Yesterday Reuters business and economics columnist Felix Salmon posted the graph above, the “chart of the day”. His conclusion?
If you were structuring a tax code from scratch, it would look nothing like this. But the problem is that tax hikes seem to be politically impossible no matter which party is in power. And since any revamp of the tax code would involve tax hikes somewhere, I fear we’re fiscally doomed.
Or, shorter, we’re screwed.
Although Mr. Salmon’s column includes most of what needs to be said about the graph (you can click on it for a larger image), I think I can add a little. First, note that the total level of federal taxation has remained, except for during periods of booms and bubbles, persistently below 18%. The only times it has ventured above 20% was during the dot-com bubble.
Second, this is not a partisan issue. Federal taxation’s share of the economy has remained in the vicinity of 18% under Democratic administrations and Republican ones, with Republican congressional majorities and Democratic.
Third, the highest income earners are those best able to shield their income and wealth from taxation and the most motivated to do so. As the federal government has become increasingly dependent on these earners and as their share of income has grown, federal tax revenues have grown increasingly vulnerable. Even if we were to eliminate FICA max, the highest wage on which employment taxes are levied, the highest income earners would take less in wages and more in dividends or other forms of income. Were we to raise marginal income tax rates above a certain level, they would move or otherwise shield their income abroad. Americans have shown little willingness to tax wealth; a declining inheritance tax suggests the opposite if anything. It has long been my view that a prime objective of our ruling plutocrats, particularly those in the Senate, has been to prevent such a thing from occurring. Note, for example, that even the farthest left millionaires in the Senate have never proposed a wealth tax.
In a fiscally sound system a ceiling on the federal government’s share of GDP would also impose a ceiling on the federal government’s spending commitments but, alas, that isn’t the case. The burden of proof that a system in which federal revenues as a share of GDP rises markedly is a political possibility is on those who suggest that’s the case. Pointing to a few stray billionaires who take to the op-ed pages of the country’s newspapers to proclaim their willingness to pay higher taxes does not constitute such proof. Were these billionaires and many of the rest of the ultra-rich to pay taxes above what they’re compelled to by law, which there is no barrier to their doing, it would constitute proof. Their urges to others to pay higher taxes while they exploit the tax code to their own benefits is merely proof of hypocrisy not proof of intent.
Cultures are malleable but they are not infinitely malleable, they are not deformable equally in all dimensions, and the propensities of different cultures for the ways in which they will allow change to take place vary. Over the period of the last 70 years the American culture has changed enormously in many ways. We are more egalitarian than we were 70 years ago. We are far more eager to extend federal benefits and to accept them than we were 70 years ago. We are far more predisposed to go into debt than we were 70 years ago. All of that is completely consistent with America’s populist nationalist (Jacksonian) strain of political thought.
We are not willing to allow taxes to rise above a certain level and it looks like that level is below 20%. That’s consistent with Jacksonian thought, too.
I like your analysis much better than the idea that there is a phoney-baloney “law” which limits tax receipts. Like you, I think it is historic US political (in)tolerance to tax.
And yeah, if that’s true, set spending to match.
(Oh, can I assume that the chart before 1950 does not look so steady?)
See here for 1900 to 2010. With the exception of a very brief period during WWII, the federal government’s share of GDP has, in general terms, been at its ceiling level over the period of the last 70 years. Prior to that it was lower.
Thanks Dave.
So we have seen that tax revenues can shift with a major shift in cultural self-identity (New Deal) or in total debt level (WWII).
I see (via NationMaster) that Denmark has been pretty stable at 30%.
We are due a realignment of some sort, which is of course what the battle is all about.
With state and local taxes, the U.S. is at about 30%, though state revenues appear to have been showing more incline than federal revenues.
PD Shaw beat me to part of my response. See here for state spending as a percent of GDP and here for federal, state, and local revenues as a percent of GDP. As you can see, we’re already at around 30% overall and there’s an apparent total ceiling of around 33%. The two spikes are bubbles. Not sustainable.
It goes back to my point about malleability. I see little evidence that U. S. culture is infinitely deformable in the direction of expanding government revenues.
For one thing this isn’t 1930. Federal revenues aren’t currently at 8% of GDP.
I guess that 30% from NationMaster must have just been the national tax in Denmark. This WikiPedia page puts them at 50%, and in apples-to-apples, US at 28%.
http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP
PS – Whenever someone makes a claim like “I see little evidence […] culture is infinitely deformable” we know they’ve yielded a lot.
(As a point of rhetoric, don’t bother with weak claims ;-))
22% of revenue in Denmark is in the form of a VAT and “[s]ince the 90’s, VAT and duties’ percentage/share has been around 32-33 %.” So some fairly large portion of the differential is taxation not observable by the citizen.
Denmark says it’s tax burden is overstated because it is unique in taxing transfer payments.
http://www.skm.dk/foreign/english/taxindenmark2008/section1howistaxrevenuegenerated/
I think the primary problem with the comparison is geography. I would assume there is more trust and transparency with regard to government spending in a small state.
Denmark is one of the largest countries in the world!
