Bob Cropf

Archive for the ‘statistics’ Category

Why taxes aren’t so bad

In economics, public finance, statistics on February 25, 2009 at 5:59 AM

Ever since the Reagan administration, the American people have been bombarded with the unrelenting message that tax increases are unacceptable. The idea is that taxes hinder economic growth and sap the incentives of individuals and families to earn more because the government will just take it all away.

In the meantime, government spending continued to grow. Entitlements like Social Security and Medicare kept expanding as a result of demographics and increased benefits. The US embarked on an expensive military venture in Iraq and Afghanistan. So while taxes have been holding steady over the last three decades, spending has continued to grow. In the simple calculation of public finance, if spending grows and revenues from taxes remain flat then deficits have to grow. As we have seen, these deficits have been financed from borrowing–increasingly from countries with more robust rates of growth than ours. See the chart from the Times article cited below:
taxes-vs-spending2

In today’s NY Times, Dave Leonhardt writes a thoughtful piece on the “upside of tax increases.” For many Americans bamboozled by years of being told we can pay for everything we need without raising taxes, his title might seem strange. However, as he points out, there is a fundamental law of economics, known as Wagner’s Law, which says that as society matures then taxes show a tendency to grow. This law was discovered in the 19th century and recent economic research confirms that it still operates.

Taxes, as Oliver Wendell Holmes, Jr., said are the price we pay for civilization. Without them, there would be no schools, highways, defense and many other things that make life worth living today. As a society, we have accepted half of the equation: The part that recognizes that we need those things to have a properly functioning society. But we seem to have forgotten or ignored the other half, the part that says that we have to sacrifice something to get what we want.

The bottom line is we cannot keep pushing off into the indefinite future paying for things we need today. By continuing to do this, we burden future generations and reduce their opportunities for economic advancement or we risk our creditors strangling our economy with higher interest rates as demand begins to outstrip supply of capital.

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Relative prices of different liquids

In economics, statistics on February 6, 2009 at 9:22 AM

I found this online. I do not know the source so I cannot say how reliable it is. The prices appear to be in the ballpark, however (although I do not know how it arrives at the price for human blood).

Relative Prices of Different Liquids

Relative Prices of Different Liquids

Looking at the graph, it’s no wonder that we’re so dependent on gas.

Good weekend

In economics, miscellaneous, statistics on January 30, 2009 at 10:29 AM

A little later today, Joshua will be uploading the question for the short essay assignment. I am looking for a paper that is between 700-1,000 words in length, double-spaced, and APA format. The due date is February 11. You can hand it in before class by emailing it to me or you can give it to me in class.

I came across this interesting article on income inequality. The article basically documents the redistribution that has been occurring since the 1970s, which has seen income flow increasingly to wealthy Americans. The authors note that “Excluding capital gains, the richest one percent claimed 17.4 percent of all pre-tax income in 2005, more than double what that figure was in the 1970s. (It bottomed out at 7.8 percent in 1973.) This is the greatest concentration of income since 1936, when the richest one percent received 17.6 percent of total income.”

The article, which is found on inequality.org (a project of Demos and the Institute for Policy Studies) is chock full of graphs and tables that underscore the massive transfer of wealth from middle-income and lower Americans to the well-to-do. There is also an excellent section at the end that takes the reader to the original sources for the data.

We will be discussing income inequity in some detail in a couple of weeks. This article will serve as a good backdrop for that discussion. One thing to keep in mind as you are thinking about income inequality is “How much of this transfer of wealth is a result of public policy?” “If much of the redistribution is the consequence of public policy, how much of it was supported by the voting public?

Accurate Pie Chart

In statistics on January 27, 2009 at 10:53 AM

accurate-pie-chart

More useful links

In statistics on January 26, 2009 at 8:37 AM

The first one is called “How to Gut a Book” and is written with history students in mind bu the advice is still pertinent. You should come to every class prepared to talk about the author’s main thesis of every article or book we read in class.

The second one is called “Visualizing Economics.” If you’re like me you probably prefer a well-done graphic to page after page of complex formulae. This website provides a wealth of economic data in attractive graphical presentations.

Checking Periodically

In statistics on January 24, 2009 at 3:54 PM

Thanks Chris and Kevin for your comments. And yes, Kevin, I agree that more referees are needed. Please everyone join in the discussion and don’t be shy.

I want to urge everyone to check in periodically–a couple times a week is probably about right–because I’ll update this space on a regular basis.

This column caught my attention in today’s NY Times. Tell me what you think. Do you detect any bias?

Greetings

In statistics on January 23, 2009 at 6:27 PM

Welcome students. The readings for next week are Friedman and O’Connor in the Peretz book. Think about how each author approaches the question of the government’s role in the economy. In some ways, both authors view the government as a threat but for different reasons…why?

How would you classify each author based on the categories discussed in class 2 weeks ago (interventionist, nonintervensionist, Marxian)? Why? How would each one view the type of fiscal stimulus package being considered by the Obama administration?

Useful Links
Milton Friedman’s Wikipedia entry
James O’Connor’s Wikipedia entry
Amazon.com’s review of O’Connor’s Fiscal Crisis of the State.
Milton Friedman on Charlie Rose

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