Be Creative, Boost Your Well-Being

Related imageSo says a new study:

Tamlin Conner, a researcher at the University of Otago in New Zealand, and two American researchers analyzed surveys from over 650 young adults who had filled out daily online diaries for 13 days. Among other things, the questions asked how much time they’d spent in creative endeavors each day, and about their well-being: their levels of positive emotion, negative emotion, and what the researchers called “flourishing”—an overall sense of meaning, purpose, engagement, and social connection in their lives.

To tease out what causes what, the researchers compared measures of creativity on one day to measures of well-being on the next day, and vice versa.

Results showed that people who were engaged in more creative activities than usual on one day reported increased positive emotion and flourishing the next day, while negative emotions didn’t change. However, the reverse effect did not seem to occur: People who experienced higher positive emotions on day one weren’t more involved in creative activities on day two, suggesting that everyday creativity leads to more well-being rather than the other way around.

The researchers also

found that people who were more creative on one day still experienced more flourishing and positive emotions like energy, enthusiasm, and excitement the next day (though not other positive emotions, like cheerfulness). This led Conner to conclude that engaging in small daily acts of creativity may influence overall well-being rather than simply making us feel good in the moment. But can everyone reap these benefits? Certain personality traits have been linked to creativity in the past, such as openness to experience. Yet, when Conner and her colleagues ran the analyses, they found that the benefits of engaging in creativity were similar across different personality types…Conner believes her findings suggest that people should incorporate more creativity into their week—perhaps learn to knit, take up cooking, sing in a group, paint, or play music. She also suggests tapping into creativity at work, by trying to come up with novel solutions to problems or writing creatively.

Persuasion in the Economy

Over 20 years ago, economists Deirdre (then Donald) McCloskey and Arjo Klamer argued that a quarter of GDP is due to “persuasion”: the sweet talk that is inherent in economic activity and transactions. A 2013 report by the Australian Treasury updates their findings and concludes that 30% of U.S. GDP is persuasion:

Chart 1 displays the steady rise of persuasion content in US employment. To focus on the biggest grouping — those having a persuasion content of three-quarters — in 1983, they accounted for 19.7 per cent of total employment and grew by two percentage points to 21.8 per cent by 1993. And again, from 22.1 per cent in 2003 the proportion of these workers increased to 22.3 per cent in 2009. Overall persuasion employment appears to have settled at around the 30 per cent mark.

How much of national output is attributable to persuasion? McCloskey and Klamer derive an estimate through the production measure of GDP: the ‘more obviously “talkie” parts of production are a large part of production for final consumption, and much of it is persuasion rather than information or command’. And since these ‘talkie’ parts, such as wholesale and retail trade, finance and general government, add up to 58 per cent of US GDP in 1991, they conjecture that ‘it would not be hard to see … a figure of about a quarter (of GDP) devoted to persuasion’ (p. 193).

An alternative guess could be made from the income side of the national accounts — GDP(I). Since the persuasion content of employment is 30 per cent and the proportion of national income accruing to labour is around 60 per cent in the US (Jacobson and Occhino (2012)), that gives the labour income component of persuasion in the national accounts of around 18 per cent. If a fifth to one-quarter of capital income represents persuasive activity, that accounts for another 8-10 per cent (that is 20-25 per cent x (1-0.6)) of persuasion in GDP(I).7 The digital economy’s rapid advance has meant that brand names, commercial trademarks and other intellectual property are playing a bigger role in economic transactions and by their nature may not be well reflected in the national accounts. Therefore it is quite possible that the persuasion content of GDP may now be closer to 30 per cent.

While it is likely that persuasion GDP has risen above one quarter, it also bears entertaining the possibility that some of that effort could be dissipated by economic contests and positioning à la Skaperdas and Vaidya (2009).

