Comment by erulabs | Hacker News Reader

Comment by erulabs | Hacker News Reader

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Unfortunately the planet Earth is not a laboratory, and correlation is not causation. If a tax is added to cigarettes, and the tax is passed by elected officials, and the elected officials are responding to the attitude of the populace, how do we know it was the tax, and not _the attitude of the populace_ that lead to lower cigarette usage? A classic example of this is the Civil Rights Act. Did racism become abhorrent due to the signing of a bill, or was racism _becoming viewed as abhorrent_, and the bill codified the new cultural attitude? Keep in mind, I am of course not saying this means "no need for laws!", that would be insane - but there is no causal link and there cannot be a causal link, because one cannot do experiments with the human race. This line of thinking splits economics apart into different schools - with my conclusion being economics must be built from pure logic, upon a priori fact, rather that be gleaned by viewing society from afar. "Human Action" by Ludwig von Mises explores this in detail (https://mises.org/sites/default/files/Human%20Action_3.pdf)

I mean, there's an entire area of accounting called tax planning where accountants consult with businesses about how to conduct business to reduce their tax burden. Avoiding paying taxes isn't some obscure thing that people do, it's something you can make a six-figure salary doing as a profession. Additionally, there is no shortage of data for changing taxes. There are more than enough natural experiments as well as actual municipal experiments testing how people react to taxes. It turns out that most people avoid spending money they don't have to. People like money and they go out of their way to keep it.

It’s hard for me to understand how an increase in price - in this case through taxation - wouldn’t adversely affect demand. I’m talking in general. If this were the case then sellers would have infinite pricing power and they clearly don’t have that. Whether the price increase comes as a result of taxation or from the seller increasing prices makes no difference to the buyer. Not even monopolies and cartels have infinite pricing power.

They passed a tax on plastic bags in Boulder (CO).

You go to the supermarket without your reusable bags, suddenly you're _paying_ for the bags.

You better believe that disposable plastic bag usage went _way_ down. People don't like to pay for what they're used to getting for free. It makes them unreasonably angry, in fact.

Angry enough to remember to bring their reusable bags, or to buy some on the spot.

in NZ we have automatic rolling tax increase every year on tobacco, and we see the reduction and is well studied.

We don't need to know absolutely the exact causal link, we just need to know while in this configuration, this trend is happening. Maybe certain things aren't needed for that trend, but like you say, we don't have the capability of much experiementing, we can have a lot of robust debate and make our best educated guesses and try different things and see what happens.

You're confusing the issue by comparing it with something much more complicated.

A tax is another kind of price increase and we do know, empirically, how to study changes in supply and demand. You can get good datasets for it and any company can do experiments by changing prices.

Logic is helpful in understanding how to analyze data but you can't get very far without data.

I'm not sure what you're talking about with the Civil Rights Act because racism is very much alive today but you're very right that planet Earth is not a laboratory.

We don't have time to tinker with taxes in an attempt that we'll prevent total environmental collapse. We need radical solutions yesterday. We shouldn't restrict ourselves to thinking inside the economic system we currently have when it's the economic system we currently have that's gotten us here.

You are correct that it is complicated and drawing firm conclusions is challenging. That doesn't mean we can't draw any conclusions ever.

It became abhorrent because of the bill. The main reason that Kennedy and Johnson supported the civil rights bill was the fear of the escalating violence.

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