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Culture War Roundup for the week of August 19, 2024

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I worry that a consumption tax would work too well and suppress overall demand for goods and services which might lead to government subsidy of "core" goods and services but would be difficult to fund because people stop spending on consumption and tax revenues go down.

There's some behavior assumptions built in there, so I admit that.

Consumption and consumer behavior is how prices are discovered and demand signals are captured. I don't know how you'd do it otherwise. Investment is good, but you have to eventually invest in a company that makes sales.

suppress overall demand for goods and services

Possibly so, similar to how income taxes suppress overall income. I guess whether this is a good thing might depend on how one feels about vague things like "consumer culture".

might lead to government subsidy of "core" goods and services

I don't see why this would be the case. What would be the set of "core" goods and services in question?

Consumption and consumer behavior is how prices are discovered and demand signals are captured. I don't know how you'd do it otherwise. Investment is good, but you have to eventually invest in a company that makes sales.

Sure. I can't imagine consumption would go to zero, just like how income doesn't go to zero just because we tax it. People still want to earn income and consume stuff. Both income and consumption taxes have some distortionary effects and suppress some amount of things that we like... but a consumption tax just does it all slightly better. I think a shift from income to consumption tax would have, as they say, marginal effects for most people. On the low income end of the spectrum, the rate is likely to be quite low, but it may provide a small nudge for such people to think about saving a bit more (which is often good for them, individually). This should be a positive for anyone who is worried about poor people not having a lot in savings to get through the occasional tough time.

Most importantly, for people who are concerned specifically about the opulent consumption of the super wealthy, this should be incredibly appealing. If anything, it's great for figuring out which people actually care about extreme consumption inequality (who should be totally fine with investment that helps everyone)... and which mostly just hate rich people generally and want to stick it to them.

I'm not sure exactly how I'd tie the concepts together, but somewhere here is the difference between spending that money on, I dunno, a bottle of fine wine and drinking it, and spending that money buying capital assets to make bottles of wine. Intuitively to me, it seems like the latter is "better" even if both nominally contribute to (immediate) GDP equally.

But you're not wrong that if we all spend all our money on vineyards and not finished bottles, the vineyard isn't really a productive investment either. There's probably a Russell Conjugation here: "I buy and experience valuable cultural institutions; you spend money on fleeting entertainment; and that guy over there is a drunk buying wine by the case." And maybe someone's culture values paperclips.

I'd be curious if Real Economists have words for this concept.