Posted by Bob Lord
Okay, actually there are several things about Thucky, but I liked the alliteration so I went with it.
The thing about Thucky for this post is that he purports to be really well read, and perhaps he is, but the synapses just don't fire for him the way they fire for the right-wing economists he worships. In my school days, he would have been referred to as a "dummy try hard." He works really hard. He reads about Rogerson and Prescott. He believes they're really smart. He reads everything they churn out. He knows their conclusions, but doesn't truly grasp how they got there. Nor does he have the mental strength or the intellectual curiosity to challenge anything his heroes throw out there for him.
Let me digress for a second. I use the male pronoun to refer to Thucky, and have no real basis for doing so. Perhaps it's because most of us tend to assume anonymous people are the same gender as we are, or perhaps it's because the real Thucydides actually was male. I don't know, but I recognize the possibility that when I say Thuckmeister I perhaps should be saying Thuckstress.
Anyhow, I've been having this ongoing debate with ole Thuckarooskie about the effect of tax policy on tax revenue, and I've realized that Thucky doesn't really grasp fundamental concepts.
He's on safe ground when he just parrots what Rogerson and Prescott and others have concluded. But when he engages in his own analysis, he gets into trouble.
This gets a bit geeky, but try to hang in here for this example.
Policy geeks often refer to the ratio, expressed as a percentage, of tax revenue to GDP. Conservatives actually want this ratio to decline, because they believe a ratio means that government is placing an undue burden on the economy. Not Thucky. He believes that if we lower tax rates, the ratio will go up.
He's terribly confused. His thinking is that if we lower tax rates, the economy will expand, which is classic supply side theory. But if the supply siders are right, the increase in the GDP would drive the ratio of tax revenue to GDP down, not up. It's possible we could recover the revenue lost from the lowering of rates through an increase in the tax base, because GDP increases. Indeed, that's the theory upon which Arthur Laffer and his ilk rely. I'm not disputing that the lowering of rates, everything else being equal, will stimulate the economy and increase GDP. But even if that's right, the net move in the ratio would be lower.
It was sort of stunning for me to realize how horribly confused out of his element Thucky is. Here's this guy throwing around fancy terms like the Beveridge Curve and the velocity of money, but he doesn't grasp the basic math that when you drive the denominator of a ratio higher, the ratio itself decreases.
I've seen this shortcoming in other exchanges with Thucky, but the other occasions involved more technical concepts, so I didn't think much of it. This time, however, it was glaring.
You have to feel for him. He wants so, so hard to be smart. It's reminiscent of when the Scarecrow from Oz gets a diploma as a substitute for a brain. Thucky reads Rogerson and Prescott and throws around terminology, just like the Scarecrow proudly displays his diploma. But it's not quite the same.