The Darwin Economy: R. H. Frank(Progressive Consumption Tax)

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Robert Frank draws some interesting parallels between Economics and Darwinian Natural Selection and competition and contrasts this with Adam Smith's "Invisible Hand".

I do personally lean Libertarian, but I find his argument fascinating. In general, I also favor a consumption tax anyway so I like his take on it the way he presents it. I would gladly support this if it ment dumping the current income tax. Also, this makes me think about how free markets have given America amazing innovations, but that same market competition is also the source of problems.

I find this persuassive and wondered what others here might think it, or if there is a flaw I'm missing.

[youtube]http://www.youtube.com/watch?v=M8j1e-oT0UQ[/youtube]


NY Times article about the book: Darwin, the Market Whiz

http://www.nytimes.com/2011/09/18/busin ... d=all&_r=0

A spectacular example from nature illustrates his point. The massive antlers of bull elk are often four feet across and weigh more than 40 pounds. Why so big? Darwin’s explanation began with the observation that bull elk, like males in most vertebrate species, take more than one mate if they can. If some succeed, others end up with no mate at all, making them the ultimate losers in the contest to pass along their genes. So bulls fight bitterly for females, and mutations coded for larger antler size help them win. That arms race has produced the gigantic antlers we see today.

As a group, bulls could better escape from wolves in densely wooded areas if their antlers were smaller, yet any individual bull with relatively small antlers would never win a mate. So bull elk are stuck with unwieldy antlers.

bump....


I don't usually bump my own threads for attention, but I think this topic could relate to the criticisms of Libertarianism.

In 2008 I supported Ron Paul and in 2012 I supported Gary Johnson. Out of the available choices, I found them the most appealing and I thought Johnson had a stronger record than Romney as Governor and as an Entrepreneur.

Yet, Robert Frank's criticism of Libertarianism and suggesting that Natural Selection influences the economy intrigues me. Also, from my Libertarian leanings, if we must have Taxes, I would prefer a Consumption Tax anyway. So why not have a Progressive Consumption Tax that puts the brakes on the very wealthy pursuing "Relative Status" or if they do, pay a hefty Tax to support the government?

Unless there is a flaw in this proposal I'm not seeing, I would support this Tax system.

On the one hand, that would lead to them putting the bulk of their money in investments, because there's nowhere else for it to go.

On the other hand, a glut of money for investment usually results in malinvestment, which wrecks the economy.

On the third hand, a lot of jobs will be lost, because the rich won't be consuming as much - and when you're not allowed to buy a private jet, that is one less sale the company makes, and they'll have to lay off staff to adjust. And the most expensive hotels will have to close, laying off all their workers. And a load of builders will find themselves out of a job, because the lucrative contracts to build a few mansions have now dried up.

I am not sure what this guy is arguing for. Is he pro Darwinian economics or not?

The UK was turned into a more Darwinian economy in the 1980s. It has led to less competition, and some companies now have a near monopoly in their industry.

The consumption tax already exists in VAT.

Income tax is an issue for everyone and I'm sure we'd all love to see it abolished, but I believe in strong government and see no other way of raising revenue for the state.

I believe those who see our economy in the same way as Darwinian natural selection are short sighted. Natural selection selects only for what is good at any one time, it does not take into account the future, and many species have gone extinct because things changed and they were too specialized to adapt.

When looking at this game of economics we've created we have the privilege of thinking strategically. This does not happen in the natural world, so the notion of Darwinian economics is misguided.

You mean investments as opposed to taxes? AFAIK, there's no clear way to determine that one is better than the other.


Again, I don't see much basis for generalizing which kinds of expenses are better than others.


When you say the rich need to buy extravegant luxuries, that's no different than saying we need to pay people to dig ditches all day just to create jobs. It's clearly a waste of time and energy. If we stopped making private jets, huge mansions, and fancy hotels, those resources could be diverted towards the production of necessities, which would lower the cost of living, which means we wouldn't need so many jobs. I see no reason why the GDP needs to be as big as it is.

(In case you're wondering, I'm very liberal, and I'm 100% behind the FairTax plan.)

I can't listen to the video, but in general I feel:

1) Taxes should be simple
2) Taxes should target the rich ahead of the poor

(and other things, but those are the relevant ones)

Consumption taxes disproportionately affect the poor ahead of the rich (because the poor spend a greater proportion of their income)
A "progressive consumption tax" that somehow charges the rich more than the poor would be complicated.

Therefore, consumption taxes are worse than progressive income tax.

If you're going to tax at all, you could at least keep it somewhat simple. An income tax, negative below a certain threshold and positive above it, flat rate. That way, everyone gets a guaranteed amount of money, and you're not seizing the majority of someone's income.

Say, t = f(i-b/f), where t = income tax, f = fraction of income that is tax, b = basic income. If you're making less than the basic income, you're income tax is negative, and you're not taxed at all until your tax exceeds the basic income. Inputting a tax of 25% and basic income of £5k, we get t = 0.25(i-20k), so if someone is making no money at all, they're being given £5k/year. Under this scenario, you only start paying income tax on income over £20k. It is assumed, of course, that this will be replacing the welfare state, rather than being in addition to it. Given the values here, and assuming incomes to be roughly normally distributed (which is actually isn't), you'd need the mean salary to be £20k to make this system self-financing. Meh, it can be adjusted if it needs to.

A quarter of the UK governments funding comes from income tax, rising to about 2/5 when you factor in national insurance, and another 1/6 from VAT (enough, by the way, to fund the police, courts, and military). They spend approx. £11k/year per person. It does not seem infeasible to me that the above mentioned citizens income system could be brought in, though we'd have to decide what programs to remove to pay for it. But it would be a lot simpler as a way to run a welfare state, and if there's extra cash from elsewhere, the income can be increased.