Elasticity of Supply

Did that subject line, "Elasticity of Supply", and the adjacent equation intimidate you?

It should have! Remember, you are reading the words of a hypereducated multiple-degreed full tenured professor. A person who can demolish any of your "lay" arguments (and your reputation!) with just an iota of my enormous reservoir of brainpower, expertise, and jargon.

So, I invite you to unquestioningly accept this lesson in "elasticity of supply" and use it to reinforce your decision to elect Barack Obama as President.

I will now explain how President Obama's plan to raise taxes is as sound as any law of physics.

Let's use Starbucks as an example of a capitalist entity that is swimming in profits on the backs of labor. Yes, the obvious moral solution is to shutter Starbucks and allow the people to drag the owners into the gutter for merciless beatings.

But we will save moral arguments for another time, and concentrate for now on science.

And the science, as President Obama knows, is to tax Starbucks to spread the wealth. So, let's say that a cup of coffee costs $5, and President Obama decrees (after legislation is passed in The People's Assembly) that a tax on this item should be $4.

What happens next?

A right-wing propagandist would say, "That would raise the price of a cup to $9. And since no one would pay $9 for coffee, Starbucks would go out of business, no one would get any coffee, and no taxes would be raised anyway."

If only!

If only it were that easy to kill Starbucks!

But even the fascist propaganda has a kernel of truth: "No taxes would be paid anyway."

But "no taxes" is the antithesis of a just nation.

Remember:

Nations are judged by how much the rich pay in taxes. (At least until The Revolution is complete.)

Here is what would really happen when a $4 tax is applied to a $5 cup of coffee: Simply put, the price will remain at $5 -- of which $4 will be returned to the people. And this is because of the elasticity of supply. In common language (for uneducated common people), the "elasticity of supply" refers to how much less (or more) of an item capitalists would be willing to sell if its price declined (or increased). That is, the change in supply divided by the change in price.

In this case, the "Before Obama" profit was $5, and the "After Obama" profit will be $1. So, we need to determine how many fewer cups of coffee Starbucks will be willing to sell if they only received $1 per cup instead of $5 per cup. And the answer is: There would be absolutely no change! How do we know this?

Because the supply elasticity is always zero!

Capitalists and their corporate marketing departments are insensitive to everything, and so will continue to force us to buy things we do not want.

Let's look at the mathematical proof:

A $5 tax is only one penny higher than a $4.99 tax. And does anyone really believe that a difference of one lousy penny would make any difference to anyone? Don't be stupid! Of course not!

And a $4.99 tax is equal to a $4.98 tax. How do we know this? Because we just proved that Starbucks executives will not change their policies based on a difference of just once cent.

Similarly, a $4.98 tax is equal to a $4.97 tax. A $4.97 tax is equal to a $4.96 tax. And continuing, we see that a one-cent tax is equal to no tax at all.

Therefore, a $5 tax has the same effect on supply as no tax at all. The elasticity of supply is zero, and Starbucks will not alter their behavior regardless of how much the taxes are.

So, tax levels have no relation whatsoever to corporate behavior, and President Obama would be justified in taxing the entire $5 of a $5 cup of coffee

Q.E.D.

Of course, that was just a sample exercise. In practice, this 100% taxation model should not be applied to Starbucks -- but should be applied to Starbucks, physicians, pharmaceutical companies, automobile manufacturers, home builders, etc., etc., etc.

After all, as Barack Obama Sr. pointed out, "there is nothing that can stop the government from taxing 100% of income."

For extra credit, think about the effects of a tax that exceeds 100%. That is, a $6 tax on a $5 purchase. Where would that money come from? Hint: They're called CAPITALists for a reason.

You can now go ahead and feel smart for having read my words, even if you lack the cognition to understand them.

Not a problem, though; you will always be taken care of when you leave the decisions to people who are smarter than you.

*****

This post is dedicated to the memory of my junior-year microeconomics professor, who in defending the minimum wage, correctly observed that "no supermarket will fire their baggers if their wages increase by a few cents." The present-day ubiquity of supermarket baggers is a testimony to this man's penetrating insights. Rest in peace, comrade; I will carry the torch for you.

Presidential Debate III

I was very proud of Barack Obama at last night's debate; he has been listening to me!

I played back this debate fourteen times already (with the McCain parts erased), and although I would like to post the entire transcript here, fourteen times over, I will only select the best of Barack:

And the financial rescue plan that Senator McCain and I supported is an important first step. And I pushed for some core principles: making sure that taxpayer can get their money back if they're putting money up.

