If we tax the rich, ...

...they will leave, work less, and there are not enough of them to raise much money. 

The Economist: 

The “Robin Hood” state, which takes from the rich to give to the poor, has obvious appeal. Governments across the developed world are strapped for cash. Budgets are burdened by legacy debts, ageing populations and the need to spend more on defence. 

INSTEAD ...

The limited revenue-raising power of the rich is why European governments have to fund their big spending with broad-based levies, such as taxes on consumption. By contrast, America, with its low overall tax burden, can get by with one of the world’s most progressive tax systems.

Broad-based taxes do not only raise much more money. They are also politically healthier. A society where the many pay tax and benefit from spending is stronger than one where the few have to pay for the many.

BOTTOM LINE: lower rates on a broader base typically produce more tax revenue ... than high rates on a narrow base. ...

HOWEVER, if progress on artificial intelligence concentrates incomes at the top, as almost everyone in Silicon Valley expects, then the tax system will require fresh thinking:  ... we may have to figure out how to redistribute wealth without destroying too much of it.  

It Has Become Cheaper to Lose Weight

Finding out that GLP-1 drugs can help reduce weight has been life changing for many and could stem the social costs of being overweight. Recently, prices have fallen dramatically. I asked ChatGPT to for some summary data for Wegovy & Zepbound which I plot below. 

Competition matters. Initially, Wegovy was the effective monopolist selling at a list price of $1,349. In November 2023. Zepbound was approved and entered at just over $1,000 but dropped its price to ~$500 in Spring 2024. Wegovy may have sold at discount by Fall 2024, but it's direct-to-consumer price did not fall to ~$500 until Jan 2025.

It will be interesting to see if similar adjustments occur over the next few years as at least three new entrants are expected..

 

Country Music Stars and two imposters

 Testifying on Media consolidation 2006.  

Back Row:  Cowboy Troy, Big & Rich, Harold Bradley, Rick Carnes, Econ Prof Luke Froeb, Dobie Gray, Sharon Kay

Front row:  Naomi Judd, George Jones, Jenny Toomey, Porter Wagoner, Bud Walters, Craig Wiseman, Law Prof Christopher Yoo 

What drives the male-female wage gap?

Economist:  Motherhood 

• Researchers took women undergoing in vitro fertilisation (IVF)—who clearly wanted children—and examined the difference in long-term wages between those who fell pregnant and those who did not. At first the mothers earned much less, but this gap shrank over time. 

• Now this approach of exploiting natural variation in fertility has been used in a new study, by Camille Landais of the London School of Economics and others. 

• It looks at women with Mayer-Rokitansky-Küster-Hauser (MRKH) syndrome, a rare condition in which a girl is born without a uterus but otherwise develops normally. These women know early in life that they will not bear children, ...

• Such early knowledge seems to make a big difference. ... Their wage trajectory is almost identical to that of their male peers. 

• In other words, remove both motherhood and any decisions women might make while anticipating it, and the wage gap seems to vanish. 

Differences-in-Differences: Handwashing and Waterborne Transmission of Cholera

 From: Carlos Chavez, On Causality

Difference-in-differences has undergone a methodological renaissance. The method’s intellectual roots reach back further than most economists realize - to the 1840s and 1850s.

• In 1847, Ignaz Semmelweis used comparative clinic analysis to show that handwashing prevented childbed fever, comparing mortality between Vienna’s physician-staffed ward (where medical students performed autopsies) and its midwife-staffed ward, then tracking outcomes after implementing chlorine disinfection.

•  John Snow’s 1854 investigation of cholera in London is credited as the first recorded application of difference-in-differences proper. Snow compared mortality rates across households served by two water companies: the Lambeth Company, which had moved its intake upstream of the city’s sewage outflow in 1852, and the Southwark & Vauxhall Company, which continued drawing contaminated water. By comparing changes in cholera deaths before and after Lambeth’s relocation - while Southwark & Vauxhall served as the control - Snow produced a cleaner diff-in-diff design, with parallel pre-treatment trends giving way to dramatic divergence. His “Grand Experiment” found 315 deaths per 10,000 households among Southwark & Vauxhall customers versus only 37 per 10,000 among Lambeth customers, providing powerful evidence for the waterborne transmission of cholera decades before germ theory was established.

