Extremely high levels of wealth are were not typically generated by people who were saving out of the income that they earned. Instead, high levels of wealth are typically about assets that rose considerably in value–sometimes land or real estate, often stock in a company. Billionaires like Elon Musk or Kim Kardashian don’t have a basement full of dollar bills, like Scrooge McDuck. Instead the bulk of their wealth is held in shares in corporations, where those shares have risen in value over time. Thus, if you want to impose taxes that will affect the wealth distribution, raising the top-level ..read more

The IMF publishes a Fiscal Monitor report twice a year about levels of spending and taxes around the world. The April 2024 report, subtitles “Fiscal Policy in the Great Election Year,” contains some warnings about the size of US budget deficits. For context, here a table with fiscal balances for high-income countries, with actual data for 2019-23, and projected data from 2024-29. You can see that before the pandemic in 2019, the US already had a higher-than-average budget deficit. When the pandemic hit, deficits go up everywhere, but among high-income countries are largest in the US. The US de ..read more

The Dunning-Kruger effect can be paraphrased in this way: “On any particular topic, people who are not experts lack the very expertise they need in order to know just how much expertise they lack.” Corey S. Powell interviews David Dunning on how the underlying idea has been developed since the original paper published in 2000 (“David Dunning: Overcoming Overconfidence,” Open Mind, April 5, 2024). For those who have only seen “Dunning-Krueger effect” deployed as an insult, it’s perhaps useful to briefly review the original paper from 25 years ago: “Unskilled and Unaware of It: How Difficulties ..read more

David A. Price interviews Ulrike Malmendier, “On law versus economics, the long-term effects of inflation, and the remembrance of crises past” (Econ Focus: Federal Reserve Bank of Richmond, First/Second Quarter 2024, pp. 22-26). One theme of the interview is Malmendier’s recent work which emphasizes that living through a salient event can leave a lasting mark. I mentioned how my early life path was influenced by my dad experiencing World War II and how everything can get destroyed — the house gets destroyed, you lose all your possessions and savings, and maybe your country’s currency isn’t wo ..read more

Over the last half-century or so, the share of corporate stock that is owned by investors with taxable mutual funds or brokerage accounts has fallen dramatically. Steven M. Rosenthal and Livia Mucciolo tell the story in “Who’s Left to Tax? Grappling With a Dwindling Shareholder Tax Base” (Tax Notes, April 1, 2024). Here’s their figure showing a breakdown of who owns stock in US publicly traded corporations. Back in the 1980s, 80% of this ownership was in the form of taxable accounts. But the share of US corporate stock held by foreign investors and retirement accounts has risen substantially ..read more

Statistics are not reality, but they are a map to reality, and that map is central to the basic knowledge needed for modern government. Or at least so argues Michel Foucault in Security, Territory, and Population: Lectures at the College du France, 1977-1978 (edited by Michel Senellart, translated by Graham Burchell, originally published 2004, translation into English published in 2007). For example, he argues: “[T]his knowledge of things that comprise the very reality of the state is precisely what at the time was called `statistics.’ Etymologically, statistics is knowledge of the state, of t ..read more

For more than a half-century, a UCLA-based research group has been carrying out surveys of incoming first-year college students. There are lots of questions about the decision process the students went through in applying, and about their expectations and priorities. The data tables from the 2022 survey, from the Higher Education Research Institute at UCLA, are available here. I’ll focus here on a single question, which asks about what life objectives are important. The first column shows the overall answer: the other two columns are divided into answers from males and females. (These figures ..read more

The widespread current belief about globalization, I would say, is that it has been in decline since the Trump presidency, as a result of increased tariffs, a sharpening of global conflicts with China and Russia, and disruptions from the pandemic. But even with this perceived decline, a common belief is that globalization is an overwhelming force in both the US and global economy. Both of these beliefs are likely incorrect. Steven A. Altman and Caroline R. Bastian provide evidence and discussion in the DHL Global Connectedness Report 2024. Altman and Bastian argue that globalization, fully und ..read more

Certain basic investment models are based on just two investment options: a safe asset like US Treasury bonds and a risky asset like a stock-market index fund. The underlying idea is that you can choose the riskiness of your preferred portfolio by having a larger or smaller share of the safe asset. For example, a person who reaches retirement can decide to take less risk by reducing what share of their portfolio is invested in stocks. But where corporate bonds fit in this scenario? There is something like $66 trillion outstanding in corporate debt around the world. Some of that debt is highly ..read more

For economists, r* refers to the “natural rate of interest” that emerges from economic theory. It’s the “Goldilocks” interest rate that is not too high and not too low: that is, the interest rate that would occur “naturally” in the economy when the economy is at potential output and inflation is stable. A “tight” or restrictive monetary policy would involve the central bank setting interest rates above r*; conversely, a “loose” or stimulative monetary policy would involve the central bank setting interest rates below r*. It would obviously be useful to have clear estimates of r*. Do such estim ..read more