The report concludes,

Since the inspired guesstimate of McCloskey and Klamer, the economics profession launched itself into modelling many aspects of persuasion. Insights are to be had for sure, particularly in how regulators might mandate minimum product or service disclosure standards or how persuasion is deployed in economic contests. There might even be lessons as to how to communicate difficult economic reform proposals and how to navigate tricky political economy landscapes.

But as McCloskey (2011) suggests, some research effort may be falling back into the trap of treating persuasion as just another factor in formal optimisation exercises. In that sense, McCloskey and Klamer’s (1995) original hope remains unrealised. They had hoped that a renewed awareness of the importance of persuasion might encourage the modern economist to augment her technical tools of trade by taking seriously the potential of language in economic discourse and by utilising the power of interpretation in distinguishing between competing ‘hard results’. In this way, McCloskey’s agenda goes beyond evidence-based policy evaluations, useful and necessary as they are in policy discourse.

On a positive note, might it be time to update the McCloskey-Klamer catch phrase to ’30 per cent of GDP is persuasion’? Such renewed speculation would of course merely inform because the persuading was eloquently done by McCloskey and Klamer.

An Ordinary Man

This post is part of the General Conference Odyssey.

Elder Faust’s testimony resonated strongly with me:

As I come to a new calling, I recognize that I am a very ordinary man. Yet I gratefully acknowledge one special gift. I have a certain knowledge that Jesus of Nazareth is our Divine Savior. I know that He lives. From my earliest recollection I have had a sure perception of this. As long as I have lived, I have had a simple faith that has never doubted. I have not always understood, yet still I have known through a knowledge that is so sacred to me that I cannot give utterance to it.

I have a similar testimony. My certain knowledge is not about Jesus Christ. It’s more general and abstract. Ever since I was a little kid I can remember a conviction I’ve had that this world is not my original home. I have always felt, at a level deeper than any argument or theory, that there is more out there than what we see around us.

It is not even a belief that life will continue on after the grave, but simply an understanding that it didn’t start with birth. I came from somewhere else.

It also gives me comfort to hear an apostle say “I am a very ordinary man.” It’s vitally important, I believe, not to place our leaders on tall, narrow pedestals and entrust them with our testimonies. If we do that, then when they fall, our testimonies fall with them.

This is a Church for ordinary men and women.

Check out the other posts from the General Conference Odyssey this week and join our Facebook group to follow along!

Humane Liberalism

Related imageAs mentioned before, the newest issue of Dialogue was just released. The first article of the new issue is Robert Rees’ “Reimagining the Restoration: Why Liberalism is the Ultimate Flowering of Mormonism.” Rees attempts to redeem the word from its current negative connotations in American society, reviewing its meaning in the Middle Ages to the Enlightenment. He further connects to Joseph Smith’s statement that God “is more liberal in His views, and boundless in His mercies and blessings, than we are ready to believe or receive” (pg. 4). Rees goes on to emphasize liberal commitments to earth stewardship, gender equality, the poor, peace, education, etc.

The article reminded me of a recent essay by economic historian Deirdre McCloskey titled “Manifesto for a New American Liberalism, or How to Be a Humane Libertarian.” As McCloskey notes, “Outside the United States libertarianism is still called plain “liberalism,” as in the usage of the president of France, Emmanuel Macron, with no “neo-” about it” (pg. 1). “Liberals 1.0 don’t like violence,” she continues. “They are friends of the voluntary market order, as against the policy-heavy feudal order or bureaucratic order or military-industrial order. They are, as Hayek declared, “the party of life, the party that favors free growth and spontaneous evolution,” against the various parties of left and right which wish “to impose [by violence] upon the world a preconceived rational pattern.” In McCloskey’s view, “humane liberals are very far from being against poor people. Nor are they ungenerous, or lacking in pity. Nor are they strictly pacifist, willing to surrender in the face of an invasion. But they believe that in achieving such goods as charity and security the polity should not turn carelessly to violence, at home or abroad, whether for leftish or rightish purposes, whether to help the poor or to police the world. We should depend chiefly on voluntary agreements, such as exchange-tested betterment, or treaties, or civil conversation, or the gift of grace, or a majority voting constrained by civil rights for the minority” (pg. 2). She explains,

