static versus dynamic

Life is not static, it is dynamic. Meaning, all forces are constantly reacting, changing, initiating, driving, etc. Unforeseen events and reactions are constantly occurring – making inaccurate any predictions based on the past.

Take, for example, taxation of smoking. We currently tax each pack of cigarettes sold. If some politician wants to raise revenue, they decide that if they raise taxes on cigarettes, revenue will go up that much.

Put in simple terms, if we have a $1 tax on cigarettes, and we sell 100 packs/year, we get $100 of revenue. If using a static model, which assumes everything is constant and nothing changes, a $2 tax on cigarettes will yield $200 in revenue.

Conservatism, though, understands that society is dynamic and that actions have consequences. By doubling that tax on cigarettes, it will create an even greater disincentive to smoke. Therefore, some will quit.

It will also create a greater incentive to cheat the system. Some some sales will go unreported.

This makes it possible that by doubling the tax from $1 to $2, you could actually lose revenue.

And this is why the notion of “paying for tax cuts” is a wholly inaccurate premise.

Every time we lower taxes, tax revenue goes up. How is this possible? By lowering taxes, you create incentives for people to invest in business or start their own. This sort of investment allows businesses to expand, which creates jobs.

Before you lowered taxes, you may have had 50 million working taxpayers. But after the job creation, you might now have 60 million working taxpayers. So, even though everyone is paying less, there are more people paying, and this is where your new revenue is generated.

Static calculations are almost always wrong because they don’t consider the effects of actions, nor do they predict the unpredictable.

I remember looking at Al Gore’s Inconvenient Truth book at the bookstore. It included a bookmark with three “inconvenient facts.” What made me laugh is that two of the three were facts about the future, i.e., “in the year 2030, blah blah blah.”

Well, you can’t have a “fact” from the future, because that’s not a fact, yet. It’s not a fact that there will be a tomorrow. The greater point, though, is that these “facts” were drawn from extrapolating on things happening at the time the book was written.

This is why climate models are so inaccurate. Few things in the universe are as complex as the earth’s climate. To think we have a model that considers absolutely everything is absurd.


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