* The document is quoted from the old geocities based diary.
2006/2/16 (Thu) Evil ID-Card!
The British Labour government is planning to adopt ID-card for anti-terrorism and well-organised "Welfare-state". Our honourable David Cameron the new leader of the British conservatives is strongly against this ID-card issue! We have been very scared of the fact the post-modern country is going to establish such a censorship. This is the "welfare-state" which says hypocrisis like "free education", "free-healthcare" "democracy"and "protecting minority"! They say they are wishing to create a liberal society but this is just a contradiction! Do not fall into their trap! There is only little evidence we can prevent the fear from terrorism by adopting ID-card! Is the "Welfare-state" good? I don t think so. I highly recommend everyone to read through a book named "Free to choose" written by Milton Friedman the winner of Nobel Memorial Prize in Economic Sciences from Chicago University in the USA. He is also famous for the inventor of Monetarism and "Radical-Libertarian". Prof. Friedman critically indicates the false of Welfare-state and myth of socialism.
We are one individual living in society, so not the state-own product! Until we realise such an evil myth, we are under the control...
Sunday, February 17, 2008
Tuesday, January 15, 2008
abolish consumption tax
This doccument proposes that consumption tax is relatively inefficient for the tax collection method and harmonising business cycles so then offers to abolish the consumption tax in Japanese case.
Speaking of consumption tax in general, which includes the turn-over tax introduced former West Germany, sales tax used in Japan, and the Value-Added Tax (VAT) which is used the European Union (EU) member states, this kind of indirect tax system tends to be inefficient to gather a stable amount of tax revenue. The reason is that the demand of comodity itself is quite fluctuant so that the revenue changes overtime inevitably. The tax on consumption, especially the sales tax, symply increases the price of necessities so than individuals' utility goes down. This causes to the moral hazard which denotes that although economy is supposed to create the individuals' well-being the consumption tax discourages the well-being of those. Even the turn-over tax and the VAT, which are regarded as less regressive than the sales tax, not only to cause the moral hazard but also is still regressive. These two kinds of consumption tax cause the disturbance to account how the value in accumulated and to judge if some goods or services need to be taxed more than others.
Furthermore, the accountancy can be easily biased by firms selling consumptions. The sales tax is the most notorious because it does not clarifies whether one comodity is on the final good or the intermediate good. The turn over tax encourages the merging firms and creates more monopolised market so then results in inefficient market pricing. The VAT which is popular and has a good reputation among the world is high controversial. The VAT is successful to prevent encouraging merging and less regressive than the previously mentioned two types of consuption tax. However, the VAT merely taxes on consumptions with the number of sales among intermediate market. Therefore, the VAT does not precisely judge whether consumptions are necessities or luxuries and need or need not to be taxed.
On the other hand, in terms of the macroeconomics perspective, consumption tax tend to stagnate the aggregate demand level. The consumption level correlated to the income level is quite hetero-scedastic, which implies the variance varies across different level of variables. The consumption level of individuals with the higher income is varied where as those with the lower income level spend most of their income for their consumption. This clarifies that the average level of merginal propensity to consume does not change across the income level. Therefore, the tax on the consumption reduces the level of disposable income of individuals with the lower income level meanwhile those with the higher income level may substitute their expensive consumptions or their saving income into inexpensive consumptions.
Neoclasscal economists may claim indirect taxation in general including consumption tax is less likely to disturb equity than direct taxation as this is relatively burdened by means of the right to spend. Neoclassical economists tend to put priority on equity of individuals' income, therefore encouraging saving, and the right to spend (the other word is "pay as spend") rather than the ability to pay. This is agreed as long as the indirect tax is not the consumption tax because this essay is going to explain about the necessity of introducing the emission tax due to reduce the negative externality. However, the consumption tax increases the negative externality unlike other forms of indirect taxation. Furthermore, although the majority of neoclassical economists support small government with little bureaucracy the consumption tax which they support, as a matter of fact consumption tax requires a high government expenditure on the sophsticated bureaucratic system to account the tax collection and increases the cost due to the risk of assymetric shick of aggregate demand level among regions.
