Tax Notes To An Unborn Grandchild

Dear Grandchild,

You’re probably wondering why I've saddled you with huge taxes to pay for debts run up before you were born.  As I write today, the total US debt is about 5 times the average personal income,  about $250,000 per person, and growing, rapidly.

The reason is, fortunately for me, that I won’t be paying the debt off.  Unfortunately for you, you will.  You probably think this is unfair but by the time you figure this out I’ll be dead.  Good luck with that.

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Caught in a Rat Trap: Jevons’ Paradox

Depleted

As natural sources of fuel deplete there is, not unnaturally, a concern to introduce more efficiency, to conserve our resources. The idea is that by producing more efficient cars, heating systems or whatever we’ll decrease fuel use and buy ourselves more time to do whatever it is we need to do: melt the polar icecaps, most likely.

Unfortunately, this is exactly wrong. If we make more efficient use of fuel we will use it faster and probably do more damage than if we stagger along in our current fashion. This is the Jevons’ paradox, a mode of market failure that should make grown environmentalists weep, if they weren’t too busy saving the few remaining penguins by smothering them in oil retardant chemicals.

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Weird Markets

Animal, Mineral or Vegetable?

Most of economics, and lots of life, revolves around a single concept: that of the "market". Yet despite the untold reams of papers, books and data generated in the name of the subject there’s a hole at the centre. This can be summarised simply: what, exactly, is a market?

This is akin to biologists suddenly recognising that they don’t actually know what an animal is despite the fact that they’ve been studying the behaviour of the things for centuries. If the existence of markets is the core assumption upon which economics exists what happens if either it turns out they’re a figment of the imagination or even simply just one way of many of understanding the world of human financial interactions?

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The Malthusian Prophesy

Doubting Thomas

Of the great triumvirate of men who invented the concept of economics Thomas Malthus is the one who’s received the bad press. Admittedly this is because, unlike Adam Smith and David Ricardo, his most famous prediction – that human population growth was ultimately limited by the capacity of the environment to produce enough food to support it – has so far been wrong. Although only by a few billion mouths or so.

However, the failure of the Malthusian Prophesy can only be temporary if human growth continues unabated. The Earth's an island and we’re marooned. Somehow, somewhere, sometime human population growth will run up against a lack of sustainable resources. Worryingly our best hope of avoiding catastrophe probably lies in the dismal science of economics, a strange superhero if there ever was one.

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