Topic: Trickle-down taxation? (Read 3764 times)

Well, if theft were legal, they'd presumably be even cheaper. The prohibition on theft holds up the price of stolen goods because people who wish to acquire and deal in stolen goods take risks that legitimate businesses don't.

Right, but they'd be cheaper still if it were legal to sell cigarettes with no taxes. The legal prohibition still increases the costs.

The hypothetical would be if one company were unusually efficient and as a result had a higher than normal profit margin. In this case, a tax on just that business would not be passed on to customers. But this is like the "what if there's a ticking bomb in a school somewhere" argument of why we need to be able to torture people. It almost never happens, but it's brought up to justify a practice that will inevitably used in a wide variety of situations, in none of which does the justification apply.

I think maybe they mean blackmarket goods are cheaper like if you buy an HDTV in the parking lot of a store.  The reason they are cheap is because there is an understanding that the item is stolen and the only cost the seller had in obtaining the HDTV is by stealing it.

Buying cigarettes illegally are usually cheaper because the seller is not paying the taxes on the smokes.

For drugs it would likely be less expensive unless they were taxed.  Except for cannabis, LSD, and psilocybin, the price of drugs would likely decrease if they were regulated by the government because most of those other drugs are insanely overpriced.  Even if the government did try to regulate the price using taxes people could undercut them by making those drugs or using a substitute.

This gets back to my main point that any tax on a business or the products it sells trickles down to the consumer.  By raising taxes on oil companies their cost of doing business increases.  They will pass on this cost to consumers if the tax is industry wide.  If a tax is not industry wide then they can cut other costs of doing business such as finding other suppliers, cutting labor costs, finding accounting tricks, or by merging with other companies so their size is able to cut the cost of business.

It is illogical to say that raising a tax on the oil industry will reduce oil prices.  More revenue may go into the pocket of the government but that money is coming directly from the consumers.  The oil companies or any company does not pay any tax unless it makes a profit, and they don't make a profit unless someone buys their product.  Investors expect a certain amount of profit and if they don't get that amount they will move on to more lucrative investments.

I agree - by regulation I mean legal enforcement of ownership and contracts.

It depends on what you mean by "regulated". If the regulation acts to hamper the market, then no. For example, there's a legal market in oxycodone, but it has not driven the illegal market in oxycodone out of business. If the regulation subsidizes the market, then yes. If the regulations do a mix of both, then it's a matter of which side wins out.

You make a great point.  I think I was totally wrong

If you are right, then regulated markets will always drive unregulated ones out of business.

Right, but who cares? That's the point. With private ownership, it doesn't matter. The owners can be smart or stupid and the damage they can do is limited. Resources will tend to drift towards those who can make best use of them because they'll generally be willing to pay more for them.

The reality is that a non-owner "manager" is much more likely to destroy something of value than an owner. And in any event, I'm not terribly concerned about people destroying their own stuff. I'm concerned with putting people in a position where they can easily get the benefit of consuming things that aren't theirs without having to pay the costs at all.

Not usually, because the set of winners and losers is more confined. Say you do something on your property that benefits you, but I'd benefit if you didn't do it. If you and I are both rational, I can offer you some sum of money in between those two values so that you don't do that thing, and we both win.

This doesn't work with things like air because the transaction costs will kill you. It's not like I can negotiate a deal with billions of people. If we somehow imagined that there were no transaction costs and any set of people automatically entered into any arrangement that was in their mutual interest, then yes, it would work for air too.

The reason this works with private ownership is because the benefits and costs are paid and borne by the same parties. With community ownership, you instead fight over rules that define who can do what. The beneficiaries always want the most, and generally the rules become inefficient. To fix this, the powerful people who want to give less negotiate exceptions and loopholes to the rules others must follow. The result is that politicians allow short-term destruction of public goods to get the money they need to stay in power and our children are left with the fallout. You may think private owners are interested in short-term profit, but that's nothing compared to a politician who needs to win an election.

Since your reply quoted here is the theme throughout your post, let's discuss it.

It's hard to pin the blame on choices the world has made. The World doesn't make unified choices. A global enforcing agency might. Otherwise, choices are made by competing entities (the heart of a free market). It's a sad fact that technology combined with greed, will and ignorance allow irreversible things to happen before technology combined with knowledge and will allow for a defense to prevent irreversible things to happen.

How do we care about a problem? It starts with education and awareness, both in understanding the consequences of actions and understanding that certain actions are happening at all. Who is 'we'? As it turns out, 'we' is an entity with enough foresight and resources to step in and do something. Sometimes it requires a conglomeration of entities. Otherwise, it only takes one group (whalers, poachers, whomever) to quietly go about their business.

Ownership works to a point, I agree. But is ownership of migrating whales as feasible or desirable as what really allowed the Blue Whale to make a comeback in the latter half of the 20th century? Is ownership a better model than what really was implemented? Which solution was doable? Which solution was enacted?

