"Jeremy: Only 4% of working age males "not in the labor force" say they have difficulty finding work."
This is not accurate. Per the linked study, 4% is the number of men who say difficulty finding work is the *main reason* they aren’t currently working. They generally cite physical or mental health issues as the main reason.
When I think of the men in my family and friend group who are either not currently working or who have spent long periods of time not working, I’m sure that nearly all of them have some diagnosis they can point to as the main reason for not working. I’m also sure that more of them would work if jobs that appealed to them were easier to get and paid better.
So I think it would be a mistake to use that 4% number to write-off the large population of prime age men who are not currently in the labor force.
"Paper explores the impact of the 2010 dissolution of personal income tax reciprocity between Minnesota and Wisconsin. This looks like it on average raised effective taxes on work across state lines by about 8% of remaining net income. This resulted in a decline in quantity of cross-border commuters between 3% and 5%, with the largest impact on low and young earners. My hunch is that the impact size is so low primarily because of inertia, switching costs and lack of understanding of the costs. Whereas jobs that don’t pay as well, and those of the young, are less sticky. It would be shocking if an 8% tax had this small an effect at equilibrium"
My guess would be that most people didn't actually pay the taxes in both states, due to the income only actually getting reported to the state they worked in.
It's like how no one pays use taxes unless it's on a giant purchase that they think will actually be tracked.
Trump has said that he hates paying overtime so much that he hires additional people rather than pay overtime. With his proposal to not tax overtime one can imagine him (as an employer) not paying any tax on overtime pay (including a social security match) and telling his employee that he gets to keep what would have been paid in taxes and that is the employee's additional wage. Trump avoids paying both the additional pay for overtime and any taxes associated with it. A win for the employer, not so much for the employee.
"It is entirely plausible that landlords could capture a large portion of these gains via higher rents for low-quality housing, perhaps all of it. In which case, what was the point?"
Seems correct that a cap on credit card interest rates will lead to dramatically less credit card availability for poor people. Not sure if that’s actually a bad thing.
Sure, Econ 101 says that increasing access to credit helps people smooth consumption, make positive sum investments, etc. But in the real world you obviously also see people doing hyperbolic discounting and just doing normal consumption on credit in an irrational way. Something like 50% of credit card holders are carrying a balance month to month and paying very high interest rates to do so. How much of that is rational?
Slightly off-topic, but didn’t all that microfinance stuff in developing countries end up being a flop?
It was a bit of a gut punch for me to see how much of the profits from credit cards comes from people with really low credit ratings. Especially next to the chart showing most of the people who have the cards are people with higher ratings. A minority of the people are the source of a majority of the profits, and the group that's least able to afford it.
It may actually make sense to ban credit for the people on the bottom, that it will directly benefit them more than having access to credit. This is far from my normal stance on this topic and I'm pretty conflicted about this thought.
I don't understand what's going on in that trade war paper. The US vs. World trade war scenario shows the US facing $910 billion in costs, but total global (including the US) costs are only $360 billion. Which means total trade war provides a global (outside the US) net benefit of $550 billion.
So why isn’t everyone outside the US already coordinating on starting the total trade war? They can all just unilaterally raise their tariffs on us to kick things off, can’t they?
Any policy proposals by a presidential candidate that require the consent of Congress, essentially do not matter. Especially with the Senate filibuster in place which effectively means that political parties can only unilaterally change the tax code. Everything else requires bipartisan agreement. Presidents can nudge the Overton window of their party slightly so the gestalt of their policy proposals matter (whether they are generally for or against an issue) but the specifics do not matter.
What does matter is what presidents have control over. Namely, judicial appointments, executive branch appointments, and foreign policy.
Regarding Chinese VC, how easy is to get money out of China? One of the few good things about the US immigration system is that there is essentially an open door for investors who can invest $800,000 in a US business- in practice a bit more. This would help the VC's providing the funds, but unfortunately not the entrepreneurs raising the funds.
