In this January post, I noted some of the uncanny parallels between George W. Bush and Herbert Hoover: Both were president during a time of economic crisis; both presided over vast expansions of government that helped cause the crisis or at least make it worse than it might have been otherwise; finally both were (inaccurately) portrayed by their political opponents as dogmatic free market advocates, when in fact both were highly statist. After leaving the presidency, Bush is unconsciously imitating Hoover in yet another way — by rhetorically supporting free markets and criticizing the even more interventionist policies of his Democratic successor (which in both cases built on the expansions of government initiated by the Republicans who preceded them):
Former President George W. Bush, outlining plans for a new public policy institute, on Thursday said America must fight the temptation to allow the federal government to take control of the private sector, declaring that too much government intervention will squelch economic recovery and expansion....
“As the world recovers, we will face a temptation to replace the risk-and-reward model of the private sector with the blunt instruments of government spending and control. History shows that the greater threat to prosperity is not too little government involvement, but too much,” said Mr. Bush...
Bush’s belated support for free markets follows in Hoover’s footsteps. After leaving office in 1933, Hoover wrote books and articles defending free markets and criticizing the Democrats’ New Deal. Some of his criticisms of FDR were well-taken. Many New Deal policies actually worsened and prolonged the Great Depression by organizing cartels and increasing unemployment. But by coming out as a free market advocate, the post-presidential Hoover actually bolstered the cause of interventionism because he helped cement the incorrect impression that he had pursued free market policies while in office, thereby causing the Depression. Bush’s post-presidential conversion creates a similar risk: it could solidify the already widespread impression that he, like the Hoover of myth, pursued laissez-faire policies which then caused an economic crisis.
What should Bush now do if he genuinely wants to help the free market cause? The best thing would be to take up economist David Henderson’s half-joking suggestion that he “express his regret at nationalizing airport safety, carrying out illegal surveillance of U.S. citizens, raiding medical marijuana clinics, bailing out General Motors, AIG and other companies, and socializing prescription drugs for the elderly [the biggest new government program from the 1960s until the present financial crisis].” Bush could also point out that he advocated an ideology of “compassionate conservatism” that included vastly expanded government, and an “ownership society” that (in his own words) involved “us[ing] the mighty muscle of the federal government” to incentivize dubious mortgages of the kind that helped cause the financial collapse of 2008. The greatest contribution Bush can now make to free market policies is to dispel the impression that he pursued them while in office.
It is probably unrealistic to expect any politician to admit major mistakes or point out that he is now advocating policies vastly different from those he pursued while in office. So the second-best way for post-presidential Bush to support free markets is to say as little about the subject as possible. The more the cause is associated with him, the worse off it will be.
B.D. says:
GREAT post.
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November 17, 2009, 11:58 pmCato The Elder says:
I believe you’ve committed a crucial error in your counsel, Prof. Somin. Let me get this straight — you’re asking a former politician concerned about his legacy to subdue his ego for the greater good of a cause? Thanks again for the hearty laugh ;-)
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November 18, 2009, 12:10 amIlya Somin says:
Let me get this straight — you’re asking a former politician concerned about his legacy to subdue his ego for the greater good of a cause? Thanks again for the hearty laugh ;-)
I didn’t say he is likely to do it. Merely that he should.
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November 18, 2009, 12:12 amRicardo says:
After leaving office in 1933, Hoover wrote books, memoirs and articles defending free markets and criticizing the Democrats’ New Deal.
Ironically, Hoover in his memoirs attacked his Treasury Secretary Andrew Mellon in the following way:
Now, criticizing such a view need not be hostile to a free-market worldview. After all, Milton Friedman criticized the views of people like Mellon also. However, in the current crisis, some self-identified free market advocates have been quick to criticize the bailouts and to more or less agree with Mellon that a financial crisis is just punishment for firms that took excessive risks or which were managed incompetently.
