Thursday, May 3, 2007

A Simple Objection To Greg's Height Tax

Greg is getting some press for his and Matthew Weinzierl's working paper on height taxation and its affront to standard notions of equity. Yet, I think the paper falls short when it fails to recognize the importance of the height-income effect mechanism.

Here is a simple example that shows why the mechanism is relevant. This is written in a tone familiar to economists. If there is enough interest among non-economists I can do a more thorough explanation.

Suppose that base income is drawn from a normal distribution. Then nature distributes a bonus to 50% of all tall people. This introduces a strong height-income effect.

Wanting to correct for this economists suggest that the social planner institute a tax on the tall and redistributes the income to the short.

However, she rejects the proposal because it fails her Rawlsian analysis.

The distribution of income for tall people conditional on not have received the bonus is the same as the distribution of income among the short. Therefore, the poorest tall person has roughly the same income as the poorest short person. Therefore, if she takes income from all tall persons the poorest tall person will likely become poorer than the currently poorest person.

Since her objective function is max min(all agents) the tax decreases social welfare.

21 comments:

Anonymous said...

dear karl,

it seems to me like the majority of your posts relate to something greg mankiw posted on his blog; you're typically refuting whatever greg says, or adding your take on whatever greg says; i like your blog, but i think all the readers here would agree that we are more interested in what you have to say (meaning, other than refuting or commenting on mankiw posts). for instance, what about that paper you said you were writing that was inspired by this blog? your readers would like to see that

Karl Smith said...

Thanks for you comments. You make a good point.

YouNotSneaky! said...

Of course the key here is that Rawls != utiliterianism.

Karl Smith said...

Then what it implies is that our innate sense of fairness may be a little more Rawls and a little less Mills.

Also, I would add that there is some set of weights that will make the utilitarian outcome equivalent to the Rawlsian. In fact if you know who the least well off person is then you just give her all the weight.

YouNotSneaky! said...

Well, I meant utilitarian in the classical sense of "equal capacity for pleasure" - i.e. equal weights.

Also I think this is wrong:

“The distribution of income for tall people conditional on not have received the bonus is the same as the distribution of income among the short. Therefore, the poorest tall person has roughly the same income as the poorest short person. Therefore, if she takes income from all tall persons the poorest tall person will likely become poorer than the currently poorest person.”

The key here is that the Rawlsian economist (or the taxing authority) either has no way of knowing who the poorest person is, or does. If she knows, then just redistribute income by taxing others to that person – why go through taxing height? If she doesn’t know then the probability that the poorest person is short is higher then the probability that the poorest person is tall (“Proof”: Draw an income distribution – label it “short people”. Now draw another one which looks exactly like the first one except it is shifted right and label it “tall people”. They gotta cross. So for a particular low level of income the density of short people at that income is higher than the density of tall people at that level of income.) If the only variable – the instrument – that the Rawlsian economist has to go by is height, and height is correlated with income then in expectations you want to transfer income to (some) short person.

Greg’s and Matthew’s point is somewhat different than this though because there income is not just determined by nature (ability) but also by effort. So you observe income but not how it is determined by these two sources. And you want to tax ability – since, in essence, it’s inelastically supplied – but not effort, since that’s where distortions come from. So in that case a tax based on BOTH income and height is optimal.

Like I said on my blog, I don’t see what the problem is with this proposal, given that one doesn’t have a problem with taxing ability in the first place. I think though that a lot of people DO have a problem with taxing intrinsic ability – what if Michelangelo had to pay a tax every time he picked up a paint brush? – and that’s why the proposal seems unfair. That’s the point where the rabbit is stuffed into the economist’s hat.

anal said...

EMERGE! From Facebook http://ryanmidnight.today.com/2007/...-from-facebook/ The Sun: Mystery Blonde From a bottle of a Ukrainian girls in fact she said, detract ALL you say big fat to settle down. Sat down to the flood of those combined, there's a beer and aim your Ukrainian girls are no time in Budapest who says you retards teen anal movies

Anonymous said...

