I’ve long argued that economists should take more stock in introspection.  Now Karl Smith argues that economists should take more stock in conversation:

[F]or example if you asked someone – why didn’t you move to San
Francisco or conversely, why did you move to Raleigh. Plenty of people
will say, the cost of living. Indeed, it’s a meme. Everyone knows that its cheaper to live in the South and this is a reason you might consider living there when you other wise wouldn’t.

This is a strong clue that prices might be influencing folks location
choices. And I mean clue. Its not definitive but it should make your
ears perk up and say, “hmm is what is going on here what everyone thinks
is going on.”


There are a ton of phrases and terms for not working because of the
welfare state:  “Put in my time”; “Hanging in there ’til 63”; “Mooching
off the system”; “Welfare queens”; “Mailbox money” etc.

This is a thing that people talk about. That is a clue that it
probably exists or at least that they mean to be talking about
something. What that is, we would want to check and be sure.

Compelling.  But I think Karl is too hasty to use conversation to question the impact of taxation on behavior:

Causal empiricism just didn’t support the notion that taxes are a big deal.

The reason is that people aren’t talking about them in a way that
they would talk about something that was a big deal. Oh, they complain
sure but that’s not what I mean…


When you ask why didn’t you take that job at the bank do people say, well you know the tax bracket thing?

There is not even an easy way to describe not working because the
after tax income made it not worth it. If there are no terms for it,
then that’s a clue people aren’t talking about it, which in turn means
that they aren’t likely doing it.

Now, maybe we could have missed something and people are talking
about it but in some sort of subtle way or in a way where they are
confusing causes. Sure, I think those things are real possibilities.
However, then someone should be able to find those phrases or terms. To
my knowledge no one has.

Two points:

1. I often hear people say that doing some more X to make extra money “isn’t worth it, especially considering Y.”  Common Y’s include transportation costs, childcare costs, and yes, taxes.

2. Proclaiming your responsiveness to taxation tends to come across as arrogant: “Oooh, I’m doing so well that I don’t even bother.  Especially in my tax bracket.”  People muffle their conversation accordingly – especially when they might be talking to people who don’t face comparable tax incentives.

Either way, though, I applaud Karl’s methodological open-mindedness.  You’d be surprised how much you can learn about economics just by listening to people.