Hellestal, thanks for your lovely posts in this thread. Some folks arguing against you don’t seem to realize that this is one of those things you can’t successfully argue against: it’s like when I was in eighth grade and argued vociferously that 0.999… does not equal 1.
It’s a mathematical argument Hellestal is making. If you think it’s something else, you’re not reading him carefully enough. If you think he’s unaware of certain real-world implications of what he’s saying, you’re not reading his posts carefully enough. If Hellestal is a woman, I’m not reading her carefully enough.
We’ve got to stir the pudding if we want it to turn out properly.
Define Libertarian: hmmm really?
The broad general definition. Pretty much leave me alone if I’m not hurting anyone and I’ll leave you alone if you’re not hurting anyone.
I don’t think it serves a small group to further divide itself into even smaller groups. On a similar note, Libertarians and Constitutionalists should probably join forces just to up the numbers. The two agree on just about everything, and should be much happier with either of those candidates than the two “spend even more than all there is, and do it NOW! parties” but that is another conversation.
Why? Home ownership has demonstrable benefits for everyone, including the government. That’s why the TPTB was to incentivize that behavior. Studies have linked home ownership has several positive outcomes including, “lower crime, higher property values, better building maintenance, more civic-minded neighbors, and better educated and well-adjusted children.” Given that some of those positive externalities that can lower the burden on government, why shouldn’t we reward people who buy into the concept?
It’s not bullying. All anyone would have to do is say they don’t believe X and why, but, if you’ll notice, they never do. They come back and tell us it doesn’t mean what we say it means, but never tell us why.
So we aren’t bullying, we’re pointing out the inconsistencies in the beliefs. “The government should leave us alone” does have specific consequences, and if you don’t like those, you shouldn’t say you are a libertarian.
Thank you. I’m never at all sure how to proceed with these sorts of conversations, and I really appreciate the advice.
I’m glad you get it, but I don’t think I can escape blame so entirely. If people don’t yet realize it’s a mathematical/logical equivalence that I’m driving at, then I haven’t explained it well enough.
This is like saying the Celsius scale was “rigged” to start at 0, but the real world doesn’t work that way.
Equivalent is equivalent. The real world can be described in many equivalent ways.
You are not wrong in the practical effects.
Yet you are talking about something subtly but crucially different from what I’m talking about.
I don’t have to insist that the practical effects are identical. I’m talking, as I have been from the beginning, about the equivalent underlying structure, and the fact that people respond differently to equivalent situations is indeed the whole point of the OP. I have tried to say, in many different ways, that if we are told that it’s 80 degrees outside, and we think “I’ll wear short-sleeves today”, and then if we are told it’s 27 degrees Celsius outside the next day, and our response is “Ooo, I’ll wear a jacket!” then we are being irrational. I’ve never denied that people are irrational. Quite the contrary, I even said that it was a damn close thing that I didn’t fall into the trap in the OP myself.
If you have a different definition of irrationality… then really, you shouldn’t. The world of social science has settled on things like rational choice theory or the vNM axioms because they offer useful definitions of rationality. They’re not just a model for human behavior but also ideals toward which people who want to be mentally careful should strive. Frankly, if we respond differently to equivalent tax systems which are this simple, then our thinking is obviously fuzzy. Surprise! Human thinking is fuzzy. That includes all of us, to great and greater degrees. (Naturally, a lot more leeway can be given for different responses to our much more complex real-world tax code.)
We need to be able to unfuzz our thinking if we walk to speak intelligently on this topic. That’s true even if we’re still stuck in a world where everybody else remains in a mental fog.
Your math hypotheticals, by the way, are basic questions about utility. You seem to have a good intuition for declining marginal utility and loss aversion, and if you’re seriously interested in topics like that, I’d give you an overwhelming recommendation to read Thinking, Fast and Slow. He discusses these definitions of rationality a bit (and not so formally) and he explains why they’re important. Fascinating stuff. People have been wondering what was up with those sorts of games you listed for more than 200 years. As it happens, we’ve progressed a bit in our knowledge of utility functions since then, both with respect to the ideal functions and also the more psychologically accurate functions. I can give a brief overview, if you want, but Kahneman’s book is superb and covers a lot of other interesting human quirks.
I’ll end with a conversation I had with two of my friends, married, one of them a math professor, about the difference between pure/theoretical and applied math.Hellestal: A helluva lot of economics is about statistics. Did you study much statistics?
Mather: No, I like my math theoretical.
Hellestal: Oh? And how does your math like you?
His Wife: Hard.I define “applied math” now as “stuff my friend doesn’t like doing”.
