A slipperly slope argument for more taxes

I have to admit that this whole debt ceiling debate makes me want to tear my hair out. If I had my druthers, I’d sit down every member of Congress. pry their eyelids open and make them read a few economic history books. Because, you know, cutting spending in a deep recession worked so well the last time, *cough* *cough* (Great Depression!) *cough*. But the politics of it all, it’s just maddening is what it is. A bunch of idiots who don’t even know what their constituents want holding this country’s–and possibly the world’s–economy hostage. I honestly (and naively) expected to come back from my Green River rafting trip and the thing would be solved, over, done with. But no, it’s like no time passed at all.

Twitter brought me two great pieces over the last few days that sent my writing juices flowing again after a few days off. The first, which I believe came from @ezraklein (correct me if I’m wrong), said something to the effect of “The US is the only country in the world with the luxury to create an economic crisis where there is none.”

Just dwell on that one for a minute.

The second was a question retweeted by the official White House twitter account (@whitehouse for the #WHChat) asking why those who are already paying the most taxes should be asked to pay more, invoking the  “it’s not fair” argument. The question of who pays more and how much is a sticky one, one that made heavy press a few months (weeks? I don’t know what’s happening to time right now) when it was announced that only 50% of Americans paid any taxes (really, federal income tax in one year with record-high unemployment; you’d be hard pressed to find someone who actually pays zero taxes). I don’t know what segment of the population the question-asker was referring to, but it got me thinking about who pays taxes and why.

From an practical standpoint, we have many different types of taxes; income taxes, use taxes, sales taxes, estate taxes, property taxes, etc. From an economic standpoint, we split taxes into bigger groups. One of those distinguishing factors of how we group comes down to who pays. From the simplest, principles of economics perspective, we have taxes that are based on use and those based on ability to pay. Use taxes are designed with the idea that the people using the service should be the ones taxed. Use taxes are often sales taxes, they’re associated with things that we use. Take a simplistic example like gasoline, which we tax, and much of the taxes go to repaving roads. If you buy gasoline, you pay tax on it based on how much you buy. If you don’t buy gasoline, you don’t pay tax on it, simple enough. Consequently, you also don’t contribute much to upkeep of roads. If you’re not buying gasoline, you’re probably not using the roads much (or your form of using them is much less destructive or limited than if you went by car), so, you don’t pay for roads.

The ability to pay principle says that those with the greatest ability to pay should pay more taxes. By this logic, a person who makes $200,000/year should pay more in gasoline taxes than a person who makes $20,000/year. Of course, creating a taxation system like that creates all sorts of incentives to lie and cheat and would be incredibly difficult to manage, but it is interesting to think about how use and ability to pay are actually interconnected, particularly at a federal level. Without any numbers to back me up, I’m certain that those with more money not only have a greater ability to pay, but also use more services. I’m going to distinguish here between services and transfers. There’s no doubt that people who make no money receive more transfers–e.g. food stamps, welfare payments, unemployment assistance–than wealthy people. But even though wealthy people may not be applying for food stamps or welfare, their money is being protected by banking laws, their consumer interests are greater because they buy more, they use the courts more for lawsuits (if not perhaps criminal defense), they’re greater users of health care (even more so if they have insurance). I of course have nothing to back this up, and realize fully that the argument could be made in precisely the opposite direction for public assistance. But then, the ability to pay part kicks in; if you’re requesting TANF funds, you have very low ability to pay.

The other reason I don’t like this argument, of course, is that it creates a slippery slope in terms of demanding to pay taxes only on the things we use. If a poor person keeps all their money stuffed in their mattress, they’re not ‘using’ the SEC or the FDIC or other federal banking institutions, and we might find dissenters trying to discount such expenditures from their taxes ala Maggie Gyllenhaal in Stranger Than Fiction. Talk about a nightmare. I think our tax code is complicated enough as it is.

With that rant being done, and regardless of whether paying taxes is fair or not, I’ll share another gem adapted from twitter. Just because you want to order a hamburger next time doesn’t mean you don’t have to pay for the filet mignon you already ate. It does appear that something is going to happen tonight, though, so we’ll see.

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Where I’ve been

The past few weeks have been spent in approximately two places. The first was in front of my computer, at my desk.

The second, though, was here, on a boat on the Green River, running through Lodore Canyons and through Echo Park and Split Mountain. It was beautiful. I’ll take the River over my desk any day.

But now, back to Economics. Thesis, defense, pulling my hair out thinking about the debt ceiling negotiations, etc.