(I like to count Greenland ;-))
Because there has been some volatility in state revenues, I’m a little skeptical that the federal “ceiling” is all that firm. I suspect that has more to do with the structure of the tax collection system, and the prevalence of deductions.
It’s precisely the opposite. The burden of proof is on whoever is proposing a change. There is enormous distance between “could&@148; and “will”. Could the United States impose a total of taxation arbitrarily high? Of course. We could also elect to repeal the First Amendment, become a monarchy, and all sorts of things.
The question is will we? Pointing to the example of a small constitutional monarchy with a population relatively homogeneous compared to the U. S. with enormous differences in politics, history, and people isn’t particularly convincing. I think that the history of the U. S. as well as current politics suggest that there’s a ceiling on what Americans will accept as a total level of taxation.
Maxwell James:
The volatility you point to is a consequence of the high dependence of state revenues on property values and retail sales. I don’t think we’re going to have either sharply increasing property values or sharply increasing retail sales and I think that we’ll see slow or no growth in incomes for the foreseeable future.
A federal VAT would be catastrophic for states whose budgets are already reeling.
Given that we have steadfastly not been solving this debt problem, I think it is an open question which breaks first, our resistance to spending cuts or our resistance to tax increases.
If we continue our spending, that leads to a cultural shift, and a more European (not just Danish) evolution.
Or, we could pull in our spending horns, and decide we are old-style Americans after all.
But I think you judge that latter course as pretty unlikely as well.
(One of the odd things here is that I am actually more open to real spending cuts than most Republican. I’m willing to do things as radical as reducing college enrollments (for BS majors). The people who in these threads take me to task about how it should all be spending cuts don’t actually name cuts as easily as I do. They are actually, pro-spending.)
Yeah, in my current cynicism, I think Americans are more attached to their spending than most admit. They’ll have to increase revenue, or they’ll have a full on debt crisis.
There’s a ceiling on what we’ll pay in taxes and a floor under what we’ll accept in services. Unfortunately we’re left with a poorly constructed home in which the floor appears to be above the ceiling.
Nobody ever said politicians can build a structurally sound building.
This trend line is being matched against the trend line of Medicare. No one has been willing to take on Medicare, or if they do, think IPAB, it is used against them.
Steve
It’s nice to see Hauser’s Law getting more mainstream recognition from the pundits and analysts.
I agree with all of Dave’s comments. His analysis is quite sound, especially his points on “could” and “will.” I also agree with PD Shaw’s points, which support Dave’s points, and vice versa.
To John’s point about how to balance the budget, I noted that I advocated doing that without tax increases when we all played with the NYT app. We don’t have a problem of too little national revenue leading us to deficits, our problem is too much spending on social programs.
“Hauser’s Law” is what I meant by “a phoney-baloney ‘law’ which limits tax receipts.”
No one serious, seriously believes it.
“our problem is too much spending on social programs”
That, and the people who love them.
jp, how many tax cuts did the U.S. agree to today? I don’t know if it’s a law, like supply and demand, but I can’t remember when a national debate on tax policy wasn’t framed between more tax cuts versus less tax cuts. Mondale?
One other thing about the Danish. They pay a 1% income tax to be members of the established church, and a little over 80% of them are members. That’s a different world.
Hauser’s Law†is what I meant by “a phoney-baloney ‘law’ which limits tax receipts.â€
Your objection is duly noted. Your objection is simply one of nomenclature, not one of substance, for you haven’t invalidated the empirical observation that increasing marginal income tax rates doesn’t much affect income tax revenue as a percent of GDP.
That, and the people who love them.
Yes, you’re right, they too are a problem. I’m glad that we agree on the main point, which is that our problem is not that we aren’t collecting enough revenue. The problem is that people like to get free stuff and stick others with the bill.
One other thing about the Danish. They pay a 1% income tax to be members of the established church, and a little over 80% of them are members. That’s a different world.
Exactly. This ties in to Dave’s point about cultural homogeneity. People with a high sense of shared values are more civicly cooperative.
I don’t know why you guys get hung up on Demark not as a placeholder for “something different” but as something that “is different?”
Good lord, since they have an Established Church, we can never be like them in any way!
Go ahead, address that list of 30 or 40 countries with total tax rates above our own. I bet you can name one point of difference between each one of them, and us.
Do you really think that proves anything?
I’d say the interesting thing is that those 30 or 40 countries are very different amongst themselves, and yet they do have tax rates exceeding this bullshit Hauser’s Law.
Unmovable object = Hauser’s Law
Irresistible Force = Medicare.
They are meeting soon.
Steve
Unmovable object = Hauser’s Law
Irresistible Force = Medicare.
They are meeting soon.
That’s very clever. And true.
I’d say the interesting thing is that those 30 or 40 countries are very different amongst themselves, and yet they do have tax rates exceeding this bullshit Hauser’s Law.
Let’s go for round #2 and see whether you will deign to address this question in this go-around:
Why do you feel it important to note what other countries are doing and presume that we can achieve the same result and yet ignore empirical evidence from the last 60 years which clearly shows we haven’t?
