Sunday
(1)I do not really believe this, but it makes a good story:
The man who sparked the flat tax revolution is former Estonian Prime Minister Mart Laar. He governed his country from 1992 to 1995 and from 1999 to 2002. When the historian became Prime Minister in 1992 at the age of 32 he knew nothing about economy. Laar's area of expertise were Europe's 19th-century national movements. "It is very fortunate that I was not an economist," he says. "I had read only one book on economics – Milton Friedman’s "Free to Choose." I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatisation, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible."
Shrewd politicians often pretend to be dumber than they are, if only so that they can look well-meaningly sheepish instead of thoroughly ridiculous when things go wrong. So, I take Laar's claim to ignorance of economics and of economic policy outside Estonia with a pinch of salt. But what does not seem to be in doubt is the importance that a good book can have, and good ideas in general. If only the same did not apply to bad books and bad ideas.
I visited Estonia briefly in 1991, for a Libertarian International gathering in Tallin. I am not surprised that the Estonians are now doing well. They struck me as very level-headed and efficient people. They of course have a long mercantile tradition as a result of their proximity to and seaborne trade with Scandinavia. Those places are not called the "Baltic" states for nothing.
Sorry, but I'm still chuckling about the "Libertarian International gathering"... for us doctrinaire (small "r") republicans, that sounds suspiciously like one of the Circles of Hell.
Posted by Kim du Toit at August 28, 2005 03:08 PM
Hey, it is entirely possible. The field of economics - at least on the academia side, is too focused on out-of-touch theories instead of, well, you know, real life.
That PM guy may be ignorant economically, but I'm sure he knows what would happen when people start paying less taxes and able to fill tax forms within an hour - more investment, more consumption, more savings.
Posted by Rajan R at August 28, 2005 04:18 PM
I once saw a fight in a pub about Estonian flat taxes. This one guy was mouthing off about how iniquitous they were, not being progressive, and this other guy says, "Don´t be a c___. Tax revenues have increased," and head-butted him.
We all piled in on the side of the flat taxes guy, on the grounds that Estonian tax revenues have indeed increased.
Posted by Harry Hutton at August 28, 2005 06:24 PM
...The Indian American economist Jagdish Baghwati of Columbia University remarked that he agreed with the view that: "India's misfortune was to have brilliant economists: an affliction that the Far Eastern super-performers were spared....."
http://www2.sjsu.edu/faculty/watkins/india.htm
THE ECONOMIC HISTORY AND THE THE ECONOMY OF INDIA
Posted by lucklucky at August 28, 2005 06:32 PM
Read all about it;
Fair tax is getting a great deal of publicity in the USA, and it is very hard to argue against the benefits, - most questions will be found to have an answer at the site linked to.
I will bet that accountants will be the ones to criticise it the most... their role in society will be shown to be no more than that of witch doctor to the Inland Revenues 'demon'.
Posted by ernest young at August 28, 2005 08:26 PM
City Paper : Intellectually, you could not have fully understood everything you were doing. You must have made a lot of your decisions based on raw faith – on the faith that the things Milton Friedman was saying were fundamentally true?ML: Yes. Like the idea that, okay, if you cut taxes, you will raise more revenue. That was only written in text books.
Also
Yegor Gaidar: Yes, I read Friedman’s books with interest, and also Hayek. They were very authoritative for us, but all the same far away from our domestic realities.More here: http://www.openrepublic.org/open_republic/20050619_publication_no1_vol1/articles_papers_formatted/20050619_flat_tax.htm
Posted by AJE at August 30, 2005 10:53 PM
