A Brilliant Comment that Deserves a Larger Audience
In the grand tradition of “pulled from comments,” I’m pulling this one—from Brad DeLong’s blog, in response to this post:
…Manzi does not seem to have a consistent view of the concavity of instantaneous indirect utility functions. He argues that it would be absurd to consume the proceeds of the IPO of a successful startup yet he argues that higher taxation of said proceeds will have a large effect on the required minimum probability of success. If he can come up with a utility function which has both of these properties, he might convince someone who cares about economic theory (not typing at the moment). If he further finds a utility function consistent with the data on risk premia and intertemporal substitution he might convince more than one such person. If he can get the sign of the effect the one he wants without ignoring the benefit for people who tried and failed to be entrepreneurs of middle class tax cuts he will convince many.
If he assumes that expected wealth calculations are OK when evaluating whether people will start companies but just idiotic when deciding how quickly they will consume the proceeds, he isn’t an economic theorist (not that I mean that as a criticism).
The source of the comment is, for those who did not follow the link, Robert Waldmann.