Focusing on the microeconomic aspect, consumption tax distorts equity despite the supporters of consumption tax put priority on equity. In particular, a nation exporting a large number of commodities produced in monopolistic or oligopolistic firms has to transfer the revenue from the consumption tax burdened on these commodities back to these firms in order to avoid the tax export. In this situation, these firms gain an extra amount of revenue from this tax revenue transfer as much as they export more than or as much as they sell domestically. This results in transfering revenues from medium and small firms exporting little to those exporting a lot. On top of it, a nation having a huge tourist industry openned up to the global market has a large proportion of tax exportation or needs a bureaucracy to enable foreign customers to refound their consumption tax. As a consumption tax becomes a huge proportion and/or complicated like the VAT, it eventually requires much more complicated bureaucracy to account the process of consumption tax and the right amount of tax refound. If the refound does not take place, it might simply create the distortion of equity across nations because foreign comers bear an extra duty which may not contribute for their public service. All in all, consumption tax tends to exploit the revenues from medium or small sized firms and encourage a monopoly and distortion of equity among firms as long as these two factors are notable. In particular, Japanese major car making entreprises and IT corporations are notorious to take an extra revenue from the tax transfer because of their enourmous scale of exportation level.
From the macroeconomics point of view, the consumption tax disharmonises the business cycle among regions in a nation. Unlike direct taxes, indirect taxes cannot vary their level of taxation across different regions. Indirect taxes are collected by refering tp the total revenue of each individual firm and extremely difficult to settle a bureaucracy varying the different level of indirect taxes across regions depending on their own business cycle. If an indirect tax is inelastic, for example the tax on habit formings, this has little influence on the business cycle. The indirect taxes burdened on roads used across different regions, and petrol and electricity used for transportations going across regions have to be equall across regions. However, consumption tax is an elastic indirect tax, its level of tax burden does not have to be same across regions unlike taxes on roads, petrol, and electricity, although it is extremely diffcult to vary the level, and has an influence on the local business cycles.
Speaking of consumption tax in general, which includes the turn-over tax introduced former West Germany, sales tax used in Japan, and the Value-Added Tax (VAT) which is used the European Union (EU) member states, this kind of indirect tax system tends to be inefficient to gather a stable amount of tax revenue. The reason is that the demand of comodity itself is quite fluctuant so that the revenue changes overtime inevitably. The tax on consumption, especially the sales tax, symply increases the price of necessities so than individuals' utility goes down. This causes to the moral hazard which denotes that although economy is supposed to create the individuals' well-being the consumption tax discourages the well-being of those. Even the turn-over tax and the VAT, which are regarded as less regressive than the sales tax, not only to cause the moral hazard but also is still regressive. These two kinds of consumption tax cause the disturbance to account how the value in accumulated and to judge if some goods or services need to be taxed more than others.
Furthermore, the accountancy can be easily biased by firms selling consumptions. The sales tax is the most notorious because it does not clarifies whether one comodity is on the final good or the intermediate good. The turn over tax encourages the merging firms and creates more monopolised market so then results in inefficient market pricing. The VAT which is popular and has a good reputation among the world is high controversial. The VAT is successful to prevent encouraging merging and less regressive than the previously mentioned two types of consuption tax. However, the VAT merely taxes on consumptions with the number of sales among intermediate market. Therefore, the VAT does not precisely judge whether consumptions are necessities or luxuries and need or need not to be taxed.
On the other hand, in terms of the macroeconomics perspective, consumption tax tend to stagnate the aggregate demand level. The consumption level correlated to the income level is quite hetero-scedastic, which implies the variance varies across different level of variables. The consumption level of individuals with the higher income is varied where as those with the lower income level spend most of their income for their consumption. This clarifies that the average level of merginal propensity to consume does not change across the income level. Therefore, the tax on the consumption reduces the level of disposable income of individuals with the lower income level meanwhile those with the higher income level may substitute their expensive consumptions or their saving income into inexpensive consumptions.