Quiet

I’m so excited that this blog is finding a voice and an audience. My apologies to all as I’ve been quiet and will likely continue to be for the next two weeks or so. I am racing to finish my dissertation, then will be on a rafting trip down the beautiful Green River for just under a week. I’m told I’m not allowed to bring work. Though I know it’s a physical impossibility to bring my computer on the river for five days, it will be much more difficult to emotionally distance myself from economics, gender, children, violence, etc, or at least the constant turning of my brain on such things. Back in August, I promise!

I think Greece could do with a little social norms marketing on taxes

Quote

Greece has a serious problem with paying its taxes. It’s a self-reinforcing problem because when people see the system as corrupt, they think their money will be wasted and they won’t face consequences, so they cheat more.

I liked this quote from James Surowiecki in the New Yorker:

According to a remarkable presentation that a member of Greece’s central bank gave last fall, the gap between what Greek taxpayers owed last year and what they paid was about a third of total tax revenue, roughly the size of the country’s budget deficit. The “shadow economy”—business that’s legal but off the books—is larger in Greece than in almost any other European country, accounting for an estimated 27.5 per cent of its G.D.P. (In the United States, by contrast, that number is closer to nine per cent.) And the culture of evasion has negative consequences beyond the current crisis.

It seems to me that Greece needs a serious infusion of social norms marketing (among several other things). I can see the billboards now: “People in our community think it’s good to pay your taxes.”

Okay, back to dissertating. So close.

Polygamy and Social Insurance

I’m currently reading Unnatural Selection, by Mara Hvistendahl, while I’m sitting here trying to tie up the loose ends on my thesis. Or at least, they were only loose ends before yesterday evening, when a small coding error (really, Erin, ‘<‘ instead of ‘>’) meant that I had written this great paper about why we don’t see any result when in fact there might be a really important result. Good work. It’s not like I had plans this weekend, anyway.

At any rate, losing myself in my dissertation means thinking a lot about ‘nontraditional’ unions and the evolving concept of the family, and reading Mara’s book means thinking a lot about all of the men that are going to spend their lives as bachelors in Asia. What I haven’t been thinking much about is the other end of the spectrum, polygamous marriages, which suddenly came up today. A good friend and PhD candidate at UCLA is working in Kenya right now as a field researcher and is occasionally sharing her thoughts on development and field work, etc. Having spent some time in that part of the world and always eager to read anything I can get my hands on, I keep close tabs on what she’s doing.

She posted recently about polygamous marriages and made a joke about how one episode of the TV show Big Love was the extent of her knowledge of polygamy in America. With the same-sex marriage becoming more and more part of our understanding of marriage, I’ve heard a few mutterings that polygamous marriage might be the next ban that is tackled. Ignoring for a moment the torrid history of polygamy in America and its association with forced marriage of children, it’s interesting to think about the value that additional help might afford. In a place with high rates of mortality for young men (from HIV, for instance), the ability to raise one’s children alongside another person, even that person is not a romantic partner and even once shared your romantic partner, seems much more palatable than knocking it out alone.

And, just to bring this full circle, Mara’s prologue starts with the story of her own youth, where two newly single women, Mara’s mother and a friend, banded together to raise their children. They weren’t co-wives or sister-wives, but it seemed to be an arrangement that worked. If you were in a polygamous marriage, you don’t even have search costs associated with finding someone to help you.

Surely, someone was going there

This article appeared Monday in the NYT, supposedly in response to the accusations leveled at Dominique Strauss-Kahn’s alleged victim (and yes, she’s still an alleged victim) concerning her asylum claim. In an earlier post, I expressed the concern that too much attention would be paid to her false claim for asylum. This, unfortunately, in addition to claims that she might be a prostitute, come with the corresponding disinterest in her claims of rape, and possible dismissal of the charges. We might never know what really happened between them because clearly, anyone who has ever lied would lie about being raped and put themselves through the hell and media firestorm that results when claim you’ve been raped.

Snarkiness aside, the somewhat sensationalist NYT article really only confirms one thing, that we have no idea how often people make fraudulent asylum claims. That’s not to say it doesn’t happen, and not to say that we’re bad (or good) at catching them, merely that we don’t know. They certainly happen. And from an economic standpoint, it’s likely, though, that if we make the process harder, we would see more fraudulent claims. Or if we make some other part of the immigration process harder, visas for skilled immigrants, for instance, we would see more fraudulent claims. If you increase the costs of something, particularly necessities, you create incentives to get around it, often in ways we don’t like. Most of the data on asylum claims are confidential in order to protect all parties (asylum-seekers, those who represent them, etc), so we’re stuck again in the place where even if we could come up with a clever way to test for fraudulent claims, we don’t have access to what we’d need to do it. We just don’t know.

