Tuesday, August 2, 2016

The Check Tax

From the NBER Reporter Fall 1995 page 31, summarizing William D, Lastrapes and George Selgin, University of Georgia, “The Check Tax and The Great Contraction”, a paper delivered at the Workshop on Macroeconomic History, Oct 13 In Cambridge, Mass.

“Although its role has been overlooked by monetary historians, a two cent tax on bank checks effective from Jun 1932 through December 1935 appears to have been an important contributory factor to the periods severe monetary contraction. According to estimates by Lastrapes and Selgin, the tax accounted for between 11 percent and 17 percent of the total increase in the ratio of currency to demand deposits and for between 11 percent and 19 percent of the total decline in M1 between October 1930 and March 1933. The contractionary consequences of the check tax had been anticipated by many legislators, but they were unable to prevent the measure from being included in the Revenue Act fl 1931.”

The resulting paper can be found at papers.ssrn.com/sol3/papers.cfm?abstract_id=33320

I have read a fair amount about monetary history and the Great Depression and I do not recall hearing about the check tax.

(This piece is the result of reading and discarding old publications of the NBER.)

Tuesday, May 10, 2016

Cereal crops vs root crops in the development of civilization

Did the potato and other root crops hinder the development of complex societies among those who cultivated it? A group of economists present a case that they did in a recent article, "The sinister, secret history of a food that everybody loves," in the Washington Post. Their thesis in short is that when cereal grains are harvested at the end of a growing season their storage attracts thieves. Those who grow the crop want it protected. Because the stored crop is easily taxed, it encourages the rise of a protector class. Thus cereal crops provide both the demand for protection and the supply of protection. Root crops, on the other hand, are not harvested and stored but are dug and used as needed. Without storage bins full of wealth, there is less temptation for thieves because they would have work digging a crop and they cannot store it. Hence, the demand for protection is less and the way to finance that protection is also more difficult. The result is that societies that grew cereal crops developed complexity and hierarchy that the societies that grew root crops did not.

This is a logical way for economists to view the issue. Not all anthropologists are convinced.

Thursday, April 7, 2016

The science was settled

The Sugar Conspiracy is a long article that argues that the epidemic of obesity was caused by nutritionists, a group that has for years almost unanimously promoted a low-fat and therefore a high carbohydrate diet: "Harder, too, to deflect or smother the charge that the promotion of low-fat diets was a 40-year fad, with disastrous outcomes, conceived of, authorised, and policed by nutritionists."

What happened in nutrition is reminder that the process of science is not the pure pursuit of truth that some think it is and that peer review is not a guarantee of quality. Peer review can be stifle criticism and protect incumbent theories from evidence. Personalities, reputations, and politics play important roles in science and incentives matter. From the article: "When I asked Lustig why he was the first researcher in years to focus on the dangers of sugar, he answered: 'John Yudkin. They took him down so severely – so severely – that nobody wanted to attempt it on their own.'"