Categories:
Income Distribution
Social Security
This is a link to a talk I gave last month in Carmel, California. The talk is titled “Economic Inequality: Popular Misconceptions and Important Facts.” The hosts were the owners of a house that used to be owned by actress Joan Fontaine. The sponsor was the California Arts & Sciences Institute.
My talk begins at the 1:30 point and goes to the 40:44 point. Then there’s pretty lively 30-minute Q& A.
One very interesting part of Q&A was our discussion of Social Security.
READER COMMENTS
Ahmed Fares
Feb 17 2024 at 3:28pm
A very good video which shows David Henderson’s love of economics and love of teaching.
There is a point in the video at the 29:30 mark where people are asked to choose between two options:
Button A: Reduce inequality; slow growth; people rise slowly
Button B: Increase inequality; higher growth; the poor rise quickly and the wealthy rise even more quickly
The answer is not so simple.
There is a debate in economics between absolute poverty and relative poverty. Relative poverty can lead to social exclusion. Option B reduces absolute poverty while increasing relative poverty.
The answer is some balance between the two options.
David Henderson
Feb 18 2024 at 1:58pm
You write:
What would be an in-between option?
David Henderson
Feb 18 2024 at 1:58pm
Oh, and thanks for your compliment, Ahmed.
Ahmed Fares
Feb 18 2024 at 2:33pm
Like Scott Sumner, I favor a progressive consumption tax.
If you are not taxing consumption . . .
I think in terms of resources, not money. A progressive consumption tax would spare Buffett who lives a frugal lifestyle and hit hard at John Travolta instead. Taxing Buffett doesn’t release resources, but taxing Travolta does because the resources he consumes in jets could be used for education, healthcare, etc.
A Look At John Travolta’s Jet Collection
Because taxing Buffett doesn’t release resources, the extra spending by the government causes inflation, which means the neutral rate of interest rises, causing a burden on the poor. Taxing Travolta gives you both money and resources, so the neutral rate of interest doesn’t have to rise. It might even fall.
As for the right tradeoff between absolute poverty and relative poverty, I don’t have an exact answer for that. But I have no problem with giving up that last $10k of per capita income to achieve a more equitable and compassionate society.
Canada (I’m Canadian) has made that trade-off, and I think we have a better society because of that.
BS
Feb 26 2024 at 11:28am
In the long run, low-growth countries will fall far enough behind high-growth countries that the former start to look impoverished. We (Canada) can’t expect to keep up with the US merely by drafting in its wake, and it’s too close for people to ignore the manifest differences without becoming discontented.
Bill Conerly
Feb 17 2024 at 11:01pm
This is an excellent explanation for lay audiences. Highly recommended.
David, I wish you would write about this: at 49:25 you are asked if the rich should pay more in taxes. It’s not clear whether you come to your answer from a philosophical viewpoint or an economic efficiency viewpoint.
You could address why Jeff Bezos has a greater responsibility than I do. Even better, two people of similar backgrounds and talents. One likes leisure time and shuns overtime and other income-producing opportunities. The other person loves overtime, works a second job on weekends, trying to get to a luxurious retirement. Why does that second person have a greater responsibility than the first?
I’m truly not sure where I stand on the issue.
David Henderson
Feb 18 2024 at 2:03pm
You wrote:
Thanks, Bill.
You wrote:
I’m not clear myself. Economic efficiency would probably dictate a regressive tax so that the distortion on the margin is less. But you would still have high income people paying more in taxes.
You wrote:
The way you’ve set it up, which I admit applies to many cases, he doesn’t. Maybe I’ve been chastened by Maggie Thatcher’s attempt to move to a head tax for local government and the fact that that cost her the prime ministership and cost the U.K. big time because of the governments that followed.
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