.
Once you have made this observation and it has passed scrutiny, it is filed away in your memory as knowledge. But is this knowledge about the universe as it exists independent of the observations and rationale that led to its formulation, or is this knowledge dependent on the perspective that created it? What I mean is, is this knowledge about the universe (realism, facts existing independent of their discoverer) or are the facts contingent on the observer (subjectivism, facts are not independent of the process that created them).
As the above discussion implies, I view knowledge as a product of the observations and rationality that led to its synthesis. More over, as humans, we know that our faculties are not flawless. Our senses can be fooled and are imperfect. There are limits to all our senses, and there are limits to our intellect. This is not to say that we as humans are incapable of coming to the same conclusions about the world (and this I feel is why realists believe facts exist a priori, or independent of the observer). Quite the opposite. We as humans share a common humanity, a common suite of senses and the ability to communicate with each other. These shared experiences lead to a nexus of thoughts and observations. Similar faculties and experiences lead to similar theories about the world. But I think it is important not to allow this to fool ourselves into thinking we thus have true independent knowledge. All our theories still suffer from the same flaw, namely ourselves. And, obviously, this is not a flaw we are capable of overcoming.
So, hopefully this discussion gives you some insight into what I have written so far, and what I plan to write in the future. Obviously, my view on this subject is not the only one and I encourage you to do some independent reading and thinking on the subject.
Why I am bringing this up in a blog post is not to run through a history of epistemological thought. Others have already written about that far more cogently than I can in a blog post after doing far more research than I am willing to do to write a blog post. Instead, the purpose of this blog post is to better explain my views on the subject as it will underlie a great deal of any further philosophical discussions on this blog.
So let us start the discussion with the question "what is knowledge?". I posit that knowledge is a theory about a particular aspect of the universe in which we exist that is well supported by observations and logical review. So, what do I mean this? By this I mean that in our lives, we are constantly making observations about the world around us. These observations are then reviewed as to whether they stand up to intellectual scrutiny (whether they make any logical sense and fit in with our other theories without creating any obvious contradictions or paradoxes) and whether the observations that led to the theory are repeatable and reliable.
Once you have made this observation and it has passed scrutiny, it is filed away in your memory as knowledge. But is this knowledge about the universe as it exists independent of the observations and rationale that led to its formulation, or is this knowledge dependent on the perspective that created it? What I mean is, is this knowledge about the universe (realism, facts existing independent of their discoverer) or are the facts contingent on the observer (subjectivism, facts are not independent of the process that created them).
As the above discussion implies, I view knowledge as a product of the observations and rationality that led to its synthesis. More over, as humans, we know that our faculties are not flawless. Our senses can be fooled and are imperfect. There are limits to all our senses, and there are limits to our intellect. This is not to say that we as humans are incapable of coming to the same conclusions about the world (and this I feel is why realists believe facts exist a priori, or independent of the observer). Quite the opposite. We as humans share a common humanity, a common suite of senses and the ability to communicate with each other. These shared experiences lead to a nexus of thoughts and observations. Similar faculties and experiences lead to similar theories about the world. But I think it is important not to allow this to fool ourselves into thinking we thus have true independent knowledge. All our theories still suffer from the same flaw, namely ourselves. And, obviously, this is not a flaw we are capable of overcoming.
So, hopefully this discussion gives you some insight into what I have written so far, and what I plan to write in the future. Obviously, my view on this subject is not the only one and I encourage you to do some independent reading and thinking on the subject.
Friday, November 16, 2012
Ideal World
Yesterday we dealt with areas I thought were ripe for easy to implement tax reform that could both increase revenues and improve our competitiveness for international businesses. One of the caveats I put on my advice was that this was aimed at something I thought could be accepted at a bipartisan level, not what I thought was the ideal outcome for America. So, the subject of today's post is what is an ideal system?
First off the term "ideal" is loaded. Like "fairness" and so many other terms thrown around in politics, its meaning greatly depends on the perspective of the person using it. However, since this is my blog, the perspective that I view as "ideal" is really my own, namely that of a limited federal government limited to its enumerated powers. So understand that my ideal may well greatly diverge from your own ideal.
Also, a word of caution. Many well intentioned thinkers over the years have set out to form more perfect political systems. Frequently this ends in abject failure (think Soviet Union), or in untenable positions never tested in real life (the Plato's Republic). One man's ideal can well become a society's totalitarian dictatorship or oligarchical nightmare. So some attention has to be paid to not only what I want, but what I think is actually in the best interests of everyone involved. This is especially true in the modern era where the ability to leave your country, find unclaimed land and start your own society is not an option (this may sound laughable, but a central theme in post Renaissance social contract theories was that anyone could choose not to participate in society, leave, and start their own).
First and foremost, since this is largely going to be a discussion focused on tax policy and not the form of government, I am going to posit the US model of government with three coequal branches of government kept in line with checks and balances on their powers. Why not a parliamentary democracy you ask? Because while they are more able to react to changes with coalition governments and are less affected by polarizing politics (since the nature of parliamentary democracy makes third parties more viable), they are also less held back by checks and balances. This level of power in a government gives it carte blanche to seize and hold political power, rig elections and marginalize groups that make up large portions of the population simply because they are not part of the coalition. So in short, I like a little partisan gridlock as a way to keep government from becoming too powerful.
