Thursday, August 18, 2011

Assault of Thoughts - 8/18/2011

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- Russia and the EU announce they are teaming up to put a man on Mars. I am guessing we'll hear more announcements this November when the cosmonauts are released from their 520 day Mars mission training.

- Paul Krugman and Dean Baker to a great job explaining how relative prices are related to aggregate prices and macroeconomic processes. The other day Peter Boettke asked "how can someone build a "general theory of anti-Mulliganism" without rejecting the use of microeconomics to understand macroeconomic problems?". I don't know what's so hard about this for him. The responses to Krugman and Baker have been grounded in microeconomics and the implications of microeconomics for macroeconomics. Casey Mulligan confuses relative price differentials for aggregate prices and lots of people have been saying this. Nobody is criticizing the use of microeconomics to understand macroeconomics - they're criticizing Mulligan's poor approach to that very problem.

- Megan McArdle talks about how beneficial exclusive schools are. I don't care so much about the result she reports as I do about the method. She's refering to an NBER working paper that uses one of my favorite quasi-experimental methods - regression discontinuity designs. It's very good to see that (1.) this method can be easily explained to readers by journalists, and (2.) nobody is second guessing it because it's not experimental. I'm going to be presenting a regression discontinuity evaluation of a job creation tax credit this November, which brings me to...

- Obama is announcing a new approach to jobs which apparently has a new hire tax credit. Very good news. It could be a lot more, but this is a good option for him to come back to.


  1. McArdle has an MBA from Booth.

    So Obama proposes adding greater complexity to the tax code? Let's all get behind that! Anyway, tax credits for hiring the unemployed isn't new (there are plenty of "targeted" tax credits for that sort of thing right now - hiring people who fled NOLA after Katrina for example).

    Speaking of McArdle, here's her classic article on tax credits here:

  2. Of course it's not new - if it were new I wouldn't have been able to do an evaluation of one state's program!

    It hasn't been used at the federal level for several years now, though. There have been several federal programs in the past. To be clear, though, this isn't a "tax credit for hiring the unemployed" - it's a tax credit for hiring anyone. And research shows there's a big distinction between those two approaches.

    McArdle's analysis (the portion that I read quickly through) in your link is a good standard application of basic comparative statics to taxes.

    As for the

  3. As for the ... ?

    Hiring anyone within the borders of the U.S. as long as they have proper documentation. I assume that is what you mean. It is just another "Buy American" type program and quite flagrant and reductionist in its protectionism.

  4. As for "complicating the tax code", I'd agree with you in most cases but disagree in this case.

    When you're taxing labor income (either through an income or a payroll tax) you are intervening in the labor market. Most of us think this is a reasonable intervention to raise revenue for the government (you may not - that's immaterial to my point and doesn't need to be discussed here). So I think it's reasonable to design a labor income tax that impacts the labor market in a way that benefits society.

    That means:

    1. If we think the labor market doesn't achieve basic levels of equality we want as a society, it is reasonable to make a progressive income tax (there are other arguments for a progressive income tax that have nothing to do with concerns about equality, of course).

    2. If we want to change the way the income tax impacts labor supply, we can have supply side adjustments like the EITC.

    3. If we want to cahnge the way the income tax impacts labor demand, we can have demand side adjustments, like these job creation tax credits.

    To me, EITCs, tax brackets, and job creation credits are all tweaks to an labor market tax that ensure if we raise money through the labor market we make the implicit distortions to that market in a way that we want to make them. So I don't consider these things to be bad instances of "complicating the tax code". Taxes distort markets. If we're going to distort markets we ought to distort it in a smart way. Labor market related credits and complications seem fine to me for a labor market tax.

    A much less tenable complication of the tax code for me is when you load up all kinds of other credits that have nothing to do with the market you're taxing. So I'm not unsympathetic to the spirit of your point, but I think you apply it in the wrong way. If we're going to introduce a distortionary tax on the labor market, we ought to have a free hand to design that distortion in the way we want to - both on the labor demand and the labor supply side. Mortgage interest deductions, green energy credits, education credits, child care credits, etc. etc. are quite different from things like the EITC or a job creation tax credit.