Such a humane liberalism has for two centuries worked on the whole astonishingly well. For one thing it produced increasingly free people, which (we moderns think) is a great good in itself. Slaves, women, colonial people, gays, handicapped, and above all the poor, from which almost all of us come, have been increasingly allowed since 1776 to pursue their own projects consistent with not using physical violence to interfere with other people’s projects. As someone put it: In the eighteenth century kings had rights and women had none. Now it’s the other way around. And—quite surprisingly—the new liberalism, by inspiriting for the first time in history a great mass of ordinary people, produced a massive explosion of betterments. 

…The Enrichment was, I say again in case you missed it, three thousand percent per person, near enough, utterly unprecedented. The goods and services available to even the poorest rose by that astounding figure, in a world in which mere doublings, increases of merely 100 percent, had been rare and temporary, as in the glory of fifth-century Greece or the vigor of the Song Dynasty. In every earlier case, the little industrial revolutions had reverted eventually to a real income per head in today’s prices of about $3 a day, which was the human condition since the caves. Consider trying to live on $3 a day, as many people worldwide still do (though during the past forty years their number has fallen like a stone). After 1800 there was no reversion. On the contrary, in every one of the forty or so recessions since 1800 the real income per head after a recession exceeded what it had been at the previous peak. Up, up, up. Even including the $3- a-day people in Chad and Zimbabwe, world real income per head has increased during the past two centuries by a factor of ten, and by a factor of thirty as I said, in the countries that were lucky, and liberally wise. Hong Kong. South Korea. Botswana. The material and cultural enrichment bids fair to spread now to the world.

And the enrichment has been equalizing. Nowadays in places like Japan and the United States the poorest make more, corrected for inflation, than did the top quarter or so two centuries ago (pgs. 4-5).

The whole thing is worth reading. Check it out.

The Long-Term Effects of the African Slave Trade

According to economist Nathan Nunn, the African slave trade (unsurprisingly) had numerous negative long-term effects, economically, socially and culturally. He writes,

An empirical literature has emerged that aims to supplement these historical accounts with quantitative estimates of the long-run impact of Africa’s slave trades. The first paper that attempted to provide such estimates was Nunn (2008). In the study, I undertook an empirical test, with the following logic. If the slave trades are partly responsible for Africa’s current underdevelopment, then, looking across different parts of Africa, one should observe that the areas that are the poorest today should also be the areas from which the largest number of slaves were taken in the past.

To undertake this study, I had to first construct estimates of the number of slaves taken from each country in Africa during the slave trades (i.e. between 1400 and 1900).

These estimates were  constructed  by  combining  data   on   the   number   of   slaves shipped from each African port or region  with  data  from  historical documents that reported the ethnicity of over 106,000 slaves taken from  Africa. Figure 1 provides an image showing a typical page from these historical documents. The documents shown are slave manumission records from Zanzibar. Each row reports information for one slave, including his/her name, ethnicity, age, and so on.

After constructing the estimates and connecting these with measures of modern day economic development, I found that, indeed, the countries from which the most slaves had been taken (taking into account differences in country size) were today the poorest in Africa. This can be seen in Figure 2, which is taken from Nunn (2008). It shows the relationship between the number of slaves taken between 1400 and 1900 and average real per capita GDP measured in 2000. As the figure clearly shows, the relationship is extremely strong. Furthermore, the relationship remains robust when many other key determinants of economic development are taken into account…According to the estimates from Nunn (2008), if the slave trades had not occurred, then 72% of the average income gap between Africa and the rest of the world would not exist today, and 99% of the income gap between Africa and other developing countries would not exist. In other words, had the slave trades not occurred, Africa would not be the most underdeveloped region of the world and it would have a similar level of development to Latin America or Asia.