So, onward to tax policy. While I personally favor a simple flat tax system as the easiest to implement and organize from a governmental administration perspective and easiest to understand from an individual perspective, it is not a popular form of taxation because it is viewed as overly burdensome on the poor. This is because they are seen as "less able to pay" the same percentage of their incomes as the rich (the poor tend to be forced to consume all of their income to meet daily life needs, unlike the rich and middle class who have enough discretionary income to save and economize). So some degree of progressivity is necessary to help alleviate the burdens to the under classes that are endemic in all modern societies.
I also like, from an administrative perspective, an income based tax system with a broad definition of income. This is because it's much easier for a government to take money from people before they have possession of it, than it is to ask them to give it to them after they have it (money tends to disappear in private hands). Instead, they get to file tax returns for the government to pay them back any over charges. Some of the biggest problems of any tax collection system are those of administration and fraud. So a system that automatically deducts the taxes from wages, lowers administrative costs and makes tax fraud more difficult, is a system to be preferred.
Also, I like, from an ease of administrative perspective, treating all money received by a person as income. This is the broad definition of income I mentioned earlier. Whether you get it from investing, cash payments, in kind service for service arrangements, or even inheritance, it should all be viewed as income and the government should be due its share. This makes it easy for people to figure out what is taxable income. All money, profits and things of monetary value that you receive qualifies.
Also, another principle I would like to put forward is that of personal benefit. We should all be in a position to receive the majority of the value of our labors after taxes. What this means is that I think total tax burdens that meet or exceed 50% are not justifiable. At the 50% threshold we reach a point where government is benefiting more from your labors than you are. This makes the tax payer more of a serf plowing the governments' fields than an independent entity working for his or her own good. This is an important point, because in modern America, between federal, state and local taxes, it is entirely possible for a person's tax burden to exceed this amount. This creates a disincentive to further work for the nations most productive tax payers (assuming a progressive tax rate where by earning more you can move into a bracket whose total burden meets or exceeds 50%). In our history, such high rates have been associated with poor economic outcomes and bad recessions. Most recently during the 70's when stagflation was rampant and the nation was in the grip of persistent recession and economic stagnation. A country that exceeds 50% total tax burden does so at its own peril.
So what do we have now? A tricameral government kept in check by democratic voting and checks and balances between its three branches as well as a progressive tax system that taxes only income. But what about luxury or wealth taxes you ask? Well, I am not a big fan of these additional taxes because they create additional disincentives to saving and wealth accumulation. The reason this is bad is that it is in saving and wealth accumulation that a populace is able to look after itself in bad times without government help. Also that the wealth people accumulate is usually then reinvested in the economy to pay great dividends in added economic growth and job creation. So creating such disincentives is counterproductive to long term growth rates and is why they are not included in my ideal tax system.
The one form of non-income based taxes that I do approve of are the so called "sin" taxes. What this usually refers to are additional taxes on alcohol, tobacco and recreational drugs. These are the sort of things that create additional societal burdens whose costs are usually born by government. The reason I do favor them is two fold: one, it creates an economic disincentive to partaking in these activities; and two, it makes government invested in not simply outright banning these vices. If we look at such bans historically, prohibition and the US war on drugs, what we see are increased violence, increased criminality and huge, largely wasted, government outlays on policing the bans and their negative externalities. Governments would be wise to tolerate such vices, tax them, and use the proceeds to negate some of these negative externalities. The alternative approach has been a failure at enormous societal cost.
So, in conclusion, I am most in favor of a simple progressive income tax system that treats all money and services received by a tax payer as income, with additional taxes on the sale of certain goods and services that are viewed by society as vices. In a later post I will explain why it is I prefer a smaller limited government instead of a larger centralized power that influences all aspects of the life of its citizens.
First off the term "ideal" is loaded. Like "fairness" and so many other terms thrown around in politics, its meaning greatly depends on the perspective of the person using it. However, since this is my blog, the perspective that I view as "ideal" is really my own, namely that of a limited federal government limited to its enumerated powers. So understand that my ideal may well greatly diverge from your own ideal.
Also, a word of caution. Many well intentioned thinkers over the years have set out to form more perfect political systems. Frequently this ends in abject failure (think Soviet Union), or in untenable positions never tested in real life (the Plato's Republic). One man's ideal can well become a society's totalitarian dictatorship or oligarchical nightmare. So some attention has to be paid to not only what I want, but what I think is actually in the best interests of everyone involved. This is especially true in the modern era where the ability to leave your country, find unclaimed land and start your own society is not an option (this may sound laughable, but a central theme in post Renaissance social contract theories was that anyone could choose not to participate in society, leave, and start their own).
First and foremost, since this is largely going to be a discussion focused on tax policy and not the form of government, I am going to posit the US model of government with three coequal branches of government kept in line with checks and balances on their powers. Why not a parliamentary democracy you ask? Because while they are more able to react to changes with coalition governments and are less affected by polarizing politics (since the nature of parliamentary democracy makes third parties more viable), they are also less held back by checks and balances. This level of power in a government gives it carte blanche to seize and hold political power, rig elections and marginalize groups that make up large portions of the population simply because they are not part of the coalition. So in short, I like a little partisan gridlock as a way to keep government from becoming too powerful.
