Tax avoidance through the ages

A sure way to commit suicide would be to hold one’s breath waiting for the G8 leaders to actually clamp down on money laundering, illegal tax evasion, and corporate tax avoidance.  It’s theater in which the politicians can pretend to deal with a problem while listening to the lobbyists who want even more loopholes.

Through the millenia those in the elites have taken for themselves the agricultural and luxury surplus mostly using force or coercion.  With the industrial revolution things changed.  Production increased so that there was some to share and the supply and demand for labor to produce that production was such that workers could claim some.

In this new situation the most effective way to cream off a big chunk of the surplus was to get governments to pass legislation restricting competition.  Thus we have trade restrictions, licensing requirements and patent and copyright legislation.

As the economy has gone into an extended decline tax avoidance has become another effective means for getting an excessive share.

Both of these approaches provide lots of work for lobbyists and most politicians are willing listeners.

So we now have increasing inequality, a concern for some but not all people.   The rich keep getting richer and more people are sliding onto or over the margin.

Even if we come up with a non-violent way to eliminate the rich it would not solve the problem as the rest of us would be lined up to take their places.  The most effective way to deal with the rich would be an economic crash and/or hyperinflation, but that would get the rest of us as well.

Fiddlers, venues and copyright

Last night we went to a concert by two Canadian fiddlers –  J.J. Guy from Saskatoon and Gordon Stobe of Nova Scotia.

The unique feature of this concert was that it was for 25 to 30 people in the living and dining rooms of a private home. Not only were the performers mingling with the audience during the intermission but there was also terrific interaction between both groups during the show.

Afterwards I asked Gordon  about the difference between this venue and a larger auditorium.  His reply was that he made more money playing to a larger crowd but this was much more enjoyable for him because of the interaction.

Another thing is that these two musicians were making a living out of their music without having to go on the cruise ships.  Even so they do a lot of teaching and they are away from home a lot.  They are making it by being very good and going for a niche in the music industry.  They are probably a lot smarter than those who try to make it in the pop sector.

I also asked about copyright and the music industry.  There have been so many recent changes in the music industry that copyright legislation is mostly irrelevant.  It may be that the future of the music industry is in small venue concerts such as last night.  I hope so and I encourage other people to seek out such concerts.

The evil Wal-Mart and offshore competition

Some people love to bash Wal-Mart.  This article is from 2003 but I suspect a lot of current critics would like it very much.

If you want to make money by far the best way is to go into a field where government legislation restricts competition – become a doctor or a teacher or something with  patent and copyright legislation.

There probably isn’t much legislation to restrict competition in retail sales so firms in that business have to sharpen their pencils or use marketing tactics.  Reading this article it is clear that Wal-mart is or has been very good with the pencil.  I am more opposed to legislation that restricts competition and marketing tactics than I am to firms that use sharp pencils.

On the theory that firms relying on legislation to restrict competition would be heavy into lobbying, I googled “Wal-Mart lobbying.”  It appears Wal-mart has not put much effort into lobbying although it is now starting to campaign for online retailers to be required to collect sales tax.

The issue appears to be that offshore competition, showing up in Wal-mart, is forcing some American manufacturers to go out of business putting their employees out of work.  Firms going out of business is a normal, and sometimes necessary thing.  The way to deal with that is a universal income scheme such as the negative income tax proposed by Milton Friedman or my own proposal for universal subsistence payments.

We should not feel guilty about buying things made in other countries.  Trade is a social activity and we want other countries to buy things from us.

I’m not a fan of Wal-Mart but I do occasionally go there.  I pride myself that most of the time I leave the store with only those items I had planned on buying.  I also know from experience they don’t always have the lowest prices and I can’t recall ever seeing Wal-Mart advertise quality.

In the retail segment of our economy there are lots of firms and lots of competition.  They all use marketing tactics to give them an edge. Therefore we should remember the old saying: “Buyer beware.”

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

The assumptions economists make

The assumptions economists make is the title of a book published in March of this year and for which a review is located here.  It sounds a little interesting so I have suggested it for purchase by our local library.  I’m not sure it is interesting enough to spend $25 for my own copy.

However, the title reminds me of my own struggles with the assumptions of perfect competition.  So here is a post from almost two years ago about the assumptions of perfect competition and how one could interpret them.

 

Perfect competition utopia

When I started studying economics and learned about perfect competition and its assumptions I thought it was totally unrealistic. I really enjoyed the joke about the economist who wanted to assume he had a can opener.

However, through the years I have come to see perfect competition as an utopia which provides guidelines for policy. I like the perfect competition model because it provides high efficiency, equality in that there are no profits, it works without economic growth and decision making is by individual consumers rather than governments.

One of the features of perfect competition is that there are no profits because if profits are being made in an industry others will enter that industry increasing competition and driving prices down until there are no more profits.

To get around this no profit feature business people lobby governments to pass legislation which restricts competition. For example, subsidies, some taxes, licensing, copyright and patent legislation all interfere with perfect competition.

To make our economy more competitive we should:

– Give subsidies to consumers rather than producers. This way prices will reflect true costs and buyers can make decisions according to their own values.

– Require producers to provide consumers will all relevant information about their products.

– Abolish patent and copyright legislation.

– Unilaterally abolish import and export tariffs.

Following is a summary of the assumptions for perfect competition.

The link for the website from which they were taken is http://tutor2u.net/economics/content/topics/competition/competition.htm

Assumptions behind a Perfectly Competitive Market

1. Many suppliers each with an insignificant share of the market “ this means that each firm is too small relative to the overall market to affect price via a change in its own supply “ each individual firm is assumed to be a price taker

2. An identical output produced by each firm “ in other words, the market supplies homogeneous or standardized products that are perfect substitutes for each other. Consumers perceive the products to be identical

3. Consumers have perfect information about the prices all sellers in the market charge “ so if some firms decide to charge a price higher than the ruling market price, there will be a large substitution effect away from this firm

4. All firms (industry participants and new entrants) are assumed to have equal access to resources (technology, other factor inputs) and improvements in production technologies achieved by one firm can spill-over to all the other suppliers in the market

5. There are assumed to be no barriers to entry & exit of firms in long run “ which means that the market is open to competition from new suppliers “ this affects the long run profits made by each firm in the industry. The long run equilibrium for a perfectly competitive market occurs when the marginal firm makes normal profit only in the long-term

6. No externalities in production and consumption so that there is no divergence between private and social costs and benefits.