Tuesday, March 6, 2012

Frivolous Factors

Up to this point, Frank has been setting-up his argument in anticipation of presenting his first proposal of what he believes as the solution to the prospective problems he has presented in the last four chapters. He's sporadically elaborated on the reoccurring themes of how individual interests often diverge with the group, concepts of relative vs. absolute consumption, positional goods, and his assumptions regarding waste. In each respect, I’ve had mixed feelings in regard to the applicability of his proposals because of their simplistic nature in a clearly more complex system. Nevertheless, Frank connects some of the logic behind his points presented in chapters past by proposing the implementation of a progressive consumption tax which could be a viable idea for the future if, and only if, it functions as successfully as Frank’s confidence seems to imply.
Firstly, something worth noting is that risk and income don't always relate in tandem as Frank represents in his examples. There are plenty of high-paying low-risk jobs in both absolute and relative terms, and while I understand Frank is merely using selected situations for analytical purposes, not every individual sacrifices safety to achieve the desired goals allowed by a larger income. Granted, a CEO's marginal physical product is difficult to measure. In those respects, their pay is bound to become more relative simply because of how difficult it is to measure physical output. Therefore, the combined possibilities an individual is presented with also manipulate their circumstance which are obviously influenced by more than just two consistent factors.

Secondly, Frank's views on waste seem rather controversial. In his mind, waste seems to be considered by many as frivolousness. Yes, consumption by social standards may seem wasteful, but in an economic context, the idea of entering a type of social arms races does little, in my opinion, to justify what may be deemed as undeniably wasteful habits. It is not uncommon for millionaires to own multiple homes. While Frank would consider this reality wasteful, the quantity of homes one possesses doesn't really say anything objectively about anyone’s personal score on any "wastefulness scale." Similarly, to assume that certain spending trends are harmful to the collective under the assumption that humans always desire to sustain a type of social arms race is purely speculative, because there are many current cases of individuals defying the upward trend of profligate luxury.

For example, consider the fact that many tourists pay large sums of money to tour Alaska. They don't come to live the life of the elite or wealthy but to encounter a classic form of simplicity which Alaska alone has uniquely been able to offer. Log cabins, Denali and the enticement of the northern lights are enough to sustain their desire to encounter the quiet beauty of Alaska. Tourists are awestruck at these timeless Alaskan classics, yet they still venture to the great north in search of solitude because of selected natural beauties. Individuals are not always pushed to accept higher or more expensive forms of existence but may in fact value simplicity simply because of how scarce it has become in Western culture. Simplicity is still valued by many even in a culture that seems to be overrun by massive spending trends.

Just because Americans have more comfortable living condition than in the past does not necessarily mean their spending is wasteful and that likewise the habit of functioning out of self-interest to "out do" their neighbor must be curbed, as Frank implies with his progressive consumption tax. Sales taxes, luxury taxes, and salary caps are nothing new as they tax individuals for their consumption which have been deemed unneeded. To my knowledge, luxury taxes were never extraordinarily successful because the idea of a luxury is yet again, a fluctuating concept. In Norway for instance, cars and chocolate used to be consider luxuries, but today they are considered a common commodity even though the tax remains intact. Therefore, the relativity of the situation really may only insure that certain objects are taxed more than others because of the past standing.

Similarly, my greatest worry with Frank's consumption tax is firstly, that he assumes instigating some form of tax will help solve governmental deficiencies. After all, how does two million tax dollars actually reduce the national deficit by an equal amount? Secondly, he assumes that promoting saving is more beneficial than spending since apparently mass spending is now considered "wasteful" even though that is hardly the case.

Ultimately, I view Frank's consumption tax as a way, yet again, to manipulate the market in ways that might sound extraordinary on paper but may ultimately stunt economic growth in the long run. Whereas before, individuals were taxed on the opportunity that they had to earn money, a consumption tax exists on the notion that they must be taxed for using resources even though they already possess the potential of their incomes to acquire those resources. But attempting to identify supposedly negative human tendencies, Frank has tried to prove that humans need government regulation because of their seemingly irrational decisions and that specifically, a consumption tax would not only be beneficial for the public but solve a myriad of the government’s problems as well. Yet again, tax dollars are money that could’ve been spent by individuals to naturally fertilize the economy, so the idea of initiating a tax to curb a digressive human nature through governmental influence seems like rather sketchy logic. Therefore, I’m leery of the implementation of a tax to stimulate a predestined economic response as there are surely to be variety of unintended consequences to accompany that assumption. To some extent, a consumption tax might be a viable option in the future, but as of now, Frank’s rather vague representations make it a little early to tell.

The very foundations of human progression through decision-making, whether those decisions be based off of simplistic or frivolous desires, relative or absolute options, suggests that pushing the whole towards one decided action, may in fact cause more unintentional consequences than Frank has yet to admit.

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