However, our ability to econometrically test for this, as fun as it might be, is less important than whether people are being afforded the services and assistance they need. To paraphrase the words of a lawyer friend, there is bad legal advice everywhere. Despite attempts to keep lawyers within a strict code of ethics, there are of course people who would encourage clients to exaggerate their claims. There are also people who would do so of their own volition out of fear, all of this even when their own story is horrific enough to merit asylum without lying. What prompts someone to file a fraudulent claim, fear that it’s too difficult to get asylum, fear of returning to one’s country, bad legal advice? Some combination of the above? Also, there are checks in place to prevent fraud. Are they perfect? Probably not, but I have plenty of checks in place to make sure my students don’t cheat, that doesn’t mean some of them haven’t gotten away with it.

The fact that people file fraudulent claims doesn’t mean we should crack down harder on asylum claims, but perhaps we should be examining why someone might feel the need to lie. Gender, in particular, is not grounds for asylum, under most interpretations. You must be part of a particular class, like abused women, to seek asylum. Requirements are open to interpretation, but you must show that you’ve been persecuted for being part of one of those classes or show that you face imminent danger if you return to your country because of being part of one of those classes. It’s not particularly easy to prove, even when you’re telling the truth. But perhaps we should take a closer look at what drives people to lie to seek asylum, rather than using isolated examples of lying to encourage a backlash against all asylum seekers, most who would face real danger if they returned to their countries.

My favorite oligopoly example just got better!

Though my students are quickly becoming far too young to remember the advent of Netflix, I often start a unit on oligopoly or game theory by posing the question of how much the DVD rental service cost when it started. The answer, you might not remember yourself, is around $20. Now, that seemed like a bargain at the time, when your only real option to rent a movie was to haul your butt over to Blockbuster and pay $4.99 for a single movie, and then face late charges, etc, when you couldn’t get it back the next day. Blockbuster didn’t like the competition of course, and soon got into the online/mail business of renting DVDs itself, leaving us with two big companies sharing the bulk of the market–an oligopoly, or a duopoly, more precisely in this situation.

In principles, and in my intermediate classes, too, I use this example to talk about the options oligopolies face. at least in our simplified, basic model. They can collude, or try to keep prices high and capture as much of the monopoly surplus as possible. Or they can cheat, undercutting their competitor’s prices. In a dichotomous world, we see the two options play out in different ways, allowing our oligopoly to look like a monopoly or to look like perfect competition. That is, high prices mean small quantity, and the consumer gets very little surplus. In the other case, where the companies continue to undercut each other, this drives prices towards the perfectly competitive equilibrium, where each company is charging their marginal cost and capturing very little of the surplus.

In some cases, they’ll even drop below their marginal cost, taking a loss in order to try to drive the other companies out of business. If one company can sustain losses for a long time, he might be able to get rid of the others and then raise prices back up to the monopoly level, thus capturing all the monopoly surplus for himself. Now, he doesn’t have to share with the other guys.

Netflix and Blockbuster have spent the last few years lowering their prices, creating more and more types of plans to have the lowest prices. But lately, Blockbuster has been in trouble. And, just in time for a new school year, Netflix announced today that it was raising prices by 60% come September 1. That makes my example even better! Netflix has a monopoly, Blockbuster enters with a lower price, Netflix responds by lowering their prices, and tit-for-tat until Blockbuster is in trouble, closing stores down all over the place. So, what does Neflix do? They see less competition and raise their prices. Full circle. I love it.

Picking boys over girls

I start almost every class I teach with a sort of overview of economics and what kind of research I do. My favorite thing to do is throw out facts that seem controversial and get my students a bit riled up. In that vein, my favorite fact to throw out is that if you give money to women, they spend it differently than if you give money to men. I, of course, phrase it slightly more contentiously, claiming that men buy booze and cigarettes and women buy books. In the simplest terms, women are likely to spend an extra dollar on their children, while men are likely to spend an extra dollar on themselves, particularly in the developing world. This is a generalization, of course, and reflects averages, and doesn’t necessarily preclude that men will spend any money on their children. They of course are spending money on their children.

A new strand of literature, in fact, is attempting to tease out exactly how men and women spend money on their children, and in particular, whether there are differences by gender of the child. One of my advisors is very active in this literature and has a recent paper* in the AER on expenditures on children in Mexican immigrant families. She shows that the absence of a male head of household, through migration to the US, shifts resources towards female children. As men send remittances home, women make the decisions about how to spend the money, and thus spend more on girls. When the male heads return, and thus the man resumes decision-making power on expenditures, resources shift back towards the boys. As much as my students might think I’m crazy or sexist, who is making decisions in a household is of extreme importance in determining expenditure allocations.

