I'm new to the Austrian school, and in my discussions with some of my leftist friends, I've seen the GDP growth after WWII cited as evidence that high taxes do not slow economic growth. I've read several articles talking about the situation and how many people really were in that top tax bracket, and other ideas, but I have one other question and want to know if my reasoning is right on this. If imports subtract from GDP, wouldn't the damaged infrastructure in other countries possibly make the imports decline, thus reducing the effect that would have on GDP. Could that not lead to a sort of inflated GDP? I'm certain it would be more complex than that, but is there anything wrong with my thinking, there?
Not to worship at the alter of GDP, but...
1. End of war is a good enough cause for growth (or should we just call it rebuilding?). War destroys wealth. If you stop war, then you stop the wealth destruction; the misallocation of resources (well not completely, you still have governments).
2. WWII saw a lot of competition either eliminated or set back for quite a few years. The US most definitely benefitted from this. First by lack of competition, second by the fact that these other countries (Germany and Japan in particular) were dependent upon American goods and services.
3. There were plenty of technological and cultural advances that occurred during the 50s that had a much greater impact on the economy.
These are but three reasons for growth during the period. Ask your friends where the real proof is that taxation had anything to do with it. Your counter-argument is that high taxation actually held people back during the 50s, a fact that was realized later. Ask them whether they thought that JFK was wrong about reducing taxes.
You are guilty of using isotemporal post-hoc-ergo-propter-hoc logic.
See here for rant/trolling.
Thank you.
I don't speak Spanish.
It doesn't matter. The point is: 1) Their comparison method is totally arbitrary and conceptually wrong. The tax rate in 1951 is not solely responsible for growth in 1951. In fact, growth in 1951 probably depends upon all the stuff decades beforehand.
2) They are cherry picking. Ask them to explain stagnant high taxation periods. If they try to cop out in any way - like if they say "well im just showing that its possible" - then they can't make policy recommendations because they're forfeiting causality.
3) I can just choose a different (in this case more sensical) method of interpreting data. It confirms that growth is caused by free markets trololololol
http://www.youtube.com/watch?v=apdeR_KYhH0
You really need to watch this.
Robert Higgs - Myth of war prosperity
Along with what the others said, I think the fundamental problem is with the GDP measure itself. In no way does it take into account whether people are acting in accordance with their highest preferences - that is, it doesn't take into account the broken-window fallacy.
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.
Voluntaryism Forum
I think it is important to know that the post-war boom was not a unique phenomenon, but rather a return to normalcy. The west had seen such fabulous growth before, prior to the world wars. The Progressive era with it's world wars and the great depression then destroyed that growth, and after the effects of those ruinous policies had worn off and were partially eliminated, markets were able to return to rapid growth again. So big government policies had in fact not caused this growth, it had caused the stagnation that made a return to growth look unusual. By simply acting as if the world started in 1930 they make all the GDP charts look as if the post war boom was a unique achievement.
In no way does it take into account whether people are acting in accordance with their highest preferences - that is, it doesn't take into account the broken-window fallacy.
It does't take into account anything other than money changing hands.
Sieben:You are guilty of using isotemporal post-hoc-ergo-propter-hoc logic.
I have never heard that term, doesn't show up on google. Could you explain?
Emperor Nero:I have never heard that term, doesn't show up on google. Could you explain?
Still less overall taxation back then. And no way anyone was paying anything near 90%.
EmperorNero: Sieben:You are guilty of using isotemporal post-hoc-ergo-propter-hoc logic. I have never heard that term, doesn't show up on google. Could you explain? EmperorNero: Sieben:You are guilty of using isotemporal post-hoc-ergo-propter-hoc logic. I have never heard that term, doesn't show up on google. Could you explain? http://www.google.com/search?q=post-hoc-ergo-propter-hoc&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a http://www.nizkor.org/features/fallacies/post-hoc.html All Austrians ever need to read about and know the above fallacy At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black... | Post Points: 5
EmperorNero: Sieben:You are guilty of using isotemporal post-hoc-ergo-propter-hoc logic. I have never heard that term, doesn't show up on google. Could you explain?
http://www.google.com/search?q=post-hoc-ergo-propter-hoc&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a
http://www.nizkor.org/features/fallacies/post-hoc.html
All Austrians ever need to read about and know the above fallacy
The tax rate was high, but there were many, many more deductions available back then. The fact is that when taxes were cut under Reagan, the effective tax rate did not change because most of those deductions were done away with.
Furthermore, why look at GDP to track economic growth? A huge component of GDP is government spending. Of course GDP is going to rise when government spending increases. That's part of the reason why our economy seemed to be doing so well during WWII even though for anyone who lived through it, they know that it was a time of austerity. Use Rothbard's Private Product Remaining as this measure shows what remained in private hands and is not influenced perversely by government spending.
Yes, I am a huge Dodgers fan.
Anti-state since I learned about the Cuban Revolution and why my dad had to flee the country.
Beer, Guns and Baseball My blog