I’m really not understanding the mental model you’re operating from. Over the last 60 years the US has grown more diverse. Over the last 60 years the US has raised and lowered its marginal tax rates. You’re proposing that we increase the top marginal tax rate once again and you’re predicting that this time the results will match what we see in other countries and we will not be bound by Hauser’s Law. What do you see as different this go around which will result in a different outcome than what we’ve seen in the past 60 years? Wishful thinking doesn’t count as an answer.
Dave raises a very good point. Economists often lament that our tax system is just horribad. A tax system could be constructed to raise about the same amount of revenue and be much less burdensome. In public finance there is a vast literature on optimal taxation. That is how would you structure a tax to collect a given amount of revenue so as to minimize the (estimated) deadweight loss. Hall and Rabushka have come up with a flat income tax that would have many characteristics of a VAT. These kinds of things could reduce the inefficiencies our current system impose on our economy and save us billions every year in terms of tax preparation costs.
It is a no brainer when looking at the issue like your typical economist. Switching should be done and the sooner we commit to such a change the better. But we don’t. Why not? Because we have accountants, tax attorneys, and cottage industries that are are starting to look like some pretty good sized mansions that have a vested interest in keeping the tax system as is…confusing, cumbersome, and creating economic efficiencies all over the place. Add on the influence of the rich to get beneficial tax treatment for this, that or the other thing, and you have: our crap system.
Basically, if we could wipe the slate clean and put into place a new tax system that reduces these inefficiencies and made it hard to mess with we could expect to see higher economic growth and that would likely mean higher levels of employment. Granted this is a little simplistic and bit pie-in-the-sky, since few politicians would relinquish such power, but it just underscores once more why democracy really is a crap from of government…it might be the best we got, but it is still crap.
“Why do you feel it important to note what other countries are doing and presume that we can achieve the same result and yet ignore empirical evidence from the last 60 years which clearly shows we haven’t?”
Because your “law” is imbecilic.
It rests on the incredible notion that American humans are separate and distinct from “Humanus Europinesis” or “Humanus Asianis” and thus the only possible future for Americans, is identical to the American past.
Good lord, look at the real estate bubble and credit crisis we are experiencing now. Japan had it, but since they ate raw fish, and we don’t, and it never happened here in the last 50 years, it never could, right?
“bounded by Hauser’s Law”
What bullshit. No one serious believes seriously in Hauser’s Law. The only people who love it are web cranks in back comment threads.
And note that a disbelief in this bullshit law does not presume an outcome. I said above that it will break one way or the other. When it comes down to low taxes or benefits, Americans will someday choose which they love more.
All they’ve done so far is ignore that.
Here’s what’s really going on. Americans will someday choose which they love more: low taxes or high benefits.
Some people think they can Astroturf that conversation with a bullshit law that presupposes the outcome.
Bottom line.
(Steve V. is right. This should be a moment of reinvention.)
Well, how do you know that Hauser’s law doesn’t apply, but just that the ratio or government revenue is higher? Could tolerance of tax rates be a cultural thing? Might the Europeans be more willing to tolerate higher tax rates?
Your “evidence” is totally inadequate I’m afraid. Simply noting that two countries have different rates that they don’t go above does not invalidate the claim. It could very well be that tax preferences are different in the two countries. You might be right, but you have yet to demonstrate that you are. And yes, Hauser’s law could still be wrong despite your failure.
“Well, how do you know that Hauser’s law doesn’t apply, but just that the ratio or government revenue is higher? Could tolerance of tax rates be a cultural thing? Might the Europeans be more willing to tolerate higher tax rates?”
Sorry, you just agreed with me.
“Could tolerance of tax rates be a cultural thing?”
Yes, and cultures shift, particularly at break-points which force reinvention.
(You certainly know Steve that the American culture of the 00’s is not the American culture of say the 70’s.
Remember Nixon? How many things did he do where are now anathema to Republicans?)
Oh, and I’m not going to accept that Hauser’s Law is “true” when it really means that tax burdens shift with cultural perceptions, social contracts.
Maybe they are in their preferences or tastes. In some research using evolutionary game theory in economics there has been work on Homo parochius. Maybe there is something to this.
I don’t think anybody is saying that. But Americans might have a lower tolerance for taxes than say the Japanese…or not. It is an empirical question and one that can be tested. As the marginal tax rates change in Japan does the amount of revenue remain roughly stable?
Think of it this way, I’d say far more Americans oppose government provided universal health care than you’d find in your typical European country. Is that significant? Maybe it is and why Hauser’s law might be true and relevant, but that each country would have its own limit.
First off the “social contract” concept is bullshit. I never saw a contract and was never offered and opportunity to sign it…or not. Kinda funny considering your response to the concept of Hauser’s law.
And yeah, Hauser’s law might not be a hard and fast number, but one that can change as social perceptions and preferences change. If people become more accustomed to paying higher taxes then a refinement of the theory is that locally (i.e. for fixed periods of time) there is a fairly hard upper-bound.
I’m fine with Americans saying that Americans have certain preferences, currently.
I’m fine with this too:
http://en.wikipedia.org/wiki/Hauser's_Law
But that’s not what (I thought) I was being asked to buy up-thread.
