US tax cuts, little short term macro impacts

“The U.S. economy’s strong 2018 performance happened without much health from the massive tax cut President Donald Trump ushered through the previous year, according to a study released this week by CRS.

An in-depth look by the nonpartisan Congressional Research Service indicated that not only did the rollbacks in business and personal rates have little macro impact, but they also delivered the most benefits to corporations and the rich, with little boost to wages.

In all, GDP rose 2.9% for the full calendar year, the best performance since the financial crisis. But that came in an economy already poised to move higher, economists Jane Gravelle and Donald Marples wrote.

“On the whole, the growth effects [from the cuts] tend to show a relatively small (if any) first-year effect on the economy,” the report said. “Although examining the growth rates cannot indicate the effects of the tax cut on GDP, it does tend to rule out very large effects in the near term.”

 (Long Study)



The Impact of Legalized Abortion on Crime over the Last Two Decades

Crime rates in the U.S. have fallen by about half since the early 1990s. A new working paper from the National Bureau of Economic Research finds that legalized abortion following the Supreme Court’s landmark Roe v. Wade decision in 1973 accounts for 45% of the decline in crime rates over the past two/three decades.

“…Donohue and Levitt (2001) presented evidence that the legalization of abortion in the early 1970s played an important role in the crime drop of the 1990s. That paper concluded with a strong out-of-sample prediction regarding the next two decades: “When a steady state is reached roughly twenty years from now, the impact of abortion will be roughly twice as great as the impact felt so far. Our results suggest that all else equal, legalized abortion will account for persistent declines of 1 percent a year in crime over the next two decades.” Estimating parallel specifications to the original paper, but using the seventeen years of data generated after that paper was written, we find strong support for the prediction. The estimated coefficient on legalized abortion is actually larger in the latter period than it was in the initial dataset in almost all specifications. We estimate that crime fell roughly 20% between 1997 and 2014 due to legalized abortion. The cumulative impact of legalized abortion on crime is roughly 45%, accounting for a very substantial portion of the roughly 50-55% overall decline from the peak of crime in the early 1990s. …”

Here is the NBER link, to paper and a backround on the debates are it here:

Taleb on Dalio, Capitalism not broken - it's skin in the game

Ray Dalio has opined on how capitalism needs reform.*

Nassim Taleb somewhat disagrees and points the blame at a lack of skin in the game for corporate managers, and the problem of big corporations over a move localist, decentralised world. Taleb is consistently localist over globalist.

Taleb: “…...I like Ray as a person. I like him personally but I think this point of view is profoundly mistaken because it's not capitalism that's wrong. It's absence of skin in the game. That is wrong. Absent yes going back to risk taking going back to risk taking. Absence of accountability. You have people making decisions that harm others without being harmed. That's not capitalism that's corporatists. Who are we talking about. What I would say is the structure that we have today Israel has skin in the game. Gray hat's kind of game was his fun. But he doesn't really protect to society where we have centralization of people in Washington making decisions like Alan Greenspan that affect this whole country. And when people you know are harmed they don't pay the price. Well that that one person is Jay Powell now the chairman of the Federal Reserve. Yes. But he's more responsible OK because he he understands the job of the Federal Reserve should be minimum harm not policies that may entail side effects more generally. Jay Powell gets that better than Alan Greenspan. He gets a lot better but of course he's not the great Volcker Volcker. OK. Not yet. OK. Hasn't Sean a swan. No let's go back to the core problem is you want to live in a society that is decentralized enough that people who make a mistake are also harmed by their sit by their mistake not just inflict harm on other bailed out. What happened is we have evolved into thanks to a large state to a situation of corporatism those close to the state are bailed out It's crony capitalism. That's not capitalism crony cup. How do you fix it. There are a lot of that. I wrote a whole book on it. The skin in the game. I wrote a whole book about it. Skin in the game. So for those who haven't read the book. OK. So the idea is is locally. First of all the shameful to make a recommendation without being harm. OK. If something goes wrong it forecast without having some skin in the game sense being harmed by it how you structure a society in a way to be smaller companies. Is that not what happened is the minute we decentralize be like Germany when you decentralized…” H/T Bloomberg markets interview.

