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AS Award #2

GB Geo-Blog

AS Award #2

You may be expecting me to make the Noble Peace Prize Committee the second recipient of my AS Award. But I  must disappoint you. To do so would continue the myth that the selection has anything to do with objective analysis and deliberations, or contributions to peace. The Noble Peace Prize long ago became a farce. Idol winners are more deserving of their prizes.

And seriously, were there any worthy candidates this year?

Sarkozy for being French, and in his mind, a philosopher king? Berlusconi for providing comic relief and acting like the offspring of Rodney Dangerfield and Hugh Hefner? Merkel for showing again that the EU is a dysfunctional entity?

How about Ahmadinejad for restoring “peace” so quickly after the elections, and for restraining, thus far this year, his henchmen known as Hezbollah and Hamas? (Sorry, he did not accomplish either in time to be considered this year. I guess this makes him the odds-on favorite to win next year’s Noble Peace Prize.) Chavez for demonstrating that democracy is messy and stands in the way of massive income redistributions and bribing of the poor? (Didn’t Mugabe already show this?) Or how about any one of the “leaders” in central Africa for not engaging in genocide on a scale comparable to Rwanda?

No, instead, I have chosen David Leonhardt, a write for the New York Times, as the recipient on my second AS Award.

In his column published on October 6, he put forth the novel hypothesis that higher tax rates can lead to higher rates of economic growth. To quote Mr. Leonhardt:

“past tax increases have not choked off economic growth. The 1980s boom didn’t immediately follow the 1981 Reagan tax cut; it followed his 1982 tax increase to reduce the deficit. The 1990s boom followed the 1993 Clinton tax increase.”

After reading this article, I checked the latest macroeconomic texts and journal articles to see if I was missing something. I could not find anything in the academic literature (but what do academics know) supporting this absurdly silly theory. Moreover, the two economic booms cited in the 1980s and 1990s resulted from a sharp reversal in monetary policy. But why let facts stand in the way.

As a footnote: in the wacky world of economic theory, it is quite simple to develop a theory supporting his contention that tax hikes can stimulate economic growth (selling this idea politically is another matter). Indeed, I did this for one of my courses this week just to show that economic theory can be used to prove almost anything, if we ignore the underlying assumptions.


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