Posts Tagged ‘progressive taxation’

Capital and Ideology—First Problem

July 1, 2020

The title is identical to the title of a new book by Thomas Piketty. He is to be congratulated for this exhaustive and highly technical analysis. It covers the history of capital and ideology from its earliest stages to the present day. HM found two problems with this book: It chose the wrong dependent variable to assess progress. And it did not do justice to the role of technology. This posts discusses the role of technology.

In reading about past generations it becomes obvious that the lives of many were uncomfortable. HM cannot think of a previous time in which he would have preferred to live. This is true, even if relatively well-off. HM remembers when he was vacationing in Japan and was visiting a palace of one of the Shogun’s. Even though it was a palace, it was a flimsy building and it was obvious that it would have been quite cold in the winter. So HM asked how did the Shogun stay warm during the winter. The answer was with sake and his concubines. At that point HM decided he would prefer to live in his current studio apartment with it’s temperature control and electronics. He also was aware that the lives of these shoguns were at risk most of the time.

HM did his doctoral dissertation during the days of typing. He needed to type his drafts and then send them to a professional typist who would also produce the final version of the dissertation. All this activity was manual. Research needed to be done at libraries with card catalogs needed to access printed versions of material of interest in both books and journals. Data processing was done on mainframe computers. Jobs were submitted and we waited for outputs to see if additional work was required.

When HM became a professional research psychologist all these activities were manual. One would go through many successive versions, each correcting and updating previous versions. This was all manual and slow.

The development of personal computers made it possible for us to do all these activities at our desks. Eventually we could send and share documents electronically. And we could do this across continents.

HM became incensed when he read an article saying that today’s generation was worse off than HM’s baby boomer generation when the costs of inflation were considered. The problem here is the same as the problem with PIketty’s book in equating a monetary measure to define being well-off. HM would much prefer living in the technology of today.

What disturbs HM is the way today’s generation is using technology. With Coursera and other sources, one can get an entire education, both undergraduate and graduate, on-line for free. Of course, there are charges for actually getting degrees. But HM is especially impressed by autodidacts who educate themselves. These are true lovers of knowledge rather than the typical college student who studies primarily to get a middle-class lifestyle.

HM finds it extremely frustrating seeing how the potential of technology is being ignored and abused. Social media are the rage so one can interact with others just for their opinions. Be aware that opinions are like a—holes in that everybody has one. They should be spending time with authoritative sources rather than being preoccupied with “likes” and staying plugged in.

There is a large fear that technology will produce unemployment. This should not be the case. No one should lose jobs due to technology. Jobs should be redefined and the number of hours being worked decreased, so that people can pursue other “growth” pursuits. Everyone should receive a guaranteed level of income.

There should be no problem financing all this provided the pie is cut up fairly. Billionaires have only one life to live. The increase in the quality of life rapidly drops off after so many billion dollars. So there should be progressive taxation on both income and wealth.

There was also an interesting idea in the utopian futuristic novel by psychologist, B.F. Skinner, Walden Two. In Walden Two, the more unpleasant the job, the higher the wage. This provided encouragement to perform unpalatable labor.

The future could be bright, provided wealth is fairly distributed and that obscene wealth does not capture politics and produce authoritarian regimes.

© Douglas Griffith and, 2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Douglas Griffith and with appropriate and specific direction to the original content.

The Wellbeing of Nations: Meaning, Motive and Measurement

August 26, 2015

This excellent text is by two researchers in England, Paul Allin and David J. Hand.  It is written in the spirit of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, which is usually abbreviated as The Wealth of Nations.  Smith is commonly regarded as the father of capitalism.  Although this is true, he is misrepresented by many politicians.  Smith was concerned with increasing the wellbeing of nations and their inhabitants.  Smith wrote an earlier book titled The Theory of Moral Sentiments.  He argued that moral sense was based on mutual sympathy, a term best captured today with the concept of empathy.   Smith advocated progressive taxation, in which the wealthier paid a higher percentage of their income to taxes than the poor.  Often politicians argue for a “flat tax”  for simplifying the tax code.  Progressive taxation is not responsible for the complexity of the tax code, but the many specific benefits and costs written into the tax code are.  The Gini coefficient is an index of the spread of wealth in an economy.  And healthier economies require that wealth be distributed among the citizens of a country.  As one Texan put it, “Money is like manure; it’s no good unless it is spread around.”

The authors note, “It looks as if the capitalist business model has evolved over the centuries into one that relies on population growth and expects economic growth.”  Clearly, this is a model for ultimate disaster.  There is no doubt that capitalism has been a success, but it is time for fine-tuning.  There have been several healthy memory blog posts wondering what has become of all the leisure time that was promised to be available today.  When I was a child few mothers worked.  Today, everybody works, and for longer hours.  Why?  John Maynard Keynes envisaged a time in which increased leisure time would enhance the quality of life for all.  Why has that time not arrived?

I believe that if Adam Smith were alive today he would have joined Allin and Hand in authoring The Wellbeing of Nations, or would have written his own complementary volume.  The starting point for this  volume is that Gross Domestic Product (GDP), although important, should not be the primary metric for economies.  Previous healthy memory blog posts had described the metric of Gross National Happiness (GNH).  Although this is a promising start, the problem is quite complicated.  It requires a variety of disciplines such as the social sciences and statistics that had either not yet developed or were still in the early stages of development when Adam Smith lived.

Although I am praising this work, I am not recommending that you read it.  It is technical and complicated.  For most of us understanding that this is a problem that needs to be addressed and is being addressed is enough.  However, if you are interested in the topic and are willing to expend the effort, this is an excellent text that cites many references and resources.

I do not mean to imply that a the solution to this problem will be easy.  One must always be aware of the dangers of unintended consequences.  When a psychologist who won a Nobel Prize in Economics, Daniel Kahneman, was asked about the speed of research and progress in this area, his advice was that it be slow and reversible.  That is, provisions should be made so that any mistakes could be easily reversed.
As the immediately preceding blog post, the Automation of Journalism suggested, many skilled jobs might disappear.  Now the disappearance of jobs could be good, if they resulted in increased leisure time where people could enjoy themselves and pursue their interests.  However, if significant proportions of the population become alienated, there will be trouble indeed.  As was mentioned at the outset, capitalism is in need of fine tuning.

© Douglas Griffith and, 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Douglas Griffith and with appropriate and specific direction to the original content.