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November 18, 2009, 12:15 amJohn Moore says:
I think you over-reach when you throw in his national security actions. Those were only statist in the sense that national defense requires government action. There are disagreements about what those actions should have been, but I hardly would have wanted libertarians in charge!
His Medicare prescription drug program, certainly statist, was unfortunately necessary and inevitable, because drugs were becoming a larger and larger part of medical costs, and the elderly were (are) already dependent on a Johnson created statist program (Medicare). As one approaching retirement age, I too will be dependent on that program, and I have yet to see a realistic proposal to take that out of government hands without leaving me and my cohort high and dry and dead.
As for the initial financial intervention... it looked at the time like government had to do something. If anything, Bush wasn’t statist enough in regulating the derivative markets (CDO’s were legally gambling until legalized under Clinton), which would have prevented the worst of this. Also, keep in mind that Bush tried to reign in the worst of the government-fed mortgage crisis, but failed (repeal of the CRA was not doable).
This is hardly to give Bush a pass on his economic performance, but a lot more is needed to take the label “big statist” on Bush than what you provided.
If Medicare prescriptions drugs is “vast expansions of government” to you, then you need to recalibrate. Also note that by injecting market-based measures in that program, it shows the way (ignored by the real statists now in power) to a better path than government monopoly.
Likewise, the TSA, incompetent as they are, do not represent anything “vast” — just annoying.
The TARP program was designed to be a temporary statist measure — not a permanent expansion.
So, I think you’re analysis of GWB falls very short in any sort of quantitative sense.
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November 18, 2009, 1:11 amRicardo says:
I agree in general, but do you have a citation for the “legalization” of CDOs under Clinton? I had always thought CDOs pre-dated Clinton and sure enough Wikipedia states the first Collateralized Debt Obligation was underwritten by Drexel Burnham Lambert in the 1980s.
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November 18, 2009, 1:23 amSteve says:
Just so we’re clear, do you believe we have had any Presidents since Hoover who were not “highly statist”?
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November 18, 2009, 1:33 ameyesay says:
I agree with Ilya that George W. Bush presided over vast expansions of government that helped cause the crisis, to wit, the trillion-dollar fool’s errand in Iraq. However, he also presided over vast contractions of government that also were very costly, including failure to inspect and reinforce the federal anti-flood system in New Orleans, failure to understand the significance of the August 6 memo and take appropriate measures, and failure to oversee the expanding use of bizarre financial derivatives.
As for the 1930s, Hoover did too little, and expanded government spending was made necessary because of the depression.
I shall not be bothered to respond to the inevitable comments here that deny the historic facts that federal government deficit spending helped end the depression, and that the temporary reversal in 1938 was caused by reducing government spending.
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November 18, 2009, 3:38 amvfwh says:
Hi there,
it’s not just about government spending vs. laissez-faire. Who you’re spending for is the key here.
Bush increased government control and surveillance for the average Joe (ballooning police state, eradication of habeas corpus, increased military and intelligence spending) and wildly expanded privatization and laissez-faire for large private corporations (the war budget is largely spent to private for-profit hands –HAL, Blackwater et al.-, telecoms immunity, no accountability for power, tax reductions for the “rich”, mega-bailout for wiped-out financiers, repeal of Glass-Steagal — by Clinton before him).
The other kind of government spending is the kind that spends money on the average Joe who needs it and takes it from where it is, the big, huge-profit corporations.
They may both be “government spending” (which tax reductions also are, BTW) and increasing the deficit, but they sure can’t be equated in terms of their social and economic value. One of them takes from taxpayers and gives money to corporations, the other takes from corporations and gives services to the tax payer. “The people”, you know? Who wrote the constitution.
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November 18, 2009, 5:00 amA. Zarkov says:
I think you mean Credit Default Swaps, not Collateralized Debt Obligations. The former are both forms of insurance and gambling. The latter simply got unrealistically high ratings from the ratings agencies. In principle there is nothing wrong with securitization of mortgages if you do it right and don’t try to make a silk purse out of a sow’s ear. Note that credit card debt has been securitized without much of a problem. Moreover I think the regulatory failure was the fault of Congress not Bush. Of course Bush was pushing for universal homeownership– even for illegal aliens.
