7 Comments so far

1. Libertarian Jason April 24, 2006 3:44 pm

   Well put, brother!

2. Sanjay April 24, 2006 3:53 pm

   DI, actually I hate to defend Slemrod’s idea — I mean, as far as I’m concerned, screw it, let people retire when they want — but you’re shorting a couple interesting side ideas here.

   I can easily see businesses for example adopting something like Slemrod’s idea (obviously their means is going to be something other than taxation) to encourage personnel to retire. The link suggests people misgauge the benefit they’re getting and giving from extra work (more below on that) and certainly to minimize healthcare costs if nothing else (one may not like that one’s employer provides healthcare, but for now they do, and they gotta figure out how to keep those costs down), you may want to edge people out via some blanket policy. It also turns out in some industries you have difficult issues created by lots of people with similar specialties retiring at once; some companies might want to keep the treadmill going predictably, but for staff goodwill reasons might want the employee to make the choice rather than really enforce a cutoff, so they’ll study and implement incentives to retirement at a fixed age.

   In general also, and in the fellow’s defense (admittedly I’m being contrarian here, I don’t like the core idea), when you say

   “If we are to believe Slemrod, we must accept that intelligent, hard-working individuals routinely and systematically fail to make accurate subjective decisions about their own livelihood. And we also must assume that government tax policy is markedly better at determining individual utilities, across the board. This of course, is absolute rubbish.”

   you’re actually on sort of weak ground. You can do experiments to measure how well people make economic decisions: how well they weigh risk or benefit or evaluate their own ability or so on. And the answer is often, surprisingly badly. In fact, “intelligent, hard-working individuals routinely and systematically fail to make accurate subjective decisions about their own livelihood,” even in simple, calculable cases — and you can prove it! So in general the idea of an overseer — less palatably the government than a large employer trying to come up with personnel policies that generally work well for it, mind you — making better decisions, is actually not so bad. You’re even weak on the bit about government sucking at making decisions because your “better” refers to the _individual_ not the market, if I’m reading it right. And the government, or my mother, or anybody else is probably a lot better at evealuating the worth of what I’m doing than I am!

   Sucks to be the employee, though. Might be nicer if you could instead of forcing the retiree’s hand, try to figure out ways of better connecting people with the actual benefit they are giving to their employers wvia their work and realizing via their wage, but it sounds like pie in the sky to me at first blush.

3. doinkicarus April 24, 2006 7:34 pm

   I appreciate the feedback sanjay - insofar as people making poor decisions, I’m not aware, and I didn’t do any looking into that particular matter. I understand that you are playing devil’s advocate here, but I would like to address one or two points:

   People may make poor decisions - but there is something to be said about having the freedom to make one’s own decisions, and to evaluate them ex poste in hopes of making better decisions in the future.

   As far as the governments ability to make individual economic decisions, I have a hard time accepting that they would do anything more than fall into an aggregation trap. In doing so, they play the actuarial odds, like an insurance company - who can readily tell you that x% of its policy holders will die of cancer, give or take a standard deviation, but would be terribly pained to predict precisely which of its policy holders would suffer that fate.

   Additionally, there is a marked difference between employers initiating some sort of policy that may encourage employees to retire in a similar manner, and a government policy of taxation to achieve the desired end. (An aside: I have no problem with establishments forbidding smoking within their property, but I do take issue with the government saying that no establishment may permit it; a similar principle applies in this case) We must remember that the role of government proper is not to ensure the solvency of businesses.

   all of that out of the way - I haven’t heard anything about this being seriously proposed by anyone other than Slemrod, so at least for the time being, there’s probably not much to worry about.

4. Sanjay April 25, 2006 12:38 am

   Thanks DI.

   Yeah, but I still think you’re overreacting. As far as I can tell from what you linked, and looking into it a very little,this isn’t a paper about taxing people into retirement.

   There’s a little about it in the press release, and that probably slightly reveals the preferences of its writer but to a considerable extent, press releases on research are squat. My guess is the way the taxation came into it is, the guy wants to look at adverse health affects in older workers, and since that costs the government money (as healthcare is construed), there’s some argument to try to figure out measures to reduce the expense, and he can get funded that way. But I don’t get the feeling that’s what he’s doing.

