4 ms·

Deadweight loss is not a judgement call, it's an actual calculable amount, effectively the loss of productivity due to the tax. https://en.wikipedia.org/wiki/De

Deadweight loss is not a judgement call, it's an actual calculable amount, effectively the loss of productivity due to the tax. https://en.wikipedia.org/wiki/Deadweight_loss https://en.wikipedia.org/wiki/Deadweight_loss

arethuza 4y ago
Maybe its just the way things are described on Wikipedia, but isn't there an almost complete lack of citing any experiments or empirical evidence on that page?
- colinmhayes 4y ago
  I'm not sure what you mean. Deadweight loss is tautological. Maybe you're asking for evidence that taxes distort markets? If you accept that as true it's easy to see that deadweight loss is just the difference in surplus before and after the tax. Every econ paper on tax policy will try to measure the deadweight loss of the intervention.
  - arethuza 4y ago
    I guess I just find it weird to have a page on Wikipedia about a quantity with no mention of what that quantity has ever been measured to be?
- kelseyfrog 4y ago
  Wikipedia is a very difficult way to learn economics. In many ways it's like trying to learn mathematics or physics from an encyclopedia. The encyclopedic approach is - pedagogically speaking - sub-optimal.
  - arethuza 4y ago
    But if I look at the page for "friction" it has tables of actual values and many references to practical experiments? NB I was just comparing the writing style of that page (which seemed a bit odd to me) with other examples. https://en.wikipedia.org/wiki/Friction https://en.wikipedia.org/wiki/Friction
Frost1x 4y ago
So in this context, how does one calculate what's "socially optimal?" The problem I have with much of economic theory is that it tries to tie things back to what's beneficial or not to societies and tries to do so through a very thick utilitarian lens. There's often a heavy amount of fairly sophisticated math, statistics, and modeling parading as certainty when the fact is, there's a very high amount of uncertainty in many assumptions and in variety of economic theories that are just hand-waved away. It's not to say the problems economists face are simple, they're actually incredibly challenging and I think it's good economist continue to push for a better understanding of these systems. My gripe arises when economists masquerade or imply current theory with certainty when in many cases, as if it were a mature science. It simply isn't and far too many use the appearance of certainty hidden in complexity of theory as certainty to push a biased personal agenda or perspective. When you overload terms like efficiency, efficiency in what context? Efficient for whom and through what perspective of the world? Very clear definitions need to be made so I don't question the motives of the attempt of quantification and can look at flaws and oversights that may exist in such metrics. Most economic theory lacks real empirical evidence because it's just to difficult to play the experiments and interplay of micro, meso, and macroscale systems at a global scale without actually running the experiment (changing policies).
- pixl97 4y ago
  Eh, it's difficult to blame economists, or any other type of scientist here. They all deal with improbability and uncertainty. It's the politicians and voting public that are the problem. It's easy to get massive numbers of people to vote for you by giving out is completely wrong as long as you're extremely confident in your presentation of it. It's easy for these political winners to drive the economic systems to collapse while increasing authoritarianism by said false confidence. People want to vote uncertainty away, authoritarianism is one way of doing that.
lisper 4y ago
The first sentence in the article is: "Deadweight loss ... is a measure of lost economic efficiency when the socially optimal quantity of a good or a service is not produced." But there is no link for "socially optimal", and the phrase appears nowhere else in the article, so this definition is incomplete at best and vacuous at worst because its meaning turns entirely on the meaning of "socially optimal" but I can't think of any reasonable way to define it that is not a judgement call.
- colinmhayes 4y ago
  You are right, wikipedia is not a great source for economics. I just reached for it first because it's generally decent for most things. You can find a great definition in https://bankicollege.ac.in/wp-content/uploads/2020/12/Principles-Of-Microeconomics-Mankiw.pdf https://bankicollege.ac.in/wp-content/uploads/2020/12/Princi... but simply it's difference between the surplus before and after an intervention. Obviously minimizing deadweight loss isn't our end goal, it's just one measure we can use to compare interventions.
  - Hermitian909 4y ago
    While not an economist, I've read enough economic papers that I actually agree with Wikipedia's definition. You can "plug-in" values to your dead weight loss calculation depending on judgement calls. For example, do you consider the fact that the carbon footprint of an object is ignored a subsidy? If so, your dead weight loss calculation changes. Suddenly you're trying to discount cash flow against the future cost of carbon removal and things are very complicated.
- mr_toad 4y ago
  > when the socially optimal Technically Pareto optimal. Pareto optimal points are not necessarily socially optimal. https://en.wikipedia.org/wiki/Pareto_efficiency https://en.wikipedia.org/wiki/Pareto_efficiency

arethuza 4y ago

Maybe its just the way things are described on Wikipedia, but isn't there an almost complete lack of citing any experiments or empirical evidence on that page?

