37 votes

Could eliminating all taxes and only creating new money theoretically work?

It would not work. Historically speaking, governments that try to fund their operations primarily via the printing press experience not just inflation but hyper-inflation. Why? Well, one explanation ...
Topher Brennan's user avatar
18 votes

Could eliminating all taxes and only creating new money theoretically work?

tl;dr this would not work in either closed or open economy unless your proposal would include very large cuts to current social and welfare spending as only arguably small part of those could be ...
1muflon1's user avatar
  • 55.5k
7 votes

What are taxes for since law forbids printing of money?

"Why I don't hear nobody speaking about such idea?" Because historical experience says it won't work. By printing money instead of collecting taxes, what increases is the nominal disposable income....
Alecos Papadopoulos's user avatar
6 votes

Why are "transfer payments" not part of GDP?

Transfer payments aren't included in GDP to prevent double-counting. The reason the author's question is troubling you is because the answer externalizes everything that happens after the payment ...
Michael's user avatar
  • 196
6 votes

Breaking Up The Big Banks

This is an interesting question. The banks themselves will not naturally divide themselves. There are great returns to scale in banking, and risk can be greatly diversified by being massive and ...
RegressForward's user avatar
6 votes
Accepted

Is the government putting a 20% tax on dividends equivalent to the government owning 20% of the company?

Is the government putting a 20% tax on dividends equivalent to the government owning 20% of the company? No, stock ownership entitles owner control over decision making in the company (via voting on ...
1muflon1's user avatar
  • 55.5k
5 votes

Welfare analysis for a military draft

An obligatory draft is a tax collected in kind - productive time. Instead of producing in the private sector, citizens of the economy offer their services to the army. Now, we should acknowledge ...
Alecos Papadopoulos's user avatar
5 votes

What are taxes for since law forbids printing of money?

The current answers correctly point out that financing the government via the printing press would generate inflation. Since inflation is bad, this would be a bad policy. However, these answers miss ...
HRSE's user avatar
  • 1,852
5 votes

Why switch from Gold to Fiat

When recession strikes, it's prone to the currency equivalent of "bank runs" where everyone attempts to trade in their paper money for gold at once, causing a drastic reduction in the money supply, ...
Jeremy Bernier's user avatar
5 votes

Could eliminating all taxes and only creating new money theoretically work?

The Modern Monetary Theory (MMT) literature discusses the historical experience of issuing “new” currencies. (Typically, the introduction of money in colonies that did not have a simple monetary ...
Brian Romanchuk's user avatar
4 votes

Why are "transfer payments" not part of GDP?

The question: How much would GDP change if during a recession the government raises unemployment benefits by $100 million? can be understood in more than one way. There is the pure accounting ...
Adam Bailey's user avatar
  • 8,346
4 votes

Why doesn't government work more like a company when it comes to taxes?

Getting the facts straight First before addressing the question, lets get the facts straight as arguing based on incorrect premises is not good and in this case this is also relevant to the answer. ...
1muflon1's user avatar
  • 55.5k
4 votes

Could eliminating all taxes and only creating new money theoretically work?

Wanted to note, with a digital currency this is exactly equivalent to replacing all forms of taxes except a single (high) Wealth Tax [1] that only applies to currency, rather than net worth. Under ...
Cireo's user avatar
  • 141
4 votes

Externality and Output

In principle in both positive and negative externality scenario government could just set price to the socially efficient price. However, outside of static textbook example this is non-starter. The ...
1muflon1's user avatar
  • 55.5k
4 votes

Externality and Output

For a government to address a positive externality by setting the price of a good to its socially efficient price would raise several difficulties. The diagram below relates to the case of a good ...
Adam Bailey's user avatar
  • 8,346
3 votes
Accepted

How much does a public sector pay rise actually cost the UK government?

Unison (2014) - Net cost The Public sector trade union did an analysis of lifting the cap in 2014. The report is here. Unlike the IFS analysis presented above, Unison estimates the net cost of an ...
luchonacho's user avatar
  • 8,591
3 votes

How can a country ensure its national currency is used by its citizens?

First of all, please check the properties of money and keep them in mind. Indeed money is a convention, but nobody forces you to use it. For example, prisoners use ciggarettes as a medium of exchange. ...
Commissar Vasili Karlovic's user avatar
3 votes

How government borrowing from central bank increases money supply in economy?

Central banks can create money 'out of nothing'. So for starters there isn't 'less amount' of money left with the central bank. The amount of money at the central bank is 'infinite'. So it's not ...
tibo's user avatar
  • 328
3 votes

Is the government a producer, a consumer, or both?

The government is a producer of goods/services that are then usually not subject to market transactions. Some goods/services that the government produce can be said to increase directly the utility ...
Alecos Papadopoulos's user avatar
3 votes
Accepted

How does the ban on surge pricing affect the companies, customers and the economy?

It depends. If customers are currently making informed decisions when they book a surge-priced car, then banning surge pricing punishes customers, drivers, intermediaries, and the wider economy. It ...
410 gone's user avatar
  • 8,143
3 votes

Economics PhD graduate?

Your claim that most go into academia is wrong. From the top universities, about half to two-thirds go into academia, but from most universities, most go to non-academic careers. It's simple ...
Sander Heinsalu's user avatar
3 votes
Accepted

Why don't we count incomes of the government from taxation when calculating GDP using the income approach?

Actually you could use taxes because GDP formula using income approach can be also expressed as value added at basic prices + taxes less subsidies. However, you can’t do it at the same time when using ...
1muflon1's user avatar
  • 55.5k
3 votes
Accepted

Which sanction against Russia creates the least side effects on Western economies: SWIFT disconnect or denying selling of government bonds?

SWIFT is basically a communication network that allows bank transitions to happen. This could potentially hurt EU a lot because EU imports 41.1% of natural gas, 26.9% oil and 46.7% coal from Russia (...
1muflon1's user avatar
  • 55.5k
3 votes
Accepted

Is there a consensus in economics about public housing?

Found a couple on the internet which I didn't read. If you think they're of no use, let me know and I'll take down the answer. Does public housing reduce housing cost burden among low-income families ...
solow supremacy's user avatar
2 votes

Why did the price level of government consumption increase in the United States?

The price level of government consumption (education, parts of health care, police etc.) consists mainly of wages. Since the productivity (as we measure it) of government production often does not ...
Merijn Knibbe's user avatar
2 votes

Government spending/borrowing difference/ national debt increase disparity

There are many ways of calculating public sector finances. One approach is similar to corporate accounting and the UK Treasury publishes Whole of Government Accounts. Those are different in ...
Henry's user avatar
  • 4,755
2 votes

Are state owned enterprises really inefficient?

In contract theory, economists such as Oliver Hart have argued that ownership of a firm would not matter if complete contracts could be written. For example, the incentives to reduce costs that the ...
mfr2011's user avatar
  • 21
2 votes

What are taxes for since law forbids printing of money?

You can't create something from nothing. When the government prints money, that's really just colored paper. Printed money, in case production has not increased, will make money lose value. When the ...
BB King's user avatar
  • 6,138
2 votes
Accepted

U.S. Bureau of Economic Analysis, when was that created?

Bureaucratic history time! Yes, this agency (and its predecessors) have always been responsible for GDP; GDP was created a couple decades after the Department of Commerce and the Department of Labor ...
dismalscience's user avatar
2 votes

How does the ban on surge pricing affect the companies, customers and the economy?

This is a difficult but important question: a) At the heart of it is whether the markets are competitive or not. In competitive markets, prices reflect demand and supply so changing prices is the ...
Fix.B.'s user avatar
  • 2,648

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