Seems plausible to me that different people have different marginal returns to savings, which if true implies the effect of lotteries and gambling on growth is ambiguous.
Linking that one paper that sports betting led to less investment and didn't displace consumption. Not exactly the same argument but it's similar- How much is added to investment from transfer to lower MPC people verses how much is reduced by displacing other uses of funds for higher MPC people seems highly not obvious, as a factual matter.
how do we think about the welfare of the low MPC types? when everyone behaves rationally you can talk about consumer surplus and do the kaldor-hicks thing, does that make sense here?
These proposals are all excellent, but allow me to go a step further and illustrate some modest ones of my own:
* A system that obviously selects low MPC types (for example, by having them sleep in an overcrowed dorm and living on a shoestring budget for *years* while they accrue human capital) being paid out of general revenue. Since state taxes are usually regressive and levied on consumption, we could fund this system at the state level for maximum redistribution between types!
* We could pass an amendement capping interexchange fee only on debit cards (ie the cards that the high MPC types are getting), while the cards that high MPC types are getting (usually referred to as "credit", an archaism originating from when the issuer still extended actual credit to the cardholder) can basically extort merchants for fees and redistribute them as rewards. The merchants will then obviouslly pass these fees through prices, thus making the high MPCs pay for some low MPC's cashback. That amemendement should have a properly patrician, French-sounding name, as it befits the righteous expropriation of the rabble in favor of their betters. Durbit? Durbique? Durbin maybe?
* Sometimes the low MPC types, clustering in cities, are strayed by the insistent offers of food, beverage and convenience sales appealing to their gluttony. This is doubly bad as it not only reduces their saving, but also allows some dasdarly high MPC type to carve a niche for themselves. Why not simply ban these establishements, so that the only dining options are fast food and Olive Garden, and any shopping trip requires at least 20min of driving? This will do great for helping the low MPC exercise their naturally-endowed self control, and keep money and opportunities away from the high MPCs who would squander them
* Despite our best efforts to make consumption as monotonous and unappetizing as possible, the engines of capitalism still made the big box stores a recepticle of foreign delicacies and palatable treats. Fortunately, as inequality rises, the low MPCs' cost of time will dwarf the savings one could incur by savvy shopping. This in turn increases markups for everyone, so that those high MPCs, no matter how many coupons they collect and how many stores they visit, will finally pay more for their groceries. It seems only logical we must hasten this process as much as possible.
I think one counterargument here mirrors the usual argument against theft being efficient (or even neutral): if there's an opportunity to extract (in expectation) $1000 from someone, people will scramble over each other and pay up to $999 (in expectation) to get it. And so you get $1 of transfer and $999 of deadweight loss.
In the seedy parts of crypto you definitely see a lot of this: projects pay influencers and KOLs, they pay large amounts for exchange listings, hire marketing departments, etc etc.
I've always had a similar feeling about gambling as an efficient implementation of the old saying "a fool and his money are soon parted". It feels reasonable that the money has now found a less foolish custodian and that such a re-allocation is a net positive. Question is just how much thinking one can do on this without being tarred as a "social-Darwinist"
> "How might we increase consumption? Well, we could have the government tax people and save more. That is one possibility. Another possibility is redistribution from high to low marginal propensity to consume (MPC) people."
I believe this is a typo. You are talking about increasing savings to the optimum, not consumption.
I must be confused about the model. Aren't they directly negatively related (in any cross-section)? So you're talking about redistributing from under-savers to increase savings in SR.
So this does imply also a long run level change in consumption, but I think it makes the reasoning unclear to go from "savings are too low" to "lets increase consumption", as these things are opposites at a fixed time.
Seems plausible to me that different people have different marginal returns to savings, which if true implies the effect of lotteries and gambling on growth is ambiguous.
