Thursday, December 28, 2006

Scott Speed and Red Bull

Here’s to hoping that Scott Speed stays in Formula 1 because the maneuvers that Red Bull has been making with its primary and sister team operation are at times baffling. Well, at least they were baffling until I realized yet again the real economic incentives to finding a driver.

Obviously, a great way for drivers to get sponsorship money is to start winning, but when they’re not on a fantastic team, circumstances can be quite difficult, especially for an American whose native country loves Formula 1 as much as it loves Are You Being Served? So, the problem is that the Red Bull Racing / Scuderia Toro Rosso test/race driver Robert Doornbos has the personal financial/sponsorship backing that Gerhard Berger is seeking to keep the team in a worthy financial position, which might leave Scott Speed out of a racing seat.

It would be a true shame if this were to happen considering that Speed’s season in 2006 was not as bad as Scott Speed’s critics would have me believe. There are also many other implications as well. Liuzzi and Speed both came out of the Red Bull young driver program, but Red Bull’s primary team has no such driver lineup - instead they've gone with vertans David Coulthard and Mark Webber. So, if Liuzzi or Speed were to vacate their racing seat, the Red Bull young driver program would essentially be proven as unessential.

So, to have a Formula 1 team, you need to fund it, and I think by the beginning of the season we’ll find out how badly Scuderia Toro Rosso is in need of capital.

Wednesday, December 27, 2006

Pigou Taxes

In this recent paper (Taxing Consumption and Other Sins) from James R. Hines Jr., Hines examines the disparity between the US’ consumption taxes compared with other countries.

The U.S. doesn’t used a value-added tax most likely because too many people would argue that it’s regressive in implementation, which would make it very difficult to pass as legislation. On the whole, consumption taxes in the U.S. are low, and most states enforce their own state taxes.

Still though, the U.S. does use some excise taxes. The gasoline tax makes up a huge chunk of the excise taxes in the U.S. (45%). The gasoline tax is about as close as we’ve gotten to a genuine “Pigou” tax.

According to Hines, the U.S. in the past has often created excise taxes when in need of revenue and then later gotten rid of those taxes. In most cases, the taxes needed to be raised for funding of certain wars. There has always been opposition over excise taxes (e.g. The Whiskey Rebellion) even when the tax is on a “sin.” However, when the government apparently gives into the will of the people, they are really just making a trade-off of what gets taxed…

The government of Thomas Jefferson abolished all federal excises in 1802, balancing its budget instead with tariffs, land sales, and military spending cuts (Dewey, 1907, p. 120).

Where Hines really starts to make reference to Pigou taxes is here…

The federal gasoline tax, introduced in 1933, discourages driving and thereby reduces pollution and traffic congestion; furthermore, since 1956, federal gas tax revenues have been parked in the Highway Trust Fund, which finances the construction and maintenance of interstate highways and urban mass transit projects.

The taxes are obviously not always efficient. Hines explains that the government’s LUST tax (to clean up underground storage tanks) “collects more revenue than it spends each year, its surplus seeping (MK: what a great pun) into the U.S. treasury.” However, when the taxes are efficient, they can provide great service to the items they tax. Some examples Hines includes are the federal tax on rifles and fishing tackle.

Hines also makes note that taxing liquor seems to be consistent for the US as well.

But back to gas…it turns out that the US consumer doesn’t pay that much for gasoline relative to other countries. Now while the economists, or anyone who ever traveled to another country knows this, I think we’d be surprised to find out just how many people still either don’t know how much better off we are, or simply don’t care. Also, as it turns out, we don’t tax alcohol that much either relative to other countries.

…but any of these comparisons classifies the United States as a low tax country.

This paper leaves me wondering though that if we increased tax rates (in any manner) would the size of the government also increase to a more inefficient amount? Should we not tax "bad" things because of this fear? In any case, the U.S.’s excise taxes are half of other OECD (Organization for Economic Cooperation and Development) countries. Also, the US tax system is the “least environmentally oriented” of any OECD country. And in terms of these environmental taxes, once again the U.S. taxes half of what other OECD countries do.

