Two Posts caught my eye today; one by PGL at Angry Bear, and the other by Chris Dillow. The first article is a Critique of a Tim Worstall piece, where PBL states that Tim ignores the Leontief Paradox. The piece by Chris Dillow sprays contempt upon the outright Rent-Seeking by Those seeking to get rid of the Inheritance Tax. Before We get started, though, I would advise Readers to check out the links provided by Dillow.
People may not associate the two Pieces, but there is a relationship. Each examines a form of Tax upon Inheritance, and which is more extreme? The Dillow thesis, if I may put words in his mouth which he most certainly object to, would contend that entrpreneurial Profits were too excessive and insufficiently taxed previously, while Beneficiaries would want to maintain such untaxed position. The Factor Price Equalization theorem assumes Wages will equalize under the impact of Free Trade, with the codicil that the markets are perfectly competitive. Can Labor markets ever be perfectly competitive?
It can be hypothesized that, in the face of competition, low-Wage Workers will drag down the Wages of high-Paid competitive labor. Can the Counter-Hypothesis be stated as positively? By the way, here also is rationale for the Leontief Paradox. Low Wages come from traditional societies, where Culture and Social mores place much greater impediment to Wage increases. One of the greatest of Lifetime forms of Taxation comes in refusal to provide Universal Education to the entire Workforce. Inability to integrate modern Labor techniques implant sharp limitations to higher Wages, while often still allowing Labor to do basic Production functions under necessary supervision. Wage Equalization downwards with loss of high-paid labor will be rapid, while Wage Equalization upwards will always be Snail-slow, especially in the face of educational impediments.
What have I produced here? Great Scott, I may have even presented justifications for the presence of Trade barriers. Could I have meant to do this? The great God, Free Trade, may even become angry. Even worse, the great Devil, Taxation, may be equally as mad; somewhere in there I may have implied that diversification of Tax placement will always breed greater Inequality of Income. One has to stand upon a platform of Equal Pay for Taxation, else the Income levels will flee from each other. The Poor can demand Pay increases to pay for Taxes, and join the Middle Class in demands that the Rich pay their fair share of the Taxes. I may have outraged all of the Economic Gods this day! lgl