Martin Lewitt (2010.02.21.0831 MST) --
[From Bill Powers (2010.02.21.0635 MST)]
Martin Lewitt (2010.02.20.1634 MST) --
Time series data are often autocorrelated. Your independent variable (tax policy changes) only changes a dozen or so times, presumably there is a time lag analysis you should do and then test whether the amount of time between changes is enough for the dependent variable to fully respond. The statistical significance of your correlation should be reduced by the amount of the auto-correlation.
I think Rick probably knows this, since he has taught statistics and experimental methods (including writing a book on the latter). I don't quite see what you're getting at here -- you seem to be arguing on Rick's side by agreeing that there are no data favoring the idea that reducing taxes increases growth; all you're saying is that the evidence indicating the opposite is not as strong as it might seem to be. That doesn't show that decreasing taxes increases growth. Are the data he is talking about highly autocorrelated? Your generalization may be true, but you didn't say whether it applies in this case. Do you know?
Rick had opportunities to show a little insight into the possible problems with his simplistic analysis and didn't. The assumption is that the data is autocorrelated until it is shown that their not, it would be a mere coincidence if an annual sample rate of convenience turned out to be the effective sample size. Rick's analysis uses top marginal rate as a proxy for the whole tax structure which ignores for instance the total tax burden and the available of effective tax avoidance behaviors, he knows that over the last few decades factors like Federal Reserve policy and the price and availability of oil were important influences yet didn't include them in his analysis. He didn't include time delays in his analysis. I'm not saying that evidence indicating the opposite is not as strong as it might be, I don't see Rick's "evidence" as indicating anything.
You also seem to be sidestepping another point made by Rick: he said "Several times in recent years I have seen statistics showing that for the last century or so each time the ownership of all the country's resources owned by the top 1% of the population has increased until - with the latest one I've seen (within the last year) - it has reached over 80%."
Your reply (which I can't find just now) was addressed to income, I seem to recall, not ownership. Ownership of resources is a little different, including as it does the means of production.
I've never seen such as statistic, so I assumed he intended the more readily available income statistic. I'd be interested in seeing it. Are you sure it includes the means of production? Does it include the extent to which they are encumbered by debt, i.e., net value? Does it include financial assets? Has it been updated since the disappearance of $5 trillion or more dollars worth in the collapse of the recent bubble? Does it distinguish between foreign and domestic ownership? individual and corporate ownship? I wondered if it was land area based and if it accepted market valuations, which might value ridgetop view property or national parks more than agricultural land. etc. Was ownership of US treasuries included ... what exactly do those owner's control? I'd be interested in the analysis.
Shannon Williams brought the discussion back to what I think is the most important underlying issue, though she expressed it in such a way that it seemed she was agreeing with you (a tactic that I have also used and found to backfire every time). I think the underlying issue has to do with control of one person's behavior by another person. Ownership of resouces makes this easier; the owner of a business can say, for example, "This is my business. If you want to work for me, you will do as I tell you, or I will find someone else who will. I make the rules; you live up to them if you want to work here." That is often cited by thinkers like Ayn Rand as proving that managing a business is prima facie evidence of moral and mental superiority. That isn't the only way to see it, of course.
Now remember, I was the one agreeing almost completely with you. You were controlling for zero fascism and I was close to zero. I think Ayn Rand's point was not that ownership or managing a business was evidence of moral and mental superiority, she gave plenty of examples by leading characters where it wasn't. Creation and productivity and excellence in managing and in other activities such as art, music, etc. plus careful avoidance of coercive behavior were evidence of moral and mental superiority.
If ownership is control, mere title doesn't tell you who is the owner. Who owned General Motors? Was it the executives who made decisons, the stockholders, the bondholders, the government, the environmentalists, the courts, the unions?
Without this factor of ownership of important resources, it becomes much harder to control other people. That was the appeal of communism -- if the people own the means of production, they can't be controlled in that way. Unfortunately, this experiment was doomed by quickly being embedded in a highly coercive and easily corrupted system of government: it was transformed into a dictatorship instead of the lovely comradeship initially imagined. Milder forms of socialism have worked a little better, but have been unable to deal with the "propertarians" as Ursula le Guin called them. Once one has control over others, apparently, giving it up becomes almost impossible. Maybe it's just too dangerous -- considering the things the owners have done, they might get a little panicky at the idea of losing the protections they enjoy.
The "people" owning the means of production doesn't seem to work beyond the natural human scale of the team, squad or village. The "people" tend to start devaluing the "person" once he gains the anonymity of a mere number. Humans are vulnerable to divisive collective identities, fanaticism and cults of persnality. That is why it is important to have cultural support for a government structure that explicitly emasculates these vulnerabilities with checks, balances, and standards, rather than a complacent, trusting and hopeful culture.
It is a hypocritical of the progressives and and Democrats to complain about the concentration of ownership in the US economy, when their policies have been important contributors to it, and the Republicans have favored broader distribution of ownership. Democratic tax policy favors leverage over equity financing, so assets on the stock market are highly encumbered with debt. This increases their riskiness, since when an individual company encounters difficulties or in any general economic downturn, most profits disappear completely and signficant losses can occur. Since the returns to equity are double taxed, even a well managed profitable but unexciting company has difficulty generating after tax returns greater than a lowly time deposit account. The Democrats have turned the stock market into a high risk casino, where highly leveraged assets have little net value other than the power that comes from controlling them for a fraction of their true cost. It should come as little surprise that the stock market attracts speculators and those seeking power, rather than savers seeking a return. Power, volatility and speculatively high potential growth rates are what is valued on the market.
GW Bush proposed social security reforms that would have greatly broadened ownership of the economy and have given ordinary retirees ownership in their retirement plan that could be passed to their heirs. The Democrats opposed it.
I was in graduate school during the Carter double digit inflation. It was a broad based economic education for the general population. Students were actively managing their financial situations, investing in gold, silver, money market and stock market mutual funds. By the end of the Carter administration, the people had adapted to inflation. Companies were adapting as well and the reduced burden of debt was increasing their ability to move production from the less efficient rust belt to the more business friendly south. Reagan's tax policies were going to result in a boom of investment and persuit of energy independence, at least that was the perception, which in markets is often determines the reality. After the election however, Paul Volker cracked down on the economy hard "to break the inflation psychology" costing the economy hundreds of billions of dollars and the growth that might have been compounded from it. Reagan's more gradual plan for producing our way out of the inflation represented a lost opportunity for converting the economy to broad based equity ownership, by an actively involved educated populace. Like Bush, he wanted to eliminate the double taxation of dividends and reduce or eliminate capital gains taxes. The temptation to hold onto power by the owners of corporations is great, so even without the double taxation, they might favor debt over equity financing where they have to sell some ownership. For that reason, I actually advocate gradually reducing the deductiability of interest payments, perhaps capping it a one or a few million dollars.
Control is more relevant to PCT than some other issues, isn't it?
Best,
Bill P.
Like you, if I can't be at or near the top of the fascist pyramid, and how many of us can, I want none of it. If I'm not the one in control of others, I at least want control of myself. Sure it would be nice to be a Castro and have prime access to females with the best genes and my own culture and economy to play with. But, I'm not sure I could as efficiently employ the tools of terror as he did. It is something about the way I was raised. If Castro left me Cuba, like Akhenaten, I might not last long, those who had fed at the trough of the old religion would take me out.
Martin L