   There’re two areas of inquiry here, both of which are actually quite interesting:

   1) Do workers contribute in a net negative way when they overwork? (Actually the answer is, yes. But what I mean is some weird definition of “overwork” where you outstay your retirement age. The answer there is probably also, _in aggregate_, yes as well: we all know cases of someone who’s gone a little senile for example and refuses to step down. But I think 100% of folks who’ve managed creative people — I have — has had to pat someone on the shoulder and say, you need to go home and knock off a day, you’re no good now. And 95% of the people who’ve been so told would say, my boss didn’t know what he was talking about, I was fine. So this is a good point to research).

   2) If there is a problem, then, what kinds of disincentives can you use? How much money does it take?

   It looks to me like Slemrod is actually poking into both of those areas at least a little, so, it’s good research (or at least, something worth studying). He perhaps reveals some unpleasant biases in how he thinks about this stuff by suggesting what he does in the press release — but it really shouldn’t freak you so much. Try to get your own sense of what’s going on better calibrated with what academics do when they give interviews. When I’ve talked to real world people I make my stuff sound like the solution to everything, man — that’s my bread and butter. Researchers’ job is to get money — yours, mine, or government — to do research.

   As for “aggregation” — get over it. A good manager will try to make things case sensitive and companies (in my example) ought to try to give wiggle room in things, just as governments (if they were to go Slemrod’s route) probably ought to try to individualize this as much as possible (which is where the cock-ups and loopholes would come in)), but basically if GM (say) is trying to figure out some way of reducing costs blown on older workers, it’s going to try to get a flexible policy but settle if it has to on a “one-size-fits-all” since after all the “aggregate” behavior is the net effect on the bottom line. In addition the “fine-tuned” policy is going to piss off the people for whom you don’t bend the rules — and their friends. Don’t underestimate the complexities of managing real people! Soem babies are going with the bathwater. As I said, this sucks for the worker — but I can see why a boss might do it. Really your point coms don to, policies should be as flexible and individualized as you can make them: but my answer of “Duh,” is quite good actually!

5. doinkicarus April 25, 2006 8:02 am

   I did look through UofM’s website, and the professor’s link, but I was unable to find the study for my own reading. Having the meat of the study to look over may clear things up - headlines are usually written by Editors to attract attention to the article, and in this instance they succeeded (at least in getting my attention.) What’s likely is that Slemrod did look into many variables, and the potentiality of using tax policy happens to be the one that the beat-writer believed made a compelling story.

   What my point ultimately boils down to, however is that really, its a business’ interest and responsibility to ensure its long-run financial solvency, it is not the proper task of the government to do such things.

   When a business fails because of poor managerial decisions, they have nobody to blame but themselves. When a business fails because policy has taxed it out of profitability, it’s a different story. The fact that aggregation may work on some, even most businesses (I will not concede that it works on each and every business) is not evidence that there exists a blanket policy that the governmenent might enact that would aggregate all employees in all lines of work for every employer.

6. Sanjay April 25, 2006 4:38 pm

   I still think you go too far. it’s more appropriate for the business than the government to watch out for its bottom line. But — and this is implied in the press release — “overworkers” (hate that term for this phenom, I’m using it for lack of a better) might cost the gov’t via health expenses, say: so they may have an interest. This was the (in that case, bogus) rationale that was used to sue tobacco producers.

   By definition this statement:
   “The fact that aggregation may work on some, even most businesses (I will not concede that it works on each and every business)”
   is going to run into problems. If _in aggregate_ your “overworked” employees are hurting the bottom line then tossing them all as a group will help you, whatever your business. Of course in some businesses they might not in aggregate be hurting you.

   Actually the Slemrod approach of trying to come up with a disincentive is seductive since as you suggest in the original post the best producers might be the least susceptible to the disincentive.

   By and large I agree with you btw. I just think — as I thought on CC’s blog — your gauge for what’s real and what’s theory needs calibrating: that applies here both in, how is a manager going to deal with this problem? and, what is it professors exacly _do_? So I hope I’m being helpful in recasting how you approach this one study. Apologies if it pisses you off instead. I’m just toying around while I run calculations in the background.

7. doinkicarus April 25, 2006 9:45 pm

   no need to worry about pissing me off sanjay - I really do appreciate constructive criticism, probably more than most people.

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