Economics Times Three, Other Events

[tcpip]

Spoke at the Kew branch of the Labor Party on Tuesday night on the Henry Review (summary version); apparently it was well-received, as the following day received an email from the branch executive suggesting that the presentation become an FEA forum/dinner. Also recommended was a evening with Steve Hurd, the Labor candidate for Kooyong who has personal reasons for advocating disability rights. As part of a panel on disabilities I suggested Donna Williams, whom I recently had the great pleasure of being the AV Tech for her presentation between Melbourne and Singapore (presentation and photo).

On more economic issues, I have also been recently debating the so-called "Robin Hood" tax and the destructive effects this well-intentioned plan has. People don't seem to understand that nearly all taxes, surcharges etc are passed on to the consumer, the exceptions being those goods in absolute supply (and the degree of the capacity to pass on these costs and the severity of the deadweight loss depends on relative elasticity from completely elastic to completely inelastic). For a third economics issue (yes, I know, I'm a bundle of fun at dinner parties) I have raised the issue of aggregate long-run productions functions. This is one of a few questions that have come to mind as I'm preparing for my exams in Economic Decision Making and Business Law next week.

Other events: Ran a short Philosophy Forum session last Sunday on continental philosophy (German idealism, phenomeonology, existentialism, hermeneutics etc). Brittania worked out really well on Sunday. Would like to adapt it to Pendragon. Played another session of Dragon Age on Thursday. Isocracy IGM on Saturday. Giving the service at the Unitarians on Sunday for the Australian Esperanto Society; providing an address at the same two weeks later on The Evolution of the Human Spirit.

Comments

[kremmen.livejournal.com]

The "Robin Hood" tax strikes me as not well thought out.

For a start, "almost universally" is equated to US dollar, euro, pound and yen. Why would any of those countries agree, esp. the USA? Currently, a huge proportion of currency transactions are through the USA. Obviously, this tax (if only applied to those four) would create a huge incentive for currency traders, banks, etc, involved in other currencies to trade them directly and avoid US banks and US dollars as much as possible. It wouldn't surprise me if Visa, MasterCard and Amex all moved to New Zealand.

At the opposite end of the spectrum, individuals who want to send money to another country can do so by many means. Our big banks rip us off, but there are many alternatives, such as Oanda and XE. Such a tax may affect consumer-level transactions. A 5c tax on a $1000 transfer is surely going to have a relatively massive administrative cost, which would then be passed on to consumers or, worst of all, might cause these companies to not bother offering the service at all.

[tcpip.livejournal.com]

Well, the administrative costs is quite low as it can be highly automated with electronic transactions etc. There is an argument that it relies highly on volume of transactions rather than a high percentage and thus is supposed to have a minimal disincentive as a result. This however is not, and has not, be borne in reality as those in the transaction business are quite happy to - as you suggest - move elsewhere once they have done the calculations on how much they would be paying. "Capital flight" is indeed a reality when the capital in question is highly mobile.

The alternative proposal, as suggested by one of the posters that the tax be applied internationally is not an option either. As you say the cost will be passed on to consumers or the transactions simply won't happen. In either case there will be a loss of trades resulting in very significant increases in unemployment in that industry. The business of financial transactions is highly elastic. A small change in costs has large changes in output.

To give some credit to the proposal how the advocates of the tax argue it should be spent has some merit. But of course that could be applied to anything. One could apply the tax on alcohol to provide emergency aid for one-legged seagulls. The distribution of public income is independent of how it is raised.

(One could even apply it recursively, illustrating the deadweight and administrative effects of such taxes. Imagine a 10% GST that provided a 9% discount on all things that it was subject to).