So, onward to tax policy. While I personally favor a simple flat tax system as the easiest to implement and organize from a governmental administration perspective and easiest to understand from an individual perspective, it is not a popular form of taxation because it is viewed as overly burdensome on the poor. This is because they are seen as "less able to pay" the same percentage of their incomes as the rich (the poor tend to be forced to consume all of their income to meet daily life needs, unlike the rich and middle class who have enough discretionary income to save and economize). So some degree of progressivity is necessary to help alleviate the burdens to the under classes that are endemic in all modern societies.
I also like, from an administrative perspective, an income based tax system with a broad definition of income. This is because it's much easier for a government to take money from people before they have possession of it, than it is to ask them to give it to them after they have it (money tends to disappear in private hands). Instead, they get to file tax returns for the government to pay them back any over charges. Some of the biggest problems of any tax collection system are those of administration and fraud. So a system that automatically deducts the taxes from wages, lowers administrative costs and makes tax fraud more difficult, is a system to be preferred.
Also, I like, from an ease of administrative perspective, treating all money received by a person as income. This is the broad definition of income I mentioned earlier. Whether you get it from investing, cash payments, in kind service for service arrangements, or even inheritance, it should all be viewed as income and the government should be due its share. This makes it easy for people to figure out what is taxable income. All money, profits and things of monetary value that you receive qualifies.
Also, another principle I would like to put forward is that of personal benefit. We should all be in a position to receive the majority of the value of our labors after taxes. What this means is that I think total tax burdens that meet or exceed 50% are not justifiable. At the 50% threshold we reach a point where government is benefiting more from your labors than you are. This makes the tax payer more of a serf plowing the governments' fields than an independent entity working for his or her own good. This is an important point, because in modern America, between federal, state and local taxes, it is entirely possible for a person's tax burden to exceed this amount. This creates a disincentive to further work for the nations most productive tax payers (assuming a progressive tax rate where by earning more you can move into a bracket whose total burden meets or exceeds 50%). In our history, such high rates have been associated with poor economic outcomes and bad recessions. Most recently during the 70's when stagflation was rampant and the nation was in the grip of persistent recession and economic stagnation. A country that exceeds 50% total tax burden does so at its own peril.
So what do we have now? A tricameral government kept in check by democratic voting and checks and balances between its three branches as well as a progressive tax system that taxes only income. But what about luxury or wealth taxes you ask? Well, I am not a big fan of these additional taxes because they create additional disincentives to saving and wealth accumulation. The reason this is bad is that it is in saving and wealth accumulation that a populace is able to look after itself in bad times without government help. Also that the wealth people accumulate is usually then reinvested in the economy to pay great dividends in added economic growth and job creation. So creating such disincentives is counterproductive to long term growth rates and is why they are not included in my ideal tax system.
The one form of non-income based taxes that I do approve of are the so called "sin" taxes. What this usually refers to are additional taxes on alcohol, tobacco and recreational drugs. These are the sort of things that create additional societal burdens whose costs are usually born by government. The reason I do favor them is two fold: one, it creates an economic disincentive to partaking in these activities; and two, it makes government invested in not simply outright banning these vices. If we look at such bans historically, prohibition and the US war on drugs, what we see are increased violence, increased criminality and huge, largely wasted, government outlays on policing the bans and their negative externalities. Governments would be wise to tolerate such vices, tax them, and use the proceeds to negate some of these negative externalities. The alternative approach has been a failure at enormous societal cost.
So, in conclusion, I am most in favor of a simple progressive income tax system that treats all money and services received by a tax payer as income, with additional taxes on the sale of certain goods and services that are viewed by society as vices. In a later post I will explain why it is I prefer a smaller limited government instead of a larger centralized power that influences all aspects of the life of its citizens.
Thursday, November 15, 2012
Tax Reform
Currently, in the media, one of the hottest topics for political debate is the subject of tax reform. Currently in the United States, we are facing an enormous and growing budget deficit. The past 4 years have seen trillion dollar deficit growth every year. On top of that we face the problem of fiscal non-competitiveness in international markets. What I mean by that is our cost of living, cost of labor and cost of taxes makes the USA one of the most expensive places to do business on the planet. The obvious solutions to each of these problems are mutually exclusive. One implies budget cuts and/or tax revenue increases, the other greater government outlays to defray business costs and lower taxes to decrease the cost of doing business here.
The political results of both having a large deficit and having an extremely high cost of doing business have been partisan finger pointing and legislative deadlock. The reasons for this are that cutting budgets and raising taxes are politically untenable positions. Look at European austerity for an example as to why this is. For every government spending program there is an entrenched special interest fighting to keep it, and nobody likes higher taxes. A politician running on a platform of decreased government outlays AND higher taxes is looking at losing their election. The result in the USA in the past few decades has been ever increasing budgets with ever decreasing tax burdens. The fault is bipartisan, with George Bush raising spending to battle terrorists around the globe while cutting taxes, and Obama increasing federal outlays for welfare and healthcare programs while pushing through "temporary" tax relief measures. Even in the 2012 election, neither candidate embraced both higher taxes AND lower federal outlays.
As much fun as it would be to completely reform government and the tax code such that we returned to a limited federal government, increased states' rights with a political class truly answerable to the populace, this is not likely to happen. This is not the article where I espouse my pseudo libertarian ideals. Instead the focus here is working inside our current architecture to make intelligent budget decisions that can solve our problems with as limited a negative economic impact as possible.
