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Less Philosophy, Please
I'm sticking with my line that conservative lack of substantive policy knowledge is a much bigger problem than the liberal lack of philosophizing. To get a good sense of where things have gotten to, take a look at Larry Kudlow coming out against "academic-style econometric finagling" as a way to assess the impact of tax rates on economic growth. After all, who needs finagling when you've got "the laws of common sense." Needless to say, only a lunatic like Paul Krugman would think that contemporary conservatism has become hostile to the basic methods of scholarly inquiry. Common sense was good enough for Ptolemaic astronomy and it should be good enough for us, too.
UPDATE: Yes, yes, this is a bit unfair to Ptolemaic astronomy. And, no, it's not at all unfair to Kudlow. He cites a few academics in defense of his proposition, which is good of him, but then he goes on to disparage the very concept of engeging in "academic-style" reasoning, which he prefers to call "finagling." Obviously, Kudlow cares not a whit about what the actual empirical research shows.
April 6, 2005 | Permalink
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» Taxes, Taxes, Taxes from Political Animal
TAXES, TAXES, TAXES....Matt is right to point to this piece of nitwittish writing from Larry Kudlow, one of National Review's seemingly endless stable of embarrassing shills on economic matters. Commenting on a perfectly sound and well backed up articl... [Read More]
Tracked on Apr 6, 2005 6:56:25 PM
» Evidence from Don Singleton
At least Kudlow specifically cited a few academics in defense of his proposition. Yglesias does not cite ANY sources for what he calls the actual empirical research. Drum showing declining growth rate and says taxes going from up from 24% of GDP to a... [Read More]
Tracked on Apr 7, 2005 12:41:22 PM
Comments
You are being unfair to Ptolemaic astronomy: perhaps the first genuinely quantitative science.
Or maybe you are attacking somebody who would be a Ptolemaic today. That's more fair, and pretty accurately describes the faith-based Party.
Posted by: Joe S. | Apr 6, 2005 2:56:15 PM
A favorite quote:
". . . common sense is merely unaided intuition, and unaided intuition is reasoning performed in the absence of instruments and the tested knowledge of science. Common sense tells us that massive satellites cannot hang suspended 36,000 kilometers above one point on the earth’s surface, but they do in synchronous equatorial orbits."
Edward O. Wilson, The Diversity of Life
Posted by: Egg | Apr 6, 2005 2:58:29 PM
Is it possible that conservatives turned to philosophy because they were out of power and that's all they had?
Posted by: praktike | Apr 6, 2005 3:17:46 PM
Yeah, second the above comment. Ptolemaic astronomy was pretty darn good science, and grounded in thorough empirical data. At some point, of course, all those epicycles became untenable, and a complete rethink was needed, but if Kudlow and co. had half the integrity and commitment to facts that those stargazers of yore did, the conservative movement would be in pretty good shape.
Posted by: Brad Plumer | Apr 6, 2005 3:26:36 PM
Mr. Yglesias,
You are being most unfair here. Kudlow spends most of the article pointing out academic counter-authorities on the effects of tax reductions, all (I think) working through empirical analysis. He also goes directly to historical precedent.
That is as conservative an approach as there is.
An alternate approach is through econometric model-making, which may or may not be a practical guide to policy as yet.
Posted by: luisalegria | Apr 6, 2005 3:27:56 PM
Common sense is our informal brain log of all the data we have seen in our lifetime. My common sense tells me that taxes have a minor impact on growth because we were more prosperous during the higher tax period of the Clinton administration.
Posted by: sf | Apr 6, 2005 3:29:04 PM
Heliocentrism is just a theory.
This is a pretty common line of thought for Republicans nowadays: all that matters is Purity of Will. All that empiricism stuff is for effete liberals.
Posted by: Brian | Apr 6, 2005 3:40:34 PM
How's this for a philosophy: Good Government.
Posted by: Mark | Apr 6, 2005 3:47:05 PM
Mr. Brian,
I do not see a current political conflict where empirical analysis operates against conservative policy ideas. Do you have any specific complaints ?
Posted by: luisalegria | Apr 6, 2005 3:48:07 PM
On the contrary, Kudlow begins his discussion by citing several academics including two Nobel laureates.
Why is it that liberals are unable to deal with disagreements honestly?
Posted by: Jim | Apr 6, 2005 3:48:26 PM
Mr. Mark,
But everybody is for good government, the soviets certainly were.
The problem with that is that you have to first define good.
Posted by: luisalegria | Apr 6, 2005 3:49:33 PM
What in the hell is Matthew reading?
Kudlow points to real world examples and to real-world economists. Prescott has written several econometric treatises on the effect of taxes and labor participation in Europe vs. the US.
Kudlow's argument is that the real world offers a different perspective to econometric models with questionable assumptions.
I think the way MY reads articles is often the most fascinating part of his blog. The deepening of the bias has grown over time.
Posted by: Hoo | Apr 6, 2005 3:50:25 PM
On the contrary, Kudlow begins his discussion by citing several academics including two Nobel laureates.
So he's all for academic economics as long as it supports his viewpoint. Only when he disagrees with its results does it become "finagling," which can be refuted by "common sense."
Why is it that conservatives are unable to deal with disagreements honestly?
Posted by: Bernard Yomtov | Apr 6, 2005 3:54:48 PM
The question is not whether increased taxes will decrease incentives. Of course it will. The question is whether increased taxes will decrease incentives so much that it will be better to just ring up massive amounts of debt.