“In a series of studies,” Nunn continues,

Whatley and Gillezeau (2011) and Whatley (2014) combine slave shipping records with ethnographic data and estimate the relationship between slave shipments and institutional quality and ethnic diversity in the locations close to the ports of shipment. Their analysis, consistent with Nunn (2008) and Green (2013), indicates that the slave trades did result in greater ethnic fractionalisation. In addition, their analysis also shows that the slave trades resulted in a deterioration of local ethnic institutions, measured in the late pre-colonial period.

Another subsequent study, undertaken by Nunn and Wantchekon (2011) asks whether the slave trades resulted in a deterioration of trust…In our study, Wantchekon and I extended the data construction efforts in Nunn (2008) and constructed estimates of the number of slaves taken from each ethnic group in Africa (rather than country). The ethnicity level estimates are displayed visually in Figure 3. The analysis combined the ethnicity-level slave export estimates with fine-grained household survey data, which reports individuals’ trust of those around them, whether neighbours, relatives, local governments, co-ethnics, or those from other ethnicities. The study documented a strong negative relationship between the intensity of the slave trade among one’s ethnic ancestors and an individual’s trust in others today.

The study then attempted to distinguish between the two most likely channels through which the slave trades could have adversely affected trust. One is that the slave trades made individuals and their descendants inherently less trusting. That is, it created a culture of distrust. In the insecure environment of the slave trade, where it was common to experience the betrayal of others, even friends and family, greater distrust may have developed, which could persist over generations even after the end of the slave trade.

Another possibility is that the slave trades may have resulted in a long-term deterioration of legal and political institutions, which are then less able to enforce good behaviour among citizens, and as a result people trust each other less today.

The study undertook a number of different statistical tests to identify the presence and strength of the two channels. They found that each of the tests generated the same answer: both channels are present. The slave trades negatively affected domestic institutions and governance, which results in less trust today. In addition, the slave trade also directly reduced the extent to which individuals were inherently trusting of others. We also found that, quantitatively, the second channel is twice as large as the first channel.

Guess what? The slave trade likely boosted the practice of polygyny in West Africa:

This is due to the fact that it was primarily males who were captured and shipped to the Americas, resulting in a shortage of men and skewed sex ratios within many parts of Africa. Interestingly, Dalton and Leung (2014) found that there is no evidence of such an impact for the Indian Ocean slave trade, where there was not a strong preference for male slaves. This has led the authors to conclude that Africa’s history of the slave trades is the primary explanation for why today polygyny is much more prevalent in West Africa than in East Africa.

Nunn concludes,

Although research understanding the long-term impacts of Africa’s slave trades is still in progress, the evidence accumulated up to this point suggests that this historic event played an important part in the shaping of the continent, in terms of not only economic outcomes, but cultural and social outcomes as well. The evidence suggests that it has affected a wide range of important outcomes, including economic prosperity, ethnic diversity, institutional quality, the prevalence of conflict, the prevalence of HIV, trust levels, female labour force participation rates, and the practice of polygyny. Thus, the slave trades appear to have played an important role in shaping the fabric of African society today.

GMO Yields

Image result for gmos

There’s a new paper out on genetically-engineered corn. Its results?:

This paper sought to identify whether, in fact, for corn “the nation-wide data . . . in the United States do not show a significant signature of genetic-engineering technology on the rate of yield increase,” as was indicated by NASEM (2016). Using corn yield panel data corresponding to roughly 28,000 U.S. county-years before and after adoption of GE corn, a simple model only including a time trend confirms NASEM’s assertion, as the effect of GE adoption appears, if anything, to have had a negative effect on yields. However, subsequent analysis reveals this simple model is biased. After controlling for weather and soil characteristics, and assuming a homogeneous effect of adoption, we find that adoption of GE corn has led to an approximate 17 percent increase in corn yields. We also find significant heterogeneity in the yield-effect that is not related to state-boundaries but rather to soil characteristics. On average, adoption of GE corn has led to an 18.5 bushel per acre increase in yield, but the effects range from 12.5 to 25.1 bushels per acre depending on soil characteristics. We conjecture that the variation across soil types may be related to differences in insect pressure.