Who is to say what an owner will do? Different owners value their property for different reasons. Ultimately, the current owners of whatever will cease to be the current owner. Then what? Parents spend their children's inheritance, and why shouldn't they? Likewise, who is to say that an owner won't decimate what posterity would value?

Regarding upstream and downstream: isn't that like the air we breath, which you acknowledge is not an easily solved problem?

Right, but that's because of choices our world has made. I'm suggesting that if we care about this problem, we should start making different choices.

I don't understand why you think that is. I understand that what happens upstream affects you downstream. If you're downstream and upstream is owned, you can pay the upstream person part of the value you gain from their conduct. If you can't afford to get them to improve your downstream value, it's likely that you're overvaluing it or undervaluing their costs. It's easy to think the benefits exceed the costs when you don't have to pay the costs. I'm saying we'll get smarter behavior all around if those who reap the benefits are the same as those who pay the costs.

Again, that's because of choices we have made. I'm suggesting we should make different choices.

There's actually no problem with oil, except where it's not privately owned. That oil which is not privately owned -- again, that's the result of choices our society has made. If we care about conserving resources, we should start making different choices -- specifically, private ownership of resources.

Now, where I don't think it works is with certain types of pollution. For example, private ownership of breathable air doesn't seem possible to me, unless you imagine one private entity owning all the air on the planet. So I'll concede that one.

But for most resource conservation problems, private ownership is the solution. We have made a lot of bad choices and should start fixing them.

Nobody's going to be owning migrating blue whales anytime soon. As for wolves, you have to understand how what happens upstream (literally) affects you downstream (literally). Ownership is not a tenable model there. Private ownership of old forest growth is helping (the Nature Conservancy). But it's not happening fast enough, and it ultimately requires cooperation with multiple entities at the global level. Private ownership of Sumatran forests is not likely enough to prevent poaching.

As for oil - well, who knows? There are so many issues there.

Aren't pretty much all of these problems solved by private ownership of the resource?

Sorry, but the theory doesn't work so well in reality. As resources become more scarce and prices rise, there is still a minority that can afford the last of the resource, and it disappears forever.

The free market did not save the near Blue Whale extinction from occurring in the mid 20th century. Regulations did. You might want to research Sumatran rhino horns to see how things really unfold.

The reasons?

1. There's enough individuals who don't care if a resource is depleted as long as they can get their take. (Japanese whalers)
2. There's enough individuals who are ignorant of the future value of said resource for other uses. (Old growth forest depletion)
3. There's enough individuals willing to harvest the last of a resource precisely because of its super high price. (Sumatran rhino horns)
4. There's enough individuals who will insist that the resource isn't near being depleted. (Oil)
5. There's enough individuals who believe they need the resource eliminated to be successful in their business model (*Ranchers vs. wolves)

* See wolves and riparian zones for number 5. This is actually a case of number 2 as well.

Bacteria can evolve, sure, but not in one isolated "minimal media" experiment. If you put some humans in a box with some food and left them there then your bacterial story might be analogous to that.

Means of production is land, labor, capital. In particular, bacterial do not have capital; machines, technology, etc. which can be used to increase the efficiency of production (get more value for a given unit of resource). As physical resources deplete, so will the efficiency with which we use them to produce value to the market. As various resources become more scarce, their price will increase, driving the market to more efficient alternatives (ie. renewables will become more economically viable).

This process will not cease; the problem of finite resources is not a problem to a rich market economy, only to bacteria in a dish.

Down?! So drugs would cost more if they were legal?

No, it's the reverse. Prices are pushed up by the need to provide your own protection and to compensate for the increased risks associated with a black or gray market. (Can't enforce contracts in court, might get arrested, etectera.)

Correct.  Even where the goods are being traded legitimately, the price on the black market is pushed down by the lack of legal protection.

Obviously without police you need to pay for security.

So by your definition the black or grey markets are not free markets?

Guess they are a creationist...

Markets only exist under the protection of some legal authority.  Without that authority, the shops would get looted and contracts would not be honoured.  Since it costs money to provide that legal protection, you can't have a free market without taxes. 

However, taxes don't have to be on the goods traded so they won't affect supply and demand in any meaningful way.  So free markets are possible. 

I'm not sure debating the nuances of whether or not free markets actually exist is worth our time. I think if there are taxes, legal tender laws, bank holidays, etc there is no free market and participants should not be expected to act as if there was.


Interesting, because to me this is why the analogy works. Humans have been "lab-culturing" (or domesticating) themselves on cheap energy for a number of generations now. I believe inflationary economic policies have accelerated this process, but the underlying driver is technology and cheap energy.

Please explain your theory within the context of the key concepts I enumerated four posts back.