Contrary to what seems to be its popular usage, the ad hominem fallacy isn’t synonymous with “hurling insults”. What it means, literally, is “to the man” and that’s what it means. In other words rather than debating the arguments that an individual is making, you’re dismissing his arguments because he’s making them.

The most common version of this in the blogosphere at least to my eye appears to be what I call the “once wrong, always wrong” presumption. Even if someone has been demonstrably in error on one or many things or is completely reprehensible, it doesn’t relieve you from addressing the arguments that individual is making rather than just dismissing them out of hand.

I didn’t post about the tenth anniversary of 9/11 here other than to link to some posts at OTB. I don’t plan to other than this.

I think that my reactions to the events of that day which, like most Americans, I followed on television may have been atypical. I didn’t feel fear or anger. I felt sorrow. Sorrow for the destruction and death, the death of those who died in the attacks and of those who would die as a consequence of the attacks.

While I’m on the subject of Social Security, I’m working on a post in which I try to model what it would take for an average income earner to save enough so that they received 60% of their wages in retirement income. I think it’s obvious that it’s, at the very least, impractical absent Social Security retirement income, and that those who advocate some variation on an expanded version of individual retirement accounts as an alternative haven’t really thought it through. But there’s quite a bit of ongoing disagreement on the subject so I think it’s worth a little chalktalk to look at the numbers.

I can’t imagine this hasn’t been done before. If anybody knows of a study or a model of this, I’d appreciate hearing about it. It’s sort of a lot of work for a casual, amateur blogger to tackle.

In the final analysis I think that social policies (like social insurance) are both practical and aspirational. They’re constrained by what will work and the realities of the economy we have but they’re also informed by the society and economy we’d like to have as well.

At the very least an America without Social Security retirement income will be one in which savings is signficiantly higher and personal consumption expenditures dramatically lower than they are now. IMO some change in that direction would be an improvement but the numbers matter. I’m not sure we can tolerate that large a decline in PCE.

Human beings exhibit the concept of fairness some time around the time they turn seven:

In research that should help to chart the origins of human social life, morality and culture, a team has pinned down when humans learn to share.

Children as young as seven are just as likely as adults to do the right thing by their friends, in contrast to kids between three and four, who are almost universally selfish, reports the study carried out at the Universities of Zurich, Switzerland, and Erfurt, Germany.

What is fascinating about the study in the journal Nature, led by Prof Ernst Fehr, is that children do not simply become more generous but develop a clear sense of what is fair and what is not.

Our best friends, dogs, have a keen sense of fairness:

Man’s best friend expects a fair treat for doing tricks, canine cognitive scientists at the Clever Dog Lab in Austria report.

Like humans and chimpanzees, dogs seem to expect fairness in their dealings with humans. When two dogs sitting next to each other complete the same action — shaking paws in this case — but don’t receive the same reward, the jilted dog stops playing along.

“I think it’s an important finding because it goes beyond primates,” said evolutionary biologist Marc Bekoff, author of a forthcoming book on animal morality, Wild Justice, who was not involved with the study. “It calls attention to the fact that animals are a heck of a lot smarter and more emotional than we give them credit for.

The new study, published this week in the Proceedings of the National Academy of Sciences, is part of a growing body of research showing that many social animals, including dogs, wolves and marmosets, have emotions previously considered unique to humans. While biologists have long thought that mammals experience primary emotions like fear, more recent studies have found strong evidence that a range of animals also feel more nuanced, secondary emotions like a sense of fairness.

as most dog owners could tell you.

At least to my untutored eye while there may be agreement that there is such a thing as fairness but there doesn’t appear to be universal standard for what’s fair and what isn’t.

Again to my untutored eye quite a bit of the discussion of Social Security revolves around what’s fair. In 1983 about 90% of income was subject to the payroll tax. That’s declined, largely due to increasing incomes by higher income earners, most of whose income isn’t subject to the tax. Was the situation in 1983 fair while the situation now isn’t, vice versa, or have ideas of fairness changed?

Due to increasing life expectancies Social Security recipients collect benefits longer and on average receive more in total benefits than previous Social Security recipients did. Is that fair? That’s not a universal view of fairness. For example, in their social insurance program the Swedes calculate benefits so that each successive age cohort receives roughly the same average total benefits as the last.

Is our system fair and the Swedes’ unfair? Vice versa? Do we just have different notions of fairness?

It’s a lovely, tranquil, bright and sunny Sunday morning and here’s to hoping it stays that way. Tonight my niece and nephew will come over for dinner. I look forward to it.

I had a funny phone call yesterday. A family friend called and asked to speak to my wife. I responded that she wasn’t home. The friend asked “Is she at a class or with Will doing therapy dog work at the hospital?”

“She’s at a trial”.

There was a long pause.

“A rally obedience trial,” I continued.

Let’s hope we all have a blessedly peaceful Sunday.

The second installment in our series of reflections on 9/11 has been published at Outside the Beltway:

A Decade of Lost Freedom

Greg Mankiw, after noting the too low level of business investment (something I’ve mentioned from time to time around here), produces some suggestions for increasing business investment:

One obvious step would be a cut in the taxation of income from corporate capital. According to a 2008 study by the Organization for Economic Cooperation and Development, “Corporate taxes are found to be most harmful for growth.” Tax reform that reduced the burden on capital income and shifted it toward consumption would improve prospects for long-run growth and, in so doing, encourage greater investment today.

