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Archive for the ‘The Economy’ Category

How big are fossil fuel subsidies?

The short answer is “too big”.

I found this report (via Political Irony), from, of all places, the International Monetary Fund, discussing the size of the gravy train subsidies given to fossil fuel industries. Among its findings:

  • Almost $5 trillion is spent in such subsidies. This is about 6.5% of global gross domestic product.
  • Coal gets the most subsidies. This finding is new to me. It is also the most disturbing, as coal is one of the worst fossil fuels in terms of pollution and global warming.
  • A substantial part of these subsidies are indirect, as in not properly charging for externalities.
  • Eliminating these subsidies would have enormous benefits, including increased government revenue, less pollution, and millions of fewer deaths
  • Global coordination is not necessary, as a country “going it alone” by eliminating subsidies will still reap benefits.

With the above benefits, it is obviously a great idea to end these subsidies now. Energy companies do not need these subsidies. Indeed, the same way those who are doing just fine don’t need an unpaid cheer squad, those who are doing just fine don’t need coddling from the government either.

Word of the year 2013 are chosen because reasons!

The American Dialect Society has chosen its words of the year for 2013. First the other categories:

  • Most Useful was “because” when used to introduce another word, like in the title of this post.
  • Most Creative was “catfish”, when you misrepresent yourself online in the pursuit of romance.
  • Most Unnecessary was “sharknado”, a tornado full of sharks that came out of a movie.
  • Most Outrageous was “underbutt”, the underside of people’s buttocks, made visible by certain clothings.
  • Most Euphemistic was “least untruthful”, the smallest amount of lying.
  • Most Likely to Succeed was “binge–watch”, which is to television shows what binge–eating is to food.
  • Least Likely to Succeed was “Thanksgivukkah”, having Hanukkah start on (US) Thanksgiving.
  • Most Productive was “–shaming”, a form of public humiliation.

As an aside, I am surprised there were no “economy words” like shutdown, sequester, debt ceiling, etc. If this is due to them being common than I really don’t like the implications of that.

And the Word of the Year? Because… because reasons! Because useful! Because everywhere!

In a companion vote, the ADS sibling organization, the American Name Society, chose Francis (after the pope) as its Name of the Year.

How to simplify the tax system

Considering that yesterday was the day that most Canadians were supposed to have filed their tax returns, I see the usual complaints about it being complicated. With that in mind, here are two possible ways to simplify the tax system. They offer features that should appeal to people from all across the political spectrum.

The first one is known as a “negative income tax“. About four in every five economists (79%) agree (possibly with provisos) that “the government should restructure the welfare system along the lines of a ‘negative income tax.'” The features of a NIT are as follows (I’ve explained them in comments elsewhere, but this is the first time in a post at this blog):

All income, whatever the source, is taxed at a flat rate. This includes incomes that are currently exempt, taxed differently, or deferred, such as capital gains and inheritances. Second, all deductions, whatever the basis, are eliminated. This includes ones like charitable donations, political party donations, or hazardous jobs. The result of this is that everyone with the same nominal income pays the same tax. Third, all welfare systems, like social assistance or unemployment insurance, are eliminated and instead converted into a refundable tax credit of some amount. Each taxpayer subtracts the refund from the income tax they paid. If the result is negative, they get a refund from the government. If the result is positive, they pay the difference to the government.

Let’s use examples to demonstrate. For the sake of this example, we’ll assume that the flat rate is 20%, and that the refund is $5000. There is nothing special about these numbers; they are examples only.

Alice’s T-slips indicate that she earned $20000 last year. She pays 20% of that ($4000) in taxes. She gets a refund of $5000, which means that she actually gets a net $1000 from the government. The same year, Bret earns $25000. He pays 20% of that ($5000) and gets a $5000 refund. Therefore, he actually pays no net taxes and gets no money from the government. The same year, Chris earns $30000. This taxpayer pays 20% of that ($6000) in taxes. After the refund, $1000 is still owing, so this taxpayer actually pays a net tax of $1000.

