28 Jan 2015

More on Bad Arguments

Oil 23 Comments

My manager, agent, family, and closest friends have all told me to walk away, but I’m going to the barricades on this one…

If Charles Krauthammer had argued, “The government should cut taxes because 2+2=4,” that would be a terrible argument. This is the case even though the premise is true, and even though I agree with the conclusion. To be sure, I probably wouldn’t devote a column to exposing the non sequitur, but I would agree–if somebody asked me–that the above is a terrible argument.

If Charles Krauthammer had argued, “The government should hike the gas tax $1 per gallon and use the proceeds to give Social Security rebates, because 2+2=4,” that would also be a terrible argument. This is the case even though the premise is true. If I point out that it’s a terrible argument, I haven’t proven that the government should NOT implement Krauthammer’s policy; but I’ve certainly shown that his argument gives us no reason to support it.

If Charles Krauthammer had argued, “The government should hike the gas tax $1 per gallon and use the proceeds to give Social Security rebates, because the rebate leaves the average motorist unharmed and it encourages job creation,” that is a really terrible argument. Now, not only is Krauthammer trying to reach a conclusion with a non sequitur (by looking at benefits and ignoring costs), but he’s relying on a premise that is FALSE. Specifically, it’s not true that the average motorist is unharmed by a gas tax hike, so long as he gets the same dollar amount refunded lump sum.

Do you doubt my last sentence? Imagine the government hiked the gas tax $1000 per gallon, and refunded all receipts to Social Security payers. The tax goes in, everyone stops driving, and gas sales fall to 0. So no refund. Zero taxes paid to the Treasury, zero Social Security rebate. According to Krauthammer, the average motorist isn’t harmed.

And now we should expect all sorts of job creation in an America where people ride bikes to work.

23 Responses to “More on Bad Arguments”

  1. Andrew says:

    Thanks Bob. This really hits your point home. I agree with you that using a theoretical $1000/gallon tax has helped you illustrate that Krauthammer’s argument is one-sided and therefore does not constitute a cost-benefit analysis or a sound policy prescription.

    Now, what am I going to do with all of these $5 bills? 😉

  2. Josiah says:

    Bob,

    You might be thinking “people still aren’t getting it; I know, I’ll write another post on the subject, then it will all be clear.” Yet in that case, why not write 100 more posts on this subject?

    • Andrew says:

      Ouch. It appears you’ve sided with Bob’s “manager, agent, family, and closest friends.” I appreciate the humor in your comment, but all you’ve done is troll Bob. You haven’t addressed whether his argument dislodges Krauthammer’s premise. Maybe your comment was intended to convey that you never will.

    • Bob Murphy says:

      Because then I would be dead.

      • Josiah says:

        It’s times like this I wish there was a way to “like” blog comments.

        • E. Harding says:

          I can just imagine it: LK: twenty dislikes, five likes. MF: fifty likes, five dislikes.

    • E. Harding says:

      Because MC would rise above MB.

  3. E. Harding says:

    I’ve finally understood why you thought postulating an excessive gas tax would be an appropriate reply to Krauthammer’s piece.

  4. Josiah says:

    By request, here’s my response to Bob’s latest iteration of the argument:

    Krauthammer says that we should raise the gas tax $1 because doing so would have benefits x, y, and z.

    Bob says that Krauthammer is pulling a fast one because he only talks about the benefits of his proposal, not the costs. But Krauthammer does mention a big cost of a higher gas tax: gas would cost more than it would without the tax. This isn’t some obscure feature of taxes. It’s something that ought to be immediately grasped by even the average Washington Post reader.

    If people didn’t implicitly understand that there was a downside to gas taxes, then saying “why not a $10 tax?” wouldn’t work rhetorically. If it’s not necessary to explicitly point out that a $10 gas tax has a downside, why wouldn’t the same be true for a $1 gas tax?

    Now it’s true that Krauthammer didn’t say “I’ve run the numbers, and after taking into account supply side effects, tax interaction, the social cost of carbon, and other environmental and national security co-benefits, the optimal gas tax increase is $0.99837465, which rounds up to $1.” Nor do I think that Krauthammer did those calculations but left it out of the finished article because he was up against his word count. But I don’t think it’s fair to fault a columnist for failing to meet that standard.

    • Dan says:

      “Bob says that Krauthammer is pulling a fast one because he only talks about the benefits of his proposal, not the costs. But Krauthammer does mention a big cost of a higher gas tax: gas would cost more than it would without the tax. This isn’t some obscure feature of taxes. It’s something that ought to be immediately grasped by even the average Washington Post reader.”

      No, Krauthammer explicitly says there is no downside. He doesn’t just tell the Washington Post reader that he wants to raise gas prices, and so it’s obvious to anyone what the negative will be. He says I want to raise gas prices, but don’t worry it’s going to be really good for you because I want to cut taxes elsewhere. He’s says it’s a “win-win”.

  5. Transformer says:

    I’m still not getting this.

    A $1000 a gallon tax probably means that no-one drives and no-one has any extra incentive to work extra either. Clearly bad.

    But a $1 a gallon tax probably means that people both work harder and drive less – which is what Krauthammer wants. (In his words: “The point is exclusively to alter incentives — to reduce the disincentive for work … and to increase the disincentive to consume gasoline.)”.