  5. As for going to Mars, I'm skeptical. For governments it is a prestige thing at best, and that wears thin awfully fast with publics.

    If you're going to fund space research via the government why not just spend modest amounts on looking for oxygen-bearing planets?

  6. Daniel,

    I stand by my case; it complicates the tax code (and will probably lead to more arbitrage of such) and looks like protectionism to me.

  7. Not that I disagree we should be collecting information on other planets, but what exactly does finding out about an oxygen-bearing planet do for you? Interstellar travel seems a long way off, even for me and I'm relatively optimistic and resistant to writing off near-future technological leaps. We have the technology to get to Mars right now. Anyone who can anticipate a technological leap enabling interstellar travel should easily be able to anticipate a technological leap enabling permanent Martian colonization.

    Indeed - regular trips back and forth to Mars are likely to foster innovation in space-faring technology and habitation that will be crucial to interstellar travel.

  8. That life possibly exists on those planets obviously; a planet can only sustain large amounts of oxygen in its atmosphere via biological processes (oxygen otherwise becomes fixed in rocks, etc.). The Earth would lose oxygen in its atmosphere and it would slowly dissipate to a very low concentration if it were not for the life that exists on it. So oxygen is clue #1 that said planet may have life.

    You're not going to get regular trips back and forth via the state; you're going to get a couple of one off missions at best (in the mean time the government will crowd out legally or otherwise folks who want to privately go there).

  9. BTW, this is why the moon has so much oxygen fixed in its rocks (well, really oxides like SiO2); if you could (via either a chemical or a physical process) release the oxygen atoms you could of course use such for a moon colony's oxygen supply.

  10. re: "if you could (via either a chemical or a physical process) release the oxygen atoms you could of course use such for a moon colony's oxygen supply."

    And not just oxygen, but also fuel and water.

  11. I would guess that Mars' surface is also littered with oxide rich rocks (I don't know much about the physical chemistry of Mars); you could, for example, heat the rocks and that would release the oxygen atoms stored therein. Electrolysis is another way to force a chemical reaction to occur.

  12. Right Gary - it's obvious why we want to know whether oxygen is there, but what does knowing that do for you? There is almost certainly life in the universe. It would be nice to know where it might be, but with current constraints on interstellar travel I'm not sure what that's supposed to do for us.

    re: "You're not going to get regular trips back and forth via the state"

    Right. We have agreed on this in the past. This doesn't mean that there's no role for a public space program, though. While I would like to see Elon Musk or some other private actor put the first person on Mars, I don't think that hope (and really not just a hope - it's my expectation) is any excuse not to push it in the public sector too. You always act like these are mutually exclusive, and I'm not sure why. Space travel and several other things are almost certainly going to be done in the private sector. Support of initial colonization, perhaps some space infrastructure, and perhaps initial pushes to Mars or to interstellar travel are perfectly fine areas for the government to get involved in. But absolutely I don't think we should expect to have regular trips back and forth via the state.

  13. I knew that seminar I took on the early Earth's chemistry would come in handy some day. ;)

  14. Well, that's where you start looking for WOW signal 2.0.

    So what you need to do if you want to advance knowledge along those lines is send out a robotic mission to Pluto to set up a telescope that can more accurately find planets which are oxygen bearing (there are a number reasons why being so far out increases the ability to find and survey planets using the old standard light spectrum method). That's a high-risk mission obviously, but that is the sort of thing you'd want to pursue IMO.

  15. "You always act like these are mutually exclusive, and I'm not sure why."

    Because of our experience with the moonshot. NASA did a great deal to kill any private rivals.

  16. Do you think the signal was anything?

    I don't know enough about radio waves (or whatever they were looking at) to say.

  17. I think it is possible; if it was then it wasn't a direct communication - it was just an internal conversation of some civilization (ship to ship or person to person on a planet or their version of the latest pop hit or whatever). I know a some astronomy, etc., but I know next to nothing about radio telescopes, etc.

    SETI has put out some cool videos on candidate signals:

    The problem with looking up anything ET related on YouTube is that you end up with a lot of garbage links.

  18. The European Union is no position to announce anything except its inevitable downfall.


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