Thread in which the world laughs at America

[Tupac Shakur]

All the more reason to prefer consumption taxes, which are easier to enforce...

[Kuciwalker]

Wealth is a lot more than deferred consumption.

Wealth is insurance against bad times/etc, it is a safety net.

"Insurance" is deferred contingent consumption, Jon.

[Jon Miller]

It is a good though, independent of the goods you are deferring.

JM

[Kuciwalker]

Jon, the value of the self-insurance you "purchase" by having $X is reduced exactly in proportion with the consumption tax levied, because if there is (e.g.) a 20% consumption tax that $X can only insure against a loss up to 0.8 * $X.

[Lorizael]

I had a dream last night that KH and Kuciguar had finally convinced me that their macroeconomic views were right, and I was arguing with my hyper-liberal brother about taxes.

[Kuciwalker]

Tax policy isn't macro.

[Jon Miller]

Except you are not including the increase of wealth due to investment.

And that doesn't even matter. You are saying that the only value of wealth is deferred consumption. That the choice that people make is between getting a donut now and getting 3 donuts in a year (and that these choices must be balanced/etc because of the market). I am pointing out that wealth is more valuable, because of the insurance aspect.

Additionally, how much wealth is considered as insurance changes due to governmental factories (distortionary for the market). For people like my grandfather, who grew up long ago, wealth is an important part of insurance. For someone like my girlfriend, living in South Africa without the social protections and with the very low poverty level, wealth is the most important insurance and so extremely valuable. For someone like myself with easy access to credit and little depending on me (and due to my student loans, not able to save up relative wealth significantly) the low amount of wealth I can develop is not very valuable as insurance and I would rather use the money to visit my girlfriend a couple times a year.

JM

[Lorizael]

Tax policy isn't macro.

It was a dream.

[Kuciwalker]

Except you are not including the increase of wealth due to investment.

Jon. Srsly. Think through this. Any increase in wealth due to investment is hit levelly by the consumption tax, when that wealth is consumed.

And that doesn't even matter. You are saying that the only value of wealth is deferred consumption. That the choice that people make is between getting a donut now and getting 3 donuts in a year (and that these choices must be balanced/etc because of the market). I am pointing out that wealth is more valuable, because of the insurance aspect.

INSURANCE IS JUST DEFERRED CONSUMPTION THAT ONLY OCCURS UNDER SOME FUTURE STATES OF THE WORLD. ITS VALUE IS NECESSARILY DIRECTLY REDUCED BY THE RATE OF TAXATION ON THAT FUTURE CONSUMPTION.

[Jon Miller]

This is actually a significant difference between myself and others. Because of the currently relatively low rate that I can acquire wealth and my consumption choices, I don't actually acquire any wealth at all. If my income was higher, and I had the opportunity to acquire wealth at a higher rate versus various consumption cases, I would place higher value on increasing my wealth.

My girlfriend, in a country without much of a safety net and with a large part of the population making less than 9000 usd per year (and a minimal apartment is 1000 usd per month), values increases of wealth much more than I.

JM

[Kuciwalker]

My girlfriend, in a country without much of a safety net and with a large part of the population making less than 9000 usd per year (and a minimal apartment is 1000 usd per month), values increases of wealth much more than I.

Jon those numbers don't even add up.

[Jon Miller]

Jon. Srsly. Think through this. Any increase in wealth due to investment is hit levelly by the consumption tax, when that wealth is consumed.



INSURANCE IS JUST DEFERRED CONSUMPTION THAT ONLY OCCURS UNDER SOME FUTURE STATES OF THE WORLD. ITS VALUE IS NECESSARILY DIRECTLY REDUCED BY THE RATE OF TAXATION ON THAT FUTURE CONSUMPTION.

I don't care if it is taxed or not.

I am pointing out that it is more than just deferred consumption.

Let's point out something from my own life.

This last year, I visited my girlfriend 3 times. If I had deferred my consumption (maybe visiting her once instead of 3 times), maybe I could visit her 3 times next year in addition to the 3 times I would be able to due to my income/expenses. This is deferred consumption. I did not do this, it was not valuable enough.

If I felt that I could visit my girlfriend 1 times this last year, and that by doing so I would be able to visit her 1 time this next year even if I lost my job (as well as living/etc as I could) then this would be an insurance effect. There is the differed consumption of being able to visit her more times in the coming year. That is definitely not worth it (as described above). But there would also be the insurance effect of being able to visit her and live even if I lost my job. Then it would become worth it.

Of course, in real life my living expenses/etc cost too much compared to visiting my girlfriend. If I deferred my consumption of visits, I would just be getting more visits next year and it wouldn't provide an insurance value.

JM

[Lorizael]

Tax policy isn't macro.

Also, I know virtually nothing about economics at all (and thus try not to have strong opinions about the subject), but wikipedia would seem to indicate that tax policy is a part of fiscal policy, and fiscal policy is a part of macroeconomics.

[Jon Miller]

My girlfriend, in a country without much of a safety net and with a large part of the population making less than 9000 usd per year (and a minimal apartment is 1000 usd per month), values increases of wealth much more than I.

Jon those numbers don't even add up.

Yes, this is why South Africa is screwed up.

There is a huge housing shortfall, yet there are a bunch of empty apartments because they cost too much to rent for the people to afford (and many of those who do rent end up putting 2+ families into a two bedroom house). Nice jobs in South Africa, like a Call Center, might pay $18000 usd. Not nice jobs (like security guard) might pay $7000 usd.

There are a lot of people living in tiny aluminum shacks....

JM

[Kuciwalker]

I don't care if it is taxed or not.

I am pointing out that it is more than just deferred consumption.

And failing, because your example - insurance - is just itself deferred consumption!♠