Economics & Finance

Quote of the Day

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Reductio ad absurdum done right.

The Upside of Income Inequality

By Gary S. Becker and Kevin M. Murphy
From the May/June 2007 Issue of American.com

For many, the solution to an increase in inequality is to make the tax structure more progressive—raise taxes on high-income households and reduce taxes on low-income households. While this may sound sensible, it is not. Would these same indi ­viduals advocate a tax on going to college and a subsidy for dropping out of high school in response to the increased importance of education? We think not. Yet shifting the tax structure has exactly this effect.

On Transatlantic Myths

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Link via Atlantic Review:

William Drozdiak writes in his article ‘4 Myths About America-Bashing in Europe’ among other things:

With the collapse of the Soviet Union and the end of the Cold War, Europe supposedly lost its relevance. Not true. In fact, Europe and the United States still act as the twin turbines of the global economy, accounting for 60 percent of all trade and investment flows.

Americans invested five times as much money in Germany last year as they did in China, and U.S. firms in total have poured four times as much money into tiny Belgium as they have into India. Europe provides three-quarters of all foreign investment in the United States, creating millions of American jobs.

It Isn’t Voodoo Economics

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An economist named John Schmitt is quoted extensively in this Reuters news article. It seems that he is rather upset with the way we do things here in the United States. You see, we are “the only advanced economy in the world that does not guarantee its workers paid vacation days and paid holidays.” Mr. Schmitt says that it is a “national embarrassment.”

The article then goes on to point out that French workers are guaranteed 30 days of paid leave per annum, but only one paid holiday. Most of the other European countries force employers to provide a mere 20 days of paid leave, but the workers also are allowed 15 paid holidays.

That sounds nice on the surface, but I seem to recall that Europe is seriously lagging behind the United States so far as GDP is concerned. In fact, didn’t Europe just manage to reach the level of prosperity that the US attained a full generation ago?

It seems to me that there might just be a connection between government mandated vacation time and slow economic growth, a connection that Mr. Schmitt seems to have missed when talking about our “national embarrassment.”

But economists probably suffer more from embarrassment than I do. If I was Mr. Schmitt, for example, my face would certainly be red after that Reuters article came out.