Browsing the archives for the economics tag.

Video Introduction to Praxeology

science

Praxeology is the science of human action, encompassing both economics and ethics. It is my favorite science, and now there is a new video introduction being created by PraxGirl. Here is the first episode:

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The Ridiculous Rahn Curve

economics, taxes

The Rahn Curve indicates two things.  The first is that there exists a single, optimal level of taxation for maximizing economic productivity.   The second is that this maximum is somewhere between 15-25% of GDP.

The first statement is true.  The second is not.

Here is the Rhan Curve:

Notice the pathetic nature of this graph. No grid, no units and no endpoints. It gives us little information but implies a lot.   It implies that GDP can only grow, not shrink.  It implies that what lies outside of the narrow (?) range covered by the graph is unimportant — nothing to see here citizen.  Let’s improve the graph a little:

Here we show that GDP could rise or fall, and some potential values for the curve near 0% and 100% taxation.

I’ve drawn three potential extensions of the Rhan curve.

If the red extension were correct, then without government (0% government spending), then the economy would collapse (presumably due to lack of police services).  On the other hand, giving government total control of the economy would lead to even more impressive GDP growth than the local maximum that was originally marked as optimal.

If the blue curve were correct, then there would not be much to complain about — just that whoever made the original graph was lazy.  One interesting thing about the blue curve is that the economy would remain the same size with either no government or total government.

Finally, if the green curve were correct, then totalitarianism would lead to economic collapse, and anarchy would lead to prosperity.

Of course, drawing lines on the graph does not tell us anything about what is true about the economy.  However, it does help indicate how poorly conceived the Rhan curve is.

In order to maximize economic productivity, there must be every incentive to produce, and little incentive not to produce.  Why do people work?  To get money.  What do taxes do?  Take away their money.  Taxes are clearly a reason to work less.  The higher tax burden is, the less productive people will be.  The lower taxes, the better.  This is not rocket science.  How low can taxes possibly go…?    Zero!

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Be an Organ Donor

intervention

The government sent me a nice, glossy advertisement telling me that it would sure be swell if I signed up to donate my organs when I die. Apparently there is a tragically short supply of organs and many people who need transplants are on waiting lists to get them.

Since shortages are only caused by government price controls, it seems a little strange for the government to ask me fix the problem.  All they need to do is remove the price control and the free market will provide all the organs people want.

In this case, the government sets the legal price of organs at zero dollars. The only people who are supplying them are those who are willing to give them away for free.

According to organdonor.gov, each day about 77 people receive organ transplants.  However, 19 people die each day waiting for transplants that can’t take place because of the shortage of donated organs.  The first thing that occurs to me is that the government kills 19 people each day with their price control on organs.  The second thing is that such a large number of people are getting their organs for free.  It seems likely that the remaining gap would be easily surmountable with a little bit of freedom.

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Unintended Consequences

economics

A baby on an airplane would be safer in a car seat than in his mother’s arms.  Recognizing this, government mandates that infants must fly in a car seat. This makes babies on airplanes safer.  However, many mothers will not be able to afford an extra plane ticket for their infant.  Instead, they will choose to drive to their destination rather than fly.  Since driving is far more dangerous than flying, many infants end up injured or killed as a result of this law.

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Democracy

economics

“The direction of all economic affairs is in the market society a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship. A superficial observer would believe that they are supreme. But they are not. They are bound to obey unconditionally the captain’s orders. The captain is the consumer.

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Obamagician

economics

The State pretends that it has the power to create wealth, peace and happiness. It writes a few magic words on a piece of legislation, waves the non-partisan wand and, presto, our every desire is realized. Sadly, many people accept this facade of the State as a magic lamp. They see politicians wishing for boondoggles and wars and think, “if I were in charge, I would only wish for good things.”

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