So, what happens if we do nothing? The answer to this is, again, Europe. For the past 20 years, with a few notable exceptions, European countries have been increasing spending, increasing taxation and increasing social welfare programs. This won the existing governments many elections. Unfortunately, Europe is now paying for its profligacy. Portugal, Italy, Greece and Spain have all seen their cost of borrowing money on international markets explode while their economies have succumbed to the pressures of the great global recession and their own lack of productivity. The result has been the highly unpopular (to the point of social unrest) austerity measures with crippling new taxes and devastating budget cuts at the same time. These efforts have predictably resulted in worsening the European recession. For now the USA cost of borrowing is low, but there is no guaranty that this will remain so, especially as the rest of the world gets its fiscal house in order and there are alternatives internationally to investing in US debt. When our cost of borrowing does go up, we are going to go from a mere budgetary crisis, to a full on catastrophe.
The solution to this problem is, predictably, to raise revenue while decreasing outlays and decreasing the cost of doing business in the USA. Right now you may be thinking, didn't he say above that this was mutually exclusive? The answer is yes, at least if you accomplish these tasks in the obvious manner, by increasing tax rates and decreasing total government spending. Instead, government has to intelligently cut outlays and increase revenues.
The first way to accomplish this is to cap all deductions at a preset amount. According to the Tax Policy Center capping deductions at $25,000 per filer would raise an additional $1.3 trillion over 10 years, or about $130 billion a year. That is 13% of the current accounts deficit by itself. More over, by allowing up to $25,000 in deductions, most wage earners tax burdens wont be affected. Only the highest earners with the largest deductions will be affected.
The second way to cut the budget deficit is to cut foreign aid completely. In 2010, according to the Organisation for Economic Co-operation and Development, the U.S. gave about $30 billion in aid. By cutting this money and applying it to paying down the deficit we can lower account deficits by 3% a year. The benefit here is that there is very little domestic impact to the spending cuts. While this will not endear ourselves to the rest of the world, the rest of the world doesn't pay our taxes and isn't responsible for our deficits. It's one thing to be charitable when you are flush with cash, it is another thing entirely to be borrowing money from a loan shark to give money to ungrateful beggars.
The third way I propose to cut the deficit is to means test social security payments. 20% of our annual federal budget goes to paying social security benefits. If we means test the program and make payments only to seniors who are close to the federal poverty level we can likely clip half of this cost, or about $350-400 billion a year. This is fully 35% to 40% of the federal accounts deficit by itself. This is a huge amount of money, and it is currently being spent to subsidize the lifestyles of seniors who do not need the money (because I am proposing cutting only those outlays to seniors with incomes well above the federal poverty line). Social Security was designed as a recession era welfare program to keep the elderly from falling into abject poverty. By means testing this, we ensure that aide only goes to those seniors who are at risk for falling into poverty. The last thing we need is for government money going to pay a rich retiree's greens fees at the local country club.
The fourth way to raise revenues is to stop capping the income that is subject to the social security tax. In 2012 the income taxable for social security is capped at $110,100 according to the Social Security Administration's own web site. By uncapping this we can increase income by hundreds of billions of dollars a year without changing any tax brackets. It simply imposes the same tax at all income levels instead of only the first $110,100. This is tax parity at it's finest, everyone in America spending the same percentage of their income to support at risk seniors. More over it would ensure the long term viability of the system.
The fifth way to increase revenues is to increase capital gains taxes from their current rate of 15% to a progressive capital gains tax referenced to income. By matching federal income tax rates and treating capital gains as income, the federal government will raise hundreds of billions of dollars in revenues. If there is concern about decreasing the incentive to invest, then the government can simply adjust capital gains rates to slightly below those of regular income to maintain an investment incentive. This also increases tax parity by making people who make a living from investments pay close to the same amount of taxes as those who earn their money in cash salaries.
OK, if you made it through all that tax information, you may be asking yourself, how does he intend to increase competitiveness? Because as he has it right now, this is just raising tax costs. The answer to this is to lower our least competitive and most destructive tax rate, our business tax rate. Currently the USA has a corporate income tax rate of 35% with each of the 50 states imposing additional state taxes on top of this. China has a 25% rate, Canada 31% total of federal and provincial, France 33%, United Kingdom 20-23%, you get the picture. Only Japan and Germany have comparable tax burdens on business, and Japan is in the midst of a decade without significant economic growth. The fact is that among most first world nations our corporate rate is outsized. By lowering this to 25% we will instantly become a much more competitive country to do business in. If we couple this by eliminating the US's tax on foreign earnings, a tax almost no other first world nation imposes, we create a large incentive for foreign companies to invest in the US, bring jobs to the US and give US companies a greater incentive to keep jobs and revenue on shore. While this provision will cost hundreds of billions a year, the first few years annyway, the hope is that the increased competitiveness will fuel job and income growth. This growth should negate some, if not all, of the negative federal income impact that this reform would create.
Lastly, we need to make cuts in our military spending. This year our government will spend around $1 trillion on defense spending (this number is subject to how you allocate government spending to defense and military). As we wind down the wars in Afghanistan, Iraq, and Libya (through NATO), some of this spending will decrease naturally. However, we can do more. Even a 10% cut in this budget will free up around $100 billion a year. Currently we spend between 5-10% of GDP on our military (again, depending on how you allocate spending numbers). In an era when even China is only spending about 2% of its GDP on its military, and they have the largest army on the planet, this seems excessive. Too much money is being spent too inefficiently with too little to show for it for this to be fully justified. We need to further right size our military and military programs and focus more on homeland defense instead of foreign occupations. It should not be the role of the United States to police the world, we can't afford it.
