Is it feasible to switch from an income-based tax system to a wealth-based tax system

[Imran Siddiqui]

This money that is saved is a drain on the economy and it is also the increase of the financial wealth in the country.

In just about all economic theories, savings = investments. A decently high savings rate is something that is pushed. For example, the only reason why Americans high marginal propensity to consume isn't a problem is because foriegns tend to invest a lot in the US. In other countries (like Japan) a high marginal propensity to save is worthwile because those savings make up a majority of investment (because there was little outside investment).

But I was talking about undeveloped land. Sure you can "invest" your money in raw land, speculating that someone someday will pay you more than you originally paid, but you could make the same "investment" with tulip bulbs or a pile of dog poo.

Raw land has traditionally in the US been used as an investment oppertunity. Many people still do it today (my parents did, for example). Raw land is much better investment than tulip bulbs. To say otherwise is really not understanding the value of land.

[DuncanK]

Originally posted by Imran Siddiqui

This money that is saved is a drain on the economy and it is also the increase of the financial wealth in the country.

In just about all economic theories, savings = investments.

This is just a foolish assumption. No economist will claim to really believe that it is true (not in this century anyway). Foolish assumptions are common place in economics. Savings = Investment even less often than the economy is at full employment, which is another foolish assumption which is made.

Originally posted by Imran Siddiqui
A decently high savings rate is something that is pushed.

Only if you are more concerned with increasing peoples wealth than you are in increasing peoples income and the amount of goods and services produced in the nation.

Originally posted by Imran Siddiqui

But I was talking about undeveloped land. Sure you can "invest" your money in raw land, speculating that someone someday will pay you more than you originally paid, but you could make the same "investment" with tulip bulbs or a pile of dog poo.

Raw land has traditionally in the US been used as an investment oppertunity. Many people still do it today (my parents did, for example). Raw land is much better investment than tulip bulbs. To say otherwise is really not understanding the value of land.

Purchasing land does not increase the production of goods and services unless the new owner is more productive with it. The purchase of raw land itself is only for speculative purposes if you don't develope it.

[Imran Siddiqui]

This is just a foolish assumption. No economist will claim to really believe that it is true

Economics is all assumption (and most foolish). You actually believe that ceterus parabus can actually occur? In the formulas used in economics classes all over the country, it is taught that Savings = Investment in order to simplify theories.

And really, it makes sense. Like pointed out banks take the money you put in there and make money off of it by investing it.

Only if you are more concerned with increasing peoples wealth than you are in increasing peoples income and the amount of goods and services produced in the nation.

Consumption isn't the only way to increase people's income! You MUST improve technology and that is where investment comes in, and for all intents and purposes savings (which goes into banks) gets invested into the market by the banks that hold the money.

Purchasing land does not increase the production of goods and services unless the new owner is more productive with it. The purchase of raw land itself is only for speculative purposes if you don't develope it.

I'm thinking you don't understand the definition of investment. Investment is, by its nature, speculative. People will always invest in favor of future, speculative profits. It is integral to the idea of investing.

[DuncanK]

Originally posted by Imran Siddiqui
I'm thinking you don't understand the definition of investment. Investment is, by its nature, speculative. People will always invest in favor of future, speculative profits. It is integral to the idea of investing.

I'm talking about the type of investment that results in the production of goods and services. I've repeated that serveral times in this thread. Your just arguing with me as though I have not made this distiction. This type of investment is the component of GDP that is calculated.

Of course, even the purchase of factories and such are speculative. That is totally beside the point.

Ah, what the hell... You're not trying to understand anything here. You just want to argue that you are right, even when you know otherwise.

[Imran Siddiqui]

I'm talking about the type of investment that results in the production of goods and services.

Uh huh... that's not true investment, its only a part of it. Its not like making up defintions to established words will get you far . Taking part of the definition and applying it to the whole doesn't work too well.

On the cash flow statement and in economics, investment means spending that results in an increase in assets. This includes capital spending on plant and equipment, i.e. a real increase in the means of production; but it also includes any swelling of unsold inventory, which can indicate a problem with consumer demand.

Residential investment mainly refers to the purchase of homes.

Annual business and residential investment respectively make up about 12% and 4% of the GDP;

http://www.moneychimp.com/glossary/investment.htm

Can you explain to me how swelling of inventory results in the production of goods and services? Hell, since it makes up part of GDP and you assert your definition is the GDP Investment, I want to know how that fits.

Does the purchasing of homes (without any improvements made to it) increase goods and services?

Btw, so do you think Investment Banks don't really invest?

Investment is the use of current income to accumulate capital assets and thereby expand productive capacity for the future. Saving is the deferral of consumption possibilities to the future by spending less than the total income available.

Businesses invest in factories, commercial buildings, machinery, equipment, inventories and some intangible types of capital assets such as corporate knowledge, human capital and customer good will. Consumers invest in housing and financial assets. Governments invest in social infrastructure such as roads, ports, schools, hospitals, museums and defence assets.

