6 ms·

Wouldn't increasing the progressivity of taxation improve redistribution without removing the efficient incentives that capitalism provides?

nickff 12y ago
One of the many problems which this idea has is that it redistributes money away from people who are good at investing in growth, and gives it to people who are likely to spend on consumption goods.
- GeneralMayhem 12y ago
  ...which is fine, really, because spending on consumption goods is the basis of the modern economy anyway. Giving money to the poor is one of the most effective ways to give money to the rich, and has the nice side effect of feeding a few mouths along the way.
  - nickff 12y ago
    Money invested in growth has different economic effects from money invested in consumption goods; the former is likely to be spent on capital goods, and thereby increase production and reduce prices in the future, whereas the latter is likely to be spent on raw materials and labor (or possibly just driving up prices), with fewer long-term benefits.
    - Retric 12y ago
      Your ignoring the most profitable use of capital which is bribes. Current tax laws are vary focused around letting rich people keep there money but there is little evidence US growth is particularly capital constrained. Overall economic growth tracks vary closely to population growth long term Per capita economic growth tending to hover around 1%. Economics 101 is a vary limited model of how real world economy's work. In the real world ultra rich people tend to cause a lot of long term economic harm because there goals tend to be vary different from most people. PS: Bill Gates sending aid money to developing areas may be a 'good' thing but it's not investing in the way your thinking.
      - nickff 12y ago
        Large corporations (such as those listed on the stock market) are not capital constrained, but the small, new and potential companies which are most important to growth are highly capital constrained.[1][2] Some have argued that it is good that rich people often get their way, because the alternative is far worse.[3] [1] http://www.theatlantic.com/business/archive/2012/09/the-30-year-decline-of-american-entrepreneurship/262831/ http://www.theatlantic.com/business/archive/2012/09/the-30-y... [2] http://www.nber.org/digest/feb11/w16300.html http://www.nber.org/digest/feb11/w16300.html [3] http://econlog.econlib.org/archives/2012/09/why_is_democrac.html http://econlog.econlib.org/archives/2012/09/why_is_democrac....
        jjoonathan 12y ago
        Small companies may be capital constrained, but the constraints come from friction more than from limitations on capital supply. If DD on the proposal for Joe's Diner is going to cost more than the pre-DD profit expectation, it doesn't matter how much capital is in the pool, Joe won't be getting funded. There's a nifty way around this: if Joe self-funds, he need not worry about his own principal agent problem. What kind of economies encourage self-funding? Those that provide employment opportunities sufficient for the purposes of saving and serving as a safety-net. NOT economies that systematically de-leverage the bulk of the working population.
- Retric 12y ago
  Past performance does not equate to future growth.
- ap22213 12y ago
  Why don't we teach more people to be better 'investors in growth'?
- ArkyBeagle 12y ago
  This is because at some point ( like ... about now ) consumption becomes the bottleneck* for production. *actually becomes the bottleneck for the transfer function between consumers and producers we call markets...
Kaizyn 12y ago
No it doesn't. People like to receive a benefit for the work that they do. When a person works and produces a surplus and it is stolen to give to people who produce nothing, it has a tendency to reduce their future output. This is the reason that communist states have a tendency to hold guns to the heads of their people and MAKE them produce for the government.
ArkyBeagle 12y ago
Possibly, but the internationalization of capital has made this much harder. Throw in that governments have lousy track records at actual redistribution... it's much harder than it looks. You have to have government-levels of instrumentation of the processes, and that's expensive. This isn't just governments, either - public charities can run into this problem as well.

nickff 12y ago

One of the many problems which this idea has is that it redistributes money away from people who are good at investing in growth, and gives it to people who are likely to spend on consumption goods.

GeneralMayhem 12y ago
...which is fine, really, because spending on consumption goods is the basis of the modern economy anyway. Giving money to the poor is one of the most effective ways to give money to the rich, and has the nice side effect of feeding a few mouths along the way.
- nickff 12y ago
  Money invested in growth has different economic effects from money invested in consumption goods; the former is likely to be spent on capital goods, and thereby increase production and reduce prices in the future, whereas the latter is likely to be spent on raw materials and labor (or possibly just driving up prices), with fewer long-term benefits.
  - Retric 12y ago
    Your ignoring the most profitable use of capital which is bribes. Current tax laws are vary focused around letting rich people keep there money but there is little evidence US growth is particularly capital constrained. Overall economic growth tracks vary closely to population growth long term Per capita economic growth tending to hover around 1%. Economics 101 is a vary limited model of how real world economy's work. In the real world ultra rich people tend to cause a lot of long term economic harm because there goals tend to be vary different from most people. PS: Bill Gates sending aid money to developing areas may be a 'good' thing but it's not investing in the way your thinking.
    - nickff 12y ago
      Large corporations (such as those listed on the stock market) are not capital constrained, but the small, new and potential companies which are most important to growth are highly capital constrained.[1][2] Some have argued that it is good that rich people often get their way, because the alternative is far worse.[3] [1] http://www.theatlantic.com/business/archive/2012/09/the-30-year-decline-of-american-entrepreneurship/262831/ http://www.theatlantic.com/business/archive/2012/09/the-30-y... [2] http://www.nber.org/digest/feb11/w16300.html http://www.nber.org/digest/feb11/w16300.html [3] http://econlog.econlib.org/archives/2012/09/why_is_democrac.html http://econlog.econlib.org/archives/2012/09/why_is_democrac....
      - jjoonathan 12y ago
        Small companies may be capital constrained, but the constraints come from friction more than from limitations on capital supply. If DD on the proposal for Joe's Diner is going to cost more than the pre-DD profit expectation, it doesn't matter how much capital is in the pool, Joe won't be getting funded. There's a nifty way around this: if Joe self-funds, he need not worry about his own principal agent problem. What kind of economies encourage self-funding? Those that provide employment opportunities sufficient for the purposes of saving and serving as a safety-net. NOT economies that systematically de-leverage the bulk of the working population.
Retric 12y ago
Past performance does not equate to future growth.
ap22213 12y ago
Why don't we teach more people to be better 'investors in growth'?
ArkyBeagle 12y ago
This is because at some point ( like ... about now ) consumption becomes the bottleneck* for production. *actually becomes the bottleneck for the transfer function between consumers and producers we call markets...

Kaizyn 12y ago

No it doesn't. People like to receive a benefit for the work that they do. When a person works and produces a surplus and it is stolen to give to people who produce nothing, it has a tendency to reduce their future output. This is the reason that communist states have a tendency to hold guns to the heads of their people and MAKE them produce for the government.

ArkyBeagle 12y ago

Possibly, but the internationalization of capital has made this much harder. Throw in that governments have lousy track records at actual redistribution... it's much harder than it looks. You have to have government-levels of instrumentation of the processes, and that's expensive. This isn't just governments, either - public charities can run into this problem as well.