As can be seen from the examples, by tinkering with the rate or the refund, a guaranteed minimum income can be maintained, and any arbitrary no tax payable point can be chosen. Update (2013–05–05): And it goes without saying that certain “special circumstances” can be given a slightly different refund, such as dependents or disability.

The negative income tax system has a number of significant advantages over the current regime (after the jump). In no particular order:

(more…)

Something that should happen, but won’t

This will probably one of the very few times I might have something nice to say about Republican obstructionism. ThinkProgress reports (my emphasis):

House Republicans let the five-year farm bill expire at the end of September without a new law to replace the massive measure covering billions of dollars in programs, including food stamps and agriculture subsidies….

I’m against cutting food stamps, but in the unlikely event that this obstructionism results in the end of American agricultural subsidies I will be really glad. Agricultural subsidies are one of the worst possible things a government can do with its money. For the most part, these line the pockets of agribusinesses and cattle barons. Contrary to popular believe, only a minute fraction of agricultural subsidies go to family farmers. The chief effect of these unnecessary subsidies is to distort the food market, mostly by artificially lowering prices. The effect is to give an income to agribusiness that the free market won’t (or can’t). In almost every other circumstance, wingnuts would be screaming “SOCIALISM” until their vocal cords broke. But in this case, we usually end up with bipartisan agreement to squander government money. It should come as no surprise that an overwhelming majority of economists agree that agricultural subsidies should be eliminated.

In many cases, these market distortions skew people’s food choices, especially towards unhealthy foods. Elimination of agricultural subsidies would hence improve public health.

Eliminating agricultural subsidies has an additional benefit. Agriculture is one of the few areas where poor countries have a comparative advantage. Eliminating agricultural subsidies (in all countries, not just the US) would allow farmers in those countries to make more money, causing economic growth and development. This is exactly what foreign aid is supposed to do. Therefore, if agricultural subsidies are eliminated, we will get most if the advantages of giving foreign aid, without any of the costs. Indeed, since eliminating these subsidies would have much of the effect as giving aid, we could even cut foreign aid, therefore saving more money.

We could get billions in revenue

A new study has determined that more than 366,000 British Columbians use marijuana, with the market value of their purchases being about half a billion dollars a year, According to the study, taxing it (the same as with alcohol or cigarettes) would bring in billions in new revenue (links removed):

The researchers also point to data from Washington, which recently held a successful referendum to legalize pot, that suggests the same number of pot smokers in that state could bring in $2.5 billion in taxes over five years in a regulated system.

This is one of the reasons why marijuana should be legalized. It would free up money spent prosecuting and incarcerating non–violent criminals who harm no one other than themselves. It is especially important, as the legalization in Washington state could cause a grey market of British Columbians going there to get their marijuana. Completely legalizing it here would prevent such an event. As it stands, a potential boost to ours (and more diffusely, the Canadian economy) is being lost and undercut.

And this study shows yet again why socons should never be allowed to control the public purse. Given the chance, they’ll always deny revenue and blow the budget on puritanism, going after people for doing something they probably do themselves.

Why a carbon tax is the way to go

An editorial in the New York Times got me thinking about why a carbon tax is a better way to fight global warming and climate change than either cap–and–trade or efficiency regulations.