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November 18, 2009, 5:14 amMark N. says:
It’s hard to say what the right thing to do on these are, though. Many markets suffer from the flaw that they can be played one of two ways: 1) in accordance with what the market is “officially” for; and 2) as a proxy bet on some underlying change. So, for example, you could buy a foreign exchange contract because you need the foreign currency, or because you need to hedge against changes in the foreign currency (say, you have some contract denominated in that currency coming due, or otherwise have obligations in it). But, it could also be because you want to bet that the foreign currency will go up or down. It’s hard to consistently distinguish those cases across a wide range of markets.
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November 18, 2009, 5:22 amA. Zarkov says:
Hoover did a lot,except he didn’t push relief programs. But today the mainstream position in economics is that FDR fiscal stimulus attempts failed. These comments by the economic historian John Nye are relevant to the current discussion.
I recommend listening to the entire podcast or reading the transcript here.
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November 18, 2009, 5:25 amBob from Ohio says:
Of course not. In fact, I bet he thinks a lot of the pre-Hoover ones were “statist” too. Wilson and TR for sure.
In the libertarian religious belief system, its still 1789.
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November 18, 2009, 7:41 amTweets that mention The Volokh Conspiracy » Blog Archive » Bush Continues His Uncanny Imitation of Herbert Hoover -- Topsy.com says:
[...] This post was mentioned on Twitter by Walter Olson, Josh Barro. Josh Barro said: Ilya Somin: “Greatest contribution GWB can make to free mkt policies is to dispel the notion he pursued them in office.” http://is.gd/4XEnP [...]
DYSPEPSIA GENERATION » Blog Archive » Bush Continues His Uncanny Imitation of Herbert Hoover says:
[...] Read it. … I noted some of the uncanny parallels between George W. Bush and Herbert Hoover: Both were president during a time of economic crisis; both presided over vast expansions of government that helped cause the crisis or at least make it worse than it might have been otherwise; finally both were (inaccurately) portrayed by their political opponents as dogmatic free market advocates, when in fact both were highly statist. After leaving the presidency, Bush is unconsciously imitating Hoover in yet another way — by rhetorically supporting free markets and criticizing the even more interventionist policies of his Democratic successor (which in both cases built on the expansions of government initiated by the Republicans who preceded them). [...]
David M. Nieporent says:
I think you should walk into a bank, stick a gun in the teller’s face, and say,“I didn’t bother to save enough money in my account here to pay my bills, so give me some from other people’s accounts or I’ll shoot you and take it.”
Just kidding. That would be immoral. If you get Congress to do that for you, then it becomes moral.
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November 18, 2009, 9:19 amPete Freans says:
both presided over vast expansions of government that helped cause the crisis or at least make it worse than it might have been otherwise; finally both were (inaccurately) portrayed by their political opponents as dogmatic free market advocates, when in fact both were highly statist.
Absolutely correct. FDR’s policy was a mere continuation and expansion of Hoover’s already interventionist agenda into free markets. Great post.
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November 18, 2009, 9:26 amMCM says:
Welcome to the social contract.
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November 18, 2009, 9:45 amRicardo says:
I would say the mainstream position is that fiscal policy was too small to make much of a difference throughout the 1930s. Whether it could have made a difference is the subject of all the current acrimony over fiscal multipliers. Additionally, it was accompanied by contractionary monetary policy (1930–1932), and, frankly, a bizarre and misguided obsession with focusing on preventing wages and prices from falling rather than focusing on stimulating demand. FDR and some of his advisers failed to realize that falling prices are a consequence not a cause of economic contraction. This led to absurdities like the government-mandated destruction of agricultural “surplus” at a time when people were going hungry in the streets.
