Taxing consumption instead of savings

"You can easily implement a consumption tax with a Form 1040 that says:
"How much did you earn this year? How much did you save? Now pay tax on
the difference." And you can make that tax as progressive as you like", from Steven Landsburg in the WSJ. Simple, effective, brilliant!
HT: G. Mankiw.

Decency

One of the lessons my father was keen on teaching me was the idea that eventually "all your sons and daughters will inherit from you is your name, so you want that name to be immaculate". I was reminded of his lessons by the attitude shown by British Airways CEO last month, when he announced the board that, despite his contract right to, he felt receiving the bonus he was entitled to would be "inappropriate".
In times when many people claim for corporations to go beyond the law to develop CSR, it's often forgotten that it is individuals who should go beyond the law, to be charitable, generous or at least, decent.

Beware inflation misinterpretation

When I first studied economics teachers always put a lot of focus in distinguishing between inflation (which is a persistent rise in the general level of prices) and one time shocks, which actually were changes in relative prices. Now, the problem is that all the indexes that have been created to measure inflation actually mix these effects, and therefore when there are “automatic inflation adjustments” a one time change in a specific price translates to the whole economy.

On that background the whole discussion on inflation arising from the increase in price of oil and food is an overreaction: If the price of oil is a bubble it should flop and not lead to further problems. (Actually it’s interesting to observe that the high prices we have seen in the last weeks have occurred in the context of low transaction amounts, according to Thomson Reuters).

But if there’s a case for it (i.e. growth in real demand from Asia in the context of fixed supply capacity), then the economies should adjust to the new relative prices (not a new level of prices). Such is the reality of globalisation. The real danger of inflation, in my perception, lies in calling this phenomena “inflation”, since it gives a backup to wages adjusting that will generate real inflation (and bust some companies that can’t follow them) in a spiral effect that usually becomes hard to handle.

UPDATE: One week after writing this piece for my MBA I read this comment from Mankiw's blog that reinforces the idea.

Source: Thomson Reuters

Sweatshops create welfare

Many times in class with my students we engaged in theoretical microeconomic analysis like the situation of workers that face tough job conditions. I usually challenged them with a statement I once heard from a very pious relative: "If I can't pay a decent salary, I'd rather not hire at all". My usual answer: "So you'd rather let them starve". This was usually enough to ignite a beautiful class, with many of the students that had been quite the whole term actually engaging in it. But I always missed some evidence to support my claim and here is a beautiful and brief document giving it! (Thanks to Don Boudreaux).