It's extremely hard, China controls all exchanges of Yuan (capped at 10k USD per year per person unless you have a state-approved reason to change more currency) and has hard limits on how much you can send abroad. You can of course try to circumvent that by buying real estate abroad (with a license) or paintings in China then selling abroad and stuff, but all of that comes with hefty losses in your total money. People still do it, but it's hard.
A lot of "price gouging" is related to the storm creating a bunch of small, temporary natural monopolies. Imagine a town gas station with a big freezer of ice -- previously people had their own freezers, and could drive to competition -- now a hurricane knocking out power and blocking roads has created a monopoly for the guy who owns the gas station.
On the one hand, reward the guy for having some foresight to store ice, on the other hand, this is also a situation where Econ 101 tells you market forces aren't going to maximize welfare. There are empirical questions here you could ask, like is the ice being priced to sell out or is the person behaving like a classic monopolist?
Let's just do classic consumer surplus calculation instead of falling back to "monopoly bad".
Scenario A: price gouging allowed. Every person that buys ice from the guy will presumably get some consumer surplus.
Scenario B: price gouging disallowed. There's no ice, as there was no reason to stock it. Consumer surplus is zero.
Obviously case A is strictly better than B.
There's probably some price X, such that "Scenario C: you can increase price, but only up to X" both incentives stocking ice (or trucking in gas, etc.) and provides large(r) consumer surplus, but we don't have a good way to find that price X.
In practice it's choice between A and B. And A is strictly better than B.
I don’t think Scenario B is very likely. There’s usually some amount of bottled water, ice, Sterno etc. that local stores will stock anyway.
In any case, my main point is this is not a 100% classic case of “stupid price controls cause deadweight loss”.
I think having trustworthy officials choose a price X would be the right move. The law already gives leeway to do this (it only bans “unconscionable” increases) but the officials can’t be trusted.
In Zvi's telling, the normal amounts of water/ice/gas get purchased immediately because the price is extremely low compared to the necessity. So the first guy buys all the ice for $50 and the rest of the people are out of luck. If that same ice cost the market rate (which is extremely high due to demand and lack of supply), then the first person buys what they need but not more. I don't know what number that is, and the gas station owner probably doesn't either, so there's likely some misjudgment going on. But a $3 bag of ice being sold for $50 probably stops someone from buying it all, even if they still buy some.
This analysis doesn't include the more typical thought that allowing people to sell high during disasters means there's more ice to be found in the first place (someone keeping a stock on hand) and that others will be willing to do very inefficient things to make sure new supplies are brought in. If you charge enough for ice and water, it makes sense for someone to bring it in by helicopter to even very remote places.
I think for this to make any sense as a solution you have to just intrinsically love markets over and above their benefits to people, and get some extra pleasure from watching price signals work.
Because I think the obvious solution of allowing a modest extra profit + rationing is obviously better after a real hurricane. Especially if you care about being somewhat egalitarian, which is a feeling people typically do have after natural disasters.
The "gas during hurricane evac" scenario is different -- there you would like Florida, collectively, to outbid other states a lot for gasoline, and to consider very inefficient ways of transporting gas to people, so the prices should have been allowed to rise a lot more.
Always enjoy these posts. As a 50M unemployed former programmer (take that with your learn to code advocacy!) I can say the job market is quite dire, certainly the worst I've ever seen it, worse than dot-bomb and GFC, though I can't untangle effects related to my age from other factors. I'm also not actively looking anymore and I can echo the survey's result that health issues are a reason, maybe the biggest one.
On that topic, one thing that may not be apparent is that for those of us not poor enough for medicaid, we need to use ACA/Obamacare/Marketplace plans. And those are generally not good insurance; poor coverage on every aspect and high baseline costs. It didn't used to be this bad. Was never great, but has definitely nose dived compared to pre-pandemic times. I suspect insurers have figured out how to optimize the game on them, and there isn't much federal or state enforcement to keep them in line.