Here are several reasons I can think of:

  • Carbon taxes always provide an incentive to pollute less and use less energy. Even if you cut carbon emissions by half, you still are paying taxes for the carbon you do emit, and therefore still have an incentive to eliminate it. Compare this with efficiency regulations, where someone has no incentive to reduce energy use once the regulation is met. In addition, all too often regulations are designed by businesses themselves, so as to prevent competition (rent seeking). Also compare this with cap–and–trade, where a source of carbon credits may well allow heavy polluters to continue, just because they have deep pockets. A lot of money will not allow someone to avoid paying a carbon tax.
  • Carbon taxes drive both individuals and companies to use less energy. Cap–and–trade is usually done by businesses, and efficiency regulations only impact new products (unless old ones are mandated to be destroyed).
  • According to the editorial, a carbon tax is far cheaper than efficiency standards once a global view of costs is taken into account.
  • Carbon taxes (especially those on fuel) make people drive less and live in denser environments. On a per capita basis, cities are more energy–efficient than suburbs. For example, recycling and public transit are more feasible in densely–populated areas. And people who drive less are less sedentary and therefore healthier.
  • It is possible that cap–and–trade and efficiency standards alone will not do enough to mitigate climate change.
  • A carbon tax is easier to offset as part of a green tax shift than other methods. It can even lead to lower tax levels overall, such as here in British Columbia (cite).
  • Efficiency improvements are subject to the rebound effect, where the decreased cost of using a resource partially offsets gains from using it more efficiently. A carbon tax does not generate perverse incentives.
  • A carbon tax is easier to adjust. If too many pollution permits are issued, cap–and–trade will not have much of an effect since it is harder to eliminate privately–owned pollution permits.
  • Many countries that export oil are rentier states, which means that they earn most of their revenue from natural resource royalties. Those royalties pay for oppressive paramilitary forces that enforce authoritarianism in those countries. A carbon tax will eventually reduce revenues received by those countries, improving freedom there and those countries’ human rights situations.

Hence, for all of the above reasons, a carbon tax is the way to go. My preferred offset is to payroll taxes. But such has virtually no chance of being enacted in the United States (a better chance in Canada [I hope]), due to the extreme polarization and total irrationality (and far worse!) of a number of politicians there. And since climate change is a major danger, Christian conservatism’s climate change denialism makes it, in the long run, the world’s most dangerous ideology.

A few scattered thoughts

I really wish I knew of a way to have comments numbered both by order posted and by nested thread. For example, if Alice posts a comment, it would be #1. Bret posts a response, and this is #1.1. Carol posts another response. Her comment is #1.2. Lastly, Alice responds to both, and those comments are #1.1.1 and #1.2.1. This makes it easier to refer to comments, while preventing them from incrementing if someone makes a nested comment further abode. This is kind of like software version numbers.


I just learnt that my local public library subscribes to a service that allows me to legally download three songs per week. To my annoyance, songs which I have been wanted to get a copy of for years aren’t available on it yet. But would me using this be a good idea? After all it costs the public library money, and since that is in part supported by public tax dollars, this service is not free in that sense.

Since I think people should pay (for the most part) when they use or get other people’s creative works, it seems to me that musical piracy is almost a sign of market failure. Rather than trying to get everyone to pay the same price, different prices should be offered to different people. This way, they can get sales from both those willing to pay a lot and those willing to pay a little. Books do this, with prices ranging from hardcover territory all the way down to free at a library or Project Gutenberg. Other industries involving art and creative works should do the same. I can almost guarantee that they will get good PR.


My knowledge of HTML is getting good use with all these horizontal rules!


I could swear that the amount of spam comments I am getting is skyrocketing. And yet, when I look at my stats, I’m only on pace to get about as many as the last few months. I am also quite a ways behind my spam “record” (if that’s the right word). Maybe I’m just more aware of this menace or something.


I have hardly any online accounts. I’m not on Twitter. I have never used eBay or Amazon. I’m not on Facebook, MySpace, or any other social networking site. I don’t have a Wikipedia account. I’ve never uploaded anything to YouTube, Flickr, or any such photo– or video–sharing website. For the most part my online accounts are WordPress, Blogspot, e–mail, and those online accounts which come with something outside of the internet. I only shop in brick–and–mortar stores and do all my banking offline. Maybe I’m just old–fashioned, but I like it that way. I intend to keep it that way for as long as possible.

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