Conservatives everywhere condemn the use of tax increases for fear of the Laffer Curve. This is the idea that if taxes are too high, people will lose the incentive to work and therefore revenue will actually decrease. It is most famous for its counter-intuitive argument that a tax cut could increase revenue. Unfortunately there is little or no evidence to support this claim. History clearly shows that cutting taxes does not increase revenue. The Laffer curve is a political idea used to justify tax cuts for the rich. It is not based on sound economics. Most economists know the Laffer Curve isn’t true. An IGM survey of economists found that not a single one of them agreed that a tax … Continue reading “The Mythical Laffer Curve”
Tag: Economics
The Euro: It Seemed Like A Good Idea At The Time
Ten years ago most countries of the European Union abolished their individual currencies in favour of one regional currency, the Euro. There were celebrations and rejoicing at a further step towards European integration and co-operation. It was proclaimed that this would lead to peace and prosperity. Most people gave it little thought beyond the fact it would be handy to use the home currency abroad on holidays. Very little consideration was given to the economic effects the currency might have. Rather it was presumed Europe could only benefit from a single currency. Ten years on and the Euro is facing widespread and possibly even collapse. Where did it go wrong? In a nutshell, the Euro is in trouble because European … Continue reading “The Euro: It Seemed Like A Good Idea At The Time”
Laissez Faire And The Irish Great Famine
Right wing libertarian politics have never really caught on in Ireland. Part of this is due to the memory of the Great Famine of 1845-8. The Famine, though caused by blight, was made worse by the prevailing conservative doctrine of laissez faire. This was the prime example of politicians believing the free market will solve everything, that it would be unethical for the government to intervene and that helping the poor would only make them lazy and dependent. This was an experiment of a world with only minimal government, of free market principles in practice, the result was so disastrous that a million people died. The normal market is governed by supply and demand. Goods are sold to whoever will … Continue reading “Laissez Faire And The Irish Great Famine”
The Benefits Of Unions
Unions have a pretty bad reputation. They are often stereotyped as protecting lazy and bad workers, as well as causing unemployment other inefficiencies. However the many benefits of unions are often ignored. These include increased morale, productivity and equality. Unions provide an important role in providing a voice for their members. If a worker has a grievance it may not be heard (either because the worker is afraid to complain or the boss may not listen). However the union can raise the issue and ensure the boss listens. Addressing grievances improves morale (as the worker feels they are valued, their opinions matter and they have the power change things for the better which increases innovation) which in turn boosts productivity. … Continue reading “The Benefits Of Unions”
The Advantage Of The Minimum Wage
There is a lot of debate over the minimum wage. An internet search of the topic will return with almost unanimous condemnation of it. It is blamed for unreasonably pushing wages too high and causing unemployment. It is decried as a major cause of economic problems rather than the solution. However, these arguments are based upon over simplified ideas and graphs. Now, most of them look nice and are easy to understand, but they should be judged on how well they describe the real world. The simple fact is they don’t really. The main argument is that if a workers marginal productivity is 5 euro, they cannot be paid 6 euro. Now this presumes that the boss knows what the … Continue reading “The Advantage Of The Minimum Wage”
How Rich Countries Got Rich . . . And Why Poor Countries Stay Poor
I have just finished reading How Rich Countries Got Rich . . . And Why Poor Countries Stay Poor by Erik Reinert. The book is interesting for it engages what should be the main question of economics, why are some countries rich and other countries poor? This crucial question is woefully under researched and barely discussed in mainstream economics. I have completed two years of economics study in university without yet having heard an explanation for this phenomenon. Reinert’s main argument is that the wealth of a nation is based upon the economic activities it specialises in. Poor countries are poor because they specialise in agriculture and the production of raw materials. This is an economic dead end as it … Continue reading “How Rich Countries Got Rich . . . And Why Poor Countries Stay Poor”