While we found important soil-GE adoption interactions, there were no significant interactions related to weather. The findings suggest that the current GE traits have not led to more resilience to heat or water stresses. Moreover, while we find that the variance in corn yield has increased over time, adoption of GE corn has not lowered the variance. Nonetheless, if as our results show, adoption of GE corn increases yield without affecting variance, the coefficient of variation on yields has fallen as a result of GE corn adoption. This suggests GE corn is less risky as, for example, the actuarially fair price of insurance to indemnify a given yield falls as the coefficient of variation falls (pgs. 21-22).

So, once again, maybe we should calm down about GMOs.

DR Editors in Dialogue: Worship Through Corporeality

Dialogue, a Journal of Mormon ThoughtI’m excited to announce that the newest issue of Dialogue: A Journal of Mormon Thought features an article by yours truly and fellow DR editor Allen Hansen. The piece is titled ““All Things Unto Me Are Spiritual”: Worship Through Corporeality in Hasidism and Mormonism.” As we explain in the introduction,

[W]e seek to draw useful parallels between Hasidic Judaism and Mormonism by presenting the former’s concept of “worship through corporeality” as a theologically rich source for understanding and describing Mormonism’s materialist merging of heaven and earth, sacred and mundane. If, as one scholar has stated, “an examination of other revival movements and their characteristics will also provide a new background against that which is distinctive in Hasidism will stand out in clear relief,” the same holds true for the study of early Mormonism. In this paper, we will outline Hasidism’s concept of “worship through corporeality” and its roots in Enochian folklore. We will also briefly touch on the Mussar movement’s connection to these Enoch stories and how it shaped their ethics and worldview. Finally, we will explore multiple sources throughout early Mormonism that similarly demonstrate an overlap of the spiritual and temporal in the minds of many Saints, leading them to view their labors as sacred tasks in the building of Zion (pgs. 59-60).[ref]Let it be known that many of the Hasidic sources were only in Hebrew and Allen provided the English translations.[/ref]

It’s a relief to finally see this in print. The seeds of it were sown with a comment by Allen on a 2013 post at The Slow Hunch. The idea eventually became a twopart blog post at Worlds Without End, which evolved into a presentation at the 2014 conference for the Mormon Transhumanist Association and later the 2015 Faith & Knowledge conference. It sat at Dialogue for a long time due to management changes. We withdrew it and submitted to BYU Studies Quarterly, which deemed it “too specialized and not right for a large enough segment of our target audience.” So we resubmitted a more focused version to Dialogue, much to the enthusiastic support of the editor.

And now, at long last, it’s here. Enjoy!

American Revolution: Taxation *and* Representation?

A week late, but what were some of the political economics behind the American Revolution? Here’s the abstract from a new working paper:

Why did the most prosperous colonies in the British Empire mount a rebellion? Even more puzzling, why didn’t the British agree to have American representation in Parliament and quickly settle the dispute peacefully? At first glance, it would appear that a deal could have been reached to share the costs of the global public goods provided by the Empire in exchange for political power and representation for the colonies. (At least, this was the view of men of the time such as Lord Chapman, Thomas Pownall and Adam Smith). We argue, however, that the incumbent government in Great Britain, controlled by the landed gentry, feared that allowing Americans to be represented in Parliament would undermine the position of the dominant coalition, strengthen the incipient democratic movement, and intensify social pressures for the reform of a political system based on land ownership. Since American elites could not credibly commit to refuse to form a coalition with the British opposition, the only realistic options were to maintain the original colonial status or fight a full-scale war of independence.

Happy belated July 4th!