I think the ACA has a structural issue that keeps making the plans worse, and it's not related to the pandemic. If people are offered insurance, they are incentivized to determine if they need it or not, and only get it if they think they will need it more than it costs. This means the people staying on the insurance are the people who will use it more, and the costs for the insurers goes up. When the costs go up, fewer people find it reasonable and then drop what coverage they had, making it a death spiral. Some people will still buy the insurance anyway, especially if older, but I don't think it's enough to keep the system working.
The individual mandate was designed to fix this - if everyone had coverage even if they didn't need it, then the situation can remain stable for the most sick. It was extremely unpopular and got dropped (and before that it was deemed a tax to save the ACA, so people could do the math and just pay the tax instead of thousands for insurance they likely didn't need).
My wife was on the exchange coverage for a few years pretty early in the ACA. Coverage and costs were decent the first year, but got more expensive while offering significantly worse coverage each year. Eventually we dropped it and just put the money we would have spent on premiums into our own account. After a few years of that, we had thousands of dollars in the account despite covering all of her medical appointments and needs from the account. We may not make the same decision now that we're getting older, but it was definitely the right decision then.
>Why isn’t there vastly more underground economic activity
There absolutely is it just by definition is not measured. I can only speak from a British background (and I grew up working class so I know how it goes) but cash in hand undeclared jobs are common, people will rent out rooms while claiming its just them and people will even obfuscate that their partners are part of their household. Extremely lax enforcement and an attitude of "everyone does it" makes this fairly low risk for the underclass.
I was a bit surprised by Zvi's bubble on this as well. Working class and especially lower class families and individuals thrive on this stuff. Childcare is totally something people do for free or cash for friends and family, for instance. Also household maintenance jobs. "Guy with a truck" type work (can you haul away this stuff for me? I'll give you $50). Lots of informal trades of goods and services where neither side charges the other and it's reciprocal.
I'd love to know how big this part of the economy is. It's very decentralized and the typical exchange is relatively low dollar value, but it happens so often it could easily be two to three-digit billions yearly and maybe more.
In grad school for economics, we were taught that a small positive inflation rate was good *because* it allowed wages to go down as well as up, which otherwise would almost never happen (apart from terminations+rehiring at a lower rate).
Isn't the correct way to end tax subsidies for homeownership not to abolish the mortgage interest deduction, but to keep it in place while adding imputed rent to taxable income?
If I own a $500,000 house, I'm receiving usufruct value from an asset and not paying tax on it. But if I rent an identical house while keeping the $500,000 in stocks and bonds, I have to pay tax on my investment income before I can use them to pay my rent. That's the bias, and it exists even when there's no mortgage.
It is no more complicated than any property tax mechanism. In Switzerland it works just fine. Avoiding complexity is an excellent heuristic but should not be an end in and of itself?
Good question but doesn't housing account for the bulk of implicit investment income from durable goods, as well as being something that's already assessed in the US on a regular basis?
(Yes, I know: assessed for sale value not rental value, because the rental market for some types of housing is very thin. Implementation would be complicated, as Zvi says.)
My point was just that the mortgage interest deduction isn't what's distortionary. People whose homes are fully paid off also get an enormous tax subsidy for holding their wealth in one asset class rather than another.
So part of what I’m getting at here as I responded to Zvi is that it’s weird not to treat usufruct value as implicitly priced in to the sale of all goods because it’s part of the domain of the demand curve function. Marginal willingness to pay for housing, like that of other durable goods, is a function of expected usufruct. You could put a VAT on house sales but it seems conceptually very odd to me to act as if the usufruct value isn’t already capitalized into the sale price — people buy houses to live in.
(As a corollary I think this also suggests that “natural” capital depreciation shouldn’t be tax deductible, although I’m not sure how you would or even if you could separare that cleanly from market-mediated depreciation where a better mousetrap suddenly devalues your existing stock of mousetraps in a way that doesn’t affect their expected usufruct.)
Couldn’t one capitalize it into a tax on the sale price based on an expectation of lifetime usability?