Neoclasscal economists may claim indirect taxation in general including consumption tax is less likely to disturb equity than direct taxation as this is relatively burdened by means of the right to spend. Neoclassical economists tend to put priority on equity of individuals' income, therefore encouraging saving, and the right to spend (the other word is "pay as spend") rather than the ability to pay. This is agreed as long as the indirect tax is not the consumption tax because this essay is going to explain about the necessity of introducing the emission tax due to reduce the negative externality. However, the consumption tax increases the negative externality unlike other forms of indirect taxation. Furthermore, although the majority of neoclassical economists support small government with little bureaucracy the consumption tax which they support, as a matter of fact consumption tax requires a high government expenditure on the sophsticated bureaucratic system to account the tax collection and increases the cost due to the risk of assymetric shick of aggregate demand level among regions.
Focusing on the microeconomic aspect, consumption tax distorts equity despite the supporters of consumption tax put priority on equity. In particular, a nation exporting a large number of commodities produced in monopolistic or oligopolistic firms has to transfer the revenue from the consumption tax burdened on these commodities back to these firms in order to avoid the tax export. In this situation, these firms gain an extra amount of revenue from this tax revenue transfer as much as they export more than or as much as they sell domestically. This results in transfering revenues from medium and small firms exporting little to those exporting a lot. On top of it, a nation having a huge tourist industry openned up to the global market has a large proportion of tax exportation or needs a bureaucracy to enable foreign customers to refound their consumption tax. As a consumption tax becomes a huge proportion and/or complicated like the VAT, it eventually requires much more complicated bureaucracy to account the process of consumption tax and the right amount of tax refound. If the refound does not take place, it might simply create the distortion of equity across nations because foreign comers bear an extra duty which may not contribute for their public service. All in all, consumption tax tends to exploit the revenues from medium or small sized firms and encourage a monopoly and distortion of equity among firms as long as these two factors are notable. In particular, Japanese major car making entreprises and IT corporations are notorious to take an extra revenue from the tax transfer because of their enourmous scale of exportation level.
From the macroeconomics point of view, the consumption tax disharmonises the business cycle among regions in a nation. Unlike direct taxes, indirect taxes cannot vary their level of taxation across different regions. Indirect taxes are collected by refering tp the total revenue of each individual firm and extremely difficult to settle a bureaucracy varying the different level of indirect taxes across regions depending on their own business cycle. If an indirect tax is inelastic, for example the tax on habit formings, this has little influence on the business cycle. The indirect taxes burdened on roads used across different regions, and petrol and electricity used for transportations going across regions have to be equall across regions. However, consumption tax is an elastic indirect tax, its level of tax burden does not have to be same across regions unlike taxes on roads, petrol, and electricity, although it is extremely diffcult to vary the level, and has an influence on the local business cycles.
Wednesday, January 02, 2008
2008, Happy New Year!
New Year Firework Scotland
from "www.scotland.org.uk/hogmanay/"
Hi there! Happy New Year for 2008!! I wish all the great success for you!
In 2008, I will be quite busy. I will complete my university life after the semester coming. As my course is the joint degree in economics and mathematics I am not going to take modules instead of the desertation, however, it is still busy because the 2 mathematics modules I am going to take are quite tough course... Also I will take an eonomics module so all in all my schedule is so packed that I might be a bit difficult to update my web-sites very often!
I am applying for postgraduate courses. I am willing to study a master degree in some university offering me. I will be quite occupied to manage all course materials therefore this will make my year 2008 so busy that I might not be able to update this website that regularly ... I really hope to be busy in 2008. However, this implies that contents of this website I will publish more academic and sophisticated articules.
Monday, December 24, 2007
Joyeux Noel!
Bonjour buddies! Hola! The christmas days have come! How have you been doing?
Well... I am enjoying quite quiet times over Scotland. The region I am staying is pretty quiet and most of my university mates have gone back their home! Very very quiety and chilling out but very very very lonely christmas days! Today and tomorrow, I am gonna spend time at my good friend's flat to have christmas meals over 2 days.