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Why Prophets?

Stormy Sea at Night by Ivan Aivazovsky (1849)

This post is part of the General Conference Odyssey.

Mormon doctrine emphasizes a combination of radical individual freedom and responsibility on the one hand with an emphasis on obedience to a hierarchy of Church leadership on the other. It’s an unstable tension that is prone to error in two different directions. One extreme can be summed up by the (heretical) idea that “When the prophet speaks, the thinking is done.” The other extreme questions why bother having prophets at all if they’re fallible and we have to come to our own conclusions about their teachings anyway.

But we don’t have to pick between the extremes, and Elder Groberg’s talk is a great explanation of why that’s so.

There are those who, through years of experience and training, and by virtue of special divine callings, can see farther and better and more clearly—and can and will save us in those situations where serious injury or death—both spiritual and physical—would be upon us before we ourselves could see.

This is the summary to a story from his life when an experienced sea captain was able to navigate through a narrow gap in a reef in the middle of a nighttime storm by seeing a light that no one else on the boat could see. It’s a great metaphor because it doesn’t presuppose infallibility or imply abdication of responsibility. Prophets see more, but they don’t see everything, and we’re still responsible for heeding their counsel, or not.

It makes sense to listen to prophets because, as Elder Groberg states, “We are in the midst of a major storm over moral values that will get worse before we arrive home.” But listening doesn’t mean letting prophets—or anyone else—lead our lives on our behalf. We are each, as Sartre said, condemned to be free. We can try and pretend to outsource the weighty decisions in our lives, but it won’t work. Like the drummer said, “if you choose not to decide, you still have made a choice.”

Listening to prophets is optional.

Being ultimately responsible for our own decisions isn’t.

Check out the other post from the General Conference Odyssey this week and join our Facebook group to follow along!

Corporations, People, and Taxes

I was reviewing some old blog posts and such and came across the following. Remember this beautiful exchange?

 

Awww, yes. The “evil corporations” trope, i.e. the “confusion between abstract categories and flesh-and-blood human beings.”[ref]Thomas Sowell, Economic Facts and Fallacies, 2nd ed. (New York: Basic Books, 2011), 153.[/ref] Explaining the fallacious nature of this thinking, Thomas Sowell writes,

Abstract people can be aggregated into statistical categories such as households, families, and income brackets, without the slightest concern for whether those statistical categories contain similar people, or even the same number of people, or people who differ substantially in age, much less in such finer distinctions as whether or not they are working or whether they are the same people in the same categories over time. Abstract people have an immortality which flesh-and-blood people have yet to achieve.[ref]Thomas Sowell, Intellectuals and Society (New York: Basic Books, 2009), 112-113.[/ref]

What Romney’s hecklers (affiliates of Iowa Citizens for Community Improvement) and critics seem to have missed is the abstract nature of “greedy corporations.” The rhetoric invoked by these individuals often describes corporations as quasi-personal, transcendent entities that exist above and beyond flesh-and-blood people. As one writer notes, “Romney doesn’t mean that corporations are entitled to some of the legal rights of people in the Citizens United sense. He means it in the sense that the money made by corporations flows in and out of human hands—or pockets, in the language of the heckler who hoisted himself on his own metaphorical petard.” The abstractions of “corporations” and “the rich” are frequently linked, if not synonymous. Yet, empirical evidence suggests that corporate taxes negatively impact actual people. And not the rich ones you would hope for.[ref]See Matthew H. Jensen, Aparna Mathur, “Corporate Tax Burden on Labor: Theory and Evidence,” Tax Notes (June 6, 2011) for a nice rundown of the literature.[/ref]

