Thursday, January 31, 2013

Laffer Curve

The Laffer Curve is one of the main theoretical constructs of supply-side economics, and is often used as a shorthand to sum up the entire pro-growth world view of supply-side economics.  However, the Laffer Curve itself simply illustrates the tradeoff between tax rates and the total tax revenues actually collected by the government.

If the revenue point is on the left-hand side of the parabola then a decreased tax rate will result in decreased revenue.  However if the revenue point is on the right-hand side of the parabola then a decreased tax rate will increase revenue.

Conversely, if the revenue point is on the left-hand side of the parabola then an increased tax rate will result in increased revenue.  However if the revenue point is on the right-hand side of the parabola then an increased tax rate will decrease revenue. 
Changes to the tax rate can affect taxpayer behaviour with ranges of tax rates giving more or less incentive to work or more or less reason to find ways to avoid paying tax.
A recent practical example of the Laffer Curve in action can be seen in the case of Gerard Depardieu's decision to renounce his French citizenship and become a Russian citizen after France increased the high earner income tax rate to 75% of income.

In this case the French government attempted to increase revenue by increasing the tax rate but instead encouraged taxpayer behaviour to avoid contributing to this increased revenue with Depardieu reducing his contribution to zero by leaving the tax zone. The French government therefore ends up with less revenue after raising the tax rate (in this particular example anyway).


The key features of the Pygmalion story from Greek mythology are:
  • Pygmalion was a sculptor who had never found a woman worthy of his love
  • He used ivory to carve a life-size statue of his ideal woman (he called her Galatea)
  • He fell in love with the statue of Galatea and prayed to the goddess Aphrodite to bring them together
  • Aphrodite brought the statue of Galatea to life
  • Pygmalion and Galatea loved each other and were soon married
There are different versions of this story from Greek mythology and later from Roman mythology such as recounted by Ovid.

There are also variations of the theme such as George Bernard Shaw's play Pygmalion (1912) which was later made into the film 'My Fair Lady' involving phonetics professor Henry Higgins transforming the working-class flower-girl Eliza Doolittle by refining her accent and conversational skills for polite society.

Shaw's version drew on on the work of W. S. Gilbert, one of his influences, who wrote a successful play based on the story in 1871, called Pygmalion and Galatea.

Friday, January 25, 2013

Leisure With Dignity - Otium Cum Dignitate

Otium Cum Dignitate

Otium cum dignitate is Latin for 'dignified leisure' or 'leisure with dignity'

“Otium cum dignitate” was the advice Cicero gave for how an honest person should live. The word “otium” does not mean 'idleness' ('dolcefarniente') instead the advice was to pursue an ensemble of non-political and non-remunerable activities that allow for the “humanistic” development of an individual.

In other words, Cicero advised that a vir bonus (good man) should dedicate himself to study, writing, intimate and erudite conversation, meditation, finding time for family and friends, and of course some time in the countryside. Together with “otium”, Cicero also recommended a strong dose of “dignitas” which was very important to people of his time. Everything was to be done with a sense of measure and moderation. It’s a lovely philosophy of living to try to pursue especially when put in the context of today’s hustle and bustle.

Tuesday, January 22, 2013

Neck Verse - Benefit of the Clergy

Neck Verse - Refers to the first lines of a Latin version of the 51st psalm formerly set before an accused person claiming benefit of clergy so that the person might vindicate his claim by an intelligent reading aloud of the verse before examiner.

This verse was so called because it was the trial-verse of those who claimed benefit of clergy; and if they could read it, the ordinary of Newgate said, “Legit ut clericus, ” and the convict saved his neck, being only burnt in the hand and set at liberty.

The Latin sentence, “Miserere mei, Deus,” was so called, because the reading of it was made a test for those who claimed benefit of clergy.

(Psalm 51.1). Have mercy upon me, O God, according to thy lovingkindness: according unto the multitude of thy tender mercies blot out my transgressions.

Also known as the Miserere: Miserere mei, Deus: secundum magnam misericordiam tuam. Et secundum multitudinem miserationum tuarum, dele iniquitatem meam.

If a clerk had been taken
For stealing of bacon.
For burglary, murder, or rape.
If he could but rehearse
(Well prompt) his neck-verse,
He never could fail to escape.

British Apollo (1710).