The last semester has required me a load of works. The economic policy in Britain is a quite comprehensive course which enables me to analyse current econommic issues with using macroeconomic knowledges we have learned already. The economic policy in EU is a very interesting and beneficial subject as it indicates a lot of key issues involved in European Intergration in terms of both micro and macro economics point of view.
During the 4th year, I have to take 2 mathematics modules so I have attended so many lectures and seminars much more than not only majorities of the art-degree students but also other economics students taking economics as just a major or combining with accounting&finance or business management. I mean I have had a ton of works to do in my accademic life in this university, I wanted to say!
Any way, I hope all of you enjoy your rest of this year whatever you can deserve yourself! Cheerio!!
Monday, December 10, 2007
Economic Rationale --- Inflation rate should be refered/targeted?
The European Central Bank (ECB) is well known as a conservative central bank which adapts German model of monetary policy. The ECB is independent from government body and not allowed to have a contact with any community to determine their policy. Also the ECB has a little accountablity on economic situation as it is only interested in the inflation control. The ECN settle the reference inflation rate as 2%. This is different from the target inflation rate used by the Bank of England (BoE).
Focusing on the ECB monetary policy, it has been respected as the most stable inflation controlling one among all European Union (EU) members. According to the Barro-Gordom model, as the central bank with the lowest and stable inflation cotrol leads the monetary unions, all the member country of monetary union are benefited from the central bank.
Barro-Gordom model indicates that the unemployment is structural and always the natural rate in the long-run so if the central bank sets the prefrence of the inflation rate lower, it enables the inflation rate stable over time. Also the country prefering higher inflation rate and lower unemployment does not success their policy to reduce the unemployment rate in the long run and the inflation rate eventually goes up in the long run. Therefure, Barro-Gordon model clarifies that countries would be better to follow the policy with lower inflation rate preference.
The ECB manages to control the inflaiton rate by means of the nominal interest rate. The ECB has a parliament constituted of representatives from all European Monetary Union (EMU) member nations. These representatives vote for the changing nominal interest rate. The decision is based on the majority voting system and all country have an equal power of vote.
On the other hand, there is a counter argument against determining the nominal interest rate by means of the inflation rate. Taylor argued that the output gap should be referred to settle the interest rate. Taylor indicated the importance of the output gap which is the gap between the potential economic activity level and the current economic acitivity level. This implies that the nominal interest should be changed not to target the inflation rate but to fill the output gap. In order to fill the output gap, if the real interest rate is lower the nominal interest rate should be increased and if the real interest rate is higher then the nominal interest rate should be declined regardless of the inflation rate.
Focusing on the ECB monetary policy, it has been respected as the most stable inflation controlling one among all European Union (EU) members. According to the Barro-Gordom model, as the central bank with the lowest and stable inflation cotrol leads the monetary unions, all the member country of monetary union are benefited from the central bank.
Barro-Gordom model indicates that the unemployment is structural and always the natural rate in the long-run so if the central bank sets the prefrence of the inflation rate lower, it enables the inflation rate stable over time. Also the country prefering higher inflation rate and lower unemployment does not success their policy to reduce the unemployment rate in the long run and the inflation rate eventually goes up in the long run. Therefure, Barro-Gordon model clarifies that countries would be better to follow the policy with lower inflation rate preference.The ECB manages to control the inflaiton rate by means of the nominal interest rate. The ECB has a parliament constituted of representatives from all European Monetary Union (EMU) member nations. These representatives vote for the changing nominal interest rate. The decision is based on the majority voting system and all country have an equal power of vote.
On the other hand, there is a counter argument against determining the nominal interest rate by means of the inflation rate. Taylor argued that the output gap should be referred to settle the interest rate. Taylor indicated the importance of the output gap which is the gap between the potential economic activity level and the current economic acitivity level. This implies that the nominal interest should be changed not to target the inflation rate but to fill the output gap. In order to fill the output gap, if the real interest rate is lower the nominal interest rate should be increased and if the real interest rate is higher then the nominal interest rate should be declined regardless of the inflation rate.