A 2010 working paper explored international tax rates and manufacturing wages across 65 countries over 25 years. It suggests that a 1 percent increase in corporate tax rates decreases wage rates by 0.5-0.6 percent. “These results also hold for effective marginal and average tax rates” (pg. 22). A 2012 study[ref]Ungated working paper version here.[/ref] looked at over 55,000 companies in 9 European countries between 1996 and 2003. It found that every $1 increase in tax liability leads to a $0.49 decline in wages. This suggests that about 50% of the increased tax burden is passed on to the labor force over the long run. A 2007 Kansas City Fed working paper used cross-country data between 1979 and 2002 to find that a 1 percentage point increase in the average corporate tax rate led to a 0.7% decrease in annual gross wages; a decrease that was more than 4 times the amount of the corporate tax revenue collected. Furthermore, the “burden of the corporate tax on wages is shared equally across skill-level, suggesting that the corporate tax may not be as progressive as many politicians assume. Also, as the economy becomes more global, raising the corporate tax may result in lower than predicted corporate revenue increases due to the ability of firms to avoid taxes more effectively” (pg. 22). Another 2007 paper looked at a panel of U.S. multinationals across 50 countries over a 15-year period. The authors found that 45-75% of the corporate tax is shouldered by labor, with the rest falling on capital. Similarly, a 2013 study finds that a $1 increase in corporate tax liability leads to decreases in wages by about $0.60. The authors conclude,

Our findings suggest that labor shares a significant part of the burden of corporate income taxes. A direct calculation of the mean marginal effect of the corporate income tax from our estimates suggests that a 10 percent increase in the tax rate would decrease the average wage rate by 0.28–0.38 percent. Labor shares at least 42 percent of the burden of the corporate tax and possibly more. The average labor share of the corporate tax burden is around 60–80 percent (pg. 233).

A 2016 study[ref]Earlier, ungated version here.[/ref] of state corporate tax rates concluded that 25-30% fell on landowners and 30-35% fell on workers. A 2016 paper for the Federal Reserve looked at 131 tax increases and 140 tax cuts across 45 states going back to 1969. It found that “a one percentage-point increase in the top marginal corporate income tax rate reduces employment by between 0.3% and 0.5% and income by between 0.3% and 0.6%, measured relative to neighboring counties on the other side of the state border. These estimates are remarkably stable: they remain essentially unchanged regardless of local characteristics such as the flexibility of local labor markets, income levels, population density, or the prevalence of small businesses in a county. They are also stable across the business cycle and little changed when we control for localized industry-level shocks by comparing employment and income in bordering counties within the same industry” (pg. 3). A 2009 study by economist Robert Carroll found that across state lines “a one percent drop in the average tax rate leads to a 0.014 percent rise in real wages five years later.” In other words, wages rise $2.50 for every dollar reduction in the state-local corporate income taxes. The opposite also occurs: every dollar increase in tax rates leads to a $2.50 loss in wages. Drawing on recent research, Carroll suggests that “the least mobile factor of production is likely to bear the burden of a tax. In an increasingly global economy, labor is the least mobile because capital can flow freely across borders…When workers have more capital to work with, their labor productivity and wages will rise” (pg. 1). An abstraction is unable to pay its demanded “fair share” and instead places the economic burden on individuals. “After all, businesses are merely convenient ways of organizing economic activity,” writes Carroll, “so while businesses write checks to pay the corporate tax (and other taxes), the burden of those taxes falls ultimately on the individuals who depend on the corporations, in their roles as investors, workers, or consumers” (pg. 2). This is why Carroll finds numerous benefits to cutting corporate taxes, including higher long-term growth, higher wages and living standards, lowered tax burdens on low-income taxpayers and seniors, and boosted entrepreneurship, investment, and productivity.

 

The point of this review is to remind us that policy is complicated and often counterintuitive. We need to look at the empirical evidence. And if there isn’t much, perhaps we should wait until there is. The effects are real and they impact real people. The problem is that rarely will you achieve a utopian outcome. As I’m fond of saying, “There are no solutions; there are only trade-offs.”[ref]Sowell, The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy(New York: Basic Books, 1995), 142.[/ref]