I’m still eagerly awaiting a the reasoning for discounting 60 years of empirical data in favor of wishful thinking based on what is happening in other societies. Which has more relevance to the issues that confront the US today, our own past attempts to raise tax rates and the consequences that followed or what other countries do, or did, and the consequences that followed in their societies.
What is it that they call a person who keeps doing the same thing over and over again and expecting a different result each time?
“First off the ‘social contract’ concept is bullshit. I never saw a contract and was never offered and opportunity to sign it…or not. Kinda funny considering your response to the concept of Hauser’s law.”
Even an asperger should be able to see other people acting to implied commitments. They are not fixed, and are often contested, but they are certainly there.
“I’m still eagerly awaiting a the reasoning for discounting 60 years of empirical data in favor of wishful thinking based on what is happening in other societies.”
I guess it wasn’t obvious that I deny the validity of your data set. I said it many ways above.
Steve got it, when he addressed the wider European examples and how they relate to …. social contracts.
But that’s not what (I thought) I was being asked to buy up-thread.
Didn’t I write a response to you which indicated that it appeared that you were arguing against nomenclature. I get that you object to the classification of this 60 years of empirical evidence as a law of economics. Fine. Let’s call it Hauser’s Conjecture. The evidence is still pertinent. Why ignore the evidence and place all your chips on what is happening in Belgium or in Finland?
Tango, do you grasp this:
“Thus, he concluded that the Law represents a socio-political policy trend rather than a true economic law and that the trend could change rapidly.”
I guess it wasn’t obvious that I deny the validity of your data set. I said it many ways above.
Please explain why you deny the validity of the data set.
Please explain why you deny the validity of the data set.
“Thus, he concluded that the Law represents a socio-political policy trend rather than a true economic law and that the trend could change rapidly.
Your data set is for one path through American history, with its accompanying social (and technological) innovations.
One path is very little in the scale of things. That is, when discussing all possible futures.
Uhmmm then you don’t think Hauser’s law is bullshit? I think you are confused.
Steve, you said “And yeah, Hauser’s law might not be a hard and fast number”
Sorry, you just agreed with me.
As did Mr. Mitchell at Forbes:
“Thus, he concluded that the Law represents a socio-political policy trend rather than a true economic law and that the trend could change rapidly.â€
Don’t tell me you are going to keep swinging, trying to make me “wrong” even as you agree?
Hauser’s Law, as a “Law” is bullshit.
Swim back up stream and read steve’s comment about the immovability of Medicare. Same with Social Security. A contract implies several things:
1. An ability to sign the contract or not.
2. Negotiating over its contents.
Neither of these were allowed to me, its bullshit for people who prefer the authoritarian approach but want to dress up their views with the patina of voluntary transactions…which is truly amusing.
“Thus, he concluded that the Law represents a socio-political policy trend rather than a true economic law and that the trend could change rapidly.â€
I get it just fine. I can even buy into your objection on calling this a law of economics.
The way that I’m interpreting your position it appears that you hold that socio-political factors are mutable and that factors arising in the realm of economics are immutable. That is, we can change human behavior in the socio-political arena in order to arrive at a desired outcome but we can’t change human behavior in the realm of economics. Economics, in many cases and especially in cases of tax sensitivity, are not immutable positions.
Where I believe that you and I disagree is on the ease of changing cultural, socio-political and economic behaviors. I hold that there are deep roots to much of our behaviors. The 60 years of empirical data is testament to this fact. We changed marginal tax rates and we didn’t get a boost in tax revenue. That’s a pretty important observation. If your position is that “this time will be different” then you need to explain how and why this time will be different.
The fact that the US today is different from what it was in the 70s is true and also a red herring. Hauser’s data is not a comparison between two discreet points in time, it is continuous so the changes that occurred between the 70s and present were also responding to the same dynamic that Hauser identified. Further, there are factors at work which are strengthening the relationship underlying Hauser’s Law, specifically we are getting more heterogeneous and heterogeneity is empirically demonstrated to result in less civic engagement, civic cooperation and civic desire for broad social programs. So when you position your argument that this time it will be different because we’re a different society than we were in the 70s, yes, that’s facially true, but substantively the drivers of our behavior, found in the socio-political realm, are actually working, on a theoretical basis, to strengthen the empirical outcomes measured by Hauser’s Law.
John,
Take your meds.
I haven’t agreed with you other than to merely note that peoples tolerances for taxation maybe cultural–i.e. there could be lots of inertia there and this notion you seem to have that we can simply go above the limit Hauser’s law implies may be false.
“A contract implies several things:
1. An ability to sign the contract or not.
2. Negotiating over its contents.”
That was very asperger, Steve.
If “social contract” meant “contract” then they wouldn’t have needed the “social” modifier, would they?
there could be lots of inertia there
That’s a safe way to position a reference to future outcomes, but the past shows that there WAS a lot of inertia in place and the present outcomes show that there IS a lot of inertia. It’s possible that we’ll all adopt Danish attitudes towards taxation levels and social programs, so the COULD framing does cover that potential outcome, but really, how likely is it that the observed inertia of the past and present is going to evaporate when Barack Obama raises marginal tax rates? I say that it’s not really necessary to soften your statement in order to allow for long-shot scenarios.