colinmhayes 4y ago
I'm not sure what you mean. Deadweight loss is tautological. Maybe you're asking for evidence that taxes distort markets? If you accept that as true it's easy to see that deadweight loss is just the difference in surplus before and after the tax. Every econ paper on tax policy will try to measure the deadweight loss of the intervention.
- arethuza 4y ago
  I guess I just find it weird to have a page on Wikipedia about a quantity with no mention of what that quantity has ever been measured to be?
kelseyfrog 4y ago
Wikipedia is a very difficult way to learn economics. In many ways it's like trying to learn mathematics or physics from an encyclopedia. The encyclopedic approach is - pedagogically speaking - sub-optimal.
- arethuza 4y ago
  But if I look at the page for "friction" it has tables of actual values and many references to practical experiments? NB I was just comparing the writing style of that page (which seemed a bit odd to me) with other examples. https://en.wikipedia.org/wiki/Friction https://en.wikipedia.org/wiki/Friction

Frost1x 4y ago

So in this context, how does one calculate what's "socially optimal?" The problem I have with much of economic theory is that it tries to tie things back to what's beneficial or not to societies and tries to do so through a very thick utilitarian lens. There's often a heavy amount of fairly sophisticated math, statistics, and modeling parading as certainty when the fact is, there's a very high amount of uncertainty in many assumptions and in variety of economic theories that are just hand-waved away. It's not to say the problems economists face are simple, they're actually incredibly challenging and I think it's good economist continue to push for a better understanding of these systems. My gripe arises when economists masquerade or imply current theory with certainty when in many cases, as if it were a mature science. It simply isn't and far too many use the appearance of certainty hidden in complexity of theory as certainty to push a biased personal agenda or perspective. When you overload terms like efficiency, efficiency in what context? Efficient for whom and through what perspective of the world? Very clear definitions need to be made so I don't question the motives of the attempt of quantification and can look at flaws and oversights that may exist in such metrics. Most economic theory lacks real empirical evidence because it's just to difficult to play the experiments and interplay of micro, meso, and macroscale systems at a global scale without actually running the experiment (changing policies).

pixl97 4y ago
Eh, it's difficult to blame economists, or any other type of scientist here. They all deal with improbability and uncertainty. It's the politicians and voting public that are the problem. It's easy to get massive numbers of people to vote for you by giving out is completely wrong as long as you're extremely confident in your presentation of it. It's easy for these political winners to drive the economic systems to collapse while increasing authoritarianism by said false confidence. People want to vote uncertainty away, authoritarianism is one way of doing that.

lisper 4y ago

The first sentence in the article is: "Deadweight loss ... is a measure of lost economic efficiency when the socially optimal quantity of a good or a service is not produced." But there is no link for "socially optimal", and the phrase appears nowhere else in the article, so this definition is incomplete at best and vacuous at worst because its meaning turns entirely on the meaning of "socially optimal" but I can't think of any reasonable way to define it that is not a judgement call.

colinmhayes 4y ago
You are right, wikipedia is not a great source for economics. I just reached for it first because it's generally decent for most things. You can find a great definition in https://bankicollege.ac.in/wp-content/uploads/2020/12/Principles-Of-Microeconomics-Mankiw.pdf https://bankicollege.ac.in/wp-content/uploads/2020/12/Princi... but simply it's difference between the surplus before and after an intervention. Obviously minimizing deadweight loss isn't our end goal, it's just one measure we can use to compare interventions.
- Hermitian909 4y ago
  While not an economist, I've read enough economic papers that I actually agree with Wikipedia's definition. You can "plug-in" values to your dead weight loss calculation depending on judgement calls. For example, do you consider the fact that the carbon footprint of an object is ignored a subsidy? If so, your dead weight loss calculation changes. Suddenly you're trying to discount cash flow against the future cost of carbon removal and things are very complicated.
mr_toad 4y ago
> when the socially optimal Technically Pareto optimal. Pareto optimal points are not necessarily socially optimal. https://en.wikipedia.org/wiki/Pareto_efficiency https://en.wikipedia.org/wiki/Pareto_efficiency