Habeas Data.

I hate when data gets in the way of a good narrative.

How about the example of the one successful country full of smart people? Among rich nations, the only example the magazine could find is the Netherlands. They have “a higher ratio of pension assets to GDP than any other country”, with 100% funding, basically, for the actuarially predicted costs. They retire younger than Americans (age 62.1 versus 65.5). Part of the magic is that they don’t promise unlimited inflation indexing. If their country gets poorer, the pain will be shared by the working and non-working alike. The same is true in Sweden, Germany, and Japan. But mostly the Dutch have deferred consumption. Overall, the countries that have at least some plan and hope for paying what they’ve promised are the Netherlands, Switzerland, Sweden, Australia, and Canada (this doesn’t include developing countries such as China, which has $3 trillion in cash and hasn’t made any long-term promises).

A 2008 study of 24 leading economies by the Organization of Economic Cooperation and Development (OECD) concludes that, “Taxation is most progressively distributed in the United States, probably reflecting the greater role played there by refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit. . . . Taxes tend to be least progressive in the Nordic countries (notably, Sweden), France and Switzerland.”

The OECD study—titled “Growing Unequal?”—also found that the ratio of taxes paid to income received by the top 10% was by far the highest in the U.S., at 1.35, compared to 1.1 for France, 1.07 for Germany, 1.01 for Japan and 1.0 for Sweden (i.e., the top decile’s share of Swedish taxes is the same as their share of income).

A second fatal flaw is that the large share of income reported by the upper 1% is largely a consequence of lower tax rates. In a 2010 paper on top incomes co-authored with Anthony Atkinson of Nuffield College, Messrs. Piketty and Saez note that “higher top marginal tax rates can reduce top reported earnings.” They say “all studies” agree that higher “top marginal tax rates do seem to negatively affect top income shares.”

I am hesitant, but willing, to accept this narrative. I wonder what someone versed in these matters would have to say about the study referenced.

It costs 1.62 cents to mint and distribute penny.  Really.  And this isn’t anything new.  Since 2006, it’s cost slightly more to produce a penny than the one cent it is worth, leading to a loss of of about $20 million dollars, total, in 2009.  The main culprit?  The metals used to make it.  A penny is 97.5% zinc and 2.5% copper, and as the price of these materials have gone up, so has the cost to produce the coin.

Kill the penny.

New research led by economists at the University of Warwick reveals that medieval England was not only far more prosperous than previously believed, it also actually boasted an average income that would be more than double the average per capita income of the world’s poorest nations today.

Worth looking into…

However, the evolution of society towards increased specialisation and exchange is not unidirectional. History is littered with examples of people who moved back towards self-sufficiency as they grew less prosperous. Unable to find trading partners to do mutual service with, they had to serve themselves and that made them poorer.

Two examples, both from The Rational Optimist:

The economist Vernon Smith, in his memoirs, recalls how in the Depression his family moved in the 1930s from Wichita, Kansas, to a farm when his father was laid off as a machinist, because ‘we could at least grow most of our own food and participate in a subsistence economy.’

And the end of the Roman empire.

As Roman rule disintegrated, at least in the west, money lending at interest stopped and coins ceased to circulate so freely. In the Dark Ages that followed, because free trade became impossible, cities shrank, markets atrophied, merchants disappeared, literacy declined and – crudely speaking – once Goth, Hun and Vandal plundering had run its course, everybody had to go back to being self-sufficient again. Europe de-urbanised. Even Rome and Constantinople fell to a fraction of their former populations. Trade with Egypt and India largely dried up, especially once the Arabs took control of Alexandria, so that not only did oriental imports such as papyrus, spices and silk cease to appear, but those export-oriented plantations in Campania became the plots of subsistence farmers instead. In that sense, the decline of the Roman empire turned consumer traders back into subsistence peasants. The Dark Ages were a massive experiment in the back-to-the-land hippy lifestyle (without the trust fund): you ground your own corn, sheared your own sheep, cured your own leather and cut your own wood. Any pathetic surplus you generated was confiscated to support a monk, or maybe you could occasionally sell something to buy a metal tool off a part-time blacksmith. Otherwise, subsistence replaced specialisation.