[url=http://vegasonlines.net/casino-directory.html]casinos de juego en espana [/url]
[url=http://vegasonlines.net/pinnacle-casino.html]casino juego computadora [/url]
[url=http://askmecode.com/members/best_2D00_casino_2D00_online.aspx]apuesta casino linea [/url]
[url=http://vegasonlines.net/dakota-casino.html]casino niagara [/url]
[url=http://vegasonlines.net/mystic-lake-casino-prior-lake.html]casino in vegas wynn [/url]
[url=http://vegasonlines.net/casino-poker-set.html]casino linea seguro [/url]
[url=http://vegasonlines.net/casino-bossier-la.html]juego and and casino and and linea and gratis [/url]
[url=http://vegasonlines.net/sierra-casino.html]casino juego computadora [/url]
[url=http://vegasonlines.net/spirit-mountain-casino-oregon.html]casino virtual dado [/url]
[url=http://vegasonlines.net/harras-casino.html]gran casino bar [/url]
[url=http://vegasonlines.net/gold-strike-casino-robinsonville-ms.html]casino juego online [/url]
[url=http://vegasonlines.net/indiana-argosy-casino.html]bajar juego casino [/url]
[url=http://vegasonlines.net/casino-bingo.html]casino aranjuez actuacion isabel pantoja [/url]
[url=http://vegasonlines.net/lake-of-the-torches-casino.html]casino de la policia nacional [/url]
[url=http://vegasonlines.net/gambling-casino-online-bonus.html]juego casino sin pago [/url]
casino cruise ship
[b]bogota casino atlantic city nj[/b]
casino game rental
gambling casino
[b]cupon casino[/b]
casino consultants
[u]casino las vega[/u]
mohegan sun casino resort
promocion casino portal web
[b]extra casino bonus[/b]
rising sun grand hyatt victoria casino resort
borgata casino atlantic city

Anonymous said...

Genial dispatch and this post helped me alot in my college assignement. Say thank you you as your information.

Anonymous said...

hi there ppl. I'm honestly into shoes and I had been searching for the sake of that meticulous brand. The prices due to the fact that the shoes are about 310 bucks on every site. But for all I bring about this locate selling them for half price. I exceptionally like these [url=http://www.shoesempire.com]prada sneakers[/url]. I will absolutely purchase these. what can you tell me about these?

Anonymous said...

hi there friends. I'm actually into shoes and I have been looking for the sake of that particular make. The prices due to the fact that the boots are about 170 bucks on every site. But completely I found this site selling them someone is concerned half price. I exceptionally want these [url=http://www.shoesempire.com]gucci sneakers[/url]. I will probably purchase those. what do you think?

Anonymous said...

green diy energy -
healthy urban kitchen -
highest pay surveys -
holo think -
homemadeenergy -
home made energy -
i want a teaching job -
joyful tomato -
keyword elite -
learn photoshop videos -
lmt forex formula -
lower body make over -
macro virus -
malware bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
microcap millionaires -
moles warts removal -
money siphon system -
muscle gaining secrets -
my list strategy -
my phone riches -
natural cancer treatments -
online tv pc -
panic away -
pdf creator -
peel away ads -
pips leader -
ppc web spy -
prevent sweating -
privacy control -
publicrecordspro -
public records pro -

Anonymous said...

questions for couples -
quick article pro -
quick paid surveys -
quit smoking today -
reg defense -
registry winner -
reg tool -
reverse mobile -
richard mackenzie direct -
rocket german -
rotator cuff training -
rss feeds submit -
satellite pc box -
save the marriage -
spy no more -
spyware stop -
super seduction power -
surefire trading challenge -
tattoo me now -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the dog food conspiracy -
the mini site formula -
tmj help -
tonsil stones remedies -
truth about abs -
twitter trick -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
win clear -
xbox 360 red light fix -

Anonymous said...

xp repair pro -
500 love making tips -
acid alkaline diet -
advanced defrag -
alpha male system -
amazing cover letters -
anti spyware -
anti spyware bot -
article rewriter -
art of approaching -
auto cash system -
burnthefat -
burn the fat -
bv cures -
calling men -
camera dollars -
carb rotation diet -
cash making power sites -
cb mall -
combat the fat -
conversationalhypnosis -
conversational hypnosis -
credit secrets bible -
destroy hemorrhoids -
dirty talking guide -
dotcom income secrets -
duplicate file cleaner -
dvd copy pro -
earth4energy -
earth 4 energy -
easy launcher -
easy system cleaner -
eatstopeat -
eat stop eat -

Anonymous said...

eczema free forever -
end your tinnitus -
error nuker -
fatburningfurnace -
fat burning furnace -
fat loss 4 idiots -
final sync -
firewall gold -
fitness model program -
fit over 40 -
fit yummy yummy -
flattenyourabs -
flatten your abs -
forex candlesticks made easy -
forex killer -
forex megadroid -
get rid of your cellulite -
g money pro -
google shadow -
governmentregistry -
government registry -
gov resources -
health biz in a box -
homemadeenergy -
home made energy -
hybrid water power -
i software tv -
joyful tomato -
keyword spy pro -
kingdom of pets -
macro virus -
malware bot -
maternityacupressure -
maternity acupressure -

Anonymous said...

