On Intellectual Scruples

Citing Jonathan Chait’s stinging takedown of a remarkably silly assertion by Larry Kudlow that it’s good to have a government run by the super-rich, because the super-rich, already satiated with wealth, are immune to the blandishments that might corrupt the merely rich or upper middle-class, Paul Krugman also skewers Kudlow for a deeper inconsistency in his world-view and that of other devotees of supply-side economics.

What Chait doesn’t note is the special irony of seeing this argument from Kudlow, or indeed any right-wing advocate of supply-side economics. Remember, their whole worldview is based around the claim that cutting taxes on rich people will work economic miracles, because of incentives: let a plutocrat keep more of an extra dollar in income, and he’ll innovate, create jobs, lead us to an earthly paradise in order to get that extra income.

To belabor what should be obvious: either the wealthy care about having more money or they don’t. If lower marginal tax rates are an incentive to produce more, the prospect of personal gain is an incentive to engage in corrupt practices. You can’t go all Ayn Rand/Gordon Gekko on the importance of greed as a motivator while claiming that wealth insulates a man from temptation. . . .

But what’s more interesting and revealing, I think, is the way people like Kudlow for whom incentives are supposedly all suddenly say something completely different when it comes to conflicts of interest.

And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. It was never about the incentives; it was just another excuse to make the rich richer.

I understand why Krugman is annoyed with Kudlow and other supply-siders. Kudlow is clearly being inconsistent. But Krugman forgets that he is a partisan advocate, so, like all advocates, he tailors his arguments to support the momentary interest and needs of the political party, and candidates, and causes with which he has aligned himself. And, like any advocate, he searches for whatever arguments he can find to support his side at a particular moment, without caring too much whether the argument he is making today is consistent with another that he made yesterday, or, for that matter, one he made 5 minutes ago. So it’s certainly fair to conclude that Kudlow doesn’t really understand what he is talking about, or that, lacking intellectual scruples, he will say whatever he thinks will advance the interests of his “team.”

But you can’t infer from Kudlow’s lack of intellectual scruples that everyone who favors reducing marginal tax rates is simply trying to make the super-rich even richer. There is a prima facie plausible argument to be made that reducing marginal tax rates would enhance economic efficiency. So the charge that everyone who advocates reducing marginal tax rates is doing so for venal and reprehensible motives just strikes me as, well, implausible.

I mean is it so hard to imagine that an intelligent person could believe that low marginal rates of taxation would promote economic efficiency and enhance productivity? Not for me at any rate, because I used to share that belief myself. If I hold a different view now than I used to, I don’t think it’s because I have become a better person than I used to be (though I hope I have); it’s because I now have serious doubts that low marginal rates of taxation are necessarily efficiency-enhancing. Those doubts result from my having realized that a lot of income — especially in the highest income brackets — is generated by activities whose private benefits greatly exceed their social benefits — the gains to some reflecting interpersonal transfers rather than increased output — so that low marginal income tax rates may, on balance, reduce overall economic efficiency.

Given the lack of research, or my lack of knowledge about the research, on the gaps between the private and social benefits from a lot of very highly remunerated activities, like various forms of financial trading and speculation, research and development aimed at creating intellectual property, and other forms of investment in winner-take-all activities and enterprises, I have no idea what the socially optimum marginal tax rate really is. I therefore have no definite position either for or against changing marginal tax rates.

But I do understand why someone with a perfectly innocent state of mind could believe that not only the super-rich, but even the least well-off members of society, could potentially benefit from reduced marginal tax rates. If you want to disprove or debunk that belief, the right way to do so is to explain what’s wrong with the straightforward — possibly simplistic — reasoning that says that lowering marginal tax rates enhances economic efficiency; it is not by asserting that such a belief could be held only out of venal motives.

As I said, I do understand, and share, Krugman’s frustration with Kudlow, but I still don’t believe that every supporter of low marginal tax rates is lacking in intellectual scruples. And not only is impugning the motives of everyone that disagrees with you unfair, it degrades an already low level of public discourse even further, and may not even be an effective rhetorical strategy.