Do you see anyone arguing against the math or the logical underpinnings of the example in the OP? Speaking for myself, I get it. Aside from that fact that you can believe the tax/penalty should be the same for both rich and poor, and have the same feelings the students did, I still think even those who may misinterpret the problem are not foolish or naive. I think they are people who let their guard down, and responded impulsively because they thought they were answering a real question, not entering a logical trap. Even if you think that “impulse” is bad, it only led the astray because they imposed real-world limitations and understanding on a hypothetical designed to ignore them.
As I said in my first post, it’s a nice little trick that fools people based on the somewhat obscured fact that the baseline change will result in a same outcome. It’s obscured because real world tax policy doesn’t work that way. We typically don’t work backwards from a fixed outcome in order to advance an argument for implementation that will hew more closely to others’ semantic biases.
That’s why this is just another semantics game. If you rephrased it emphasize the point that the burdens will be the same under both systems, or just used hypothetical numbers, people will not get hung up on their semantic biases. Now I know you are saying, well that’s the point. And if it your conclusions were solely limited to you can temporarily trick people with well constructed hypos, then I would agree.
My issue is that this example is used to argue that people don’t implicitly understand framing, that these biases lead to incorrect decisions, that every system has neatly defined in-groups and out-groups for which a benefit for one group represents a penalty for the other, that incentives and disincentives are the same, that “pure math” is always more sound method of making real-world decisions, and that answering incorrectly means you are harboring some dissonance that truly blinds you to the substance of your position and convictions. To me, this is like saying being awed and confounded by a magician who makes a woman levitate means I don’t understand gravity or physics.
Ok, but the math argument is not where the disagreement lies. It’s the conclusions we draw, and the real-world applicability of the feedback.
I’m sorry. If that is the case, then where is the Great Debate?
I think you’ve misunderstood OP’s point. To use your magician metaphor, OP is not saying that being awed by a levitation illusion shows you don’t understand gravity. OP doesn’t think that–rather, OP would say that thinking you can count on the magician to levitate things in other contexts would show you don’t understand gravity.
In other words, having differing reactions to the OP’s two policy proposals doesn’t show you don’t get the math. (OP himself has the two different reactions, after all.) But actually enacting policy based on this gut reaction does show that (even if you get the math) you’re not basing your policy decisions on anything real.
No. Maybe we are talking past one another here. The hypo is rigged because you are asking a fundamentally dishonest question with the goal of obscuring a key fact which will lead people to answer differently. It’s rigged because you are anchored to a result from which you work backwards. That is not how the real world works in general. When you ask people their gut reaction, they often rely on real-world heuristics gleaned from their actual engagement with, and understanding of tax policy. When you do that, people rest more on the typical context in which you see words like tax, subsidy, credit, etc. That’s why they don’t see that all those terms are “defanged” by your change in baselines. Again, it’s not because they don’t get it, it’s because that is not a typical real-world action.
You are asking someone to put aside their real-world biases even though said biases are generally helpful and logical in the real-world. For example, if you read the title of an op-ed about abortion called, “the basis for the anti-choice position” you can probably safely assume that the author is supportive of “abortion rights.” Then you read the op-ed and it’s the complete opposite of what you expected. Some would say, oh your bias towards the phase, “anti-choice” made you misjudge the situation. That’s a somewhat defensible argument, but the reality is that the use of such words are often evidence of motives. With the original hypo, a person who explicitly wants to punish not having 2 kids and one who wants to encourage having two guys are typically not after the same outcome, nor are they arguing the same thing in reality. When you create a fiction where they do only to fool people, I don’t think you are demonstrating much. Especially when you consider that even if you argue that such semantic bias leads people to misjudge hypos, it rarely leads then to actually enact “bad” tax policy. That’s my beef with it.
I don’t think I am. But feel free to try to explain what you are getting at that I am missing.
But you assume the people are responding to the underlying structure when that is not at all clear from the hypo. In fact, there are better analogies to illustrate similar errors in thinking. The one you posed is IMO, more of a trick than anything.
For example. There is the study that shows how people will pay more for comprehensive insurance that explicitly covers a black swan event like alien abduction or a terrorist attack, than one that doesn’t explicitly spell that out, even though they both cover the same stuff. Or how people people respond to “free” in ways they don’t with other prices. Or price anchoring, or the decoy effect. These biases lead to real, demonstrably things like Amazon’s free shipping policy, and Apple’s policy that you must enter your password even to update free apps, infomercial sales tactics, etc.
