Why you can't soak the rich

The WSJ has a editorial about an interesting calculation from San Francisco investment economist Kurt Hauser (which they suggest calling Hauser's law):

No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP.

The point being that a tax rate hike reduces GDP (which is agreed up by everyone) but it will lower tax revenues. The Journal notes the similarity to the Laffer curve but this seems wholly independent.

"For God's Sake, Please Stop the Aid!"

There's an interesting interview in German magazine Spiegel with Kenyan economics expert James Shikwati who says to stop the aid. A couple of reasons:

1. Huge corrupt, complacent bureaucracies form around this aid. (both in Africa and among the organizations built to "help" but who ultimately would have to close down if their help were no longer needed).
   
2. Africans are taught to become beggars and not to be independent. African nations should be trading within themselves (which would also be a huge environmental gain as we reduce the impact of huge worldwide shipments).
   
3. Weakening of the local market and reduction in the incentives for entrepreneurship.

One of the biggest problem, as pointed out, is that the item most shipped over is the one thing all Western nations heavily subsidize (and what all Africa actually has a competitive advantage in): food. The other "problem" is AIDS, both the realistic problem and the perverse incentive for those countries to exaggerate the problem so as to keep their biggest "business" working.

Further gas tax holiday fun

Along with all the economists saying that a decrease in the federal tax is just going to go into the oil companies' pockets, I see that states like Nevada have genius regulations that simply will raise their state gas taxes to offset any reduction in the federal tax. Either by the left hand or the right hand, the government's getting its money.

Hillary Clinton: I'm not listening to economists

A Democrat not listening to economists? What a shock. Of course, Hillary's plan (holiday for the gas tax over the summer) is the same as McCain's.

On the other hand, Obama's windfall profits tax is the same as well. Of course, when the price increase is passed down, the strategy is the same: rebates back. Whenever politicians suggest taxing one group and subsidizing another, we end up hoping to equalize the effect but they get the added votes and bribe money, er, campaign contributions from the other group.

Further note: I couldn't make this up if I tried but now we've got more than two-hundred and thirty economists all saying how stupid the gas tax holiday plan is. I swear, I couldn't get five economists in my class to agree on anything but knowing politics, we'll have a holiday for the summer.

Why a command economy never works

And just because I love his cartoons, Michael Ramirez has his pulse on the situation:

Well, it seems like the craze over biofuels is finally ending. Hailed as a great idea and with tons of government pushing for more investment, we see insane worldwide inflation, especially for foodstuffs. President Bush asks for $770 million more in world food aid. The new United Nation top adviser on food, Olivier de Schutter, quite simply calls any further investment in biofuels "irresponsible." However, he's much more calmer that the prior guy, Jean Ziegler, who called biofuels "a crime against humanity." Of course, once they killed all investments, we're back to our next problem: there will be a glut in global food prices everywhere and we'll see farmers everywhere starving yet again.

How many times do we need to see that once the government decides that it is going to "help", there is a huge bubble and then a massive self-correcting shock before we stop playing this game? Now it is biofuels, it was housing a decade ago, telecommunications before that (AT&T as a monopoly), the airline industry (just let something die!) and going back in American history, the railroads (leading to the "robber barons" and the need for antitrust regulation).

[Note: to top it off, Nobel Prize winner Norman Borlaug (leader of the Green Revolution) has a Wall Street Journal OpEd telling the Bush Administration to use actual foreign aid, buying food in Africa for Africans, rather that this disguised domestic aid nonsense the US does]

ABA Affirmative Action

A Wall Street Journal Article on the ABA requiring what looks like a quota if minorities. I was reminded of Thomas Sowell's latest book, Economic Facts and Fallacies, in which he has a section dedicated to the ABA's means-oriented approach to accreditation.
Rather than require a certain number of courses in specific topics or require that each class have a certain number of minorities, the ABA should just look at the ends. Let each law school design its program as it sees fit, and the ABA can just look at the overall bar passage rates and the bar passage rates of its minorities. If both rates are high, who cares if the law schools is accomplishing this by having less than a fixed number of credits in writing or ethics.
I think his most important point is that affirmative action does not do minorities any favors. Affirmative action has encouraged minorities to enroll in higher ranked law schools with low minority bar passage rates instead of staying at lower ranked law schools with dramatically higher minority bar passage rates.

The Efficiency of Gifts

I recently received a copy of Richard Posner's Economic Analysis of Law for my birthday. "Gifts" are actually in the index, (pg. 523) although it deals with whether or not gifts should be considered income for tax purposes. Posner comes to the conclusion that if gifts are truly altruistic, they will not substitute away from market employment, and therefore should not count as taxable income.
Thanks to Rob for getting me the most efficient present I've ever received.