(I mean, my real reason for discomfort with usufruct taxes is your parenthetical, but I think that capitalizing expected usufruct value into the consumer’s willingness to pay seems like a conceptually reasonable thing to do that avoids the iterated transaction costs problem by basically substituing something that from the outside looks like a VAT.)
Ed.: part of what I’m getting at here is also that usufruct value is implicitly capitalized into sale price already at least insofar as the marginal consumer’s willingness to pay combined with the marginal cost of production dictates the equilibrium sale price. But that should also hold for housing too, right? The central YIMBY dogma is that housing is, in fact, subject to supply and demand.
WRT unions and wage conflict: I think Bruenig's point is not that collective bargaining reduces the incidence of conflict but that it reduces the cost of conflict, such that when conflict is needed to move the real wage to equilibrium there's less friction to prevent it.
You pay union dues to outsource wage conflict to negotiators who are better at it than you are and who also enjoy it more: standard welfare-enhancing arbitrage, I think.
Outsourcing conflict to people who enjoy it more (and who profit from it!) is only welfare-enhancing if it doesn't lead to more and more expensive conflict...
Right. Unions will be welfare-subtracting when firms have pricing power in product markets and there are rents for labor to extract.
But if the "cost of conflict" theory is right, then every firm has pricing power over its currently employed labor when the inflation rate is positive (as it usually is) and the nominal wage adjustments that conflict-aversion obstructs are upward adjustments. A lower cost of conflict will be welfare-enhancing in that case.
It's an interesting idea but I'm not sure I buy it, because it's done in partial equilibrium. How do you make a general equilibrium model where most of the workforce earns a real wage below the market rate?
"Jeremy: Only 4% of working age males "not in the labor force" say they have difficulty finding work."
This is not accurate. Per the linked study, 4% is the number of men who say difficulty finding work is the *main reason* they aren’t currently working. They generally cite physical or mental health issues as the main reason.
When I think of the men in my family and friend group who are either not currently working or who have spent long periods of time not working, I’m sure that nearly all of them have some diagnosis they can point to as the main reason for not working. I’m also sure that more of them would work if jobs that appealed to them were easier to get and paid better.
So I think it would be a mistake to use that 4% number to write-off the large population of prime age men who are not currently in the labor force.
"Paper explores the impact of the 2010 dissolution of personal income tax reciprocity between Minnesota and Wisconsin. This looks like it on average raised effective taxes on work across state lines by about 8% of remaining net income. This resulted in a decline in quantity of cross-border commuters between 3% and 5%, with the largest impact on low and young earners. My hunch is that the impact size is so low primarily because of inertia, switching costs and lack of understanding of the costs. Whereas jobs that don’t pay as well, and those of the young, are less sticky. It would be shocking if an 8% tax had this small an effect at equilibrium"
My guess would be that most people didn't actually pay the taxes in both states, due to the income only actually getting reported to the state they worked in.
It's like how no one pays use taxes unless it's on a giant purchase that they think will actually be tracked.
Podcast episode for this post:
https://open.substack.com/pub/dwatvpodcast/p/economics-roundup-4
Trump has said that he hates paying overtime so much that he hires additional people rather than pay overtime. With his proposal to not tax overtime one can imagine him (as an employer) not paying any tax on overtime pay (including a social security match) and telling his employee that he gets to keep what would have been paid in taxes and that is the employee's additional wage. Trump avoids paying both the additional pay for overtime and any taxes associated with it. A win for the employer, not so much for the employee.
RE the odds on Polymarket - a big old Whale started buying heavily on the 7th of October and has - I think - driven some of the change.
https://johnwhiles.com/posts/positive-ev-polymarket
"It is entirely plausible that landlords could capture a large portion of these gains via higher rents for low-quality housing, perhaps all of it. In which case, what was the point?"
Missed oportunity to mention Georgism.
Seems correct that a cap on credit card interest rates will lead to dramatically less credit card availability for poor people. Not sure if that’s actually a bad thing.
