Scott Sumner has Another Post Debating the Efficacy of Fiscal Stimulus

Scott Sumner has Another Post Debating the Efficacy of Fiscal Stimulus.

To me it is a moot point because even if it works even taking the advocates numbers the cost is way too high per job saved/created. It is clearly better to use monetary stimulus combined with a wage subsidy. 

This seems especially true in the current downturn because the lower skilled workers are so much more likely to be out of work. For the people at the bottom of skill levels a wage subsidy is a much cheaper way to create jobs than a stimulus which is likely to have quite a bit of crowding out.  Even Allen Blinder an advocate of the first stimulus has said as much.  


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High School Should not Just Prepare Adolescents for College

Edububble excerpts:

High school, in short, should not just prepare adolescents for college and careers, but for successful lives as adults. And far from backing off modern notions of success, this approach actually embodies new understandings of what really helps people succeed: not just reading and math, but deeper life skills that aren’t reflected on exit exams or college applications.

I have been saying something like that for years.
Why is it that people complain endlessly about US children not do well on PISA and similar test but we seldom talk about what knowledge or skills would help them live better lives and what are the most efficient ways to get that knowledge and those skills to people.

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If the OWS People were Serious People

If the OWS protesters were serious people the would carry signs that say things like:


One percent per year expense on a mutual funds is over 20% of the expected real gain! And you do not even beat the indexes!  And you must have paid of congress because 401ks legally require us to use mutual funds!


Or


We know from Benford's Law that you are scamming us.


Or

Goldman Sachs runs the US Treasury, is it any surprise that it biased in their favor?

Or

The Federal Reserve system cannot function well in a sharp contraction.  We need free banking.


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Tyler Cowen Outlines a Way to Solve Italy's Debt Problems

Tyler Cowne on a way to solve Italy's debt problems.  Tyler suggests that a wealth tax would work.

My comments:  

Unlike the Germans, Italians do not obey laws just because they are laws democratically enacted.  This has good and bad effects.  One result is that makes it difficult to collect any  tax, let alone a wealth tax.   So I think that Italy may have to default in some way.  

But Italians should not disrepair.  The biggest negative result from a partial default would be that it would make it difficult for the Italian government to borrow, but IMHO the benefits of being able to borrow are overrated.

To me the 2 benefits of borrowing are:

1. To move some of your consumption earlier in you life when it is more enjoyable. 
2. It enables businesses with good ideas to grow faster. 

A balanced budget amendment results in the same thing a government that cannot borrow.  Also borrowing is not a great idea if you like Italy have rapidly falling population. 

If I was an Italian citizen (or Greek) I would vote for default. I would say the government is debt not me. 

Free Banking

For a free banking system to work well the bankers need to know their business, they need to be greedy but not completely immoral and nobody needs to understand the monetary system.  For the current system to work well the bankers need to be free of  greedy and highly moral, and the median voter needs to understand the monetary system and the government regulators need to diligent.  

Cigarettes the Drug war and Transfer of Learning

Aaron Carroll over at the incidental economist blog has a good post on the costs of alcohol consumption.  

In 2006, the economic costs of excessive drinking in the US were $223 billion. That’s about $1.90 per drink. Another way of looking at this is that the cost was almost $750 per person in the US.
Almost three quarters of that sum is from lost productivity. An addition 11% is due to healthcare costs and 9% is due to criminal justice costs.
Underage drinking cost $27 billion. Binge drinking cost more than $170 billion. Drinking during pregnancy cost more than $5 billion. Alcohol-attributable crime cost more than $73 billion.
The cost to the government was more than $94 billion, or about $0.80 per alcoholic drink.

It is funny that Democrats are on a holy crusade against smoking (there is now a big black market in cigarettes) but they do not touch alcohol due to our experience with prohibition. Worse yet, both Democrats and republicans are on a holy crusade against recreational use of drugs. I guess that is proof that knowledge in one area is not transferable to other areas:

Here are links to Bryan Caplan on that subject:  

http://econlog.econlib.org/archives/2010/10/take_notice_of.html
http://econlog.econlib.org/archives/2011/01/the_case_agains_5.html

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A Progressive Consumption Tax

You tax experts out there, would this work?

Many economists have called for a consumption tax to replace the income tax. Invested money that is never spent promotes economic growth and has been compared to indiscriminate charity.

The problem is that it is difficulty to make a consumption tax that is simple and progressive. One way to achieve this goal would be to allow a person to put as much money as they want, pre-tax, into an IRA. Then allow people to take as much as they want out of their IRA at any time but pay taxes on all of the withdrawals.

You would tax income not put in an IRA plus any withdrawals from the IRA at a progressive rate. You could also allow people to buy cars and homes in their IRA and rent them at market rates.  The result would be a progressive consumption tax.

You would also want to end the Corporate profits tax.

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