A roundup of economic news from around the Web.
–80% Tax Rate: Emmanuel Saez and Thomas Piketty propose a rethinking of tax rates. “Naturally, cross-country comparisons are bound to be fragile; exact results vary with the specification, years, and countries. But the bottom line is that rich countries have all grown at roughly the same rate over the past 30 years – in spite of huge variations in tax policies. By our calculations about the response of top earners to top tax rate cuts being due in part to increased rent-seeking behaviour and in part to increased productive work, we find that the top tax rate could potentially be set as high as 83% (as opposed to the 57% allowed by the pure supply-side model).”
–Giving to the Poor: David Kestenbaum looks at what happens when you just give money directly to the poor. “A couple months ago, we reported on an new charity called GiveDirectly that’s trying to help poor people in the developing world in an unusual way: By sending them money with no strings attached. The idea behind this is simple. Poor people know what they need, and if you give them money they can buy it. But to some veterans of the charity world, giving cash is worrisome. When we first reported on this we spoke with Carol Bellamy, who used to run UNICEF, and who said people might spend the money on things like alcohol or gambling. To see whether this was actually happening, researchers did an actual experiment. They surveyed people in Kenya who received money from GiveDirectly, and a similar group of people who didn’t get money. The results from the study are encouraging, says Johannes Haushofer, an economist at MIT’s Poverty Action Lab who was one of the study’s co-authors.”
–New Orleans: Tim Taylor examines how New Orleans has fared since Hurricane Katrina. “New Orleans as a city and a metropolitan area has a chance to move into the future with a different kind of momentum: that is, as a city in which tourism and dilapidation plays a relatively less important role, and entrepreneurs with higher education levels living in a refurbished housing stock play a greater role. But of course, these changes have arrived only after the gut-wrenching destruction and deaths from Hurricane Katrina, and the forces it created for resettlement and rebuilding. There’s no question that the economy, schools and governance of New Orleans circa mid-2005 were stagnating in a way that wasn’t providing opportunity for many of its residents–but what a dreadful and disruptive way for some welcome changes to arrive.”
Compiled by Phil Izzo