22
Jun
11

Clearing out some tabs…

…mostly from Megan McArdle’s guest-bloggers.

First we have a question that seems straightforward on its face:

No, not that question; this question:

Yesterday, Cheap Talk contributor and Northwestern University economics professor Jeffrey Ely posed an excellent question to me:

Suppose you had a choice between only two policies: A) grotesque pictures or B) increased per-pack taxes calculated to generate exactly the same reduction in demand. Which do you prefer?

It’s well-known that consumption taxes are regressive, and that tobacco taxes are particularly regressive even for consumption taxes.  I don’t know that we should let regressiveness bother us in this case, though: both alternatives are predicated on the assumption that policy can make people choose to stop smoking (or never start), so in this thought experiment we’re stuck in the simple-minded land where lotteries are a tax on innumeracy and gambling addiction doesn’t exist (or can be overcome with nothing more than an heroic exertion of will).  And besides: health-care costs, Social Security, debt-service payments.  Aren’t those arguments sufficient to persuade us to take the revenue-generating option?

Ms. Knapp isn’t so sure:

This is a tough question. To me, as disturbing as the photos are, raising already regressive-taxes (assuming that current levels of taxes with discount rate already more than offset the costs to government of people smoking) is bad policy. Smokers may quit or not start, but without a larger revenue stream no new vested interests would be created.

(Emphasis added.)

Debt-service payments, meet public choice.  Once thuh gummint starts making significant amounts of money from people smoking, it has a strong incentive to keep people smoking.  (Some might argue that this has already happened.)  Sin taxes have Laffer curves too.

——

Next on the not-McArdle list, Adam Ozimek has a pair of posts on immigration:

I love running into data like these, and I’m going to post each and every one I find until people quit being stupid hateful tribalist cockvomits about immigration:

On April 20, 1980, Fidel Castro made an important contribution to the social sciences. His unexpected declaration that the port of Mariel would be temporarily open to any Cubans seeking to flee the island served as a natural experiment that has helped labor economists understand the impact of immigration. In his now classic paper, economist David Card convincingly showed that the massive influx of 120,000 Cubans increased the labor force of Miami by 7% yet had almost no impact on the employment or wages of natives.

(Emphasis added.)

But how can this possibly be?  Don’t immigrants, like, steal our jobs and stuff?  You didn’t think I was going to let this one go without proposing a mechanism, did you?

One important reason is that immigrants aren’t just workers, but also consumers. Economists Bodvarsson, Lewer, and Van den Berg studied the Mariel boatlift and found that migrants increased labor demand enough to offset the increase in labor supply so that there was no negative impact on natives that one might otherwise expect when labor supply increases drastically. This result shouldn’t be surprising. Immigrants buy stuff, that means businesses sell more, and they need to expand and hire new workers.

Next question: isn’t this just Keynesian stimulus with a Hispanic accent?  “Immigrants buy stuff, which means businesses sell more” sounds an awful lot like “Governments issue debt to finance buying stuff, which means businesses sell more”, doesn’t it?  Not hardly.  The focus should be on who’s doing the buying (and thus the selling), not on how much buying and selling is going on.  I am vastly underqualified to speculate with any degree of authority on the differences between the two mechanisms, but I’m gonna speculate regardless: my guess is that immigrants, being free-willed individuals with their own ideas of what they want, create new and more diverse patterns of sustainable specialization and trade, while government stimulus tends to wind up reinforcing underfunded government programmes (as most of the states did with their federal stimulus funds) or buying new projects from well-connected contractors who aren’t wallowing in the paradox of thrift.

Now, about those jobs immigrants might take:

If you’re not going to let illegal immigrants do the jobs they are currently being hired to do, then farmers will have to raise wages to replace them. Since farmers are taking a risk in hiring immigrant workers, you can bet they were getting a significant deal on wage costs relative to “market wages”. I put market wages here in quotations, because it’s quite possible that the wages required to get workers to do the job are so high that it’s no longer profitable for farmers to plant the crops in the first place.

[…]

Importantly, the more competitive the final goods market (meaning the market for the product that the workers are being hired to make) the flatter the labor demand curve will be. If the market is competitive, then a small increase in prices will cause buyers to shift to a competitors products. This means that a firm’s (or in this case, a farmer’s) profits are sensitive to small shifts in input prices. In the case of agriculture, where one farmers crops are usually very comparable with another farmers, the market will be highly competitive and the demand curve will be flat. This problem is even more exacerbated when the demand is for Georgia farmers in particular, since retailers who buy their products can shift to farmers in competing states.

All of this is to say if you’re going to stop illegal immigrants from doing a job you should be prepared for the job, and perhaps even the business itself, to go away. You may think this is worth it, but you should at least be acknowledging the risks and weigh them against what, if anything, you think is being gained.

Funny how that works.

——

Finally, we have an unholy mix of petroleum and plutonium interacting with groundwater.  Put on your Hysteria Hats, everyone: it’s time to whip yourselves into a panicked frenzy!

[…] years ago, in […], groundwater flows containing dissolved uranium from nearby […], met a zone of petroleum. The petroleum de-oxygenated the water, and the uranium precipitated out of solution. At least 16 separate naturally occurring reactors went critical for a period of around […] years, producing heat, highly radioactive fission products, and approximately two tonnes of plutonium.

Now before I fill in the blanks, I want you to speculate on the circumstances — and especially the perpetrator — of this horrifying atrocity.  Was it BP?  The French government?  TEPCO?  Blackwater?

Would you believe… Mother Nature?

Two billion years ago, in what is now the Gabon, Africa, groundwater flows containing dissolved uranium from nearby igneous deposits, met a zone of petroleum. The petroleum de-oxygenated the water, and the uranium precipitated out of solution. At least 16 separate naturally occurring reactors went critical for a period of around 100,000 years, producing heat, highly radioactive fission products, and approximately two tonnes of plutonium. These are the Oklo nuclear reactors.

Somebody needs to tell Gaea to get her shit together and follow the Narrative.

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