What you have demonstrated has little direct, translatable real world effects AFAICT. If it does, I would love to hear about it. Like I said, I get what you are saying. I just think the example is not particularly compelling because it rests on a a verbal sleight of hand as opposed to illuminating a true misunderstanding or dissonance.
The issue is closer to asking an American the temp and he says it’s 80 degrees Fahrenheit, then you later ask a Frenchman living in America who responds that’s it’s 27, and you think it’s cold ONLY because you assumed he was using your scale. Most people would never be fooled if he said it was 27 degrees Celsius because they recognize you are shifting the frame of reference. The original hypo only works because that is made less clear when you only say you are “changing the baseline” rather than explicitly spelling out what you are doing, ensuring the same outcome.
Yet, you didn’t answer them. I didn’t ask them to be provocative. I think they both illustrate the prescriptive failure of “pure math” or logic in the real-world. It’s the economist joke about $20 bills on the sidewalk in practice.
Read it, and, I knew about his findings, and those with Tversky, long before his book came out. I also read others doing work in that field (or related fields) like Dan Ariely, Nassim Taleb, etc.
Forgive me, as I have no idea what you are trying to say here. Are you saying statistics is applied math in your estimation?
Not really. It’s trivial to construct a tax system where the two scenarios are mathematically different. It’s a peculiarity of the US tax code that they are the same, not some intrinsic feature of taxes.
The two situations are not the same at all. In the first, some will get a reduction to their taxable income which will reduce their taxes by diffferent amounts depending on their income. In the second, some (those with less than 2 kids) will directly pay a surcharge which is unexplained. Or maybe the prize winning economist is using the words exemption and surcharge in ways I am not used to.
I disagree. It never matters what you do if you are always gonna be fixed to an outcome. However, in establishing a policy regarding a situation where one number is natural, or vastly more common, that baseline is not arbitrary. Let’s say we decide vets who come back from war with no legs should get a pay bonus. Does it really make any kind of sense to institute a “two working legs tax” rather than a disability bonus? Sure you can make the money balance in both cases, but doing so makes no sense whatsoever. He acts as though it’s all the same thing in every regard, but the reality is that the outcome is the same because we reserved the right to keep our finger on the scale. It’s like saying since f=ma, it’s makes a much sense to say f= 7+ma-8+(99/99). Yeah, it’s technically correct, but it makes no sense to define the equation that way.
In this case it’s not our thinking that lacks precision, it’s our language. The hypo is mostly a semantics thing. This is why translations are rarely exactly the same.
Being tricked deliberately by a awkwardly phrased hypo tells us very little about one’s qualifications to talk about tax policy.
Covered this earlier.
In the real world, this is just wrong. Mostly because their equivalence is contingent upon a number of things that are not givens. It’s like my coupon example. Issuing a coupon is not a tax on those who don’t have the coupon. It’s only that way when you decide in advance that you want the revenue to be the same, so you raise the prices.
I disagree with this analysis because the assumptions (whether no kids or two kids are the norm) cannot be equally transferable to both scenarios. Clearly, under the existing tax system, no children is the norm. One cannot simply shift perspective and that that people with no children are paying a penalty: they simply are not receiving a benefit.
If the tax system were to actually change so that two children families were the norm, the last outcome would almost certainly be different: poor people would probably pay a $200 penalty, and rich people might pay a $500 penalty if the tax system were designed around that assumption.
The framing you present is as deceptive in these questions as it is in the “where did the other dollar go?” riddle. I understand what you are arguing, but it seems both you and this mathematician are underestimating that the effect of various public policies generally must be measured on common philosophical principles, not interesting math exercises. Just like very few people will agree that non-coupon clippers are paying a penalty, I doubt very many people believe that childless taxpayers are paying a penalty.
Let’s look at this another way: I currently am not able to take deductions for things like home energy efficiency tax credits, electric car tax credits, gambling loss deductions, and many other things. Would you honestly describe me as paying tax penalties because I did not go out and pay $30,000 for solar panels, dropped $42,000 for a Chevy Volt, and lost $50,000 in Las Vegas? You truly and honestly think that Uncle Sam is punishing me with a tax penalty of perhaps $10,000 for not doing all of that?
The baselines are mathematically arbitrary. Psychologically? No. Mathematically? Yes.
“Yes, they are mathematically equivalent baselines, but you’re wrong!” is just silly. I’ve never denied the psychological weight or the conventional structure of the code.
Wait. You seem to act like this is a permanent condition. Is that what your problem is?
This is not a one-time trial.