Yet it would be overly optimistic to think that any single public policy, by itself, could lead to the kind of robust investment spending seen in previous recoveries. Myriad government actions influence the expected future profitability of capital. These include not only policies concerning taxation but also those concerning trade and regulation.

For example, passing the free trade agreement with South Korea, which has languished in Congress more than four years after first being negotiated, would be a step in the right direction. So would reining in the National Labor Relations Board; its decision to block Boeing from opening a nonunion plant in South Carolina may have been hailed by organized labor, but it surely did not hearten investors.

As I have previously written here, we should eliminate the corporate income tax altogether. Not only does it disincentivize capital investment, it produces deadweight loss. GE, for example, has a department of nearly 1,000 people whose job it is to reduce the company’s exposure to the corporate income tax. And that’s just a single company.

If your concern is the loss of revenue, increase the personal income tax to cover the difference. If your concern is fairness, how is it fair to tax the same income twice? That’s what happens: the income is taxed once when it’s received by the company and again when it’s paid out in the form of wages to company employees or dividends to owners.

If your concern is that reducing corporate income taxes won’t be an efficient way of spurring demand on the part of business because they’re already sitting on piles of cash, remember that not all businesses are sitting on piles of cash. Newly-formed companies, the ones that create most of the new jobs, aren’t typically cash-rich.

Robert Barro writes on a related topic:

What drives investment? Stable expectations of a sound economic environment, including the long-run path of tax rates, regulations and so on. And employment is akin to investment in that hiring decisions take into account the long-run economic climate.

The lesson is that effective incentives for investment and employment require permanence and transparency. Measures that are transient or uncertain will be ineffective.

And yet these are precisely the kinds of policies the Obama administration has pursued: temporarily cutting the payroll tax rate, maintaining the marginal income-tax rates from the George W. Bush era while vowing to raise them in the future, holding off on clean-air regulations while promising to implement them later and enacting an ambitious overhaul of Wall Street regulations while leaving lots of rules undefined and ambiguous.

Is there a better way? I believe that a long-term fiscal plan for the country requires six big steps.

He goes on to propose six measures for reducing the deficit and boosting the economy:

• Increasing the Social Security retirement age and adjusting the formula by which increases in benefits are calculated.
• Phase out the home mortgage interest and state and local tax deductions and beginning to tax employer-paid healthcare benefits.
• Reduce marginal personal income tax rates.
• Return the baseline of federal spending to what it was in 2006 (adjusted for inflation).
• Introduce a value-added tax.
• Eliminate corporate and estate taxes.

The first three were parts of the Bowles-Simpson deficit reduction commission recommendations.

I think that all of those are good ideas. I would also add eliminating agricultural subsidies just to name one.

The most important thing is that we need to change how we view the role of the federal government and sub-prioritize what it does. That’s the unspoken message behind all of the proposals in the two op-eds. So, for example, in coming years regardless of what we do the federal government is going to be spending more money on the elderly than we’ve been accustomed to for the last half century. That’s no surprise. We’ve known that would be the case for sixty years.

However, that means we must adjust priorities rather than just trying to pile Ossa upon Pelion.

I’ve published my thoughts in a post at Outside the Beltway:

Are We Safer?

The executive summary of my thoughts on whether we’re safer than we were ten years ago is no, we’ve largely been spinning our wheels at great cost in time, money, and lives, and we have barely started coming to terms with the security challenges of the 21st century.

when you’re not standing on the brink. Karl Smith has published a very thought-provoking post in which he proposes a complete, temporary tax holiday:

So what happens if we simply suspend taxation for a few years and then pay it back later?

I know, I know there are issues about market freak out and the signals that such a move would create. Some will also object that such a move would alter interest rates based on sheer volume but I doubt that actually.

Even still lets put all that aside for the moment.

If the government suspends taxation and then tries to raise the money later to repay what it borrows it will actually be extracting less real resources from the economy.

Hat tip: Alex Knapp

Dr. Smith goes on to discuss interest rates, growth rates, and deadweight loss.

The reason I find this post interesting is that Dr. Smith has almost but not quite introduced a very new topic into the discussion of the economy and how to make it grow. He assumes that we will pay back the extra trillion or so per year that is the difference between what we’re raising in taxes and what we’re spending. Why?

We presently finance our government by a combination of taxes, borrowing, and currency expansion. What is the optimal mix? Does it change over time?

We have a fiat currency. Let’s assume, arguendo, that we are in a “liquidity trap”. That’s what any number of economists, notably Paul Krugman, have been saying for some time. A liquidity trap is a situation in which the sovereign is unable to debase the currency whatever it does. Given those circumstances, isn’t the best solution with the least deadweight loss to suspend taxation and finance the government solely via currency expansion? We could even pay down the debt a bit to improve our cashflow situation when conditions return to normal (if ever).

Horrifying, isn’t it? But is the suggestion wrong or right?