    I just don’t see why the fact that any specific level of tax doesn’t leave the average motorist unharmed is at all relevant to the absurdity of the “if $1 is a good tax then $1000 must be better” argument.

    • Dan says:

      Krauthammer said his proposal has no downside, that it is a win-win because he is offsetting a tax increase on gas with an equal tax reduction on social security taxes. Well, this is simply false. If his proposal had no downside because of the offsetting tax reduction then the amount of the tax increase should be irrelevant. It’s not that “if $1 is a good tax then $1000 must be better”. It’s that if you say the reason a $1 tax is a win-win is because it’s offset with an equal tax reduction on SS, then any tax increase on gas is a win-win because it is offset with an equal tax reduction on SS. Now, Krauthammer may be right, personally I think he is wrong, that we should raise taxes on gas by $1 and reduce taxes on SS by the same amount that is collected, but he didn’t demonstrate that by making a clearly false argument in it’s favor, and he is also wrong that it is a win-win.

      • Transformer says:

        Where does he say there is no downside ?

        • Dan says:

          He said his proposal leaves the average motorists unharmed and that it is a win-win.

          • Transformer says:

            Krauthammer’s argument is based on the view that:

            1) The gas tax addresses a negative externality
            2) The reduction in payroll tax reduces deadweight loss

            That sounds like win/win, but only as long as you set the gas tax to the right level. $100 a gallon would probably be too high under reasonable assumption , while $1 sounds like it might be correct.

            It is kind of weird to argue “OK, if the optimal level is good, then why isn’t a level that is way over the optimal level even better”.

            • Dan says:

              No, what Krauthammer said was that the average motorist would be unharmed and it would be a win-win as long as the tax was accompanied by a reduction in SS taxes equal to the amount collected. Yes, if you act like he said it would not harm the average motorist and would be a win-win as long as the tax was set at the optimal level, then Murphy’s point doesn’t work, but if we deal with his actual stated reason for why the tax wouldn’t hurt the average motorist and would be a win-win, then the critique is perfectly valid.

              Also, you’re not even getting what Murphy said right. He didn’t say “if the optimal level is good, then an amount way over the optimal level is even better”. He said that if a $1 tax leaves the average motorists unharmed, and that it is a win-win for the actual reasons Krauthammer explicitly stated, then that would also mean a $100 tax would be also not harm the average motorist and be a win-win for those same exact reasons.

              You’re not only changing what Krauthammer explicitly said, but you’re also changing the point Murphy made.

            • Dan says:

              “That sounds like win/win, but only as long as you set the gas tax to the right level.”

              I mean, you’re completely missing the point if you don’t see the difference between what you just wrote there and what Krauthammer actually wrote.

              “…but only as long as you set the gas tax to the right level.”

              Is not the same as…

              “…but only as long as you reduce SS taxes by the same amount as you collect from the increase in the gas tax”

              If Krauthammer had actually wrote what you said, then Murphy wouldn’t have used his reductio. You can’t see that?

  6. khodge says:

    I think that for an argument to be effective, even ad absurdum, it must be compelling. Frequently the one who presents the argument gets caught up in its “correctness” without noticing that he’s lost the intended audience. You presented a valid argument but the effectiveness failed as posters started coming up with counter examples, some of which were quite clever. You are at a point where you have to back off the $1,000 tax and start ratcheting it up from $1.00 (see Lot and Sodom).

    I find argumentum ad absurdum more clever than persuasive. My favorite: a guy meets a girl in a bar and asks if she would go to bed with him for $1 million. She says yes. He then offers a quarter. She, offended, says she’s not that kind of girl. He responds that they have already decided what kind of a girl she is; now they are just haggling over the price.

    • khodge says:

      Personally, I was hoping to read more about deadweight loss. Your initial question promised some intriguing lines of thought.

    • Dan says:

      Just because the argument wasn’t effective for all doesn’t mean it wasn’t effective. Obviously, Andrew found it to be an effective argument.

  7. Dan says:

    “If Charles Krauthammer had argued, “The government should hike the gas tax $1 per gallon and use the proceeds to give Social Security rebates, because the rebate leaves the average motorist unharmed and it encourages job creation,” that is a really terrible argument. Now, not only is Krauthammer trying to reach a conclusion with a non sequitur (by looking at benefits and ignoring costs), but he’s relying on a premise that is FALSE. Specifically, it’s not true that the average motorist is unharmed by a gas tax hike, so long as he gets the same dollar amount refunded lump sum.”

    Shouldn’t that “but he’s relying on a conclusion that is FALSE.”?

    • Dan says:

      Never mind, I read that part wrong when I was going back over your post.

  8. Harold says:

    The full argument should be:
    We tax gas $1. we give it back as social security rebate. The consumer is unharmed except for the difference in deadweight loss between the two taxes, which is likely to be greater for the gas tax. Now I am assuming this is small, so I am ignoring it for the purposes of my argument. This allows us to assume a win-win. If I were to include the deadweight loss difference, I could no longer assume a win-win.

    More accurately, there is a deadweight loss arising from the externality of burning gas, and a deadweight loss from taxing gas. We reduce the deadweight loss arising from the gas tax if we reduce another tax with the revenue.

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