Or, wait for magical supply side benefits. There is a laffler curve, it just doesn't look like laffler thought it did. The point at which increases in taxes decrease revenue is much closer to 99% than 40%.
Posted by: joe o | Apr 6, 2005 3:57:24 PM
Mr. Yomtov,
It seems to me that the preponderance of economic opinion on the subject may be on the side of Mr. Kudlow.
It certainly is within the empiricist approach which a good conservative would prefer.
Posted by: luisalegria | Apr 6, 2005 3:59:05 PM
Mr. Joe O,
"The point at which increases in taxes decrease revenue is much closer to 99% than 40%"
Where do you get this ? It does not square at all with what I have understood.
Posted by: luisalegria | Apr 6, 2005 4:01:34 PM
He cites a lot of names and no articles. I'd very much like to see the works he is referring to; there is most certainly no consensus within the economic profession that the phrase "Lower tax rates are correlated with (or, more strongly, cause) growth" is universally true.
Also, Mankiw is a hack. I just wanted to say that, because it frustrates me that I have to use a hack's textbook. I really wish he'd stick to writing textbooks. He's actually quite good at that.
Posted by: Kimmitt | Apr 6, 2005 4:02:47 PM
I read this Kinsley's opinion piece yesterday (LAT, registration). It seems vaguely relevant. Enjoy.
Posted by: abb1 | Apr 6, 2005 4:03:26 PM
Under our system lowering taxes creates higher deficit spending -- sometimes a couple per cent, sometimes a lot more.
If in addition to promoting some sensible Keynesian theory, Kudlow didn't get on his high moral horse and talk about disincentivising those poor hard working entrepreneurs, would any of us be upset with him?
Posted by: Ellen1910 | Apr 6, 2005 4:03:38 PM
I hate to resort to the dictionary, but in this case I must. My dictionary defines "finagle" as:
1 : to obtain by indirect or involved means
2 : to obtain by trickery
Therefore, "econometric finagling" means to obtain your econometric result by devious means.
As someone who spent some years in a job in which the task was to use numbers to work backwards from the result to the proof, I can guarantee that "econometric finagling" is pretty simple. You want to prove that higher taxes will improve the economy? No problem. You want to prove that lower taxes will improve the economy? Also no problem.
Also, a disclaimer: Kudlow generally nauseates me, but in this case the criticism is unfounded.
Posted by: ostap | Apr 6, 2005 4:05:48 PM
Not surprsing Luis. But I'm sure you'll just label me a communist and be done with it. Supply Side economics does not work. Any honest source will tell you that.
Posted by: Rob | Apr 6, 2005 4:05:55 PM
But repeated tax increases by Herbert Hoover and Franklin D. Roosevelt produced and prolonged the Great Depression.
Okay, this is faith-based fantasy. It's true that a series of tariffs almost certainly contributed to the crash which lead to the Depression, but that's a trade issue, not a tax issue. And it's probably true that Roosevelt's decision to try to balance the budget in 1937 ended up being extremely poor macroeconomic policy, but since when do conservatives buy Keynesian countercyclic arguments? By that reasoning, the US should be running about even about now, not $400 billion in the hole.
No amount of academic-style econometric finagling can take away from the historical evidence that flatter and simpler taxes are the best way to maximize our economy’s potential to grow.
Simpler, sure, but flatter? There's no historical evidence whatsoever for this -- and both "simple" and "flat" are orthogonal to "small." Who writes this tripe?
Posted by: Kimmitt | Apr 6, 2005 4:06:47 PM
Mr. Rob,
Arguing about +/- 5-10% in tax doesn't make you a communist. On the other hand, long-term growth seems to be very affected by tax levels, ceteris paribus (my favorite economics phrase).
It seems to me a lot of the complaints (and of the praise too, to be fair) vs "supply side" work only if you ignore other factors. This applies particularly to European examples, where high marginal tax rates seemed to be a non-issue during the two decades or so of postwar recovery - a most specific condition.
Posted by: luisalegria | Apr 6, 2005 4:14:19 PM
Kudlow's article was pretty sloppy, but it's at least as good as the op-ed he's responding to. Matt is wrong to suggest that Kudlow is relying on common sense as opposed to theory. The Bernasek op-ed merely cites two economists who say that there is little evidence that taxes inhibit economic growth. Kudlow cites several economists who disagree and provides a number of concrete, if somewhat anecdotal, counterexamples.
The only real problem with Kudlow's article is that he takes a cheap shot at "academic-style econometric finagling" without explaining any specific flaws in the methodology. Of course, it would be a lot easier to find flaws in the methodology if the Bernasek op-ed had many any attempt to explain the methodology of the studies she was endorsing.
I think the real problem is that a NYTimes op-ed and a National Review article are very poor formats for discussing complex economic analysis. These aren't academic journals. Neither side can effectively do anything more than rely on citations to other experts who make more substantive arguments. In that regard, I think Kudlow was more effective.
The only mistake Kudlow made was in trying to make a half-assed substantive criticism of methodology without backing it up. Since it would have been impossible to make a well-developed argument in an article that short, he should have left it out altogether.
This whole incident doesn't show that conservatives are hostile to scholarly inquiry. It just shows that the mainstream media is a poor forum for scholarly inquiry regardless of the author's politics.
Posted by: Xavier | Apr 6, 2005 4:15:45 PM
No it doesn't. Labor is supplied inelastically in discrete amounts--taxes have little efect on labor supply decisions and so little effect on output.
Posted by: Rob | Apr 6, 2005 4:16:33 PM
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