12 Responses to “On Intellectual Scruples”

  1. 1 nottrampis January 1, 2017 at 2:39 pm


    My fading memory had Kruggers on Reagan’s council of economic advisors. That being the case and Stockman’s classic book on why the Reagan Presidency actually did cut taxes enhances Kruggers arguments.

    By the way if you wish to assert Kruggers is tailoring his arguments to suit his political fancies surely you should show it.

    Given Kudlow’s past you are surely giving him way too much slack IMHO.

    You have put out a lot of posts given it is Christmas and the New Year with your typical high quality. Dave Giles said it was the snow. Same with you??


  2. 2 David Glasner January 1, 2017 at 8:03 pm

    nottrampis, Krugman was on the CEA staff in the Reagan administration; he was not one of the three advisors. There are two levels of supply-side advocacy. One is that cutting marginal rates, by increasing economic growth and reducing the incentive to shelter income, would increase tax revenue by more than lowering rates would reduce tax revenue, causing a net increase in revenue. That argument might have been plausible if only the highest marginal rates, which were then as high as 70%, had been cut. But politically, the Republicans were committed to cutting rates across the board by about 25%. But on another level, you could still favor cutting tax rates as being a net benefit for the economy even if there was a net loss of revenue. The deficits as a percentage of GDP were never as unmanageable as Stockman claimed at the time. I don’t remember Stockman’s book well enough to know what you are referring to. But his subsequent writings have shown him to be a crank.

    I was not arguing that Krugman is tailoring his economic arguments to suit his political fancies; I am saying that I disapprove of his rhetorical strategy in attributing base motives to everyone who holds a certain set of beliefs of which he disapproves.

    I don’t think I am giving Kudlow any slack. I am just saying that it’s enough to point out his inconsistencies and his foolishness without claiming to know that his motives for being a hack are enirely mercenary.

    Aside from some random snowflakes, no snow has fallen yet in the mid-Atlantic region. And thanks for the favorable quality assessment.


  3. 3 nottrampis January 2, 2017 at 1:32 pm


    Agree that Stockman was/is a crank but his book simply showed that supply side rhetoric was a sham merely to give the well off tax breaks.

    I would wait until the team is in action until motives can be attributed although I think ( as opposed to know) Kruggers will be on the money.


  4. 4 Frank Restly January 2, 2017 at 4:09 pm


    “…it’s good to have a government run by the super-rich, because the super-rich, already satiated with wealth, are immune to the blandishments that might corrupt the merely rich or upper middle-class..”

    Of course that is an overly simplistic world view. Even the super wealthy can be narcissistic, petulant, and petty.

    But there is some logic to it. The argument seems to be that Donald Trump can’t be bought off and can stick to his principles. Left unsaid is where those principles lie.

    There is also some historical context:


    Roosevelt by all intents and purposes was a wealthy (perhaps even fabulously wealthy) man upon inheriting $125,000 in 1878 from his deceased father.


  5. 5 David Glasner January 2, 2017 at 7:58 pm

    I have very little recollection of Stockman’s first book, but from a quick glance at the wikipedia entry on Stockman, it seems to me that Stockman’s argument was that they should have just taken the top rate down from 70% to 50% which they could have done without much revenue loss, but by cutting rates across the board they lost revenue and Congress was not willing to cut spending as much as he would have liked plus they were increasing military spending big time. I think he was overly concerned about the budget deficit, but I don’t think he was making an argument that cutting the top rates was just to serve the interests of wealthy Republicans. His argument was that it was the right thing to do for economic efficiency. You may disagree with that, but he could have held that belief in good faith.

    Frank, Maybe, but the question is how does the belief that wealthy people are unresponsive to pecuniary incentives to engage in corrupt activities for financial gain fit with the argument that wealthy people require the pecuniary incentive of a low marginal rate of income tax to engage in productive economic activity?


