[ETH_start]

Government spending as a share of GDP is increasing. The main issue is this, not what the government is spending on.

Increasingly taxing people to subsidize other people, through large government bureaucracies with a monopoly on those tax dollars, leads to slower economic growth. Picketty is ignoring the elephant in the room when trying to identity the cause of European economic sluggishness.

And if you want people's quality of life to improve, reduce their tax burdens and lift regulatory restrictions on their business activities, so that they can serve consumers more effectively by investing more of their time and money creating firms that cater to them.

[tharmas]

Heavily tax speculation and heavily reduce taxes on productive activities.

[ETH_start]

Speculation is productive. All investment is a form of speculation about the future.

Even speculation in the secondary market is productive. It supports the valuation of securities, which allows companies to raise more capital on issuances of new societies, which in turn provides firms with funding for the formation of productive assets.

[tharmas]

My bad. I wasn't clear on how I define "speculation". When i use the term "speculation" i refer to things like buying up assets such as housing to extract more wealth from those assets or even to help drive the price up of said asset.

However, buying shares in a startup can be interpreted as "speculation" but I would see it as a good thing, so my choice of terms was not the best.

I dont see Blackrock or Blackstone buying up houses as a good thing. I see that as "speculation". But I realize now my definition of the term is much different from most other people.

[ETH_start]

I know it seems counter-intuitive, but investors buying up scarce resources like housing, and pushing up their price, is what you want to happen. When the price rises to reflect the scarcity of the product, then the profit motive to produce more of that product increases. That means more houses get built. A high price has a real purpose in the economy, so we should let investors buy up the assets they want so that the price of assets aligns with their respective scarcitym

Now Single Family Houses are a slightly different thing, as much of their value derives from the land that they're built on, and you can't build more land. So the benefit of investors buying up SFHs is going to be much less significant than investors buying up units in high-density developments like condo towers.

[jandrewrogers]

> Heavily tax speculation

Like startups?

[tharmas]

Are startups not "productive activities"? I said to REDUCE taxes on productive activities which in my definition includes Startups.

Perhaps my definitions of "speculation" and "productive activities" go against conventions?

[rickydroll]

Like most financial engineering. Put a tax on every transaction

[ETH_start]

This reduces economic coordination, which makes the economy less productive.

[rickydroll]

Reduces economic coordination? Do you mean collusion? Price-fixing?

Yes, there are advantages and disadvantages to financial transaction taxes. I like them because they are progressive and reduce the profitability of share flipping. In theory, they would also reduce high-frequency trading, which seems like it's casino adjacent.

[ETH_start]

Transactions are not needed for collusion or price-fixing. Those happen through regular communication channels. Economic coordination happens through price signals and commercial exchange. The more friction is attached to commercial exchange, the less people trade, and the fewer opportunities to coordinate for the benefit of all involved parties can be exploited.

In other words, taxing transactions reduces division of labor, which is one of the main sources of productivity:

https://en.wikipedia.org/wiki/Division_of_labour