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November 18, 2009, 9:48 amwm13 says:
That’s funny, because that’s what Sarah Palin says, for which Thomas Frank (in today’s WSJ) calls Palin a fool and a liar. If Prof. Somin had some intellectual courage, he would take on fellow members of the chattering classes, like Frank, rather than proving that he is smarter than politicians. But I have noticed that university professors almost never do that.
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November 18, 2009, 9:49 amMark Field says:
And the sad thing is, that libertarians have no clue what life was actually like in 1789. It was no libertarian fantasy world, it was a very regulated one, both socially and economically. It’s the social conservatives, not the libertarians, who seem to have a better sense of life then.
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November 18, 2009, 9:58 amAn Uncanny Imitation of Hoover « The moon in daylight says:
[...] However, we can admire his leadership and get real about his economic policies. Writing at The Volokh Conspiracy Ilya Somnin has the following advice for President Bush. Bush’s belated support for free markets [...]
egd says:
Well it’s good to know that once someone supports one form of government intervention they they can never oppose more forms of government intervention.
Do you support the government prohibiting the manufacture of child pornography? Yes? Then stop complaining about government policies that require you to buy health insurance, hypocrite!
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November 18, 2009, 10:47 amAllan Walstad says:
Straw man on top of straw man.
Good post, Prof. Somin. The least Bush could have done, if not apologize for expanding the welfare-warfare state, was to keep his mouth shut. That he can’t is just one more reason to despise the man.
And Sarah Palin may have arrived at a correct statement a la monkeys at typewriters. So what? What does that have to do with anything? It’s well understood that FDR prolonged the depression by pursuing precisely the opposite policies of what he campaigned on, basically just Hoover-on-stilts.
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November 18, 2009, 10:54 amuberVU - social comments says:
Social comments and analytics for this post...
This post was mentioned on Twitter by jbarro: Ilya Somin: “Greatest contribution GWB can make to free mkt policies is to dispel the notion he pursued them in office.” http://is.gd/4XEnP...
Randy says:
Links between Hoover and Bush? Well, both were male, so I guess there is a link.
Hoover at least accomplished things before and after his presidency. He standardized many industrial parts when he was Commerce Sec’y, and is considered the greatest we ever had. He helped modernize industry and business to their benefit. During and after WWI, he implemented programs to save people from starvation in Europe.
If you read his bio, you will find lots of wonderful things he did that greatly benefited the country and spearheaded many humanitarian projects. Bush’s name isn’t worthy of being spoken in the same sentence.
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November 18, 2009, 11:29 amRob in CT says:
Bravo, Randy. Hoover gets a bad rap, some of it deserved, but he was more than “just” a so-so President. His resume is pretty impressive, at least to me. Bush the Younger, on the other hand, has done nothing but fail. Hoover TOWERS over him.
As for this “the free market path hasn’t been tried” stuff well, yes. At least not since the 19th century, anyway. I, for one, do not wish to live in a 19th-century style system. I will vote accordingly.
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November 18, 2009, 11:43 amTony says:
@Randy — I’m sure one or two of the 50 million people liberated by Bush.
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November 18, 2009, 11:55 amTony says:
(cont) might not agree...
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November 18, 2009, 11:58 amJohn Moore says:
Typo. CDS’s, not CDO’s.
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November 18, 2009, 12:02 pmJohn Moore says:
David M. Nieporent says:
Or maybe you could take off your ideological blinders and look at how things really work with medical insurance. If you are a corporate employee most of your life (as I was/am), you usually have no choice but to get your medical insurance from them. That medical insurance is not portable and does you no good when you retire. If, during that time, you happen to develop pre-existing conditions (I did by age 30), then you cannot get out of the system and still get insurance. Also, of course, I have been forced to pay Medicare taxes my entire adult life.
I would also argue that the old social contract (pre-statism) was that the young took care of their elderly. Medicare is a socialized way of doing that. I don’t claim it is the best, but in our modern economy of specialization, it takes money, not just a community, to take care of the old. Or, we could all get Randist and just let them die off.
