By Bill Bonner – The Bill Bonner Letter (USA) –
Last month, just a few minutes’ walk from my office, there gathered some remarkably wonky people with some remarkably absurd ideas.
It was the annual meeting of the National Tax Association, a group of people from the government, universities, and private firms who try to calculate and predict the effects of tax law changes.
One of the ideas presented was that human beings never die — at least, not for the purpose of their models. Everyone present admitted that this was not true. But since it made the math more interesting… and allowed modelers to come to a different conclusion… the “immortality assumption” was not rejected offhand.
Not rejecting preposterous assumptions is at the heart of the profession. Humans, being human, react to change in ways that are not fully predictable.
That is the difference between social science and hard science. The hard scientists know that water, at sea level, will boil at 212 degrees Fahrenheit. The social scientists know that if you put people under pressure they will react; but they don’t know how.
Every year, there are about 6,000 to 7,000 tax and spending changes proposed to the federal government. It is the responsibility of the Joint Committee on Taxation to analyze the proposals and estimate what they will cost. Or what they will produce in revenue. To do so, the wonks put together formulae, overheat their computers, and make assumptions.
The models are occasionally fairly accurate. But rarely important. Everybody knows that you can get almost any answer you want simply by changing the assumptions. And the deciders tend to do what they want to do anyway.
They shake the trees and the acorns fall as they will. But now cometh to the nation’s capital a man who has pledged to shake the tree harder than ever.