For people who persist in being unable to switch between frames, their thinking absolutely does lack precision. But this is not a traditional shibboleth, where you’re murdered for being a bit too hasty on an internet message board quiz. There’s no exile from the grown-up community, no big pointed dunce cap and sitting in the corner. Nobody cares in the slightest if we misread an emotionally tricky quiz. Did you miss the part where I said right from the beginning that I came a hair’s breadth from getting it wrong myself?
I saw what I thought was a mistake. I thought I’d start with another example in a new thread, based on Kahneman’s book because his book is super nifty. Screwing up a silly quiz is meaningless. Being in denial after repeated explanations (and this did happen in other places, at least by my reading) is something else entirely. Maybe the first sentence of the OP is unclear, but that is what it’s in reference to.
Nope. I wouldn’t say that myself, at least not in any normal tax conversation.
Neither would I call it deceptive to say that, though, if we were clear on our baselines in an exercise of the sort this thread is intended to convey. I realize this is far removed from the normal philosophical foundations of tax law, but this thread is quite deliberately not about the normal philosophical foundations of tax law. I did that intentionally, because I didn’t want someone (and I was specifically thinking of you, in fact, since you gave me a memorable and well-deserved law smackdown earlier) to change the subject into something that was never intended.
Let’s break it down.First Baseline of Tax Burden, No Children
Poor Man: 1,000
Rich Woman: 20,000Poor Man has a very low income, Rich Woman high. Poor Man doesn’t pay much in taxes. Rich Woman pays a lot more. You can see how much they give to the gummint, 1k vs 20k. We as a society wish to encourage the sexings, so we want to provide some incentive for baby making. A child tax “exemption” is the proposed solution. First question from the quiz: Should the exemption be larger for the rich than the poor? We answer hell no. In fact, to make the math easier, let’s be even more blindly generous, and say that Poor Man should get a bigger exemption than Rich Woman. It’s only fair, right? Let’s give him a $500 exemption, and her just $200. She doesn’t need it as much.First Baseline of Tax Burden, Minus Exemptions for Kiddies.
Poor Man: 1,000 - 500 = 500
Rich Woman: 20,000 - 200 = 19,800There we go. Poor Man gets a bigger exemption for breeding. Good job, guy. Way to pay less tax for spreading some seed. Ah. But remember that the baseline for taxation is utterly arbitrary. There is no right answer here, no perfect baseline, just like there’s no correct choice between Fahrenheit or Celsius. So now let’s set the baseline tax burden as two children. This is our updated baseline, our new default level.Updated Baseline of Tax Burden, With Children
Poor Man: 500
Rich Woman: 19,800I’m not intending to create a new tax system here. I want an identical tax system. I want the amount that people pay, the final calculation, to be exactly identical to the last system. The only thing that’s different here, the only thing, is that I’m describing the default differently. Now the default, the new baseline, is a family with children. This tax system is the same, so people with children pay less tax. But because the baseline is different, I need to calculate what the penalty is for not having children. This “penalty” is what it absolutely logically must be, mathematically, to match the first situation. We’re not changing the tax system, just changing the way we describe it. Let’s add it up.Updated Baseline of Tax Burden, With No Kids Penalty
Poor Man: 500 + 500 = 1,000
Rich Woman: 19,800 + 200 = 20,000And lookit that. The numbers for no children are exactly the same as they were before. I can’t emphasize that enough: This is the same tax system. There are no changes in the tax system, except the terminology. We’ve switched from Fahrenheit to Celsius, and that is all. People in both systems pay the exact same amount of tax for any given situation. Water still freezes as you would expect. There is no difference here between the systems. Yet you can see clearly that Poor Man has a bigger tax “penalty” for having no children. Why? Because providing a bigger exemption for a certain behavior is absolutely the same as providing a bigger penalty for not doing that behavior, when you consider the relative baselines.
The problem is: $500 means a whole more to someone paying $1,000 in taxes than $200 to someone with a $20k bill.
Okay, but that’s what the professor’s questionnaire is alleging, isn’t it? That if we look at any credit as being equal to a penalty for the opposite behavior, that makes a certain amount of sense in one respect. But it leads to more and more absurd outcomes as the scope of the “penalties” expands.
Like, take my own case. Let’s say I actually pay $10,000 a year in taxes. There is great potential for reducing my taxes through various deductions, credits, and exemptions. It wouldn’t be difficult to say that my whole tax bill is a penalty for not doing various things: too few children, too little in charitable contributions, etc. In fact, the total amount of “penalties” that I may be liable for would substantially exceed the taxes I am paying, I would think.
I would tend to think that this thread is really about TANSTAAFL: is a benefit for one person actually a penalty for someone else? I’d be curious what you think the fundamental issue is. I think you and I might have different views on what the real lesson is here.