Sure, Econ 101 says that increasing access to credit helps people smooth consumption, make positive sum investments, etc. But in the real world you obviously also see people doing hyperbolic discounting and just doing normal consumption on credit in an irrational way. Something like 50% of credit card holders are carrying a balance month to month and paying very high interest rates to do so. How much of that is rational?
Slightly off-topic, but didn’t all that microfinance stuff in developing countries end up being a flop?
It was a bit of a gut punch for me to see how much of the profits from credit cards comes from people with really low credit ratings. Especially next to the chart showing most of the people who have the cards are people with higher ratings. A minority of the people are the source of a majority of the profits, and the group that's least able to afford it.
It may actually make sense to ban credit for the people on the bottom, that it will directly benefit them more than having access to credit. This is far from my normal stance on this topic and I'm pretty conflicted about this thought.
I don't understand what's going on in that trade war paper. The US vs. World trade war scenario shows the US facing $910 billion in costs, but total global (including the US) costs are only $360 billion. Which means total trade war provides a global (outside the US) net benefit of $550 billion.
So why isn’t everyone outside the US already coordinating on starting the total trade war? They can all just unilaterally raise their tariffs on us to kick things off, can’t they?
Any policy proposals by a presidential candidate that require the consent of Congress, essentially do not matter. Especially with the Senate filibuster in place which effectively means that political parties can only unilaterally change the tax code. Everything else requires bipartisan agreement. Presidents can nudge the Overton window of their party slightly so the gestalt of their policy proposals matter (whether they are generally for or against an issue) but the specifics do not matter.
What does matter is what presidents have control over. Namely, judicial appointments, executive branch appointments, and foreign policy.
This is why the tariff proposal is more worrying. The executive has some rather wide authority on tariffs that don't require congressional approval.
Regarding Chinese VC, how easy is to get money out of China? One of the few good things about the US immigration system is that there is essentially an open door for investors who can invest $800,000 in a US business- in practice a bit more. This would help the VC's providing the funds, but unfortunately not the entrepreneurs raising the funds.
It's extremely hard, China controls all exchanges of Yuan (capped at 10k USD per year per person unless you have a state-approved reason to change more currency) and has hard limits on how much you can send abroad. You can of course try to circumvent that by buying real estate abroad (with a license) or paintings in China then selling abroad and stuff, but all of that comes with hefty losses in your total money. People still do it, but it's hard.
A lot of "price gouging" is related to the storm creating a bunch of small, temporary natural monopolies. Imagine a town gas station with a big freezer of ice -- previously people had their own freezers, and could drive to competition -- now a hurricane knocking out power and blocking roads has created a monopoly for the guy who owns the gas station.
On the one hand, reward the guy for having some foresight to store ice, on the other hand, this is also a situation where Econ 101 tells you market forces aren't going to maximize welfare. There are empirical questions here you could ask, like is the ice being priced to sell out or is the person behaving like a classic monopolist?
Let's just do classic consumer surplus calculation instead of falling back to "monopoly bad".
Scenario A: price gouging allowed. Every person that buys ice from the guy will presumably get some consumer surplus.
Scenario B: price gouging disallowed. There's no ice, as there was no reason to stock it. Consumer surplus is zero.
Obviously case A is strictly better than B.
There's probably some price X, such that "Scenario C: you can increase price, but only up to X" both incentives stocking ice (or trucking in gas, etc.) and provides large(r) consumer surplus, but we don't have a good way to find that price X.
In practice it's choice between A and B. And A is strictly better than B.
I don’t think Scenario B is very likely. There’s usually some amount of bottled water, ice, Sterno etc. that local stores will stock anyway.
In any case, my main point is this is not a 100% classic case of “stupid price controls cause deadweight loss”.
I think having trustworthy officials choose a price X would be the right move. The law already gives leeway to do this (it only bans “unconscionable” increases) but the officials can’t be trusted.
