An exclusive with economist Tim Worstall about the basics.
Published on January 25, 2012
SKY: So Tim, as a writer on economics, and someone with more knowledge than the "average Joe" about what's going on with regards to the global economy, what really is going on? Everyone is so opinionated, but do any of us know what's happening?
TIM: Erm, no, none of us do. Which was Hayek's point. It's all very difficult, all very complex and none of us can in fact calculate it ourselves. We actually need the economy, the market, as our method of calculation. Which leads to a quite liberating conclusion: I cannot calculate better than the market (and of course neither can the politicians or the bureaucrats) but I can react to , invest with, the things that the market is telling me.
SKY: How can we improve our global economy? Here in the states we have Republicans demanding lower and lower and even lower taxes, including on the wealthiest income earners, while Democrats insist that there should tax cuts, but only for the working-class. To me, it would seem logical that the wealthy "have enough" but am I missing something? Is there some logical way that lowering taxes on the wealthiest, even at the expense of social services and jobs for the masses would help working-class people more? I'd be concerned to see the US turn into some kind of third-world country, where the wealthy live safe in hidden, gated communities away from the rest of us as we scrounge for scraps.
TIM: We've a category error here. If we're going to tax incomes, there's no (major, there are minor ones) problem with taxing high incomes at a higher marginal rate than low ones. However, we already do that and that's not what people are really talking about. There are major problems with taxing capital gains at the same (or, as some places have tried, higher) rates than income. Now, it's true that many of the rich have been gaining their income from capital gains, not income: but this does not mean that taxing the two at the same rates makes sense. I would refer you to here
. The argument is, and it's the standard economics of taxation, is that all taxes reduce future growth (sure, what we spend the money on might increase it, but stick with how we raise the money first). Yet different taxes have different such effects. And taxes on capital reduce future growth more than taxes on income, both more than taxes on consumption and all more than taxes on land values. You have to think intergenerational, sure. But yes, here is a good reason why capital gains are taxed less than income. Because it will make our children richer.
SKY: What's involved in your work with exotic metals and scandium? Are mineral commodities one of those surefire safe bets for an investor in this economy?
TIM: My work? Secret, sorry.. I could tell you but I'd have to kill you. Mineral commodities a sure bet? Sheeeeit no! I know more than most about them and I won't touch that market with your money let alone mine! Great for gambling, in fact very exciting as a gamble, far better than Black Jack. As an investment? No, for those not actually in the market, those without specialist knowledge, no, you'll do betrter playing craps even if you cannot count to seven.
SKY: What do you think of Mitt Romney? Obama?
TIM: I was in favour of Obama getting elected. I didn't think he would be a good president (hey, personal opinion, OK?) but I really did like the idea of a black man (although I would call him a half caste, but that's a difference between English and American) getting elected. Because I thought it would hugely piss off large numbers of people who really should be pissed off. It used to be that the US would not elect a black man because he was black. OK, that's been done, passed. In the future the country can elect people on the quality of their policies (we hope!). A test that Obama has failed but then we cannot have everything. Romney? Who? Given that Gary Johnson was exluded from the Rep race there is no one there that I would like to be ruling over me. Fortunately, as an Englishman, none of those running will rule over me.
SKY: How's Portugal?
TIM: Good food, good wine, good people and good weather. Think Louisiana without that whole racism sh*t, California without that Californian Government sh*t, Fly over Country without those coastal shits and Santa Barbara without all that Santa Barbara sh*t. Sure, it ain't perfect, Portugal, but having been to the other places mentioned, it's not that sh**ty.
SKY: What's going to be the most pressing issue for us to look for economically in the next coming years? Is it changes in technology, the globalization of markets? Broken governmental programs? What do you think will have the biggest impact on both investors and average working-class citizens?
TIM: Regulation. Currently 30% of the US working population requires a licence to do their job. A state (as in, government, not the state of Indiana, or California) licence. This is going back to the French system of the time of Versailles. Matt Yglesias is good on this: why in buggery does someone need a licence from the state to do interior decorating? Now, I would argue in favour of killing the bureaucrats who demand this. Yglesias perhaps would be more controlled, arguing that we should simply reduce their influence. But regulation is the big problem.
Thanks so much Tim for your insights and opinions!