Crafting the Cynical Generation?

…continuing our conversation in the Economics of Taxation series (part 2)

 

A European Generation ‘E’ enquiry – (‘E’ for employment)

Referring to our previous article entitled ‘The Economics of Taxation’, today we elaborate and flesh out the basic ideas around taxation.

The basic idea is that any form of taxation becomes a drain on productive resources and at some point counter productive in attempts at balancing the government budget.  For a fuller explanation of the effects of tax rate rises see the Laffer Curve analysis and the Cato Institute’s Dan Mitchell explain the Centre for Freedom and Prosperity’s view on Fiscal policy.


 Source: Wikipedia – Laffer Curve

Two specific points are made by Dan Mitchell in his explanation, which bears thinking about:

  • We don’t necessarily want to be at the point on the curve where government revenue is maximised, due to other factors such as the disincentives of maximising tax declaration by tax payers or the cost of collecting that revenue in the first place (sub-optimisation effects)
  • Growth (in the economy) incentives fall well short on the upward side of the Laffer curve.  In plain English this means that economic growth is maximised somewhere where people have the incentive to retain as much of their hard earned income and that point is somewhere well before we reach the Government Revenue maximising point.  (The second Laffer Curve graph above captures this point in a more visual and understandable format).  At point D on the curve economic growth will be maximised and note how it still falls well short of the Government Revenue maximising point B.

The behavioural question that fascinates us at theMarketSoul ©1999 – 2011 is how come citizens in Europe are able to tolerate so much more of an overall higher tax rate burden than our cousins across the pond in the United States?

theMarketSoul ©2011

Risk Management Ideas

Risk has as one of its essential elements TRUST as a foundation.

Trust on the other hand has many other factors that interplay and interact on it.

Markets are created when there are needs that are not immediately met from you local environment and therefore scarcity exists.  Market participants step in to fill this ‘needs’ void.

English: Risk management sub processes
Image via Wikipedia

As for any subset of Risk, either Operational, Market, Liquidity, Interest, etc. a big part of the assessment process it not just about looking inward and assessing the risk profiles, risk attitudes, risk systems, etc., but an important part of the process is stepping into the realm of uncertainty and looking outwards and the wider market context we find ourselves in.

Being too prescriptive about the individual risk profiles and control systems will only stifle innovation and growth.  Some say we need a very healthy dose of growth right now, whereas others are content with the new world order of the ‘anti growth economic’ bias (our description of austerity) we have already entered in the Western Hemisphere.

Our positive risk management framework, also known as Value Oriented Risk Management encapsulates both risk and uncertainty management and combines it with the best offerings of Value Based Management.  (For more information or to contact us, please click on the Contact us link or read the article entitled “The Intersection – Where Risk, Value & Reward link by clicking on the embedded link.

Our Value Oriented Risk Management is the positive Risk Management focus, acting as an enabler ensuring that you unlock value in your organisation a midst the regulatory compliance constraints added to your management agenda.

TheMarketSoul ©2010