In Zvi's telling, the normal amounts of water/ice/gas get purchased immediately because the price is extremely low compared to the necessity. So the first guy buys all the ice for $50 and the rest of the people are out of luck. If that same ice cost the market rate (which is extremely high due to demand and lack of supply), then the first person buys what they need but not more. I don't know what number that is, and the gas station owner probably doesn't either, so there's likely some misjudgment going on. But a $3 bag of ice being sold for $50 probably stops someone from buying it all, even if they still buy some.
This analysis doesn't include the more typical thought that allowing people to sell high during disasters means there's more ice to be found in the first place (someone keeping a stock on hand) and that others will be willing to do very inefficient things to make sure new supplies are brought in. If you charge enough for ice and water, it makes sense for someone to bring it in by helicopter to even very remote places.
I think for this to make any sense as a solution you have to just intrinsically love markets over and above their benefits to people, and get some extra pleasure from watching price signals work.
Because I think the obvious solution of allowing a modest extra profit + rationing is obviously better after a real hurricane. Especially if you care about being somewhat egalitarian, which is a feeling people typically do have after natural disasters.
The "gas during hurricane evac" scenario is different -- there you would like Florida, collectively, to outbid other states a lot for gasoline, and to consider very inefficient ways of transporting gas to people, so the prices should have been allowed to rise a lot more.
Always enjoy these posts. As a 50M unemployed former programmer (take that with your learn to code advocacy!) I can say the job market is quite dire, certainly the worst I've ever seen it, worse than dot-bomb and GFC, though I can't untangle effects related to my age from other factors. I'm also not actively looking anymore and I can echo the survey's result that health issues are a reason, maybe the biggest one.
On that topic, one thing that may not be apparent is that for those of us not poor enough for medicaid, we need to use ACA/Obamacare/Marketplace plans. And those are generally not good insurance; poor coverage on every aspect and high baseline costs. It didn't used to be this bad. Was never great, but has definitely nose dived compared to pre-pandemic times. I suspect insurers have figured out how to optimize the game on them, and there isn't much federal or state enforcement to keep them in line.
I think the ACA has a structural issue that keeps making the plans worse, and it's not related to the pandemic. If people are offered insurance, they are incentivized to determine if they need it or not, and only get it if they think they will need it more than it costs. This means the people staying on the insurance are the people who will use it more, and the costs for the insurers goes up. When the costs go up, fewer people find it reasonable and then drop what coverage they had, making it a death spiral. Some people will still buy the insurance anyway, especially if older, but I don't think it's enough to keep the system working.
The individual mandate was designed to fix this - if everyone had coverage even if they didn't need it, then the situation can remain stable for the most sick. It was extremely unpopular and got dropped (and before that it was deemed a tax to save the ACA, so people could do the math and just pay the tax instead of thousands for insurance they likely didn't need).
My wife was on the exchange coverage for a few years pretty early in the ACA. Coverage and costs were decent the first year, but got more expensive while offering significantly worse coverage each year. Eventually we dropped it and just put the money we would have spent on premiums into our own account. After a few years of that, we had thousands of dollars in the account despite covering all of her medical appointments and needs from the account. We may not make the same decision now that we're getting older, but it was definitely the right decision then.
>Why isn’t there vastly more underground economic activity
There absolutely is it just by definition is not measured. I can only speak from a British background (and I grew up working class so I know how it goes) but cash in hand undeclared jobs are common, people will rent out rooms while claiming its just them and people will even obfuscate that their partners are part of their household. Extremely lax enforcement and an attitude of "everyone does it" makes this fairly low risk for the underclass.
I was a bit surprised by Zvi's bubble on this as well. Working class and especially lower class families and individuals thrive on this stuff. Childcare is totally something people do for free or cash for friends and family, for instance. Also household maintenance jobs. "Guy with a truck" type work (can you haul away this stuff for me? I'll give you $50). Lots of informal trades of goods and services where neither side charges the other and it's reciprocal.
I'd love to know how big this part of the economy is. It's very decentralized and the typical exchange is relatively low dollar value, but it happens so often it could easily be two to three-digit billions yearly and maybe more.
