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It's a legitimate criticism, but he's arguing a strawman. First off, the reviewer's coinflip analogy is deeply flawed. If you take a million draws from a binom
by VodkaHaze 10y ago
It's a legitimate criticism, but he's arguing a strawman.
First off, the reviewer's coinflip analogy is deeply flawed. If you take a million draws from a binomial distribution, it's not going to end up the same as a million draws from an exponential distribution. That has an even deeper meaning when you, as an individual, are one random draw from said distribution, especially if you want to live in a society that considers itself "fair" (whatever that may mean).
Now Frank is not arguing against inequality. Frank is an economist, and almost no serious economist is against inequality as a whole concept (though many are against extreme inequality and, importantly, social immobility) because inequality is what you'd call "incentive compatible".
Frank's policy proposal is consistent and sane, but it will rub some the wrong way, as any policy proposal does. I'm certainly in favor of it; consumption is a better target for progressive taxation than most of what has been proposed this election season. That's the part that got the reviewer so riled up. I'm guessing the reviewer is not a professional economist.
The idea of a progressive consumption tax is consistent with microeconomic theory, too. People value things in an ordinal (not cardinal) manner, and at a sufficiently high level of income this means consumption has to be conspicuous to some degree (that's Veblen's whole insight).
Of course, political feasibility of the policy proposal is one thing, and certainly many worse policies are more politically feasible, as exemplified by how rubbed that reviewer has been by Frank's book.
The main difference between this book and Taleb's book is that Franks book is "Successful people are lucky, here's a policy proposal" and Taleb's book is "Successful people are lucky and also everyone is dumb and I'm so smart"
- bduerst 10y agoOkay, so I haven't read the book but I read the scathing review - and I think your rebuttal isn't quite fair. You started to address the review but switched to ad hom attacks to discredit the reviewer - when in reality the reviewer is a past financial professor who works in risk management, and makes some very salient points about the logic behind the books claims. Even what you say about sampling binomial vs. exponential populations isn't quite relevant, because as a coin or a person, you're not going to be switching between such distributions when sampling.
- VodkaHaze 10y agoSorry about the ad homs; the reviewer used moral/philosophical instead of technical reasons to argue against (except that point on simulations), so I assumed he was a riled up layperson. I read his review too fast, I guess. The reviewer's point is this: "Finally, the author is not asking me to personally give more money to the government, he wants me to support forcing other people to do it. But those other people have average luck, by definition " But that's wrong; if the tax is progressive, and you take it as given that the successful are lucky, then you are in fact taxing the lucky with a progressive tax. The question is targeting the tax correctly.
- bduerst 10y agoThe reviewer had a few more points than just that, such as how the author not only fails to point out that luck is correlated with success, but contradicts himself. Even in that statement you quoted out of context, the reviewer is referring to how we all have the same amount of luck, so luck alone shouldn't be the basis for a progressive tax. Now, there are good reasons for a progressive tax, but the reviewer is saying it doesn't justify ignoring illogical arguments in the book. Just because the conclusion is proven right somewhere else doesn't mean that all arguments for it are valid.