John,
Look, I’m not the one trying to hide my authoritarian tendencies. I know its not very nice to look at, but implying I have aspergers is pretty lame.
“If your position is that ‘this time will be different’ then you need to explain how and why this time will be different.”
In the words of Herbert Stein (speaking of “laws”): “If something cannot go on forever, it will stop.”
Remember, I said up above that this will break one way or the other. Proponents of Hauser’s (bullshit) Law are saying that it can only break one way.
Steve, if you play at this idea that you can’t see the social contracts around you, what should I call it?
Seriously.
Social contracts go back to tribal life. They are not “authoritarian,” they are human. Go read The Blank Slate.
The Blank Slate. Page 285 to be exact. It’s at google books.
Sure and it can stop in more than one way, so this doesn’t help you. For example, no matter how bad it gets people might refuse to pay a larger portion of GDP in taxes thus forcing spending cuts of on sort or another.
It appears to be true, though. No matter what we haven’t seen a rise in tax revenues above that 20% mark (at least for long). Even when we reduced the debt/deficits during WWII it was mostly with reduced spending.
Maybe that is wrong, but it is up to you to explain why it, at the very least, has a good chance of breaking the other way.
Ha, and you call Hauser’s law bullshit. The idea behind the social contract is that life is “nasty, short and brutish” in a state of total freedom. Thus, to avoid this rather unpleasant state we subject ourselves to political authority…authoritarian….authority….get it.
Now it doesn’t have to be boot-in-the-face authoritarian policies, but it is a departure from freedom and turning towards authoritarianism.
Now my objection is not that we have laws, but that many of our decision rules are arbitrary and could lead to tyranny (read de Tocqueville’s last chapter on the type of tyranny/despotism that could arise in America). When you read that you’d think that guy was rather prescient, IMO. We have no real check on the growing power of the “political authority” Locke’s notion of Right of Rebellion really doesn’t exist.
“Sure and it can stop in more than one way, so this doesn’t help you. For example, no matter how bad it gets people might refuse to pay a larger portion of GDP in taxes thus forcing spending cuts of on sort or another.”
What an idiot. In one paragraph, again, you agree with me, and then say that doesn’t help me.
Because it “might” go some other way.
(Page 285 contrasts Rousseau’s original “social contract” with the modern, evolutionary, view.)
Your problem Steve, is that you need to move me to a position I never had, in order to really prove me “wrong.”
Remember, I said up above that this will break one way or the other. Proponents of Hauser’s (bullshit) Law are saying that it can only break one way.
There are essentially two forms that this can “break.” The first is that Obama raises taxes and Hauser’s Law kicks in. No real change occurs and the debt crisis continues to grow in significance. This will occur because we’re dealing with two separate factors at work. The first is that people can recognize the debt explosion but not connect it to how they respond to tax levels. Think of it like going to a few store and noting price differences for the product you want to buy and then purposely choosing to buy the most expensive offering of the product. You have to willfully change your behavior in response to price signals and willfully choose not to maximize your utility. That’s the underlying assumption to your position that people will change their behavior in the face of higher tax levels and become like the Danes.
The second form that this conflict between tax levels and entitlement spending can break is when the moment arises when the system is no longer tenable. That’s when steve;s quip gets tested. If social trends continue then the US in the future will be even more heterogeneous than it is today and that weakens the likelihood that higher taxes will be chosen instead of spending cuts. We’ve seen this dynamic play out in other countries – government spending is reduced when faced with a crisis.
The only hope of salvation is a kind of threading of the needle, in that there is a social revolution in attitudes towards taxation and a commensurate increased awareness that a happy willingness to pay more taxes results in a reduction of the threat from the debt crisis. Basically, we become Danes.
So, when you say that this will break one way of the other, I agree with you. The day when that break arrives is not going to be a pretty day. Why continue to spend like drunken sailors and force that day of reckoning on us?
“There are essentially two forms that this can “break.†The first is that Obama raises taxes and Hauser’s Law kicks in. No real change occurs and the debt crisis continues to grow in significance.”
So Steve, do you actually buy this?
Tango is telling us that Hauser’s Law is a real Law which prevents revenue from rising, no matter the changes to US tax law.
Tango is telling us that Hauser’s Law is a real Law which prevents revenue from rising, no matter the changes to US tax law.
It’s worked for 60 years. It’s safer to predict that it will work the same next year than it is to predict that we’re going to think like Danes next year and thereafter.
My point in the “break” comment was that there has to be some force at work which will create a behavioral change in how people conduct themselves in their economic lives. The debt crisis is too far removed in terms of being a causal agent which can give impetus to people economic and behavioral choices.
If you think that our national behavior will change, tell me why it will change.
Okay, John, I read it and I’m not presuaded. I do not see reciprocal altruism as the social contract. With reciprocal altruism I voluntarily give up some of what I might give to ensure I get a good outcome. That is, in experiments, fairness matters to many players (these are game theory experiments) and when someone offers an “unfair” offer but one that the other player should accept according to economic theory the other player will often reject the offer even if it means lower payouts for both players.