Investment is made possible by saving, with banks and other financial institutions facilitating the flow of savings to investors.

http://canadianeconomy.gc.ca/english/economy/investment.html

Emphasis mine (and this is an economic defintion).

Investment made possible by saving with banks? Hmmm...

[DuncanK]

Originally posted by Imran Siddiqui
[i]Investment is the use of current income to accumulate capital assets and thereby expand productive capacity for the future.

Ah, so you do know what I'm talking about when I'm talking about investment.

The other type of investment that you are talking about is called speculation by economists, and is considered a leakage of the economy because it reduces the amount of goods and services produced in the economy. Do you understand that?

[Goingonit]

I actually asked somebody who does have a B.A. in Economics, who said, "in economics, savings is generally assumed to be equal to investments."

And investment has nothing to do with GDP except insofar as it results in money changing hands.

As you see to be, I'm getting really tired of this argument. Thus, I will source my argument so you have someone else to rant at. I quote: "Total savings are equal to total investment." http://www.j-bradford-delong.net/mac..._glossary.html - a glossary from a macroeconomics textbook, written by the Chair of Berkeley's Political Economy of Industrial Societies.

Furthermore, any investment that makes you money accumulates more capital for you. If you buy stock in a business, the goal is for that business to grow, and thus for your share of its capital to grow, resulting in capital gains. You don't need to go buy a machine; you can invest in a company that you believe will buy a machine that you will own part of. You are investing by proxy.

[Imran Siddiqui]

You definition is incomplete. Savings and Housing do not immediately lead to the production of goods and services, yet the defintion I quotes (which you only took part of) states that savings makes investment possible. WITHOUT savings there is no (or little) investment!

So, we come to the beginning. Savings are important and without it investment does not result, which is WHY economic formula tend to have Savings = Investment.

Do you understand that?

--

Oh, psst: land is a capital asset. By purchasing it you 'expand productive capacity for the future' and thus is investment under the defintion you so loved (and cited).

[Goingonit]

To add to Imran, I very much hope that you don't disput that you need three things for production: land, labour, and capital.

[Imran Siddiqui]

I actually asked somebody who does have a B.A. in Economics, who said, "in economics, savings is generally assumed to be equal to investments."

Well I could have told you that, and I DO have a B.A. in Economics (Rutgers University, 2002) as well.

I tire of this as well. Duncan seems to want to ignore all economic theory to try to make his point.

[DuncanK]

Originally posted by Goingonit
And investment has nothing to do with GDP except insofar as it results in money changing hands.

no no no. I realize you are tired but what you are speaking of is called a transfer payment. Why should a new factory not be included in GDP? In fact it is.

[DuncanK]

Originally posted by Imran Siddiqui
Duncan seems to want to ignore all economic theory to try to make his point.

Imran, first let me apologize for being short.

Now, since you have an interest in economic theory that me direct you to the theory of Adam Smith. He wrote a book called "The Wealth of Nations."

You see people used to believe just as you that the best thing to do is increase the amount of wealth (in this case gold) that people held. In his book, Adam Smith argues that only the production of goods and services (the income of a nation) is of any importance to that nation. The gold that nations were trying soooo hard to collect was only really hurting the nation.

[Goingonit]

Originally posted by DuncanK
no no no. I realize you are tired but what you are speaking of is called a transfer payment. Why should a new factory not be included in GDP? In fact it is.

Form the same source I used before, GDP is "The total amount of final goods and services produced. By the circular flow principle, equal to the total income earned through domestically-located production."

Thus, the building of a factory, because it is the production of a good/serivce, is part of GDP. But the point I was trying to make is that investment is not special in GDP, it's just in GDP because it involves production of goods and services.

[Goingonit]

Originally posted by DuncanK


Imran, first let me apologize for being short.

Now, since you have an interest in economic theory that me direct you to the theory of Adam Smith. He wrote a book called "The Wealth of Nations."

You see people used to believe just as you that the best thing to do is increase the amount of wealth (in this case gold) that people held. In his book, Adam Smith argues that only the production of goods and services (the income of a nation) is of any importance to that nation. The gold that nations were trying soooo hard to collect was only really hurting the nation.

You have just confused currency (in this case, specie) for wealth. WEALTH IS THE SUM OF THE VALUES OF ALL GOODS OWNED. mining gold (or printing currency) neither increases or decreases wealth. The nations were striving after currency, which is bad. BUT CURRENCY IS NOT WEALTH.

Now you have patronized someone who actually does have a BA in economics (Imran), and misinterpreted one of the greatest economists ever.

[DuncanK]

Originally posted by Goingonit


Form the same source I used before, GDP is "The total amount of final goods and services produced. By the circular flow principle, equal to the total income earned through domestically-located production."

Thus, the building of a factory, because it is the production of a good/serivce, is part of GDP. But the point I was trying to make is that investment is not special in GDP, it's just in GDP because it involves production of goods and services.

ok, right