*A blog on Ray Dalio’s piece on Reforming Capitalism

Taleb on Climate:

Taleb Commencement address

Besos' Amazon shareowner letters, excerpt thoughts

The culture and processes are somewhat unique at Amazon and its rise to the top of the global corporate ladder has been astonishing.

An understanding of why that might be, where it is heading and some of the broadly libertarian philosophical worldview comes across in the annual Amazon shareholder letters.

Besos has not been as accessible to the wider public as a Warren Buffet or Bill Gates, or even accessible to most other Amazon shareholders.

Debates on tax, technology, workforce labour, globalisation, inequality, sustainability and consumerism can all be filtered through an Amazon lens.

A careful reading of the letters can tell you an awful lot, I think. If you simply want three highlights I suggest looking at (1) the 6 page memo decision making technique used at Amazon and (2) the articulation of type 1/type 2 decisions (crucial big decisions hard to change vs nimble decisions that can easily be reversed or course changed) and (3) a reflection on corporate culture.

Here are some exceprts with link to the letters below:

Jeff Besos and Nassim Taleb both agree on the danger of surveys and proxies. This is Besos in the 2016 Shareholder letter:

“A common example is process as proxy. Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.” A more experienced leader will use it as an opportunity to investigate and improve the process. The process is not the thing. It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second. Another example: market research and customer surveys can become proxies for customers–something that’s especially dangerous when you’re inventing and designing products. “Fifty-five percent of beta testers report being satisfied with this feature. That is up from 47% in the first survey.” That’s hard to interpret and could unintentionally mislead. Good inventors and designers deeply understand their customer. They spend tremendous energy developing that intuition. They study and understand many anecdotes rather than only the averages you’ll find on surveys. They live with the design. I’m not against beta testing or surveys. But you, the product or service owner, must understand the customer, have a vision, and love the offering. Then, beta testing and research can help you find your blind spots. A remarkable customer experience starts with heart, intuition, curiosity, play, guts, taste. You won’t find any of it in a survey.”

Besos on corporate culture:

“A word about corporate cultures: for better or for worse, they are enduring, stable, hard to change. They can be a source of advantage or disadvantage. You can write down your corporate culture, but when you do so, you’re discovering it, uncovering it–not creating it. It is created slowly over time by the people and by events–by the stories of past success and failure that become a deep part of the company lore. If it’s a distinctive culture, it will fit certain people like a custom-made glove. The reason cultures are so stable in time is because people self-select. Someone energized by competitive zeal may select and be happy in one culture, while someone who loves to pioneer and invent may choose another. The world, thankfully, is full of many high-performing, highly distinctive corporate cultures. We never claim that our approach is the right one–just that it’s ours–and over the last two decades, we’ve collected a large group of like-minded people. Folks who find our approach energizing and meaningful.”

On decision making:

“One common pitfall for large organizations–one that hurts speed and inventiveness–is “one-size-fits-all” decision making. Some decisions are consequential and irreversible or nearly irreversible–one-way doors–and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that–they are changeable, reversible–they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups. As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.1 We’ll have to figure out how to fight that tendency. And one-size-fits-all thinking will turn out to be only one of the pitfalls. We’ll work hard to avoid it… and any other large organization maladies we can identify.”

“Six-Page Narratives

We don’t do PowerPoint (or any other slide-oriented) presentations at Amazon. Instead, we write narratively structured six-page memos. We silently read one at the beginning of each meeting in a kind of “study hall.” Not surprisingly, the quality of these memos varies widely. Some have the clarity of angels singing. They are brilliant and thoughtful and set up the meeting for high-quality discussion. Sometimes they come in at the other end of the spectrum.