And for the many people who cry out “commie” when they hear of taxes, it’s important to note that Hines’ paper sees that the OECD countries that use value-added taxes have more open economies. Also, for those that might argue that value-added taxes might hurt small business, it really depends on the regulations that come afterwards. And to address the regressive argument against a VAT…

For example, Michael Graetz (2002) has proposed one version of such a comprehensive U.S. tax reform, that includes a 15% VAT, elimination of personal taxes on the first $100,000 of income, reduction of payroll taxes for low-income workers, and other features designed to maintain progressivity.

And even a flat tax on gas would have some progressive effects. Don’t believe me? Here’s Hines…

Poterba (1989, 1991) and Walls and Hanson (1999) analyze U.S. gasoline taxes from the standpoint of lifetime incidence, finding that gasoline consumption rises more than proportionally with affluence over much of the range of total spending, suggesting that gasoline taxes are progressive, albeit less so than income taxes.

So, is a government excise tax increase possible? One thing is for sure, the current tax system would have to go through a major overhaul because states would have to re-work their own sales taxes.

And as for those excise taxes, even if they are not perfect and don’t have very sensitive tailoring, the taxes can still be beneficial by reducing the amount of harmful externalities by associating a cost with those externalities that would be realized in the present transaction.

So, would it be hard to start excise taxing (taxing “sin” as Hines likes to put it)? You betcha! Lobbying would still be a horrendous problem. Also, even my good friend,
William Zeallor made mention to a culture of materialism that seems to be manifesting. And in terms of a value-added tax, both political parties in the U.S. hate it. “Democrats think it is regressive, and Republicans think it is too easy to raise revenue with one.”

Tuesday, December 26, 2006

George Will on Blogging and Online Media

Now that the major brunt of the holiday season is over, I hope to get back to posting on a regular basis. For now, I’d like to take a moment to mention this article by George Will on blogging and online media.

I like the article on many fronts. First, Will explains the outright idiocy of naming the Person of the Year, “you.” (or me):

Most bloggers have the private purpose of expressing themselves for their own satisfaction. There is nothing wrong with that, but there is nothing demanding or especially admirable about it, either. They do it successfully because there is nothing singular about it, and each is the judge of his or her own success.

George Will is exactly right. First, let’s simply face the fact that even the best bloggers who publish (e.g. Andrew Sullivan) have an enormously large amount of hatred brought on towards them. And if you don’t want to call it hatred, then it has to be the most undignified form of critique to which I have ever bared witness. And that’s the best. What I do is a FAR cry from Greg Mankiw, so you might as well throw me in with the rest of people that George Will is eluding.

Will throws the final blow as such:

Time's issue includes an unenthralled essay by NBC's Brian Williams, who believes that raptures over the Web's egalitarianism arise from the same impulse that causes today's youth soccer programs to award trophies -- "entire bedrooms full" -- to any child who shows up: "The danger just might be that we miss the next great book or the next great idea, or that we will fail to meet the next great challenge . . . because we are too busy celebrating ourselves and listening to the same tune we already know by heart."

The fact that Stengel included Williams's essay proves that Stengel's Time has what 99.9 percent of the Web's content lacks: seriousness.

A great op-ed piece from Will and here’s to hoping that if you provide content on the web, that you are actually providing something that isn’t wholly self-serving.

Tuesday, December 12, 2006

Arnold Kling and Blogs

In this post from Arnold Kling, Arnold makes mention about what attracts his reading eye to certain blogs.

I've noticed that one of the characteristics that is common to a lot of blogs I like is that they have a "thinking out loud" feel to them.

I can only imagine that if my writing were anymore “stream of consciousness,” I would have the majority of my posts deal with the topic of the Cookie Monster’s origins and if he really had any seething hatred for Big Bird.

Sunday, December 10, 2006

Websites Popping Up Everywhere

Apparently, these days you’re not cool unless you’re on the Internet. I have some old friends from college who have put up their own website, called “Closed Concepts.” I’m not exactly sure what the purpose of the site is yet, but it looks like they’re uninformed just as much as I am. Being they say that this is part of an “e-journey toward e-enlightenment,” I’m thinking we’ll all find out their purpose together.