This is my general solution to the current problem facing America from a federal budget perspective. It includes revenue increases with welfare program reform and military budget cuts. This list is not exhaustive. There are many other areas of government that can and should be cut. Redundancies that can be smoothed out at net benefit to all. More over, this is a plan that I think could receive some bipartisan support (including both cuts and revenue increases). It is not necessarily ideal, as I pointed out earlier, but the ideal role of government will be the subject for another post. This is focused mostly on making adjustments to the current architecture of the federal government. In other words, this plan deals with the reality we face, not how I would make our government from scratch.
The political results of both having a large deficit and having an extremely high cost of doing business have been partisan finger pointing and legislative deadlock. The reasons for this are that cutting budgets and raising taxes are politically untenable positions. Look at European austerity for an example as to why this is. For every government spending program there is an entrenched special interest fighting to keep it, and nobody likes higher taxes. A politician running on a platform of decreased government outlays AND higher taxes is looking at losing their election. The result in the USA in the past few decades has been ever increasing budgets with ever decreasing tax burdens. The fault is bipartisan, with George Bush raising spending to battle terrorists around the globe while cutting taxes, and Obama increasing federal outlays for welfare and healthcare programs while pushing through "temporary" tax relief measures. Even in the 2012 election, neither candidate embraced both higher taxes AND lower federal outlays.
As much fun as it would be to completely reform government and the tax code such that we returned to a limited federal government, increased states' rights with a political class truly answerable to the populace, this is not likely to happen. This is not the article where I espouse my pseudo libertarian ideals. Instead the focus here is working inside our current architecture to make intelligent budget decisions that can solve our problems with as limited a negative economic impact as possible.
So, what happens if we do nothing? The answer to this is, again, Europe. For the past 20 years, with a few notable exceptions, European countries have been increasing spending, increasing taxation and increasing social welfare programs. This won the existing governments many elections. Unfortunately, Europe is now paying for its profligacy. Portugal, Italy, Greece and Spain have all seen their cost of borrowing money on international markets explode while their economies have succumbed to the pressures of the great global recession and their own lack of productivity. The result has been the highly unpopular (to the point of social unrest) austerity measures with crippling new taxes and devastating budget cuts at the same time. These efforts have predictably resulted in worsening the European recession. For now the USA cost of borrowing is low, but there is no guaranty that this will remain so, especially as the rest of the world gets its fiscal house in order and there are alternatives internationally to investing in US debt. When our cost of borrowing does go up, we are going to go from a mere budgetary crisis, to a full on catastrophe.
The solution to this problem is, predictably, to raise revenue while decreasing outlays and decreasing the cost of doing business in the USA. Right now you may be thinking, didn't he say above that this was mutually exclusive? The answer is yes, at least if you accomplish these tasks in the obvious manner, by increasing tax rates and decreasing total government spending. Instead, government has to intelligently cut outlays and increase revenues.
The first way to accomplish this is to cap all deductions at a preset amount. According to the Tax Policy Center capping deductions at $25,000 per filer would raise an additional $1.3 trillion over 10 years, or about $130 billion a year. That is 13% of the current accounts deficit by itself. More over, by allowing up to $25,000 in deductions, most wage earners tax burdens wont be affected. Only the highest earners with the largest deductions will be affected.
The second way to cut the budget deficit is to cut foreign aid completely. In 2010, according to the Organisation for Economic Co-operation and Development, the U.S. gave about $30 billion in aid. By cutting this money and applying it to paying down the deficit we can lower account deficits by 3% a year. The benefit here is that there is very little domestic impact to the spending cuts. While this will not endear ourselves to the rest of the world, the rest of the world doesn't pay our taxes and isn't responsible for our deficits. It's one thing to be charitable when you are flush with cash, it is another thing entirely to be borrowing money from a loan shark to give money to ungrateful beggars.
The third way I propose to cut the deficit is to means test social security payments. 20% of our annual federal budget goes to paying social security benefits. If we means test the program and make payments only to seniors who are close to the federal poverty level we can likely clip half of this cost, or about $350-400 billion a year. This is fully 35% to 40% of the federal accounts deficit by itself. This is a huge amount of money, and it is currently being spent to subsidize the lifestyles of seniors who do not need the money (because I am proposing cutting only those outlays to seniors with incomes well above the federal poverty line). Social Security was designed as a recession era welfare program to keep the elderly from falling into abject poverty. By means testing this, we ensure that aide only goes to those seniors who are at risk for falling into poverty. The last thing we need is for government money going to pay a rich retiree's greens fees at the local country club.
The fourth way to raise revenues is to stop capping the income that is subject to the social security tax. In 2012 the income taxable for social security is capped at $110,100 according to the Social Security Administration's own web site. By uncapping this we can increase income by hundreds of billions of dollars a year without changing any tax brackets. It simply imposes the same tax at all income levels instead of only the first $110,100. This is tax parity at it's finest, everyone in America spending the same percentage of their income to support at risk seniors. More over it would ensure the long term viability of the system.