..Here’s what we’ve figured out. Often, when a memo isn’t great, it’s not the writer’s inability to recognize the high standard, but instead a wrong expectation on scope: they mistakenly believe a high-standards, six-page memo can be written in one or two days or even a few hours, when really it might take a week or more! They’re trying to perfect a handstand in just two weeks, and we’re not coaching them right. The great memos are written and re-written, shared with colleagues who are asked to improve the work, set aside for a couple of days, and then edited again with a fresh mind. They simply can’t be done in a day or two. The key point here is that you can improve results through the simple act of teaching scope – that a great memo probably should take a week or more.”

The Amazon site with Reports and letters here:

All Amazon Besos letters 1997 to 2017 in PDF form here.

Carbon Tax, an assessment

Petition idea: Debate the merits of a wider carbon tax (or equivalent) with revenue raised being directed back to the people or to long-term innovation investment.

Taxing carbon is one of the best ways to incentivize the reduction of greenhouse gas emissions.

By putting a price on carbon, emitters are confronted with the environmental cost of their actions and forced to manage their carbon output. While other policy interventions are also required, putting a price on carbon is central to reducing emissions cost-effectively.

As part of the EU, the UK is involved in a form of pricing carbon via the EU emissions trading system (EU ETS).

However 58% of emissions are out of scope of the EU ETS as they originate in transport, buildings, waste management and agriculture.


If the UK leaves the EU there are scenarios where a Carbon Emissions Tax will be collected but only by UK stationary installations currently in the EU ETS.

Parliament needs to debate the introduction of a wider carbon emissions tax for all industries and sectors and in a way that is just for society.


A carbon tax or similar is widely supported by economists (both those associated with right wing ideas as well as those associated with left wing ideas). It goes across political lines.

There is support from business and industry. Most notably many fossil fuel companies are supportive, but the support cross all business industries (for instance, Microsoft).

Much of the infrastructure is already in place to be able to collect such taxes.


A carbon tax is considered “regressive” as it impacts those on low-income more than higher income.

Areas of Debate and Mitigation

A “Carbon Dividend” could be committed to be given directly back to the UK people. This would mitigate the regressive impact. This could be means-tested to further help those on lower income. Adjustments to VAT could also be made. A graduated ramp up can also mitigate impacts.

Or, when, for instance, electricity prices go up by £100, the government could give a £100 dividend that lowers internet costs of a similar non-carbon intensive good/service.

The tax revenue could also be ear marked for innovation. As energy innovation is likely to be a vital part of transitioning to a lower carbon economy.

The tax revenue could also be ear marked for other positive long term investments such as healthcare or education or other investment which have broad support.

A border adjustment for carbon content of imports and exports may be needed to discourage free-riding by other nations.

Formation of a “climate club” as suggested by economist William Nordhaus should be explored.

A mix of all the above ideas is possible and deserves debate.


A comprehensive carbon tax plan should enable reduced emissions, predictability for business, and stimulate long-term investments.

There is strong support from multiple stakeholders across the socio-political divides for a more comprehensive carbon tax. This support is further strengthened by economic and academic work and popular opinion. Negative economics can be mitigated leading to an overall positive for society.

This needs proper parliamentary debate.

Selected but not-comprehensive sources

(will be updated periodically - message me if you have good sources)

Nordhaus DICE model below:

and some papers:


 Comments (I will add useful comments on sources or ideas to those who message me)

A near universal benefit/dividend softens the tax impact.

Means-testing in general is expensive and prone to errors, it may be better to simply give benefits widely or at least to 80 percent of people, almost universal.

Carbon price escalators have been deemed a success because it provides visibility and graduation; allowing businesses to plan.

The proceeds must be ring-fenced by law so the Treasury doesn't raid it and then split into three elements: one, which goes to everyone except the richest, another to innovation and the remainder specifically to industries that are stranded or most severely affected by anti-competitiveness from carbon tax.

Making sure the impact does not fall on the low income is important, which is why the re-distribution element is crucial.