Monday, July 9, 2007

Uniformed Intentions

It's always aggravating when someone starts off "The thing about economics that nobody realizes", or "What really annoys me about people who don't get economics".

This is because the person making the statement generally knows little about economics, regardless of how well educated they may be.

For example, take
this. The author of this story (in which Thomas Jefferson arrives in 2003), has done extensive research, including reading the entirety of Jefferson's voluminous collection of letters, which is thousands of pages and hundreds of missives. Obviously, no small task, and a highly respectable one.

However, he holds on to the (forgivable) misconception that tax cuts raise government revenue (aka. supply-side economics). While it is agreed that the distortionary effects of taxes make it so that a $1 tax cut reduces government income by less than $1, the evidence shows that tax cuts do not boost government income except in extreme circumstances.

Somewhat bizarrely, he also holds that US oil majors control the world price of oil and alter it at whim to keep their stock prices steady. I have not heard this hypothesis previously, but I trust that I don't need to explain that it's not true. Demand? Supply?

This should serve as a warning, elucidated competently in Krugman's
Pop Internationalism: People who aren't economists have a remarkable ability to voice opinions about economics. And such opinions should be taken with much salt.

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