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Eduardo Porter has a very good explanation, today, of why it makes much more sense, from an economic perspective, to simply start raising gasoline taxes than it does to implement ever-tougher fuel-efficiency standards. But before we get to the meat of his argument, it’s worth correcting his numbers. Here’s his conclusion:
This was originally posted at Rortybomb
For the next few posts I need to allude to an ongoing battle of ideas about what is troubling our economy and what solutions are available. I figured it might be a good idea to try and create some sort of topological map of the various clustering of ideas and policies that constitute these arguments as well as the overlap among them. This is a preliminary version of this map: I’d really appreciate your input about what is missing and how to make this better.
Mohamed El-Erian has the best explanation of what happened in the markets yesterday. First and foremost, there were “technical factors”. This doesn’t mean lines on charts and head-and-shoulders patterns and similar astrological nonsense, but rather the dynamics of where investors’ money was being held and the amount that the market would fall given a modest downward nudge. Sometimes that number is tiny, but it can fluctuate a lot, and yesterday it just happened to be huge.
The new Basel III capital ratios are going to be announced this weekend, and the banks are going to complain about how much the new ratios are going to raise lending costs and hurt economic growth. The BIS, of course, has taken these complaints seriously, and has released two monster reports calculating exactly what the impact of higher capital standards will be.
Never mind the stimulus vs austerity debate: here’s something that both sides should be able to get behind. It’s a simple legislative fix which increases tax revenues without raising taxes; which increases the demand for housing; which increases the economy’s productive capacity; and which boosts wages for American workers. It’s about as Pareto-optimal as legislation gets. So let’s open the borders, and encourage much more immigration into the US!