meet your sweet -
microcap millionaires -
moles warts removal -
mole wart removal -
muscle gaining secrets -
natural cure for yeast infection -
paid surveys etc -
panic away -
pdf creator -
public records pro -
quick article pro -
quick income blueprint -
quit smoking today -
ranking loophole -
reg clean -
reg defense -
regi cleanse -
registry easy -
registry genius -
registry winner -
reg sweep -
reg tool -
reverse mobile -
richard mackenzie direct -
rig worker -
rocket chinese -
rocket french -
rocket german -
rotator cuff training -
rss feeds submit -
save the marriage -
site builder elite -
six figure yearly 2009 -
sleep tracks -

Anonymous said...

sold in 21 days -
spyware stop -
stop being tired -
stop your hair loss -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
tonsil stones remedies -
top secret magic code -
truth about abs -
turbulence training -
turn your photos into cash -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
win clear -
xbox 360 red light fix -
xp repair pro -
1st promotion -
3 redlight fix -
500 love making tips -
acid alkaline diet -
advanced defrag -
anti spyware -
anti spyware bot -
art of approaching -
banish rosacea -
blog lock down -
brad yates -
building a chicken coop -
burnthefat -
burn the fat -
carb rotation diet -

Anonymous said...

combat the fat -
conversationalhypnosis -
conversational hypnosis -
copy n profit -
credit secrets bible -
cure angular cheilitis -
cure morning sickness -
dirty talking guide -
domain tweak system -
dotcom income secrets -
duplicate file cleaner -
earth4energy -
earth 4 energy -
easy launcher -
easy system cleaner -
eatstopeat -
eat stop eat -
eczema free forever -
email finder -
energy 2 green -
error nuker -
evidence smart -
fat burning furnace -
fat loss 4 idiots -
final sync -
fitness model program -
fit yummy yummy -
flattenyourabs -
forex enterprise -
governmentregistry -
government registry -
home job stop -
homemadeenergy -
home made energy -

Anonymous said...

how do i get him back -
hyper vre -
keyword spy pro -
kingdom of pets -
mafia war secrets -
malware bot -
master cleanse secrets -
maternityacupressure -
maternity acupressure -
maximum paid surveys -
meet your sweet -
mobile tv pro -
musclegainingsecrets -
muscle gaining secrets -
my dish biz -
one minute cure -
paid surveys online -
panic away -
pc tv 4 me -
pdf creator -
perfect optimizer -
pick the gender of your baby -
plr wholesaler -
private niche empire -
project quick cash -
public records pro -
pull your ex back -
quick article pro -
quit smoking today -
reality creation secrets -
reg clean -
regi cleanse -
registry easy -
registry fix -

Anonymous said...

registry winner -
reg sweep -
reg tool -
reverse mobile -
reverse phone detective -
richard mackenzie direct -
rich garbage man -
rocket chinese -
rocket french -
seize cars -
shop until you drop -
six figure yearly 2009 -
sleep tracks -
spyware nuker -
spyware stop -
sunshine 4u -
the bad breath report -
the cash1234 system -
thedietsolutionprogram -
the diet solution program -
the free car -
the lazy marketer -
tonsil stones remedies -
truth about abs -
truth about diets -
turbulence training -
vincedelmontefitness -
vince del monte fitness -
violin master pro -
warp speed fat loss -
wedding speech 4u -
xp repair pro -
yeast infection no more -
2ip hosting -

Anonymous said...

10 minute forex wealth builder -
30 minute back links -
500 love making tips -
acid alkaline diet -
advanced defrag -
affiliate jackpot -
anti spyware -
art of approaching -
battery reconditioning -
blogging to the bank -
burnthefat -
burn the fat -
carb rotation diet -
carp evolution -
cb bonus domination -
combat the fat -
content website builder -
conversationalhypnosis -
conversational hypnosis -
cure angular cheilitis -
cure morning sickness -
dirty talking guide -
driver robot -
earth4energy -
earth 4 energy -
easy launcher -
easy system cleaner -
eatstopeat -
eat stop eat -
error smart -
evidence eraser -
evidence smart -
fatburningfurnace -
fat loss 4 idiots -

Anonymous said...

fitness model program -
fit yummy yummy -
flattenyourabs -
flatten your abs -
forex trading machine -
forex trading made ez -
get your exgirlfriend back -
google snatch -
governmentregistry -
government registry -
grow taller 4 idiots -
guy gets girl -
hcg recipes -
homemadeenergy -
home made energy -
how to break 80 -
hyper vre -
instant domain cash -
i software tv -
jamo rama acoustic -
linden method -
lose the back pain -
magni work -
maternityacupressure -
maternity acupressure -
musclegainingsecrets -
muscle gaining secrets -
negative calorie diet -
one minute cure -
one week marketing -
only 4 gamers -
paid surveys online -
panic away -
pc on point -