QOTD: Andrew Dickson and Bill Kaye-Blake

While the blog was out of action I noticed a lot of people linking the following article by Andrew Dickson and Bill Kaye-Blake (from Groping to Bethlehem).

All the links focused on how the article made the case for a tax on sugar.  That is fine and all, it was an externality case that we can discuss, appeal to evidence and value judgments on, and then decide whether we agree or not.  In fact, I get the impression that is the exact point that the authors are raising after setting up the pro-argument.

However, I didn’t get the impression that many people made it to the second half of the article (given the way it was used) – and the second half was absolutely glorious.

The second half starts with this: Read more

Hiding value judgments behind economic rhetoric: The case of obesity

Note:  Renamed this from “Discussion Thursday” as I ended up inadvertently writing a post rather than a comment …

Sorry, a bit busy to do real posts.  Also wanted to get a discussion going on this excellent quote from Eric Crampton about using sugar taxes to pay for the “health care externality” from obesity/sugar consumption:

What happens then if we find that it’s those healthy exercise people who cost the system more, on the whole, because they live longer (costing the superfund) and consume health services over a longer period?

Be careful wanting to tax all the fiscal externalities. You might not like where it leads.

Let me throw up a quick first comment here ;)

Read more

QOTD: John Roemer on Equality of Opportunity

Unrelated note:  I am not around too much atm, so as you may have noticed I am not replying to comments at the moment.  I intend to catch up on the comments I missed later in the week, so please still comment.  Things are a tad busy is all ;)

From the start of his book “Equality of Opportunity” comes the following quote from John Roemer.  Note that the two poles, non-discrimination and leveling the playing field, are described earlier in the book.  Also, equality of opportunity isn’t necessarily the only principle of distributive justice.  However, taking these as given we have:

Among citizens of any advanced democracy, we find individuals who hold a spectrum of views with respect to what is required for equal opportunity, from the nondiscrimination view at one pole to pervasive social provision to correct for all manner of disadvantage at the other.

Common to all these views, however, is the precept that the equal-opportunity principle, at some point, holds the individual accountable for the achievement of the advantage in question, whether that advantage be a level of educational achievement, health, employment status, income, or the economist’s utility or welfare.

Thus there is, in the notion of equality of opportunity, a “before” and an “after”: before the competition starts opportunities must be equalized, by social intervention if need be, but after it begins, individuals are on their own.  The different views of equality of opportunity can be categorized according to where they place the starting gate which separates “before” from “after”.

Read more

More rhetoric on restricting the choice of the poor

I see that leading Stuff today is an article on New Zealand’s “obesity epidemic”, and how we must changes some things because we are “killing ourselves”.  The policy suggestions are:

In a report published today, the association calls for drastic cures for the bulge, including taxing or minimum prices for sugary drinks, restricting food advertising aimed at children, and taking fast food out of schools.

I’ll be honest, I can see a reasonable justification for everything except the minimum price.  I can see a good justification for changing policies around children, based on habit formation.  This isn’t the point.  The point I’m touching on involves the inappropriateness of quotes like this:

Otago University health researcher Professor Jim Mann said he supported the report’s recommendations, particularly a fizzy drink tax. Kiwis were becoming so big that they were almost blind to obesity. “Parents can’t even identify when their children are overweight or obese. Obesity is fast becoming normal.”

New Zealand’s poverty rates, particularly among children, and cheap access to fatty tasty foods were largely to blame, as was a lack of political will. “There is this obsession with the nanny state, that we shouldn’t be telling people what to do.”

Read more

Inherited ability, tax elasticity, and fairness

Tyler Cowen has a post titled “does rigid mobility imply low tax elasticities“.  It is a question driver from this book review by Arnold Kling, of The Son also Rises by Gregory Clark.

I have purchased this book, but haven’t read it yet.  I have also purchased Income Inequality and IQ by Charles Murray, but have only read the first couple of chapters.  As a result, I haven’t even read the pop literature let alone the academic literature!

However, I have done a few economics courses in my time, and I thought I may note the type of framework I would use to understand IQ, income inequality, and the scope for an “efficiency-equity” trade-off.  By doing this, I can help to point out why Cowen’s question is a good one.

Read more

Minimum wage and the “deserving poor”

Via Marginal Revolution I see that there is a paper common confirming the intuition that the minimum wage is a wage of targeting a given view of the “deserving poor”.  Essentially, those with a strong taste for leisure are assumed to be the ones that lose their jobs first in the case of a minimum wage (efficient rationing) and as a result the minimum wage gives a way to “target” our income transfers to those we think are most deserving.

I have so far only skimmed the paper, and the Saez 2012 paper that justifies efficient rationing – so take my comments with a grain of salt.  However, I have two issues with this:

  1. The efficient rationing argument does not appear compelling – the wage will be in excess of the market wage for both types of workers, so the efficient rationing argument seems to rely on a situation where lower labour demand is primarily working through the intensive margin and the “high leisure” individuals are either generally unemployed or loosely tied to the labour market to start with.  I need to think on this point more – but it is the crux of the issue.
  2. I generally find the “deserving poor” argument weak.  I don’t like the normative assumption that we should favour people with one set of preferences over another – the general policies I’d favour don’t follow this type of assumption.  Now, society may hold this view, and then society should make policies along this line – that is fine.  But I don’t have to like it ;)

I want to read these papers in more detail and write about this business.  The new minimum wage and optimal tax literature is formalising a lot of topics that we’ve previously used “intuition” on, and that is pretty exciting!  Why – well formalisation helps to make assumptions transparent, which is what we really want to do before going around and trying to figure out policy.  However, it is going to be a while until I get to this, as I get very busy through the middle of the year – and this year is busier than usual!

If anyone knows the literature, and would like to do a guest post, I would really like it – compensation would involve a beer and a discussion about economics in a Wellington bar ;)