Of course everyone will get their money back. That’s why they must contribute, whether or not they think it’s a good idea. If this was a bad idea, we would not make the taxpayers contribute.

Making sure that CEOs are not enriching themselves through this process.

Again, correct. When CEOs become rich, everyone else gets a smaller piece of the pie.

I want to end the tax breaks for companies that are shipping jobs overseas and provide a tax credit for every company that's creating a job right here in America.

This is only fair. Taxpayers need to pay more in order to ensure that Americans spend less time working in industries like aeronautics and pharmaceuticals -- and instead recover the jobs that are done abroad, like sewing buttons on clothing.

That's why we included in the financial package a proposal to get homeowners in a position where they can renegotiate their mortgages.

Trivial. Simply force people who are making mortgage payments to also make payments for those who are not making mortgage payments. They shall be sent two bills: One for their own homes, and one for the homes of those who cannot pay.

And 95 percent of working families, 95 percent of you out there, will get a tax cut.

And when we teach the remaining 5% what it is like to really pay taxes, it will have no effect whatsoever on prices that the remaining 95% pay.

And that requires us to make some important choices…

I weep with joy at lines like this. To see the best, the brightest, and the most concerned make important choices for the people!

Then Exxon Mobil, which made $12 billion, record profits, over the last several quarters, they can afford to pay a little more so that ordinary families who are hurting out there -- they're trying to figure out how they're going to afford food, how they're going to save for their kids' college education, they need a break.

That’s right, you selfish bastards at Exxon Mobil. How about ponying up a little more, like maybe a dime a week, to provide the starving people, the near-corpses lying in the gutter, the most basic sustenance so that you can whip some more work out of them.

But there is no doubt that we've been living beyond our means and we're going to have to make some adjustments.

Oh yes! Yes, yes, yes, yes, YES!! Wayyyy beyond our means! Notwithstanding the Exxon Mobil inflicted famine referenced above, the rest of us are driving cars (we need more buses, peeps!), eating too much fast food (nationalized food co-ops, my dream…), and using too much energy (you don’t have to actually cook potatoes, you know).

…if we're going to focus on lifting wages that have declined over the last eight years and create jobs here in America, then Democrats, independents and Republicans, we're going to have to be able to work together.

I believe that universal conscription into an anti-capitalist youth corps will create plenty of jobs when they burn the banks, put wrecking balls to Walmart, and trash rich people’s homes. Full employment will be achieved to fix everything so that we can destroy it again.

Bill Ayers is a professor of education in Chicago.

A professor and a friend of mine, I might add. Those qualifications should negate anything else about him, however fabricated.

ACORN is a community organization…

The evidence is in, not guilty!

…it is absolutely critical that we develop a high fuel efficient car that's built not in Japan and not in South Korea, but built here in the United States of America.

As aggressors against the Democratic People’s Republic of Korea, I fully agree that Japan and South “Korea” should be punished, severely. And to accomplish this, we should draft Americans from whatever other jobs they’re working on – and put them to work (with rich people’s tax dollars) to build a non-polluting car in GM and Ford factories. No matter how much GM, Ford, and the AWU object to receiving tax dollars, this is an important move that must be done.

And when it comes to South Korea, we've got a trade agreement up right now, they are sending hundreds of thousands of South Korean cars into the United States. That's all good. We can only get 4,000 to 5,000 into South Korea. That is not free trade.

Thank you, Barack, for pointing that out. And don’t forget: Italy sends us hundreds of thousands of gallons of olive oil, but we can’t get any of our olive oil into Italy. That is not fair trade, either.

If you want to do the right thing with your employees and you want to provide them health insurance, we'll give you a 50 percent credit so that you will actually be able to afford it.

That’s half way to a 100% tax credit, which is on the path to a 100% government subsidy. Fact: When one group of taxpayers gives money to a second group taxpayers, then the second group can afford things (like healthcare) easier, and there is no effect on the first group – like the employees who paid the taxes to begin with. If you cannot understand that, then you truly are hopelessly uneducable.

All I want to do, if you've already got health care, is lower your costs.

Fact: Costs can always be lowered when a leader wills them to be lower.

And finally, this question:

The question is this: the U.S. spends more per capita than any other country on education. Yet, by every international measurement, in math and science competence, from kindergarten through the 12th grade, we trail most of the countries of the world. The implications of this are clearly obvious. Some even say it poses a threat to our national security. Do you feel that way and what do you intend to do about it?