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November 18, 2009, 12:08 pmMatthew Bilinsky says:
Expecting George W. Bush to admit mistakes and accept responsibility would be like expecting a cow to bark and a dog to go “Moooo.” It’s just not in his nature or genetic make-up.
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November 18, 2009, 12:12 pmJohn Moore says:
vfwh:
I just love it when the left, the champions of the little people, unknowingly push strongly regressive tax policies. A corporate tax is exactly that. It is a consumption tax, paid by the customers of the corporation, who are ultimately the consumers. It hits the poorest hardest. Kudos to vfwh for a sane tax policy.
As for military/security spending — many of us believe that it is part of the most import justification for having a government at all: protection from evil doers. Bush’s spending was for that purpose, whether you agree with the specifics or not.
Even libertarians (those not too drunk on silliness) recognize that.
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November 18, 2009, 12:14 pmmariner says:
If you recognize that W was a big-government Republican his stance makes sense.
He believed that Reagan’s, his father’s and Clinton’s support for government was too little, and Obama’s is too big, but his own was just right.
Nothing to see here.
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November 18, 2009, 12:46 pmBill Alden says:
Bush’s biggest mistake was in thinking that you could boost the wealth of an advanced First World nation by importing millions of peasants barely literate in their own languages and expecting them (or their children) to become literate and educated in ours. In 8 short years (1996–2004) the percentage of California 19-year-olds in college fell from 43% to 30%, and every single reader here knows why. There is no real or theoretical government program that can change that. This movie doesn’t end well. It doesn’t end well at all.
Moreover, not one single senator, governor or presidential contender has acted in any way to put the religion of Multiculturalism out of its misery. It is now our new state religion*, with its own Inquisition, and we are now forced to continue to act on the same false assumptions that got us into this mess.
The really hilarious aspect of it is that members of the Big Business Party now think the poorly paid, leftist Latin labor they’ve imported is going to vote for low taxes and low regulation.
The best thing Bush could have done was to reduce legal immigration, control the borders and deport those illegally here. He didn’t do it. He won’t say he should have done it. Obama won’t do it. His successor won’t do it.
* YouTube Obama’s preference at Copenhagen for proof. His remarks come near the end, around 21 minutes.
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November 18, 2009, 12:55 pmBob from Ohio says:
Why don’t you explain why its a straw man. I don’t think it is.
Maybe its 1801 when Jefferson became president instead. Or some other long ago date.
The whole libertarian theory is there was a time when free markets and free men strode the earth. Then the heavy hand of “statist” government ruined everything.
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November 18, 2009, 1:06 pmBill Alden says:
Bob from Ohio: “The whole libertarian theory is there was a time when free markets and free men strode the earth. Then the heavy hand of “statist” government ruined everything.”
Well if you simply look at the growth of government spending from 1900 until now you’ll know that to be true — from roughly 5% of GDP to over 35% now. We might never have been truly libertarian, but we were certainly more libertarian.
We’ll never get back to that 5% — that’s our defense spending alone — and we’ll never even get back to 30% if current demographic changes aren’t reversed.
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November 18, 2009, 1:15 pmmariner says:
Bill Alden:
They don’t need to. Big Business lobbyists will ensure that they won’t bear the immediate economic consequences of either regulation or taxes — those will fall on “the other guy”.
Witness for example the CPSIA, which is putting craft businesses and thrift shops out of business while Feds snoop on garage sales.
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November 18, 2009, 1:54 pmguy in the veal calf office says:
This doesn’t contradict anything in the post, but Hoover was vastly more accomplished outside his presidency than Bush.
I think Hoover was the most accomplished person to hold that office since the founders era. (Check out his biography one day, its an incredible list of enduring successes.) His disastrous presidency shows that experience, sound judgment, smarts and accomplishments are not enough for the office. I’d nominate as a key ingredient: humilty in person, and in assessing unintended consequences of the exercise of presidential power.
