… A vast majority of Swedes believe that they are poorer, relative to others, than they actually are. This is true across groups, but younger, poorer, less cognitively able and less educated individuals have perceptions that are further from reality.
To put it more bluntly, people pushing an agenda for income redistribution will have better luck if their target market is young, dumb, and ignorant.
Then the authors try a little social engineering:
… We conduct an experiment by randomly informing a subsample about their true relative income position. Respondents who learn that they are richer than they thought demand less redistribution and increase their support for the Conservative party.
Their evidence of this is based on before and after responses to survey questions, not actual voting records.
FWIW: This mirrors discussions I have around my house with the vXboy and vXgirl. They think we’re poor. I try and explain that spending all your money and having nothing extra left is not the same thing as poor. I also try and emphasize that they need to think a lot more about careers that make a decent amount of money … since they have no idea how far along the income distribution they actually are.
Most of this piece isn’t explicitly about macroeconomics. But it gets at the point that one of the things that makes thinking about macroeconomics and policy so hard is the breathless negativity which politicians the legacy media condition us with.
Unfortunately, politically these solutions do not seem possible at this juncture. Note that because of the way the comparative dynamics work, the efficacy of each of these solutions diminishes as we move into the future.
This is ridiculous. Consider the two largest items.
The biggest is indexing payments to the CPI minus 1%. Macroeconomists know that the CPI overstates price inflation, by something in the range of 1%. So, we’ve already been giving seniors a gift every month by indexing to just the CPI.
To draw an analogy, this is like having your parents pay for your gas, and every time the price per gallon goes up by a nickel, they give you a dime to cover it. Last I checked, keeping the change as a habit, and then bitching about it if your parents threaten to ask for it back is something most of outgrew a long time ago.
The second biggest is raising the retirement age immediately (to compensate for it not being raised earlier), and then indexing it to increasing life expectancy in the future. Without doing this, with every passing month we’re offering new retirees funding for a longer expected retirement with each passing month … without them having contributed extra to the system with a longer career.
An analogy for this might be giving a football team 5 downs, or a baseball hitter 4 strikes … after the game has started. Again, excepting things like the Colorado Buffaloes 1990 co-championship, this is something that most people would find unacceptable in others.
A few months back, I suggested something like this in an e-mail to the folks at Information Is Beautiful. They’d already done something like this, but they updated it. Kudos for reading and responding!
President Barack Obama is spending his vacation golfing on Martha’s Vineyard. Hillary Rodham Clinton is spending her vacation in the habitual Clintonian mode, making a vulgar spectacle of herself in the Hamptons. Joe Biden, not that anybody cares, is off to Grand Teton.
Senator Rand Paul, on the other hand, is spending his vacation in Guatemala, performing eye surgeries on poor children who need care. (Eliana Johnson wrote about the trip here.) As the Washington Postpoints out, this is not a new thing for the senator-surgeon; on this trip, he saw two patients he’d first treated 15 years ago.
For once, the Washingtonian term “optics” is entirely apt.
Senator Paul will come out of his vacation looking pretty good. Given the political class’s endless appetite for self-serving theater, I found myself wondering why President Obama, Mrs. Clinton, or Vice President Biden did not choose to spend their vacations in a similar way, offering to put their skills and abilities to use on behalf of others. And then I realized that this was a deeply stupid question on my part.
What the hell would they do?
Unlike Senator Paul, neither the president nor the vice president nor the former secretary of state has anything that one might describe as a useful skill. That’s not quite right: They have skills that are useful . . . to themselves. As for skills that are useful to other people — you’d be hard pressed to think of one. [bold emphasis added]
As always, Chris Rock continues to show signs that he may be the George Carlin of the next 30 years:
Like my friend Jay Nordlinger, I enjoyed Chris Rock’s simple yet subtle twisting of the knife in Jesse Jackson, innocently asking: “So, what exactly do you do?” That really is the relevant question.
What do any of them do?
It gets worse: look at Jimmy Carter. Here’s a man who does do things for others, and yet what he does for others has little to do with what he did when he was in office, or what he did to justify getting elected.
