Category: Economics

middle-classWhether they wear boxers or briefs is none of my concern. Nor do I care whether they choose to use a PC or a Mac. When it comes to presidential candidates one of the least-asked question I want answered is, “What do you mean when you say ‘middle class?’”

This undefined group of citizens seems to be a favorite of politicians on both ends of the political spectrum. Reagan and Bush cut their taxes. Bill Clinton and Obama did too (or so they claim).

Hillary Clinton has proposed cutting their taxes as has every Republican candidate. Even the socialist Bernie Sanders has said he’d lower taxes on the middle class (by raising taxes on the “rich”, naturally).

What they rarely ever explain, though, is who exactly they consider to be “middle class.” Most people use the term as a means of emotion-based self-categorization (“I don’t feel rich or poor so I must be middle class”). Ask the janitor sweeping your company’s floors and he’ll likely tell you he’s middle class. Query the vice-president of marketing and he will give you the same answer. The single girls down in accounts payable and the married attorneys in the legal department will give the same response.

In the land of equal opportunity, it appears, we’re all middle class.

Blog author: jsunde
Thursday, December 10, 2015

elvesIn “The Elves and the Shoemaker,” the famous fairy tale by the Brothers Grimm, a cobbler and his wife struggle to survive, barely making enough to eat (never mind investing in the future of their business).

One morning, however, they wake to find that their last scraps of leather have been turned into a remarkable pair of shoes. Not knowing the source of such craftsmanship — and apparently incurious — the cobbler sells them off at a higher price, gaining new capital to grow his business. Each night thereafter, the miracle continues, and the enterprise grows in turn.

Months later, they finally take an interest in the source of such help, staying awake through the night to spot two naked elves, each happily laboring to make more shoes. The wife sews clothes for the elves, who, after finishing their work, express their thanks and graciously depart, never to be seen again.

One can find several morals or lessons in the tale, but Jeffrey Tucker does a marvelous job of highlighting its themes on the meaning of work, the gift of exchange, and the glories of capitalism. (more…)

Riding to LaGuardia at the end of a business trip to New York City this past Saturday, my cab driver complained of the traffic in Midtown. In a non-malicious way (for a New Yorker), he suggested that the general increase in recent times might be due to the ride-sharing service Uber.

Generally speaking, I like Uber. I can only say “generally,” because I haven’t actually tried it yet. It’s a good idea though, as far as I’m concerned (shhh, don’t tell Hilary Clinton).

Nevertheless, call me old-fashioned or sentimental, but I still prefer a yellow cab. This is likely in part due to the fact that Grand Rapids, MI, where I live, has never had a thriving taxi business. For the most part, everyone either owns a car or takes the bus, so riding in a taxi feels like I get to be a part of every movie ever set in New York City to me. It’s at least a little magical, you know, like Die Hard 3.

Anyway, to get back to my cab driver, whose name I regret to have forgotten, I wondered if perhaps he was right. A recent article at FiveThirtyEight by , and actually explores some data on NYC taxi and Uber business. They write that in the Manhattan core area,

The increase in total Uber and taxi pickups during evening rush hours and later at night wasn’t spread evenly between the two competing services. Instead, Uber pickups surged by more during that time than they did the rest of the day, while taxi pickups experienced their biggest drops.

So Uber isn’t just poaching cab rides, it’s getting some business from people who wouldn’t have taken a taxi. And outside of the Manhattan core the effect is even sharper: (more…)

window-taxKing William III of England needed money, so in 1696 he decided to implement a new property tax. To make sure the tax was progressive (i.e., affected the rich more than the poor), the parliament devised a seemingly clever idea: they’d use the number of windows as an index for the value of a house.

The assumption was that larger homes, presumably owned by the wealthy, would have more windows than the houses of the poor. All a tax assessor needed to do to calculate the tax was walk around a building and count the windows. Ingenious, no?

In its initial form, the tax consisted of a flat rate of 2 shillings upon each house and an additional charge of 4 shillings on houses with between 10 and 20 windows, or 8 shillings on houses with more than 20 windows.

You can probably imagine what happened next.

As economist Tim Hartford explains, a “fundamental error is the idea that architecture doesn’t respond to tax incentives.”

Sales-taxImagine you’re at the checkout line at the supermarket and the clerk asks how much income your family earns each year. Offended, you ask why that is any of her business.

“We need to know to determine how much sales tax you need to pay,” the checker politely explains. “If you’re classified as the ‘working poor’ you need to pay more sales tax.”

“I think you have that backwards,” you helpfully add. “You mean the working poor need to pay less sales tax, right?”

“Oh, no sir,” she say, still blissfully cheerful. “It’s a new anti-poverty program initiated by the federal government that helps the poor by making them pay an addition sales tax on their groceries.”

Although it isn’t stated so clearly or applied so directly, the federal government has in fact implemented an “anti-poverty” initiative that does just that. As economist Thomas Macurdy says, “Most Americans wouldn’t cheer this program, nor would most political leaders champion it. Yet that is what happens when Congress raises the minimum wage.”

Earlier this year Macurdy published a study in the Journal of Political Economy that examined the effect of the minimum wage on the poor. As he explains in the Wall Street Journal, his findings show that the minimum wage serves as a tax on the poor:

sharing“There are solid grounds for believing that the first Christian believers practiced a form of communism and usufruct [i.e., the right to enjoy the use and advantages of another’s property short of the destruction or waste of its substance],” wrote Peter Marshall in Demanding the Impossible: A History of Anarchism. As evidence Marshall cites the second chapter of the book of Acts:

And all who believed were together and had all things in common. And they were selling their possessions and belongings and distributing the proceeds to all, as any had need. And day by day, attending the temple together and breaking bread in their homes, they received their food with glad and generous hearts, praising God and having favor with all the people. (Acts 2:44-47, ESV)

Marshall is (mostly) correct. The early Christians did engage in a form of voluntary usufruct and wealth redistribution. Since then, many Christians have asked why we don’t follow that sort of proto-communist model today. If the economic system was good enough for the apostles, why isn’t it good enough for modern society?

A hint at why the system is not longer used is found in the verse that immediately follows the passage cited above:


box2Contrary to popular perceptions, people with disabilities are equipped with unique skills and creative capacity, giving them a powerful role to play in the world economy, whether as restauranteurs, goldsmiths, warehouse workers, marine biologists, car washers, or Costco employees.

Unfortunately, those gifts are not always recognized by the marketplace. According to the U.S. Department of Labor, the unemployment rate for those with disabilities is more than double the average for those without.

Thankfully, that blind spot is slowly being revealed, whether by forward-thinking entrepreneurs and executives or in the case of Vanderbilt’s Kennedy Center, university researchers and church congregations.

Thanks to a significant grant from the Kessler Foundation, researchers at the Kennedy Center are working with local churches to find new ways to provide work for young people with disabilities: (more…)