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November 18, 2009, 3:10 pmJohn Moore says:
Clue: The “big business” party is whatever party is in a position to help or hurt big business. Thus the Democrat party is the “big business” party. Even worse, it is a corporatist party — buying off (or blackmailing — the distinction is minimal) specific big business interests (but not little business) in order to get support for certain policies.
Clue 2: Labor Unions are a big business.
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November 18, 2009, 3:27 pmLN says:
We had a lot more respect for property rights back in the day before Lincoln came in and “freed” the “slaves.”
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November 18, 2009, 3:35 pmAllan Walstad says:
The first comment is simply a gratuitous insult tenuously related to the substance of the discussion at hand. The second elaborates upon the first. Got some real arguments?
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November 18, 2009, 3:38 pmLeo Marvin says:
You said that like you expected anyone to object.
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November 18, 2009, 4:46 pmOren says:
We might also never get back to Cholera, widespread illiteracy or rural areas without electricity.
In all seriousness, that additional 30% of the GDP buys something that the populace (putatively) approves of.
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November 18, 2009, 4:53 pmjosil says:
If Bush did nothing else in his two terms, he earned the good will of many citizens by sparing us from regimes led by Gore or Kerry. This is not a partisan comment so much as an observation of character–a rather old fashioned virtue.
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November 18, 2009, 6:27 pmLeo Marvin says:
No, nothing partisan there.
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November 18, 2009, 6:51 pmJohn Moore says:
In all seriousness, that’s correct, but not an excuse for all of it.
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November 18, 2009, 7:21 pmDaily Right 11/18/09 « The Quantum Conservative says:
[...] *Bush Continues His Uncanny Imitation of Herbert Hoover, by Ilya Somin. [...]
eyesay says:
John Moore write, “I just love it when the left, the champions of the little people, unknowingly push strongly regressive tax policies. A corporate tax is exactly that. It is a consumption tax, paid by the customers of the corporation, who are ultimately the consumers. It hits the poorest hardest.”
Please cite credible econometric research across industries and across decades that establishes that U.S. federal corporate income taxes are passed on to consumers and not borne at all by corporate employees, management, or shareholders — or, for that matter, are are not paid “for free” to some extent by spurring corporations to innovate and be more productive. Does the answer depend on the amount of international competition faced by the industry?
“As for military/security spending — many of us believe that it is part of the most import justification for having a government at all: protection from evil doers. Bush’s spending was for that purpose, whether you agree with the specifics or not.”
That may have been his intent, but we now know that Saddam Hussein did not have “WMD”; he posed little threat to U.S. security — in sharp contrast to Al Qaeda and evil doers living in Pakistan and Afghanistan, which Mr. Bush failed to contain.
We also know that Bush fabricated the evidence for WMD and encouraged the CIA and others to do so as well; the need to fabricate evidence casts doubt on whether he ever had any in the first place, which means in turn that his purpose was never to protect America from evil doers but rather to reward certain favored corporations in the United States, such as KBR, Blackwater, Halliburton, etc.
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November 18, 2009, 8:04 pmJohn Moore says:
Would one of the lawyers here furnish me whatever phrase you guys use when it is not necessary to cite the bloody obvious?
The WMD issue was but one threat to US interests — there were many more cited in the justification. As for Pak and Afghanistan, if Bush screwed that up so much, how come it took them so long to return to being a problem?
Right, and he did such a marvelous job that it totally fooled everyone in Congress who voted for the war (including the most vociferous, if amnesic, critics later), and the intelligence agencies of several allied countries. Give that BS a rest, okay? It’s sold old it’s getting moldy.
I assume you are being sarcastic, right?
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November 18, 2009, 8:15 pmeyesay says:
John Moore: “bloody obvious” is not an argument. Economists have a model called “supply and demand” to explain the behavior of producers and consumers — I assume you have heard of it? And I assume you realize supply and demand are functions of price? It is easy to draw supply and demand curves for which the imposition of corporate income taxes would result in the taxes being paid partly by the supplier, and therefore by the supplier’s owners. Since you’re the one asserting it, the burden of proof is on you to establish that corporate income taxes are borne entirely by consumers.