Business-cycle and Ricardian-equivalence
The business cycle is an important objective to refer in order to operate an economic policy. Controlling business cycle is a significant policy for government because during the recession, government inevitably have to spend for the social security due to rise in both unemployment rate and the absolute poverty rate i.e. fall in the average income level. These factors are very crucial elements in economy because these factors are (In particular, unemployment is) a lugging indicator in economy. There are two main government demand management policies intervening into the business cycle; the monetary policy and the fiscal policy.
Some economists put priority on the counter-cyclical government expenditure plan. This policy connotes the fiscal policy is effective to control the business cycle. This reason is based on Keynesian theory denoting that the liquidity of money supply by the monetary policy is ineffective. These economists believe that the increase in government expenditure helps to overwhelm economic recession rather than the extra cash flow. Furthermore, the tax cannot be increased during the recession time as tax rise may perpetuate the recession. Therefore, they support to reduce the tax in order to stimulate the economic activity and incur national debt in order to cover the cost for the government expenditure.
By contrast, this point of view has been contradicted by Neoclassical economists. According to the Neoclassical point of view, the tax deduction does not have much impact on economy. The reason is that individuals may prefer save the amount of extra income from tax deduction to predict their extra expenditure for the interest payment for the government debt. This theory is called "Ricardian Equivalence".
Focusing on the graph, individuals prefer spending for consumption at both current and future time at the level of their utility curve. Therefore, although there is an tax deduction it does not have any effect on the current consumption level and eventually they still have to pay the interest payment through taxation in order to pay back for the debt incurred in the past. Thus, Ricardian equivalence states that the fiscal plan should be fixed over time.
Neoclassical theorists put emphasis on the monetary policy and the supply-side reforms in order to tackle with the recession.
Nevertheless, there has been a counter argument against Ricardian equivalence. Some economists argued that Ricardian equivalence might be true if the recession is not serious and the absolute poverty level is lower. Otherwise, tax deduction and
debt incuring are required.
Focusing on the graph above, if individuals have not gained enough income to consume, the extra tax deduction can increase the current consumption level because it expands the borrowing constraint. During the recession, some individuals may face this borrowing constraint which denotes the incapability of their income to both spend and save. Therefore, the Recardian equivalence might be contradicted in terms of the aspect that unless tax deduction and debt incurring take place, it may induce the recession lugging.
Some economists put priority on the counter-cyclical government expenditure plan. This policy connotes the fiscal policy is effective to control the business cycle. This reason is based on Keynesian theory denoting that the liquidity of money supply by the monetary policy is ineffective. These economists believe that the increase in government expenditure helps to overwhelm economic recession rather than the extra cash flow. Furthermore, the tax cannot be increased during the recession time as tax rise may perpetuate the recession. Therefore, they support to reduce the tax in order to stimulate the economic activity and incur national debt in order to cover the cost for the government expenditure.
By contrast, this point of view has been contradicted by Neoclassical economists. According to the Neoclassical point of view, the tax deduction does not have much impact on economy. The reason is that individuals may prefer save the amount of extra income from tax deduction to predict their extra expenditure for the interest payment for the government debt. This theory is called "Ricardian Equivalence".
Focusing on the graph, individuals prefer spending for consumption at both current and future time at the level of their utility curve. Therefore, although there is an tax deduction it does not have any effect on the current consumption level and eventually they still have to pay the interest payment through taxation in order to pay back for the debt incurred in the past. Thus, Ricardian equivalence states that the fiscal plan should be fixed over time.
Neoclassical theorists put emphasis on the monetary policy and the supply-side reforms in order to tackle with the recession.
Nevertheless, there has been a counter argument against Ricardian equivalence. Some economists argued that Ricardian equivalence might be true if the recession is not serious and the absolute poverty level is lower. Otherwise, tax deduction and
debt incuring are required.
Focusing on the graph above, if individuals have not gained enough income to consume, the extra tax deduction can increase the current consumption level because it expands the borrowing constraint. During the recession, some individuals may face this borrowing constraint which denotes the incapability of their income to both spend and save. Therefore, the Recardian equivalence might be contradicted in terms of the aspect that unless tax deduction and debt incurring take place, it may induce the recession lugging.
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