Where is it cheaper to rent vs. buy?

.

The Economist:  In long-run equilibrium, buyers should be indifferent between renting and buying. If buying were cheaper, then some renters would buy, which would drive down rents and drive up prices, until consumers became indifferent between the two options.  

One of the signs of a housing bubble is when it is cheaper to rent.  

Calif. "Jock Tax" takes Half of Superbowl Players' Cut

Superbowl players earn $178,000 each if they win and $108,000 if they lose. But California taxes athletes based on the number of "Duty Days" spent in the state, eight for the Superbowl. Jeffrey Degner, of the American Institute for Economic Research (AIER),crunched the numbers to calculate that the average player will leave California with much less.

"What that means here is that the winning team, their take-home pay will be approximately $86,000. If you're on the losing side, the take-home would be about $49,800," Degner said. 

Because the tax is based on you salary, winning Seahawks QB Sam Darnold will actually pay more in taxes than his Superbowl compensation. I suspect the NFL Players Association will want to revisit holding future Superbowls in California.

Economies of scope between SpaceX and xAI

Link:

The merging of what is arguably Musk’s most successful company, SpaceX, with the more speculative xAI venture is a risk. Founded in 2023, xAI’s main products are the generative AI chatbot Grok and the social media site X, formerly known as Twitter. The company aims to compete with OpenAI and other artificial intelligence firms.

...

With this merger, he plans to use SpaceX’s deep expertise in rapid launch and satellite manufacturing and management to deploy a constellation of up to 1 million orbital data centers. This will provide the backbone of computing power needed to support xAI’s operations.

HT: MarginalRevolution

Natural Gas Markets When Under Stress

The January 2026 cold snap, "Winter Storm Fern,"was unprecedented in both its severity but also in its size. It that blanketed two-thirds of the US causing considerable stress on the market for natural gas. While the media often focuses on surging heating demand during these events, the historic price spike was equally driven by a leftward shift in the supply. Due to plummeting temperatures, the industry faced record-setting "freeze-offs" where water in the gas stream freezes and physically blocks wellheads. Even though demand increased, gas production fell from a pre-storm average of 108 Bcf/d to a of 95.8 Bcf/d. This 12% contraction in total output meant supply shifted leftward by more than demand shifted rightward. Just as the market required more fuel, less was being produced. Both shifts created a deficit that could not be reconciled through normal operational adjustments.

Market equilibrium would have to be achieved by moving up along a near vertical demand curve to an extreme price point to clear. While the American Gas Association (AGA) noted that demand hit an all-time 7-day high, the scarcity was compounded by the fact that roughly 18.1 Bcf/d of expected production simply vanished from the grid. The result was that the spot price surged in some locations by over 1,000%, with the national average more than doubling to over $7/MMBtu over the typical of around  $3/MMBtu. A total system collapse was prevented by the rapid withdrawal of 360 a record Bcf from storage. The price was not merely a reflection of high usage, but also included a scarcity premium.

Border Security Type I and Type II Errors

One way of looking at the a policy of increased ICE enforcement of US border security is as a debate over decision error costs. The expressed goal is to remove the worst of the worst criminals. Few would disagree with this goal. However, in this dragnet, immigrants without criminal backgrounds have also been detained. The administration may see this as representing a small cost to pay, while the protesters see this as an unacceptable consequence.

The graphic below from the Financial Times indicates how many more criminal and non-criminal detainees the policy change has resulted in. Your position in this debate likely comes down to whether you think the benefit of detaining ~6,000 more criminals outweighs the cost of detaining ~25,000 more with no criminal background. Reasonable people can disagree over what would be acceptable, but few have stated what value they consider to be acceptable.

(I understand there is also debate over what are acceptable detention tactics.)