And Barack’s answer:

…we are going to have to invest…

An investment! Clearly, spending more than any other country is not enough, and only an investment can remedy this.

…recruit a generation of new teachers…

More teachers! Quantity always equals quality, so more is more.

… an army of new teachers…

Armies of teachers! I hope the AFT does not object.

…give them higher pay…

Highest costs per capita in the world…pay them more! Wait…I’m in academia, so I need more, too! Pay me more! I am entitled to more!

… and I think it's important for us to make college affordable….

So true! So true! And here it comes…

And that's why I've proposed a $4,000 tuition credit, every student, every year, in exchange for some form of community service, whether it's military service, whether it's Peace Corps, whether it's working in a community.

Gaaaaaa!! Tuition credits! Community service! Conscription for the common good! I played that part back well over one hundred times. If the leader wills it, it shall be free!!!! Please, Barack! Let’s give every student $100,000 per semester to attend college! That will really drive tuition down.

.. If we do those things, then I believe that we can create a better school system.

And then we can do the same thing to everything else, from food to clothing to manufacturing to the arts to research to literature to the entire realm of anything and everything that anyone does anywhere, anytime, and anyplace.

I turn all decisions to you, my new leader -- for if you will it, it will happen.

God DAMN Amerikkka!

"You Make It, We Take It"

"You Make It, We Take It"

The above slogan (which I advise Barack Obama to use) is catchy, truthful, heartfelt, and compassionate.

Of course, I am referring to Barack's pledge to ask the top-income 5% to return their stolen wealth to the bottom 95% -- who we, as benevolent guardians, must care for.

This rests on the basic economic theory that a society's health is best determined by how much rich people pay in taxes. In academic circles, we jest that "taxing is relaxing". (The humor in that phrase is derived from the fact that "tax" rhymes with "relax". To be sure there is nothing funny about the concept. And there is absolutely nothing to laugh at in hard economic times like these.)

Here is how we are all better off when the rich people contribute their so-called "earnings" back to the community: Say you are a filthy blood-sucking moneybags pig, like an owner of Walmart. And you make your money selling...what does Walmart sell anyway? Weapons to Zionists? Probably. So, let's say that a poor person comes into Walmart looking for a way to disembowel Palestinian babies...

Wait, this will not work! Zionists are rich, and are therefore not compelled to shop at Walmart.

So, let's instead say that a person of color is coerced by capitalist exploitation to buy their tofu at Walmart. Normally, tofu costs $10 per pound. (At least, that is what I pay at the food coop.) So, Walmart probably charges $100 per pound. This, clearly, is obscene. So, we (that is, the government) will apply a tax on Walmart. Let's say the tax is $25. Ha ha! Fuck you Walmart, you now have to add a $25 tax to the $100 price, and charge $125 a pound! See? The price was $100, but under Barack, it will be $125. But $25 of that is a tax, so Walmart loses!

At that point, Walmart will be forced to contribute that $25 tax to Barack and our new government, whereupon it will be used to further the greater good by establishing a national-service youth corps, purchasing windmills from government contractors, and investing in insured no-interest housing mortgages.

Nothing can go wrong with this plan. Ever.

Meanwhile, 95% of the population is protected because they are not being taxed. The tax is applied to Walmart instead, and there is no possible way this can translate into a negative for people shopping at Walmart. In fact, hurting Walmart is just one of many benefits of this tax plan.

When the rich pay, everyone wins.

Win, win, win, win, win.

Cross posted at The People's Cube

A Malevolent and Stupid Question

This morning, a student approached me with a most malevolent question:

"Professor Kurgman, you always say that taxes should be higher. But what is stopping you from contributing extra taxes on your own, beyond what the IRS requires?"

I thought about this question, and referred this student to academic discipline for committing a hate crime against me.

Yes, there is such a thing as a stupid question, and this is one of them.

And there are many responses:

1. My extra contributions would only feed the Republican War Machine, and I refuse to cooperate.

2. My extra contributions, in the bigger scheme of things, are too negligible to matter.

3. I have no need to further illustrate my virtue; it is the rest of the populace that needs the
therapeutic effects of additional taxes to understand our struggle.

4. This is the ultimate example of the "Tragedy of The Commons" where private greed can only be defeated by demanding collective action of higher tax payments.

5. Such questions are clearly planted by the CIA to further oppress the cause of working people.

Listen: I will not respond to vicious personal attacks, as they are not only irrelevant, but are also insensitive and hurtful. And my lawyer will tell you as much.