Linking that one paper that sports betting led to less investment and didn't displace consumption. Not exactly the same argument but it's similar- How much is added to investment from transfer to lower MPC people verses how much is reduced by displacing other uses of funds for higher MPC people seems highly not obvious, as a factual matter.
https://www.nber.org/papers/w33108
how do we think about the welfare of the low MPC types? when everyone behaves rationally you can talk about consumer surplus and do the kaldor-hicks thing, does that make sense here?
I would think it does.
The point of this is (partially to be a bit puckish) but to ask under what circumstances forced savings due to vices would actually benefit everyone.
but, can't you get a potential pareto improvement from forced savings just from hyperbolic discounting, no dependence of A on K necessary?
These proposals are all excellent, but allow me to go a step further and illustrate some modest ones of my own:
* A system that obviously selects low MPC types (for example, by having them sleep in an overcrowed dorm and living on a shoestring budget for *years* while they accrue human capital) being paid out of general revenue. Since state taxes are usually regressive and levied on consumption, we could fund this system at the state level for maximum redistribution between types!
* We could pass an amendement capping interexchange fee only on debit cards (ie the cards that the high MPC types are getting), while the cards that high MPC types are getting (usually referred to as "credit", an archaism originating from when the issuer still extended actual credit to the cardholder) can basically extort merchants for fees and redistribute them as rewards. The merchants will then obviouslly pass these fees through prices, thus making the high MPCs pay for some low MPC's cashback. That amemendement should have a properly patrician, French-sounding name, as it befits the righteous expropriation of the rabble in favor of their betters. Durbit? Durbique? Durbin maybe?
https://luluywang.github.io/PaperRepository/payment_jmp.pdf
* Sometimes the low MPC types, clustering in cities, are strayed by the insistent offers of food, beverage and convenience sales appealing to their gluttony. This is doubly bad as it not only reduces their saving, but also allows some dasdarly high MPC type to carve a niche for themselves. Why not simply ban these establishements, so that the only dining options are fast food and Olive Garden, and any shopping trip requires at least 20min of driving? This will do great for helping the low MPC exercise their naturally-endowed self control, and keep money and opportunities away from the high MPCs who would squander them
* Despite our best efforts to make consumption as monotonous and unappetizing as possible, the engines of capitalism still made the big box stores a recepticle of foreign delicacies and palatable treats. Fortunately, as inequality rises, the low MPCs' cost of time will dwarf the savings one could incur by savvy shopping. This in turn increases markups for everyone, so that those high MPCs, no matter how many coupons they collect and how many stores they visit, will finally pay more for their groceries. It seems only logical we must hasten this process as much as possible.
https://kunalsangani.com/files/income_markups_live.pdf
I think one counterargument here mirrors the usual argument against theft being efficient (or even neutral): if there's an opportunity to extract (in expectation) $1000 from someone, people will scramble over each other and pay up to $999 (in expectation) to get it. And so you get $1 of transfer and $999 of deadweight loss.
In the seedy parts of crypto you definitely see a lot of this: projects pay influencers and KOLs, they pay large amounts for exchange listings, hire marketing departments, etc etc.
I've always had a similar feeling about gambling as an efficient implementation of the old saying "a fool and his money are soon parted". It feels reasonable that the money has now found a less foolish custodian and that such a re-allocation is a net positive. Question is just how much thinking one can do on this without being tarred as a "social-Darwinist"
> "How might we increase consumption? Well, we could have the government tax people and save more. That is one possibility. Another possibility is redistribution from high to low marginal propensity to consume (MPC) people."
I believe this is a typo. You are talking about increasing savings to the optimum, not consumption.
Increasing savings (if it’s below the optimal level) will increase consumption in the ling run!
I must be confused about the model. Aren't they directly negatively related (in any cross-section)? So you're talking about redistributing from under-savers to increase savings in SR.
So this does imply also a long run level change in consumption, but I think it makes the reasoning unclear to go from "savings are too low" to "lets increase consumption", as these things are opposites at a fixed time.