  6. 6 Benjamin Cole January 3, 2017 at 4:45 am

    Great post.

    I believe in cutting marginal income tax rates—but from the bottom, not the top!

    When, oh when, will the GOP say, “We plan to leave the top-rate where it is, but cut all the rates underneath, targeting the middle-class in particular.”

    Add on: Given that $30 trillion to $40 trillion is sloshing around in offshore bank accounts, who knows what is the effective marginal tax rate anyway?

    We know what are reported marginal tax rates on reported adjusted gross income. I think, anyway, but maybe not even that.

    Actually, let’s just go to consumption, fossil fuels, Pigou and import taxes.

    Why import taxes? Easy to collect, and since no one cares if property zoning distorts markets, why should anyone care if import taxes distort markets?

    Happy New Year David Glasner, you are an exception intellect.


  7. 7 David Glasner January 3, 2017 at 1:50 pm

    Benjamin, Thanks and happy new year to you as well.

    I understand your point, but as a simple matter of definition, cutting marginal tax rates is cutting the top rate.


  8. 8 nottrampis January 3, 2017 at 1:53 pm

    Also if the USA is anything like Australia it costs far less in revenue forgone.

    Totally agree with Benjamin on David’s intellect and we are all the richer for it.


  9. 9 Frank Restly January 3, 2017 at 6:08 pm


    “Frank, Maybe, but the question is how does the belief that wealthy people are unresponsive to pecuniary incentives to engage in corrupt activities for financial gain fit with the argument that wealthy people require the pecuniary incentive of a low marginal rate of income tax to engage in productive economic activity?”

    Okay. So let’s talk about marginal tax rates. With a flat tax code (all rates are the same) people are not punished for working longer and obtaining extra income. That is straight out of the conservative economic playbook – flatter tax rates are more economically efficient. Liberals would of course argue that wealthy individuals should be required to commit a larger portion of their income to the common good.

    But your question runs deeper than that, so let me answer it this way. As President of the United States (or in any other position of significant authority), Trump is under greater scrutiny to stay within legal bounds. And so the absolute risks (personal, professional, legal, financial) involved in engaging in corrupt activities become greater than the reward relative to his already large financial empire.


  10. 10 David Glasner January 3, 2017 at 6:15 pm

    Frank, In case you have forgotten, you are talking about the guy who said he could shoot somebody in the middle of Fifth Avenue and his supporters wouldn’t care. And that’s certainly one statement of his that I believe.


  11. 11 Frank Restly January 4, 2017 at 6:32 am

    “Frank, In case you have forgotten, you are talking about the guy who said he could shoot somebody in the middle of Fifth Avenue and his supporters wouldn’t care.”

    David, in case you have forgotten, he has his detractors as well as his supporters at the federal government level.

    “And that’s certainly one statement of his that I believe.”

    I don’t profess to know what his supporters care / don’t care about.


  12. 12 Frank Restly January 4, 2017 at 4:36 pm


    Speaking of those detractors, you are probably aware of the “Title of Nobility Clause”?


    “The Title of Nobility Clause is a provision in Article I, Section 9, Clause 8 of the United States Constitution, that prohibits the Federal government from granting titles of nobility, and restricts members of the government from receiving gifts, emoluments, offices or titles from foreign states without the consent of the United States Congress.”

    Also, this Slate article goes over the finer details.



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About Me

David Glasner
Washington, DC

I am an economist in the Washington DC area. My research and writing has been mostly on monetary economics and policy and the history of economics. In my book Free Banking and Monetary Reform, I argued for a non-Monetarist non-Keynesian approach to monetary policy, based on a theory of a competitive supply of money. Over the years, I have become increasingly impressed by the similarities between my approach and that of R. G. Hawtrey and hope to bring Hawtrey’s unduly neglected contributions to the attention of a wider audience.

My new book Studies in the History of Monetary Theory: Controversies and Clarifications has been published by Palgrave Macmillan

Follow me on Twitter @david_glasner


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