In grad school for economics, we were taught that a small positive inflation rate was good *because* it allowed wages to go down as well as up, which otherwise would almost never happen (apart from terminations+rehiring at a lower rate).
Isn't the correct way to end tax subsidies for homeownership not to abolish the mortgage interest deduction, but to keep it in place while adding imputed rent to taxable income?
If I own a $500,000 house, I'm receiving usufruct value from an asset and not paying tax on it. But if I rent an identical house while keeping the $500,000 in stocks and bonds, I have to pay tax on my investment income before I can use them to pay my rent. That's the bias, and it exists even when there's no mortgage.
Complexity is bad. So in theory you're arguably right, but no.
It is no more complicated than any property tax mechanism. In Switzerland it works just fine. Avoiding complexity is an excellent heuristic but should not be an end in and of itself?
What's the argument against paying for usufruct value on literally any durable good?
Good question but doesn't housing account for the bulk of implicit investment income from durable goods, as well as being something that's already assessed in the US on a regular basis?
(Yes, I know: assessed for sale value not rental value, because the rental market for some types of housing is very thin. Implementation would be complicated, as Zvi says.)
My point was just that the mortgage interest deduction isn't what's distortionary. People whose homes are fully paid off also get an enormous tax subsidy for holding their wealth in one asset class rather than another.
So part of what I’m getting at here as I responded to Zvi is that it’s weird not to treat usufruct value as implicitly priced in to the sale of all goods because it’s part of the domain of the demand curve function. Marginal willingness to pay for housing, like that of other durable goods, is a function of expected usufruct. You could put a VAT on house sales but it seems conceptually very odd to me to act as if the usufruct value isn’t already capitalized into the sale price — people buy houses to live in.
(As a corollary I think this also suggests that “natural” capital depreciation shouldn’t be tax deductible, although I’m not sure how you would or even if you could separare that cleanly from market-mediated depreciation where a better mousetrap suddenly devalues your existing stock of mousetraps in a way that doesn’t affect their expected usufruct.)
Transaction costs.
(Also, this risks de facto confiscating and at least would highly discourage production and ownership of durable goods, And That's Terrible.)
But oh man the transaction costs.
Couldn’t one capitalize it into a tax on the sale price based on an expectation of lifetime usability?
(I mean, my real reason for discomfort with usufruct taxes is your parenthetical, but I think that capitalizing expected usufruct value into the consumer’s willingness to pay seems like a conceptually reasonable thing to do that avoids the iterated transaction costs problem by basically substituing something that from the outside looks like a VAT.)
Ed.: part of what I’m getting at here is also that usufruct value is implicitly capitalized into sale price already at least insofar as the marginal consumer’s willingness to pay combined with the marginal cost of production dictates the equilibrium sale price. But that should also hold for housing too, right? The central YIMBY dogma is that housing is, in fact, subject to supply and demand.
WRT unions and wage conflict: I think Bruenig's point is not that collective bargaining reduces the incidence of conflict but that it reduces the cost of conflict, such that when conflict is needed to move the real wage to equilibrium there's less friction to prevent it.
You pay union dues to outsource wage conflict to negotiators who are better at it than you are and who also enjoy it more: standard welfare-enhancing arbitrage, I think.
Outsourcing conflict to people who enjoy it more (and who profit from it!) is only welfare-enhancing if it doesn't lead to more and more expensive conflict...
Right. Unions will be welfare-subtracting when firms have pricing power in product markets and there are rents for labor to extract.
But if the "cost of conflict" theory is right, then every firm has pricing power over its currently employed labor when the inflation rate is positive (as it usually is) and the nominal wage adjustments that conflict-aversion obstructs are upward adjustments. A lower cost of conflict will be welfare-enhancing in that case.
It's an interesting idea but I'm not sure I buy it, because it's done in partial equilibrium. How do you make a general equilibrium model where most of the workforce earns a real wage below the market rate?