In John Mooreland, the more successful lying is in deceiving others, however temporarily, the more virtuous. Next!
I was not being sarcastic, and I have no idea why anyone would infer that I was.
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November 18, 2009, 9:11 pmJohn Moore says:
The hell it’s not.
You can blather all you want about this and that complexity, but ultimately, taxing corporations raises prices for those who consume the goods of the corporation. I am not claiming it is a 100% linear relationship or anything like that, because that is simply irrelevant to the fundamental fact. If you don’t understand that fact, or if you need a cite to show you that, then you are being outrageously clueless, which you aptly demonstrate with:
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November 18, 2009, 11:21 pmRandy says:
Tony: ” I’m sure one or two of the 50 million people liberated by Bush.”
I didn’t know we had that many people in US prisons, or that Bush liberated them. Anyone else know who these phantom people were?
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November 19, 2009, 12:37 ameyesay says:
Here’s a mathematical example, deliberately contrived just to illustrate the point. Suppose the demand for widgets is unlimited at $25.00 and zero at $25.01. Assume as usual an upwardly-sloped supply curve; suppliers can produce more widgets if the price is higher. In this scenario, suppliers will sell as many widgets as they can manufacture for $25.00. Now suppose a corporate tax is imposed that works out to $2.00 per widget. Then suppliers will sell as many widgets as they can manufacture for $25.00 after taxes, which is $23.00 before taxes. Sales of widgets will be less, but the price will still be $25.00, and the suppliers will have less profit because they won’t manufacture the widgets they could have produced in the region where their production cost ranges from $23.00 to $25.00. In this deliberately contrived example, the tax results in less profits for producers, but the consumers still pay the same $25.00 per widget. In real life, the demand function wouldn’t have such a sharp kink, but it’s still easy to see that if demand is highly elastic (a steeply-sloped demand curve) and supply is inelastic (a nearly flat supply curve), most of the cost of a tax on suppliers would, in fact, be paid by the suppliers.
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November 19, 2009, 3:13 amvfwh says:
John Moore:
Well I guess that settles it then.
eyesay:
Nice to have at least some people making the effort to substantiate their views with refutable points, instead of making irrefutable assertions (which are pretty much how religion is defined, in terms of its relationship to science).
Fiction:
Reality:
What “many of you believe” (here’s that belief system as the root of thought again), is of very marginal interest to reality, you know?
The point I was making was not about what you do or don’t “believe”, it was about the fact that releasing the “government spending” mental pheromone doesn’t even begin to tell the story of what’s actually going on. It’s what people actually do, what things actually happen, that matter.
Not what religion you “believe” is behind the actions.
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November 19, 2009, 5:05 amA. Zarkov says:
Judical Notice.
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November 19, 2009, 2:33 pmA. Zarkov says:
You are correct so far as the mathematical model goes. But we have two problems.
1. In not clear that in real life, you could ever get the required elasticities so that the consumer doesn’t pay most of tax.
2. Those demand and supply curves pretty much only exist inside economists heads. Have you ever seen real curves derived from actual data? Every economic textbook I have ever seen present the curves as artists conceptions.
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November 19, 2009, 2:41 pmRichard Aubrey says:
I missed the profit margin on the widget.
Is it more or less than $2.00?
In addition, we have the primary manufacturer selling the things retail. Doesn’t always happen.
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November 19, 2009, 4:55 pmSuperSkeptic says:
Fascinating thread; the parts having nothing to do with the topic of the post. Wish I had been here yesterday.
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November 19, 2009, 7:47 pmEric says:
Beg your pardon, but you say that Bush should apologize for bailing out corporations like AIG, this makes no sense to me whatsoever since Obama presided over the corporate bailout, am I missing something?
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November 20, 2009, 12:33 amEric says:
Eyesay, you’re knowledge of economics is atrocious. Really? You actually need proof that raising corporate taxes raises the prices consumers have to pay? What next, going to demand proof that water is wet.
