If Elephants Had Wings...

Economists imagine universes to which they can apply their tools, namely, and quite often, mathematics taken from engineers who have to deal with reality. As engineers we use mathematical tools to do things, we model reality and then test it out to be certain our models work. Economists have no such checks and balances. And as we have recently seen they also seem to have the tendency to promote their ideas via prevarication, namely saying one thing to push their belief while holding onto to a reality starkly different. There is no other occupation that allows no less encourage this other than magicians and circus acts. Oh, yes and of course politicians.

Now I read an article in Vox which focuses on the 1% and inequality. They conclude, regarding their proposed extortionary tax plan of some 90%+ marginal rate:

Overall we find that increasing tax rates at the very top of the income distribution and thereby reducing tax burdens for the rest of the population is a suitable measure to increase social welfare. As a side effect, it reduces both income and wealth inequality within the US population. Admittedly, our results apply with certain qualifications. First, taxing the top 1% more heavily will most certainly not work if these people can engage in heavy tax avoidance, make use of extensive tax loopholes, or just leave the country in response to a tax increase at the top. Second, and probably as importantly, our results rely on a certain notion of how the top 1% became such high earners. In our model, earnings ‘superstars’ are made from luck coupled with labour effort. However, if high income tax rates at the top would lead individuals not to pursue high-earning careers at all, then our results might change^. Last but not least, our analysis focuses solely on the taxation of large labour earnings rather than capital income at the top 1%. Despite these limitations, which might affect the exact number for the optimal marginal tax rate on the top 1%, many sensitivity analyses in our research suggest one very robust result – current top marginal tax rates in the US are lower than would be optimal, and pursuing a policy aimed at increasing them is likely to be beneficial for society as a whole.

You see they assume that the rich just got rich by luck. There seems to be little hard work involved. But they do seem to admit that perhaps they could avoid taxes by moving, that they may possibly not work as hard.

This is a classic example of some thought based upon no knowledge. But unfortunately our current Government policies are all too often based upon academic advice from these people.