21/08/2008

There's a Ph.D. in There

Here's an interesting older post by Greg Mankiw about how right-leaning and left-leaning economists differ. His first point:
The right sees large deadweight losses associated with taxation and, therefore, is worried about the growth of government as a share in the economy. The left sees smaller elasticities of supply and demand and, therefore, is less worried about the distortionary effect of taxes.
If you're ignorant about economics you probably didn't understand what he means. The idea here is that the higher the taxes, the less people are motivated to work (and hence create wealth). This is used routinely as an argument against high taxes as well as an argument against progressive taxes.

I have no doubt that there is some truth to the argument. If people were taxed at 100%, most of them would probably stop working. However, I once asked economist Robin Hanson at his blog how good the evidence was for the taxation-reduces-work notion and he replied that the evidence was no better than the evidence for other claims made in taxation debates. In other words, he didn't know of any evidence.

Huh? A professor of economics doesn't know of any evidence to support one of one of the pet claims made by economists, including himself? Why don't people put a bit of research into this? I know, you can't run experiments on this and it is generally a hard topic to study given that many, many other factors will have an influence on the dependent variable, and they're probably going to influence each other back and forth - so your estimate is going to be shaky.

But I'd rather see a shaky estimate than none. After all, this seems to be an important question, no?

P.S.: If you know of any economic studies looking into this, please let me know.

3 comments:

Anonymous said...

I think Feldstein for one, and Goolsbee (?) for another may be two guys to start with (don´t remember where just now, but they looked into the effects of the tax increases that Clinton administered sometime in his first term)

LemmusLemmus said...

Anon,

thank you. Will do a bit of googling once I find the time. Maybe there'll be a follow-up post, we'll see.

M said...

Me and a co-author have recently completed a paper on the analysis of

economists’ disagreement and of its determinants.

http://micdimaio.googlepages.com/DeBenedictisDiMaio2008-Economistsvie.pdf

As a case study we took the Italian profession and we measured Italian economists' disagreement about : 1) the cause of the difficulties of the Italian economy; 2) which are the most effective policy proposals to solve the economy's problems.

Then we relate the respondent's opinion on each specific policy proposal to her individual characteristics, academic profile, methodological approach and political opinions.

We find that the political view of the respondent matters a lot in explaining difference in the judgement of a policy proposal but which aspect of her political view matters most depends on how much controversial the policy proposal is.

We have also prepared a website for additional documentation on the survey - the questionnaire, other descriptive statistics, etc.. The link is:

http://micdimaio.googlepages.com/surveyofitalianeconomists

No need to say, whatever comments or suggestion is more than welcome.

Ciao,
michele