Here, I’ll try my best:
When a company has an expense foisted upon it the company distributes the expense along its products for the sake of analyzing revenues and expenditures. When this happens the point where marginal costs equal marginal revenues rises so companies companies have to raise prices or otherwise lower costs by laying off workers or reducing supply, all of which would have a similar monetary effect on the country, you can’t impose arbitrary taxes without some negative effect on the economy.
As to your assumptions: unlimited demand, how quaint, but this is real world effects not arbitrary theoretical ideas.
Regardless of the state of the widget market companies have to make up for the expense somehow and in this world where economic decisions in China affect the fortunes of millions in America to assume that a tax increase will have no effect on consumers is ludicrous.
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November 20, 2009, 1:07 amJohn Moore says:
Eric, sadly, it looks like you did have to explain that water is wet.
But you did a good job of it.
I didn’t bother, because nobody of any interest is going to be fooled by eyesay’s attempt to obfuscate the obvious.
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November 20, 2009, 1:16 ameyesay says:
Zarkov, yes, I have seen supply and demand curves based on econometric data, and no, I don’t claim that my example represents any particular industry. I gave the example to support my earlier remark to Mr. Moore, “Since you’re the one asserting it, the burden of proof is on you to establish that corporate income taxes are borne entirely by consumers.”
Richard Aubrey, the profit margin cannot be determined from what I supplied in my example. I postulated an upward sloping supply curve. I didn’t specify what it cost to produce the first widget. In my example, some widgets could be made for less than $23 each, and additional widgets beyond some point could be made for between $23 and $25, and beyond that point, widgets could be made for more than $25 each. An upward-sloping supply curve is typical of many industries, although not of microchip manufacturing, where the first one costs a lot and each additional costs very little. You are right that for simplicity’s sake, I assumed no middleman. Relaxing that assumption would not change the fact that if demand is highly elastic and supply is highly inelastic, most of the costs of a tax on producers will be borne by the producers.
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November 20, 2009, 1:36 amvfwh says:
Fascinating. It’s like watching ID vs. evolution debates.
“But the rotating flagellum is just to complex to have evolved! It’s bloddy obvious!”
Eric: companies don’t decide at what price they sell, like eyesay tries to explain and which you don’t respond to (“How quaint” is not a response). You also feign to ignore the massive amounts of profits reserves in the chain that can very well bear at least certain targeted taxes, at least provided there is a political context for it.
That taxes put pressure on costs: yes, that’s true, in the manner you show it does to an extent.
That this is transferred automatically to consumers, no, that’s not true, as eyesay shows.
That taxes actually come out of profits, not costs or revenues, is something you prefer to ignore.
That most companies manage their analytics and cost distribution above the EBITA line is also true, and that’s the limit of your demonstration.
Generally, though, as you so-called libertarians (because of course invading and occupying by force another country that you want to appropriate resources from, at the cost of hundred of thousands of lives, is so true to the libertarian ethos, isn’t it?) always decide to ignore, are the actual, real, wealth-creating and justice-creating aspects of taxes. You don’t ignore them because your so-called economic science bears you out, you do so on ideological grounds, because John Galt told you so. You just believe in a self-contained system of explaining the whole world, which has very tenuous links to empirical information. In other words, religion.
None of us has a system for explaining the way the world works that is actually predictive. There is empirical data, there are some sort of rules that we can infer, but, mostly, things happen that are not modeled like that. Things happen because people want them to happen for all kinds of reasons.
Bush didn’t cut taxes and increase security spending because science says it’s the right thing to do or he is a libertarian. He did it because his posse is rich and doesn’t like taxes, and because his posse digs oil and power.
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November 20, 2009, 5:13 amAN OVERVIEW FROM THE PATRIOT POST | RUTHFULLY YOURS says:
[...] market policies is to dispel the impression that he pursued them while in office.” –Ilya Somin, Associate Professor at George Mason University School of Law AKPC_IDS += “1127,”;Popularity: [...]