The fifth way to increase revenues is to increase capital gains taxes from their current rate of 15% to a progressive capital gains tax referenced to income. By matching federal income tax rates and treating capital gains as income, the federal government will raise hundreds of billions of dollars in revenues. If there is concern about decreasing the incentive to invest, then the government can simply adjust capital gains rates to slightly below those of regular income to maintain an investment incentive. This also increases tax parity by making people who make a living from investments pay close to the same amount of taxes as those who earn their money in cash salaries.
OK, if you made it through all that tax information, you may be asking yourself, how does he intend to increase competitiveness? Because as he has it right now, this is just raising tax costs. The answer to this is to lower our least competitive and most destructive tax rate, our business tax rate. Currently the USA has a corporate income tax rate of 35% with each of the 50 states imposing additional state taxes on top of this. China has a 25% rate, Canada 31% total of federal and provincial, France 33%, United Kingdom 20-23%, you get the picture. Only Japan and Germany have comparable tax burdens on business, and Japan is in the midst of a decade without significant economic growth. The fact is that among most first world nations our corporate rate is outsized. By lowering this to 25% we will instantly become a much more competitive country to do business in. If we couple this by eliminating the US's tax on foreign earnings, a tax almost no other first world nation imposes, we create a large incentive for foreign companies to invest in the US, bring jobs to the US and give US companies a greater incentive to keep jobs and revenue on shore. While this provision will cost hundreds of billions a year, the first few years annyway, the hope is that the increased competitiveness will fuel job and income growth. This growth should negate some, if not all, of the negative federal income impact that this reform would create.
Lastly, we need to make cuts in our military spending. This year our government will spend around $1 trillion on defense spending (this number is subject to how you allocate government spending to defense and military). As we wind down the wars in Afghanistan, Iraq, and Libya (through NATO), some of this spending will decrease naturally. However, we can do more. Even a 10% cut in this budget will free up around $100 billion a year. Currently we spend between 5-10% of GDP on our military (again, depending on how you allocate spending numbers). In an era when even China is only spending about 2% of its GDP on its military, and they have the largest army on the planet, this seems excessive. Too much money is being spent too inefficiently with too little to show for it for this to be fully justified. We need to further right size our military and military programs and focus more on homeland defense instead of foreign occupations. It should not be the role of the United States to police the world, we can't afford it.
This is my general solution to the current problem facing America from a federal budget perspective. It includes revenue increases with welfare program reform and military budget cuts. This list is not exhaustive. There are many other areas of government that can and should be cut. Redundancies that can be smoothed out at net benefit to all. More over, this is a plan that I think could receive some bipartisan support (including both cuts and revenue increases). It is not necessarily ideal, as I pointed out earlier, but the ideal role of government will be the subject for another post. This is focused mostly on making adjustments to the current architecture of the federal government. In other words, this plan deals with the reality we face, not how I would make our government from scratch.
Wednesday, November 14, 2012
Classes to take in College
One of the first things I want to discuss with whoever might be reading this blog are what classes I think people should take in college. I say college because these classes tend not to be offered until you are in college. This is not to say that if you are not in college you should not try to educate yourself in these subjects. The internet is vast and can offer you more than a rudimentary understanding of any of these subjects. In the end it is up to you to educate yourself, regardless of whether you are currently attending an institution of higher learning. So I encourage everyone to learn about the following:
1. Logic.
I am constantly appalled by the quantity of faulty reasoning and outright logical fallacies I see in the modern media. In order to make an effective argument you have to convince someone to accept your point of view on the subject. To do this you need to craft an argument that is effective in getting your point across, that demonstrates a clear understanding of the subject and that is convincing. Logic is the main tool in rhetoric and communication for doing this.
Logic in its most basic sense is a way to organize your thoughts, assumptions, propositions and conclusions so that it is easy for a reader to follow how you reached a certain conclusion and evaluate whether your reasoning has validity and that the conclusion follows with a certain degree of necessity from the assumptions and propositions. Without this frame work it is quite difficult to evaluate whether a person has adequate support for their opinions on a subject. If a person can not evaluate your reasoning, they will see no reason to believe your conclusions are correct.
So, when in college or otherwise, please do everyone a favor and take a course or two on logic and logical argument. It will make you a much more effective communicator.
2. Math and Statistics.
In my college career, the only math instruction I got was in connection with my study of economics. In hindsight this was a mistake. While my high school mathematics education was quite thorough, it did not include calculus. This came back to bite me in the ass when I had to take a class on economic statistics. It took a great amount of effort on my part to overcome my lack of knowledge and get a good grade in this class. It would have been much better had I buckled down and taken a calculus course beforehand.
But more than just my personal trials and travails, a basic understanding of mathematics is important in everyday life. This is especially true when it comes to evaluating statistics. Everyday in the media we are bombarded with studies that promote all sorts of propositions that are not necessarily supported by the raw data produced by the study. In order to evaluate the quality of the conclusions of the study, you will have to be able to evaluate the raw data and the statistical manipulation that was used on that data to reach the conclusion. If you do not have a basic understanding of math and statistics, you will be unable to do this.
This is where the expressions "there are lies, damn lies and statistics" come from.
Questionable use of data and statistical analysis can be used to support all sorts of hair brained ideas. Without being able to understand what was done, you will be more likely to believe the faulty study's conclusions.
