Do you have a source for that statement? Everything I have seen says the opposite.


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>Isn’t it possible that at least part of what people want insurance against is the circumstances of their birth.

Excellent point.

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Of course the problem is the public's information is incorrect. The "top 1% don't control a significantly larger portion of the nation's wealth today than they did in 1965.

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Oh for God's sake. The reason people want lower capital gains taxes is because it's a form of income that's highly sensitive the Laffer Curve. That's why EVERY SINGLE COUNTRY in the world taxes it lower rate than regular income.

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> This is why people like Romney want low taxes on capital gains and interest and high taxes on earned income.

No, he wants that for two reasons:

Primarily he wants it because he thinks it will help him become the president. Secondly, he wants it because he doesn't want to fork over his cash but doesn't want the government to go bankrupt and this is the easiest way to do that.

Your reasoning should have him actually favoring taxes that hit the other rich people but avoid him. No matter what tax policy is adopted the middle class won't even come close to his level of money so they don't threaten his positional prestige/influence regardless of tax policy. The people it's most in his interest to beat down are those who are also rich and can present real competition for (money based) influence/prestige.

Ultimately, however, I doubt Romney really thinks that much about money as a positional good nor spends time scheming to raise his position. Like everyone else he probably just finds it unpleasant to fork over his money to the government and also like everyone else finds whatever justification is convenient to explain why he should be paying less.

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Your brother has more control over his employment than getting hit by a car.

Beyond that, I don't see a relevant difference. You get insurance against being hit by a car so it's not as bad if you're unlucky enough to get hit by a car. You get insurance against being a bad worker so it's not as bad if you're unlucky enough to be a bad worker.

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Isn't it possible that at least part of what people want insurance against is the circumstances of their birth. That is, some people are born with better genetic endowments and family circumstances and by the time they are born it is too late to buy insurance against a poor drawing in the genetic / environmental lottery. I'm not sure whether people would want this sort of insurance if they could somehow freely contract for it, but it is clear that there are pretty fundamental barriers to private provision of it. It is also worth noting that birth position is much more purely a function of luck than life success is. Insurance that incorporated this aspect would have a more favorable mix off hedging risk and creating moral hazard / weakening incentives.

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I've thought about this a little, but with a twist. Basically I want to become rich to provide a form of insurance against bad events and "low tail" kids. However, I don't want my kids to know about my wealth lest their incentives to work hard and/or choose profitable careers deteriorate (not to mention the satisfaction they would miss out on if they never felt that they were 'self-made' men and women). To keep incentives aligned, I would add an extra layer of secrecy between generations within a family. When bad events occur, I could pretend to mortgage the house when in reality I'm paying it off in cash. Eventually I inform my adult children of the wealth so that they can do the same with their kids, etc.

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I disagree, what drives some of the very wealthy is the desire for money as a means of obtaining social power, not because of material possessions it can purchase.

The problem is that social power is zero-sum, and wealth is only useful in obtaining social power if wealth acquisition is limited. Those who would acquire wealth as a means of obtaining social power have to prevent others from getting wealth or their wealth is not useful.

This is why people like Romney want low taxes on capital gains and interest and high taxes on earned income.

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>It’s pretty obvious the marginal utility of income over $75,000 isn’t negligible.

It's a counter-intuitive result. Keynes diagnosed the source of the counter-intuition long ago:

"The love of money as a possession – as distinguished from the love of money as a means to the enjoyments and realities of life – will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease."

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Doug, did you read the article? Take-overs are not necessarily profitable only by the breaching of implicit agreements, but breaking those agreements can be highly profitable to those who get the benefit.

There are examples in the article.

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Another interesting thing he covers is that higher income "should" pay more taxes because they are WILLING to pay more for the goods it brings them.

Yet another interesting thing he covers are positional goods where an 80,000 sq ft house signal you are richer than the guy with the 70,000 sq ft house and this would work just as well if there were taxes on these things and it was 40,000 and 35,000 sq ft houses after tax.

The book covered a LOT of good ideas and interesting analyses.

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Frankly I find the argument of breaking implicit agreements to be crap. Basically what you're trying to say is that laying off a long-time employed worker is equivalent to contract breach. "Because well, you know ol' Gary always expected to work at that plant."

If anything pre-industrial peasants had FAR more of an implicit guarantee of lifetime employment than modern day corporate workers. Yet would you try to argue that the industrial revolution was not "value creating."

Reductio ad absurdum.

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It's pretty obvious the marginal utility of income over $75,000 isn't negligible.

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>Why exactly this is not available privately if customers want it isn’t usually clarified. And it could be that the incentive costs of the insurance outweigh its risk-reduction benefits.

The reason isn't clarified because the incentive-based reason is obvious.

>And asking this of my undergrads consistently gets the same answer – very few want such insurance for their own or their kids’ future.

Did the answers determine their grades?

What's the hypothetical price of this insurance? Are you saying students would refuse it, even were it free? This would seem blatantly irrational, in light of studies purporting to show that the marginal utility of income increments over $75,000 is negligible. The price of such insurance would be prohibitively high, and your students might have taken the probable price into account.

Otherwise, I'd just have to say you must have particularly stupid students. I think the vast majority would take advantage of such insurance for themselves, were it freely available.

Your argument about families "teaching" their children to share is fatuous because you assume parents have powers they don't in "teaching" their kids' "values." But while I'm sure people would want this insurance for themselves, I don't have a prediction on whether parents would want it for their kids. I don't think the average parent is all that well-intentioned about their children. Their *personal* interest lies in having one of them get rich.

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But you could also tell your kids to keep this income-sharing policy a family secret, only to tell potential spouses.

And you know they don't... how again?

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