Economics & Finance

The Laffer Curve, as Explained in 1377

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Ibn Khaldun:

It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.

The reason for this is that when the dynasty follows the ways (sunan) of the religion, it imposes only such taxes as are stipulated by the religious law, such as charity taxes, the land tax, and the poll tax. They mean small assessments, because, as everyone knows, the charity tax on property is low. The same applies to the charity tax on grain and cattle, and also to the poll tax, the land tax, and all other taxes required by the religious law. They have fixed limits that cannot be overstepped.

When the dynasty follows the ways of group feeling and (political) superiority, it necessarily has at first a desert attitude, as has been mentioned before. The desert attitude requires kindness, reverence, humility, respect for the property of other people, and disinclination to appropriate it, except in rare instances. Therefore, the individual imposts and assessments, which together constitute the tax revenue, are low. When tax assessments and imposts upon the subjects are low, the latter have the energy and desire to do things. Cultural enterprises grow and increase, because the low taxes bring satisfaction. When cultural enterprises grow, the number of individual imposts and assessments mounts. In consequence, the tax revenue, which is the sum total of (the individual assessments), increases.

Read the whole thing.

Via Isegoria.

Worthwhile Reading

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David Brooks argues that the crime wave of the 1970s has had a long-term effect on the American psyche, and especially on parenting. (via FFOF)

Victor Davis Hanson reflects on small-town America.

Paul Levy describes redesign of the pharmacy in the hospital he runs, making use of Lean principles, including mock-ups and heavy participation from those who will be using the new space. (via Lean Blog)

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Intellectual Nondiversity

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David Bernstein observes that if Elena Kagan is confirmed then every single Supreme Court Justice will have attended Harvard or Yale law schools. He also observes that:

The president went to Harvard, and barely defeated a primary opponent who went to Yale. His predecessor went to Yale and Harvard, and defeated opponents who went to Yale and Harvard, and Harvard, respectively. The previous two presidents also went to Yale, with Bush I defeating another Harvard grad for the presidency.

..and asks, “Isn’t this a bit much?”

His post reminded me of something that Peter Drucker wrote, way back in 1968:

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The Markets and the Economy

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Some Monday morning reading for your pleasure, or displeasure, as the case may be:

1)When economists and financial analysts start quoting Yeats:

Turning and turning in the widening gyre
The falcon cannot hear the falconer
Things fall apart; the center cannot hold

…it may not be an encouraging sign. John Mauldin offers some less-than-cheerful thoughts.

2)On the other hand, the very astute MaxedOutMama sees some positive signs for the U.S. economy, at least in the fairly near term.

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Raising Protestors… A Stalking Horse

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On May 5th I was walking through the Loop when I saw a long line of kids chanting and holding signs. Per this article it was an organized walk-out of about 700 Chicago Public School students to protest education cuts needed to close Illinois’ massive budget deficit. The “no 37” signs are referencing the fact that class sizes may go up to 37 students as a result of these cuts.

I read the article and the “journalist” who is covering the protests talks to students and they mention how their after-school programs are getting cut and that more students in a classroom means that the teachers will have less time to spend with each of the students.

What was interesting to me is that the article DID NOT mention that there were many teachers and non-students among the protesters. I could see them in the crowd, although the majority of the protesters were students. Obviously the teachers have their own motives for pushing back on financial cuts, including their own pay and job security. It does look much more convenient to have the students out front rather than the unionized teachers demanding that, although the state is broke, and their pensions are a significant cause of what is wrecking the state financially, that they shouldn’t bear any of the fiscal belt-tightening that is inevitable for Illinois in the future.

I also want to know if this message of teaching the students to agitate for more taxpayer funds is really a lesson that we should be imparting; the governor is proposing a 33% tax hike and he puts education on the block first because he knows that it is the part of the budget that will rile up the largest part of his political base (a variant of the “Washington Monument” strategy), rather than actually trying to tackle the core issues that are driving our state into financial insolvency. The students are pawns in this game, and demanding that taxes be raised on other people rather than sharing in the communal pain after our fiscal profligacy is a sad lesson to be teaching.

Cross posted at LITGM