The reciprocity game works like this:
I move first and I have $100. I can keep some of the money, but only after I’ve offered you a share. And suppose the smallest share I can offer you is $1. Economic theory says, I should offer you $1 and you’ll accept it because if you don’t we both get nothing, and $1 > $0.
However, actual experiments with these types of games find that people routinely offer more than the minimum offer suggested by economics. The reason? The second player would often tell the first player to piss off if the offer was “unfair”. They tested it in repeated games where players play multiple rounds. They tried it where players switched in a group. And they tried it with a computer as the second player. The only exception is when people were playing computers, if they found out the computer would accept any offer > $0 then the first player would default to the economics implied outcome.
In other words, reading that passage suggests to me that Pinker does not have nearly as good a grasp of that part of the topic as he might think he does.
And yes, he also notes the social contract is where a person submits to authority to some degree for enhanced safety. There maybe a biological element to it, but it still does not negate the fact that it is authoritarian and calling a “social contract” is really nothing other than an attempt to paint over this fact, IMO. Call it what you will, but don’t deny it is authoritarian.
The problem Tango it that it becomes a “just so” story, when in fact it may just be an artifact of our path.
History collapses to a single narrative, the future will, but not until it happens.
The problem Tango it that it becomes a “just so†story, when in fact it may just be an artifact of our path.M
It would only qualify as a “just so” story if there was no reasoning or data behind the proposition. “Just so” mostly indicates a handwaving, a raft of assumptions.
Hauser’s Law has been empirically tested for 60 years. Falsify that data and then get back to me with the “just do” accusation.
If this time is to be different tell me why it will be different and tell me why the past isn’t prologue.
Steve, I think you are being more fixed in your terms than I (or Pinker). Pinker is willing to place reciprocal altruism and social contract in the same fuzzy place.
I appreciate your typing out the ultimatum experiment, but I read Thaler’s Winner’s Curse as well, and find it entirely consistent.
Thaler is full of things that can, in a fuzzy sense, be termed social contract.
Indeed, the Pinker/Thaler social contract is the one I’m talking about.
“It would only qualify as a “just so†story if there was no reasoning or data behind the proposition. “Just so†mostly indicates a handwaving, a raft of assumptions.”
Is there any reasoning? Beyond “this is a magic number?”
“Thaler is full of things that can, in a fuzzy sense, be termed social contract.”
Actually, no. I should say that Pinker and Thaler describe a “human nature” that the Blank Slaters rejected. Out of that grow our social contracts. Rooted in our human nature.
Gotta go, thanks for the argument!
http://www.youtube.com/watch?v=kQFKtI6gn9Y
I guess I’m frustrated by the tax deal, perhaps as are you all.
Actually, no. I should say that Pinker and Thaler describe a “human nature†that the Blank Slaters rejected. Out of that grow our social contracts. Rooted in our human nature.
Careful now, you wouldn’t want to be accused of being a racist.
Is there any reasoning? Beyond “this is a magic number?â€
No, I’m not aware of a theoretical construct which supports Hauser’s Law.
Gravity existed before Newton started codifying what he saw and constructing a theory to explain what he saw.
Empirical observations are not worthless simply because they have no theory, yet, in support of what is being observed.
Fascinating comment thread. It’s like watching an old Barrymore movie when he’s fencing two foes simultaneously and winning.
In case that’s ambiguous, Personna is Barrymore in this scenario.
Steve, the idea that a social contract is authoritarian is absurd. I’m sorry, but it does smack of Aspergers. Whether or not it’s pathological, it’s clueless. But at least you’re playing say, Basil Rathbone, to John’s Barrymore.
And Tango of course has a brain like a steel trap . . . rusty, creaky and existing only for the purpose of inflicting injury. Which makes Tango the big, clumsy extra who Barrymore quickly dispatches.
There is a simple solution to the problem that we’ve been debating in this thread. We live in a system where it is possible to run 50 simultaneous experiments on tax systems.
I propose that California, with it’s dismal state finances, raise their top marginal tax to 75% and then we can watch if Hauser’s Law kicks in or whether the California deficit declines.
California is the ideal state to take the lead on this initiative for the whole political establishment in Sacramento believes that raising taxes on the wealthy is all that is needed to close the budget gap. So, income tax rates go up to 75%, royalty income is taxed at 90%, dividends are taxed at 90%, capital gains are taxed at 90%. Californians will state pay their federal taxes at the uniform federal rates, but the state rates all get modified.
What will happen as a result?
Uh, is Steve arguing (at December 7, 2010 at 6:08 pm) that experiment has shown that Rawls was right?
I think the issue is not merely some difficult to articulate “American culture.” The country was founded by people who did not like taxes, and the institutions and the systems they put in place require very broad consensus to raise taxes (three independent decision points). If you then add in diverse cultures and geography, you can see that there are going to be constraints that appear to be a ceiling.
Michael,
In a broad sense it is authoritarian. Perhaps you have in mind this notion of some sort of Eastern European country prior to the wall coming down. That isn’t what I’m talking about. If anyone has aspergers its JP.
