The General Economics Thread

Once again, there is money for the banks, but austerity for the people.

Its like the ghost of Reagan has somehow possessed their souls.

I think there’s a global conspiracy to see who can get the most clicks on the worst lies

So, I was wondering, has this ever been tried before: Loophole-hunting Tiger Teams? That is to say, teams of accountants, lawyers, and so on, specifically paid to look for loopholes, perverse incentives, and unintended ways to "game the system", so that any law, code, or policy could be foolproofed before both big and small businesses had a chance to exploit it?

By the way, relevant episode from Extra Credits:

edited 1st Jul '16 6:47:53 AM by TheHandle

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

Sounds like a good concept. Though the cynic in me says that many ways to 'game the system' are intended.

If such teams are set up publicly, then those flaws and loopholes can hardly be kept open after discovery. Especially if you make an extra provision that would give, to anyone finding such loopholes, a fraction of the estimated money that the State would save by having them closed. That could be a skillful accountant's quick way to millionaire-hood, no?

Seriously, though, why don't most government invest more in fraud inspection? The returns tend to be phenomenal. It's one of the most profitable investments a government can make.

edited 1st Jul '16 7:01:21 AM by TheHandle

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

To implement such a system, wouldn't it have to be set-up and overseen by those in positions where they're most likely to benefit from keeping said loopholes and corruption in place?

Well, it's all part of an ongoing process, a cultural shift towards a corrpution-free society. This requires a free press that is not afraid of tearing politicians apart at the slightest hint of corruption, and does so accurately and without misinformation, a politically active people that care about this and make themselves heard accordingly, an electoral system that makes said people's opinion count for a lot...

So, yeah, to have a political system that makes active strides to eliminate corruption, it's much easier if it's already substantially not-corrupt. It's a Real Life case of Fake Balance, but, well, you've got to start somewhere, and just getting such policies into the public consciousness expanding the Overton Window towards them is a start. Assuming that it's a good policy, of course.

The road from North Korea to Iceland, or even from the US to the UK, is complex and fraught with difficulties. But you gotta start somewhere.

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

I would think that this would be more an Unstable Equilibrium - a somewhat-less-corrupt system is more likely to become less corrupt, a somewhat-more-corrupt system is more likely to become more corrupt.

You are correct: I used the wrong trope. Fake Balance would be what the anti-corruption policies are supposed to weed out!

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

Mostly when tax law has loopholes and perverse incentives, it's not an accident, it's lobbying. This is one of the reasons I am opposed to tax breaks for anything whatsoever despite being very frequently in favor of government intervention in the economy - intervening in the economy via tax breaks is a very murky way to do it and you also loose all control over the size of your intervention.

If the government wants to support something, it should explicitly have to put that on the books as an expense or subsidy.

Agreed.

Unless it's, like, an extremely obvious and clear tax break, such as a reduction of a Consumption Tax. It also seems to make better political sense, making consumers happy in a very immediate way. Seems like a vote-winner.

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

That's a change in a tax rate - Which is a perfectly sensible way to manage overall demand. Basically, I do not like tax codes that cant be handed out as a flyer. Extreme complexity is not your friend in legislation and economics.

Is extreme complexity your friend anywhere at all?

edited 1st Jul '16 9:59:45 AM by TheHandle

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

It's not quite a friend, but it's something your forced to live with in certain fields. Most life sciences (my field being molecular biology) have that problem; unlike say computer code, DNA does not have comments and is about as "sphagetti code" as it's possible to get in an analogue system.

There may not possibly be a more apt metaphor for DNA as "Spaghetti Code". It's just almost perfect in every way. Though it might look more like Sagne Incannulate or Fusilli Lunghi than Spaghetii, strictly speaking...

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

Easy to say, hard to do. When you're trying to do specific things, you need specific incentives. If you're trying to do a bunch of specific things, you need a bunch of specific incentives. Now add in a raft of Obvious Rule Patches to avoid unintended consequences of your incentives and suddenly your tax code is the size of an encyclopedia.

Life is complicated. Complexity isn't something we should seek for its own sake, but often a complex system is better than a simple one, despite the drawbacks of complexity.

edited 1st Jul '16 11:14:18 AM by NativeJovian

Really from Jupiter, but not an alien.

That's why you need regular Justinian-ian simplifications.

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.

The tax code is a terrible policy tool. Any government needs to pursue many ends, but each of those ends should be pursued with coherent policy, whether by law, regulation, or quasi-government entity, or heck, just outright subsidy. Not just have a tax exemption slapped on because a lobbyist made a good pitch. Tax breaks for specific things are perfectly equivalent to subsidies, only since they do not appear on the budget as a line item, politicians hand them out far too freely, in a way they never would pass laws to tie an equivalent amount of explicit expenditure to that end.

Note that there are a fair few countries in the world with very simple tax codes, and their governments still function perfectly fine.

edited 1st Jul '16 12:17:22 PM by Izeinsummer

Regulatory capture by special interests is a problem in all aspects of government. Taxes are not special in that regard.

Really from Jupiter, but not an alien.

And special interests can include other parts of Government, can't they?^note  Although it sounds silly, it does happen, like a Government Department being fined by their Regulator....

Keep Rolling On

They are, because they are far less transparent. If a lobbyist asks for a bill to have the government just give his employer a billion dollars, that's a scandal. If the same lobbyist manages to win a tax exemption that lowers the tax burden of his employer by a billion dollars that's "tuesday"

That's not how lobbying works. No one ever just gets a law written that says the government has to give their company free money. What they do is make sure that the regulatory environment is friendly to their business — whether that means environmental laws, financial requirements, or yes, taxes. Companies do all of this in order to lower their costs of complying with the law and thus boost their profits. Taxes aren't unique in this at all.

Really from Jupiter, but not an alien.

The US does give out some fairly massive subsidies however, and a great deal of taxpayer funded research gets passed on to the private sector darlings to sell back to them at a truly massive markup.

A Government can perform Regulatory Capture on itself, can't it?

Keep Rolling On

Subsidies and publicly-funded scientific research are also things that the government provides as incentives for specific behaviors — namely, lowering prices for the end consumers and/or allowing companies to develop and sell products (like medicine) that would be unprofitable to develop (and thus unavailable to the public) otherwise.

None of this is inherently bad — it can be, certainly, but it isn't categorically so.

Really from Jupiter, but not an alien.