4. Economics.
So much of modern politics and our economy are described in terms of economics and economic reasoning that it is imperative for everyone of voting age to have a basic understanding of economics. By this I mean not only the basic principles of this school of thought, but also its short comings and underlying assumptions. All too often I hear news reporters in particular trotting out economic reasoning that belies their conclusion. Because they do not fully (or at all) understand economics, their reasoning and predictions of the economic impacts of political policy are often demonstrably false, or at least highly suspect. It makes their entire analysis laughable instead of insightful.
In order for any person to be a responsible voting adult, I believe they should at least be conversant in basic market interactions so that they have some idea what the economic impact of their decisions will (possibly) be. Also, so that when someone is making an argument based on economic reasoning, that they are able to spot the holes in the person's arguments and form their own opinions on the subject. No one should be accepting on blind faith that the person describing certain economic interactions has any idea what they are talking about.
5. Science.
I don't care whether it is chemistry, biology, geology, physics or what have you, you should take a few courses in basic science so that you are familiar with the scientific method and the general terminology used in scientific endeavors. This will allow you to read scientific studies and evaluate the data and theories presented in an intelligent fashion and form your own ideas about how reliable the information is.
Far too frequently I observe people taking as truth the theory of some crack pot scientist with an ax to grind without evaluating the data or having any knowledge about competing schools of thought. Learning about science and the scientific method will give you the ability to evaluate these studies and form your own educated opinions about them.
More over, science has become rife with entrenched viewpoints. Scientists have serious economic incentives to prove that their theories are correct and their opponents are wrong in the modern world. Patents, teaching positions and other lucrative endeavors depend on it. This creates incentives for scientists to make the data fit the theory instead of making the theory fit the data. Fortunately we still exist in a world where peer review is alive and well so that we can refute crack pot theories. But without a basic understanding of science, you might not understand why peer review is important let alone whether you should be accepting the conclusion of some new study.
Conclusion.
If you have read all of the above, congratulations, it was not necessarily the most fascinating discussion. The common theme that all of these subjects share is that having knowledge of them better lets you evaluate other people's assertions and arguments such that you can form your own opinions about the world.
1. Logic.
I am constantly appalled by the quantity of faulty reasoning and outright logical fallacies I see in the modern media. In order to make an effective argument you have to convince someone to accept your point of view on the subject. To do this you need to craft an argument that is effective in getting your point across, that demonstrates a clear understanding of the subject and that is convincing. Logic is the main tool in rhetoric and communication for doing this.
Logic in its most basic sense is a way to organize your thoughts, assumptions, propositions and conclusions so that it is easy for a reader to follow how you reached a certain conclusion and evaluate whether your reasoning has validity and that the conclusion follows with a certain degree of necessity from the assumptions and propositions. Without this frame work it is quite difficult to evaluate whether a person has adequate support for their opinions on a subject. If a person can not evaluate your reasoning, they will see no reason to believe your conclusions are correct.
So, when in college or otherwise, please do everyone a favor and take a course or two on logic and logical argument. It will make you a much more effective communicator.
2. Math and Statistics.
In my college career, the only math instruction I got was in connection with my study of economics. In hindsight this was a mistake. While my high school mathematics education was quite thorough, it did not include calculus. This came back to bite me in the ass when I had to take a class on economic statistics. It took a great amount of effort on my part to overcome my lack of knowledge and get a good grade in this class. It would have been much better had I buckled down and taken a calculus course beforehand.
But more than just my personal trials and travails, a basic understanding of mathematics is important in everyday life. This is especially true when it comes to evaluating statistics. Everyday in the media we are bombarded with studies that promote all sorts of propositions that are not necessarily supported by the raw data produced by the study. In order to evaluate the quality of the conclusions of the study, you will have to be able to evaluate the raw data and the statistical manipulation that was used on that data to reach the conclusion. If you do not have a basic understanding of math and statistics, you will be unable to do this.
This is where the expressions "there are lies, damn lies and statistics" come from.
Questionable use of data and statistical analysis can be used to support all sorts of hair brained ideas. Without being able to understand what was done, you will be more likely to believe the faulty study's conclusions.
4. Economics.
So much of modern politics and our economy are described in terms of economics and economic reasoning that it is imperative for everyone of voting age to have a basic understanding of economics. By this I mean not only the basic principles of this school of thought, but also its short comings and underlying assumptions. All too often I hear news reporters in particular trotting out economic reasoning that belies their conclusion. Because they do not fully (or at all) understand economics, their reasoning and predictions of the economic impacts of political policy are often demonstrably false, or at least highly suspect. It makes their entire analysis laughable instead of insightful.
In order for any person to be a responsible voting adult, I believe they should at least be conversant in basic market interactions so that they have some idea what the economic impact of their decisions will (possibly) be. Also, so that when someone is making an argument based on economic reasoning, that they are able to spot the holes in the person's arguments and form their own opinions on the subject. No one should be accepting on blind faith that the person describing certain economic interactions has any idea what they are talking about.
5. Science.
I don't care whether it is chemistry, biology, geology, physics or what have you, you should take a few courses in basic science so that you are familiar with the scientific method and the general terminology used in scientific endeavors. This will allow you to read scientific studies and evaluate the data and theories presented in an intelligent fashion and form your own ideas about how reliable the information is.
Far too frequently I observe people taking as truth the theory of some crack pot scientist with an ax to grind without evaluating the data or having any knowledge about competing schools of thought. Learning about science and the scientific method will give you the ability to evaluate these studies and form your own educated opinions about them.