Keep in mind that the “social contract” for some was actually for a single person, a king. Hobbes was also in favor of censorship and restrictions on the press as the sovereign seemed fit.
sam,
I’m not sure what you mean here. Rawls said lots of things, but I don’t see how noting that people care about fairness even to the point of punishing others while taking a loss for doing so necessarily means Rawls was right (about what specifically would really help)?
JP again,
Your position was that Hauser’s Law was bullshit–i.e. unequivocally wrong. Now you are back tracking and saying,
“Oh no, I think there might be institutional and cultural inertia that prevents the tax rate from rising.”
You want to have it both ways. If there are cultural and also institutional forces that make raising taxes difficult that don’t exist in say, Denmark, then Hauser’s Law would not work there. Merely noting that it doesn’t work in Denmark and then concluding it must not apply to the US as well is stupid reasoning.
And yeah, you just saw Obama put forward a tentative deal to Republicans on extending the Bush tax cuts, a payroll tax holiday, in exchange for keeping unemployment extensions. Seems to me that is an outcome, if it comes to pass, that would be additional support for Hauser’s Law.
Keep in mind that the “social contract†for some was actually for a single person, a king. Hobbes was also in favor of censorship and restrictions on the press as the sovereign seemed fit.
That’s like arguing that “liberal” used to mean most of the things “conservative” now means. True, but irrelevant. Obviously we’re discussing common contemporary usage. The phrase has morphed as phrases will do, and has come to have a very broad meaning a long way from Hobbes and Rousseau. So I suspect this is a mostly semantic debate.
In contemporary terms I believe a social contract refers to an informal and not-necessarily-articulated agreement among most members of a society to do or not do certain things. Does this reduce the phrase to something useless for close philosophical debate? Pretty much. We live in a linguistically imprecise age.
But the concept retains some usefulness as a term closely related to “social mores,” or, “general consensus.” At the trivial end we have a social contract that requires us to bathe and brush our teeth. No law, no threat, we’ve just all sort of decided we’re not going to stink up the place because we owe it to our fellow man.
At the grander level we have a social contract to obey most of the important laws (homicide, theft, rape) and to assist the government in enforcing them — despite the fact that we are not generally required by law to offer assistance to the cops. 99% of people approve if you turn in a rapist to the police. We’ve all just sort of agreed that’s cool.
The flip side is a social contract to soften the harder edges of the law by refusing generally to cooperate in enforcement. (Marijuana laws, minor tax cheating, etc…) Most people would be horrified if you turned in a neighbor for a bit of “creative accounting” on his taxes.
In effect we’ve decided as a society to vote laws up or down like a posting at Reddit and have a social contract, a general consensus strongly suggesting that we take some laws seriously and others not so much. Although the concept has been envagued — that’s right, I just made up that word — failure to abide by the terms of the various social contracts does carry penalties: shunning, public shaming, being called a douche.
But however Hobbes and Locke and the boys saw the issue in their day, in ours it is almost the opposite of authoritarian in that it quite often substitutes for law or softens laws.
Two social contracts are at odds today. We have general agreement — a social contract — that American citizens will not be allowed to starve, or children to go without access to medical care, or old people be abandoned in the forest. And we have a general social contract to the effect that we respect wealth and property. There’s no law requiring us to in effect outlaw starvation, just a consensus, an agreement among us that that’s not on the table as a policy option. We have a social contract with our fellow Americans not to let that happen.
So by consensus or social contract (again, using the current loose-fitting definition) we’ve built a floor and we’ve built a ceiling and all that remains is to reconcile the two.
@Steve
“I’m not sure what you mean here. Rawls said lots of things, but I don’t see how noting that people care about fairness even to the point of punishing others while taking a loss for doing so necessarily means Rawls was right (about what specifically would really help)?”
The premise of A Theory of Justice is justice as fairness. You can see the basic argument in his paper, Justice As Fairness.
The argument of TOJ precedes from what he calls the “original position” — very, very roughly, imagine ourselves behind a veil of ignorance about ourselves and our place in a society, and we are asked to fashion a system of justice for that society. Since we do not know how we would end up in that society, he argues we would develop system of justice based on a principle of fairness to all. He’s committed, I think, to the proposition that we all possess an (innate?) sense of fairness that would guide us in fashioning the theory of justice. And this, it appears to me, confirms that:
” [I]n experiments, fairness matters to many players (these are game theory experiments) and when someone offers an “unfair†offer but one that the other player should accept according to economic theory the other player will often reject the offer even if it means lower payouts for both players.”
I have no patience for this today, and luckily Steve only wants to engage with positions I do not have.
We could go back (yet again!) to Daniel Mitchell writing at forbes.com (via Wikipedia):
“Thus, he concluded that the Law represents a socio-political policy trend rather than a true economic law and that the trend could change rapidly.”
Steve, buddy, look at your post again. You are asking me to accept that things cannot “change rapidly” because of the very “Law” which I reject. That is where you think you’ve caught me(!!!), where I won’t defend that which I do not believe.