However, to the core of the matter… Economically speaking, since the cost of publishing yourself on the Internet is free, why not do it? And if you can afford the money to have your own domain, then these instances of having your friends put up websites for purposes that we’re not sure of will probably continue to occur. Like I said, at this cost, maybe the question isn’t why, but why not?

However, running and maintaining the website and continuously makings posts or providing new content requires time and/or money. So, that ends up being a cost. As I’ve seen personally, my friend Will has been studying and working so hard at Loyola that we’ve rarely seen an update from Blogicology.

In fact, if you yourself wonder what makes a website (or more relevantly, a blog) awesome, then check out this post from Scott Ginsberg.

Saturday, December 09, 2006

BT touring with Thomas Dolby

BT is one of my favorite musical artists. And he's touring with Thomas Dolby performing from This Binary Universe.

I would normally put up a review, but This Binary Universe is just so different from anything I have ever heard before. To put it bluntly, it's a modern electronic composition. If you can catch the tour, I highly recommend it.

Friday, December 08, 2006

Bryan Caplan on the Religous Gender Gap

A very interesting post that I think is a must read by Bryan Caplan at Econ Log. Bryan uses two different reasons regarding why women are more religious than men (the religious gender gap).

I’ll use just use a few snippets, but I really mean it when I say that his entire post is a must read.


On a deep level, then, men are more inclined to want some hard proof that religious claims are true, while women are more willing to take religious teachings on faith because they sound nice. Burn me at the stake if you must, but it's true.


As traditional mores break down, however, men feel freer to be themselves - and share their doubts with others. In contrast, since their piety was relatively sincere from the start, women don't respond much to the fall in social pressure.

I can’t help but agree with Bryan’s reasoning here. I’d like to see people try to counter his argument.

Robots are the Future

In case any of you were worried that you might get too drunk to make that favorite drink of yours, there's good news on the horizon.
My favorite quote:
"And if you have a robot that talks to you and insults can be sure that people won't forget him," Calkinds said. "Of course, I could build a robot that irons shirts or something, and that would be just as difficult. But having a cocktail robot is just much more fun, and even if your robot doesn't work, you still have a party."
This is part of where the future is taking us, unfortunately, I don't drink alcohol. Although, I'm sure they could program them for milkshakes.

Thursday, December 07, 2006

Media Ownership

Just as I had slyly mentioned Rupert Murdoch and News Corp in a post about media slant, it turns out that News Corp is buying out its shares from Liberty Media.

The deal would give Murdoch more control over his News Corp empire.

As I said in that previous post, while in newspapers it doesn’t seem to matter who owns the company, maybe the case (and the incentives) are different for other media conglomerates.

Tuesday, December 05, 2006

Newspaper Slant

In this latest paper from Matthew Gentzkow and Jesse M Shapiro, they research media slant, but add a test for the owner’s influence on the newspaper in question.

The key bits of the paper…

…consumers are more likely to read a newspaper whose slant is close to their own political ideology. This creates a strong economic incentive for newspapers to tailor their slant to suit the political leanings of their geographic market…

..owners do not exert a greater influence in areas where the political returns to persuasion are highest. Taken together, these findings further support the view that owners exert at most a small or modest role on the ideological content of the news.

So, while I am not sure about 24 hour cable news and how much Rupert Murdoch might influence Fox News, the print media seems to do exactly what it should do economically.

And if you don’t know about this site (, now you do. It’s a great resource.

Sunday, December 03, 2006

Hawking's Latest

And I quote...

Sooner or later, disasters such as an asteroid collision or nuclear war could wipe us all out. But once we spread out into space and establish independent colonies, our future should be safe.


However, we can still within the law, by using matter/antimatter annihilation, at least reach just below the speed of light.

With that, it would be possible to reach the next star in about six years, though it wouldn't seem so long for those on board.

Any one of my friends wants to chime in on that?