More over, science has become rife with entrenched viewpoints. Scientists have serious economic incentives to prove that their theories are correct and their opponents are wrong in the modern world. Patents, teaching positions and other lucrative endeavors depend on it. This creates incentives for scientists to make the data fit the theory instead of making the theory fit the data. Fortunately we still exist in a world where peer review is alive and well so that we can refute crack pot theories. But without a basic understanding of science, you might not understand why peer review is important let alone whether you should be accepting the conclusion of some new study.
Conclusion.
If you have read all of the above, congratulations, it was not necessarily the most fascinating discussion. The common theme that all of these subjects share is that having knowledge of them better lets you evaluate other people's assertions and arguments such that you can form your own opinions about the world.
Introduction
I guess the first thing you may well be asking yourself is who is Ogre Sophist and why should I care that he has started writing a blog.
As for who I am, my real identity is not important. What is important is the theoretical and philosophical underpinnings that I bring to this blog. Why this is important is that it gives you insight into where my posts are coming from, what preconceived notions I have, and the underlying assumptions upon which many of my future posts will be based. All too often such considerations are left out of discussions of important topics and can lead to impasses and needless arguments. So, essentially, in letting you know certain things ahead of time, I hope to forestall needless questions.
My background is generally in philosophy, economics and law. Philosophically, I tend towards relativism, at least in my metaphysics. What I mean by that is that I believe that there are no a priori facts, just observations and categorizations that we have adopted as being more reliable than alternate definitions. Similarly, I believe that a great deal of our metaphysics is dictated by language, as it is a convenient prepackaged tool for organizing thoughts and the world around us. But as these are products of fallible human intellect, they are not beyond reproach. The result is countless philosophy 101 thought problems that focus on the shortcomings of our language, metaphysics and metaethics.
Economically, I am a free market supporter. I think that, while the free market has many problems, it still allocates resources more efficiently than a statist, socialist or communist ideology. This is not to say the efficiency is fairness, a common misconception. By efficient I mean the most likely allocation of resources to yield the greatest growth in resources in the future. Also, I do not operate under the assumption of perfect information that underlies so much of basic economic analysis. This is part of the reason why real markets do not always resemble model economic markets. So I am a free marketer, but not a blind one.
Politically I lean libertarian. By lean I mean I do not support the idea that there is no role for a centralized government, more that I think that this role should be limited in scope and power with as little intrusion into people's lives and economic activity as necessary to meet its basic political goals. How is this different from Republican? Because I don't care about social engineering. I don't think government should be interfering in human choices about how to live their lives. The debate over marriage, abortion and consensual sexual interactions should be beyond the scope of government power. These will likely be the focus of future posts, so I will stop this discussion here.
Lastly, why you should care I have a Blog. First off, you probably shouldn't. The point of the blog is to allow me to vent to the aether my thoughts and feelings about certain subjects. My hope is that you will find my discussion enlightening and that it helps you organize your own thoughts on the subjects I hope to be discussing in the future. These subjects will range from the philosophic, the economic, the legal and the political.
Enjoy, or not. And if you have made it this far through my introductory post, thanks for reading.
As for who I am, my real identity is not important. What is important is the theoretical and philosophical underpinnings that I bring to this blog. Why this is important is that it gives you insight into where my posts are coming from, what preconceived notions I have, and the underlying assumptions upon which many of my future posts will be based. All too often such considerations are left out of discussions of important topics and can lead to impasses and needless arguments. So, essentially, in letting you know certain things ahead of time, I hope to forestall needless questions.
My background is generally in philosophy, economics and law. Philosophically, I tend towards relativism, at least in my metaphysics. What I mean by that is that I believe that there are no a priori facts, just observations and categorizations that we have adopted as being more reliable than alternate definitions. Similarly, I believe that a great deal of our metaphysics is dictated by language, as it is a convenient prepackaged tool for organizing thoughts and the world around us. But as these are products of fallible human intellect, they are not beyond reproach. The result is countless philosophy 101 thought problems that focus on the shortcomings of our language, metaphysics and metaethics.
Economically, I am a free market supporter. I think that, while the free market has many problems, it still allocates resources more efficiently than a statist, socialist or communist ideology. This is not to say the efficiency is fairness, a common misconception. By efficient I mean the most likely allocation of resources to yield the greatest growth in resources in the future. Also, I do not operate under the assumption of perfect information that underlies so much of basic economic analysis. This is part of the reason why real markets do not always resemble model economic markets. So I am a free marketer, but not a blind one.
Politically I lean libertarian. By lean I mean I do not support the idea that there is no role for a centralized government, more that I think that this role should be limited in scope and power with as little intrusion into people's lives and economic activity as necessary to meet its basic political goals. How is this different from Republican? Because I don't care about social engineering. I don't think government should be interfering in human choices about how to live their lives. The debate over marriage, abortion and consensual sexual interactions should be beyond the scope of government power. These will likely be the focus of future posts, so I will stop this discussion here.
Lastly, why you should care I have a Blog. First off, you probably shouldn't. The point of the blog is to allow me to vent to the aether my thoughts and feelings about certain subjects. My hope is that you will find my discussion enlightening and that it helps you organize your own thoughts on the subjects I hope to be discussing in the future. These subjects will range from the philosophic, the economic, the legal and the political.
Enjoy, or not. And if you have made it this far through my introductory post, thanks for reading.
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