Steve, buddy, look at your post again. You are asking me to accept that things cannot “change rapidly†because of the very “Law†which I reject. That is where you think you’ve caught me(!!!), where I won’t defend that which I do not believe.
Steve and I are arguing the position that what you’re writing doesn’t make sense. If it makes sense in your mind then you need to find a better way of explaining what you think because your writing is laced with logical inconsistencies.
You write that Steve is :asking me to accept that things cannot “change rapidly†because of the very “Law†which I reject.” No, that’s not his position. He’s pointing out that, on the one hand, you reject the very notion that Hauser’s Law is a law and, on the other hand, you concede that “I think there might be institutional and cultural inertia that prevents the tax rate from rising.â€
If there is institutional and cultural inertia that prevents the tax rate from rising, then Hauser’s Law is in effect. What exactly do you imagine are the independent variables at work which drive Hauser’s Law?
That is totally unbelievable. You do not believe that things can be the same, until they change? You believe in single stable states runinng through history?
In chemistry we talked about multiple stable states and energies of transition, but use whatever metaphor works for you. Strange attractors, black swans, or just common sense.
Unbelievable.
That is totally unbelievable. You do not believe that things can be the same, until they change? You believe in single stable states runinng through history?
WHY will this time be different? Give us something to work with. You’re basically taking the position that if you release a ball from your hand that it could fall upwards instead of downwards and then criticizing people for believing that because the ball has always fallen downwards it’s likely to fall downwards once again. Something has to be different this time. If you’re in the space station and you conduct the experiment then you can point to a different environment being the cause of the ball falling “upwards” to the ceiling of the space-station.
Until you tell us why this time is different from every other time in the last 60 years, your argument looks just like frantic rambling, grasping at straws, and one that is being driven by emotionalism.
Your position is one that afflicts many people when they keep doing the same things over and over again and expecting a different outcome.
So you’ve forgotten that the US had other tax stabilities, before 1950, but each stability ended in change.
Again, I’ve said this could go either way. You position is that the only possible path is a continuation of the most recent trend.
Unbelievable.
“Until you tell us why this time is different from every other time in the last 60 years, your argument looks just like frantic rambling, grasping at straws, and one that is being driven by emotionalism.
Your position is one that afflicts many people when they keep doing the same things over and over again and expecting a different outcome.”
I’ve been trying to understand what you mean by these paragraphs. I hope you don’t mean that the world is set on its tracks to the future, with no switches, or change points.
I certainly hope that you don’t think that, for there to be change points, some random commenter (me) can be required to name them.
That is not how the world, nor the future work. The future is overwhelmingly unpredictable, bullshit “laws” notwithstanding.
Why do you keep dodging the very direct questions I ask you.
WHAT WILL BE DIFFERENT THIS TIME? We’ve raised marginal tax rates before and the revenue raised as a percent of GDP has remained fairly constant. WHAT WILL BE DIFFERENT THIS TIME?
WHY WILL WE SUDDENLY BECOME DANISH IN OUR OUTLOOK ON ACCEPTABLE TAX LEVELS?
Could you just answer the questions.
One of the things we know is that no one can predict the future.
Every now and then though, you meet some guy who has forgotten that.
He thinks the only answer to his prediction (or bullshit law) is a ‘better’ prediction.
That presupposes that we can predict the future.
Note: if I hadn’t said “it could break either way,” if I’d claimed to know the one true path, then we’d both be trading bullshit futures, and then I could answer your questions.
That would be kind of dumb though, if my only “prediction” was that it could break either way.
Once again you dodge the questions. That’s quite telling.
One of the things we know is that no one can predict the future.
Every morning on your way to work you cross a street beggar. He asks you for money and you give it to him on the condition that he not use the money to buy junk to shoot up. Every evening on your way home from work you see the junkie laying under a bench zoned out from his high. Every morning you give this person $5 on the expectation that they will use that money to buy food or clothes. Every evening you realize that they just bought smack. Your friend asks you why you keep expecting a different result every morning when you give the junkie the money. You respond that “I hope you don’t mean that the world is set on its tracks to the future, with no switches, or change points.
Your friend looks at you and comes to a conclusion.
John:
You need to understand who Tango is, what he believes, and where he comes from. He is a white supremacist. How could he ever possibly believe in the possibility of cultural change? He’s dead from the neck up: of course he rejects any suggestion of change.
There is quite literally no point in discussing anything with him. He’s not there. There’s nobody home. You might as well be arguing with your Roomba.
Tango, the Peak Oilers and the Complexity Collapsers say the same thing.
They have a detailed story about the future, and if you don’t give them an equally detailed account of an alternate future, then theirs must be true.
Strange stories about junkies not withstanding.
I will say this, while my coffee drips:
Futurology is one of those places where a “best” guess doesn’t have to be particularly “good.” See Taleb. For this reason, people tend to make successive predictions, discarding their old ones “as conditions change.”
Knowing that, we can say that “tomorrow will probably be like today” can be a best guess, without being particularly good. Things stay the same, until they change.
Now on revenues and spending, the problem is that they BOTH have a tendency to follow their trajectories …
Tastes Great!! Less Filling!! Tastes Great!! Less Filling!!