There’s a bit of a firestorm on campus, with an official letter of clarification sent out to faculty by SUU’s new president after coverage on the local radio turned … hmmm … misinformative.
Here’s the straight story:
Harry Reid is a 1959 graduate of SUU’s former incarnation as the 2-year College of Southern Utah.
SUU’s last president was a pretty good fundraiser.
Under SUU’s last president, a number of campus “engagement centers” were created. These were in name only; they aren’t supported much in the way of line items in the budget, and are intended to attract external funding.
One of these was named after Harry Reid. There was a pretty obvious notion that supporters of Reid would contribute money to support the new center. I don’t think anyone had any illusions that they’d most likely have to be supporters from outside of Utah.
Basically no money came in to support the Harry Reid Center and it never opened in an official sense (whatever “opened” means when you use bureaucratic-speak about whatever the heck an engagement center actually is).
The Harry Reid Center was later merged with another center which had low, albeit better, support.
The Harry Reid name was retained on the merged center, again, thinking he’d have some supporters that would contribute money.
There was confusion because there is no basis in public knowledge for attaching Harry Reid’s name to an “Outdoor Engagement” center. Management of the Outdoor Engagement Center pointed out that the name was not benefitting them.
The concept of outdoor engagement continues to attract some external funding, while the Harry Reid name brings in nothing to SUU.
So administration split the centers again. SUU retains a Harry Reid center (feel free to donate to support it).
The current SUU president stated explicitly that donations for outdoor engagement that were contingent on removing Harry Reid’s name from that center were declined.
You can make what you want of that. I report, you decide.
As a business professor, I will note that this sounds like a typical problem in brand management that probably does not deserve a firestorm. Executive decisions about weak brands are often messy.
The really big implication here is that Harry Reid is not a brand that’s successful: nationally, Democrats ought to think long and hard about what it means to have a Senate majority leader whose brand even they don’t support.
And heck … as an economist, I’ll point out that if you’re a Democrat the marginal benefit of donating money on behalf of a Harry Reid center would be highest if that center was located in one of the reddest states.
Finally, would it be cynical or realistic of me to point out that this is prima facie evidence that perhaps the contemporary Democratic party really doesn’t care much about the red states?
FWIW: I quipped in the office that if SUU wanted to name something after Harry Reid that was relevant to his time here, perhaps it should be the general studies or associates degree programs … since we were a 2-year school when he was here.
To control for the weirdness of the real world, they did this as a lab experiment. In these experiments, subjects enter for free and play for real money that is proportional to their performance.
They simulated taxes. Subjects got to keep the after-tax money they earned.
They did this with the same people in two environments: one in which taxes were simpler (had less rules to follow) and one in which they were more complex (had more rules to follow). The subjects’ outcomes would be the same across the two environments if they were able to follow all the rules.
They found that subjects behavior was closer to optimal when the tax system was simpler. Basically, subjects left money on the table when the tax system was too complex.
It gets worse. Then they added an identical rule to each tax system — making each setup a little more complex — and had the subjects play again. Now, put on your thinking caps: in the simpler system, the marginal increase in complexity from an identical change will plausibly be larger. What they did was actually go from 2 to 3 tax rules, and from 22 to 23 tax rules, so this seems like a plausible conclusion. What they found was that performance went down under both systems, which isn’t very surprising. What is surprising is that they found that 1) performance got “more worse” (I know that sounds kludgy) with the complex system, 2) poorer performance was concentrated in the people who performed worse before the change, and 3) the measured decision-making time of those people didn’t change much.
The authors conclude from this that they were able to isolate subjects who found the complex system to be beyond their cognitive ability, and that when confronted with a rule change that made that problem worse, these people shut down and ignored the change.
This is a strong case that a complex tax system discriminates against people on the lower end of the intelligence spectrum.
That’s a bombshell: politicians, in collusion with bureaucrats, accountants and lawyers, may have set up systems that discriminate against people who aren’t as smart as they are.
Keep this research in mind the next time someone tells you that a flat tax system is bad, or that a progressive tax system is better.
BTW: In perusing the reference list, I conclude that the strain of literature these authors are targeting is liberal rather than conservative: it falls in the Elizabeth Warren, Cass Sunstein orbit of the Democratic party.
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