*Antman, Francisca M. 2011. “Migration and Gender Discrimination Among Children Left Behind.” American Economic Review 100:3, 645-649.

Revictimizing the victim

Since I posted here about Mac McClelland’s piece on her own PTSD, and how she used violent sex to lift herself out of it, I thought it appropriate to give voice to one of her sources. A Haitian woman whose experiences were tweeted by McClelland has found the means to say that she never gave McClelland permission to share her story in such a way. The author here even suggests that McClelland put her source’s life in danger.

There’s a fine line when we choose to share someone else’ experiences through any media outlet, be it social media, a newspaper or an online magazine. I don’t remember who said it, but I was once told that in order to be a good reporter, you have to be warm enough to earn people’s trust, and then callous enough to betray it by telling their story to the world.

We’re all talking more about the problem of rape in war-torn or disaster-affected countries as a result of this story, I’m sure. Haiti, Congo, Syria. Not many of us likely have ideas about how to fix it, but I think we can all agree that retraumatizing a victim does not add up to good work.

A lawyer, an economist and a social psychologist walk into a bar…

Over the last few months, I’ve been hard at work on an amazing project with two even more amazing coauthors. Through my undergrad, I’ve come into contact with so many fantastically smart people and as we all grow professionally, we’re starting to collaborate and work together on various academic projects. It just so happens that this most recent collaboration was proposed to me by a lawyer, to write a handbook chapter on gender-based violence, or GBV, from a social psychology perspective, with the other coauthor being a social psychologist. It starts to sound like a joke, but I promise it’s not.

I delved into this world of social psychology with some trepidation. My advisors expressed their qualms about the project, and not just because it would take time away from finishing my dissertation (it has, but it’s all going to get done). Academics in general, and economists in particular, are wary of crossing disciplinary lines, and there are good reasons for that hesitation. We’ve all been “raised” in very different academic environments, with not only different advisors, but different canonical texts, different standards for what constitutes research, for what constitutes a conclusion, different styles of writing, of citation, etc. In this light, our differences can seem overwhelming, to the point of excluding all possibility of collaboration. When it comes down to it, though, we’re all interested in asking interesting questions and finding answers to them. It’s that curiosity, that drive to solve problems, that I think unites us as academics. Certainly, we all took these (at least theoretical) pay cuts for a reason other than “summers off”.

In the research I did for this paper, and am still doing as organizations get back to me, and more sources and programs come to light, has opened up a whole new world in terms of how we present information. While I’ve spent a lot of time thinking about how we ask questions, and particularly survey questions, I’ve spent less time in thinking about how we present information to change behavior. It’s easy to agree that gender-based violence is an undesirable outcome, but with the wealth of experience that tells us how easily we can alienate those we try to teach, how teaching can backfire in the face of culture and how unique individual situations are, it’s harder to say that we know how to combat it.

Programs that follow the dicta of social norms marketing fall squarely in this idea of how do we present information to change behavior. It’s a term that at first confused me, the economist, but quickly took hold. We talk about social norms all the time from what constitutes appropriate dinner talk to the acceptability of practices like FGM or honor killings in certain communities. As regards gender-based violence social norms, is gender-based violence acceptable? Or, rather, are there certain situations under which beating your wife is acceptable? We find that the answers to these questions are rather different, and how we pose them to survey respondents greatly affects the data to come out of such surveys.

The marketing part is the presentation of information. Through pamphlets or television shows or radio programs, advertisements, participatory workshops or events, social norms marketers try to present information about social norms, or rather present information about desirable social norms, using methods that are familiar, or not. Some of the most successful social norms marketing programs for gender-based violence rely on what are essentially soap operas and likable characters to portray desirable behavior.

Perhaps it’s my relatively naivete in the subject, but it really warms my heart to see new campaigns like this coming out. While in all reality, they really haven’t been sufficiently evaluated, the glimmers of promise in their success at creating desirable social norms around violence (it’s not okay to hit your wife, ever; rape is not something real men do, etc) bode well.

My coauthor recently sent me these videos from the Democratic Republic of the Congo, featuring a famous Congolese rapper in various roles portraying strong, loving, respectful real men. Real men who make their wives dinner when they’re late coming home from work instead of beating them and real men who treat women as equals instead of demanding sexual favors in return for employment. The videos don’t have subtitles and I don’t speak much French, but they’re cool nonetheless. I don’t see them winning an Oscar by any means, but hopefully they’ll change someone’s mind.