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Can you distinguish between correlation and causation?

The evidence was unambiguous: as tax paid as a proportion of GDP rises so too does income, usually. Oil states are an exception.

The whole basis on which Truss is building her economic strategy is wrong, in other words.

High-tax states work for the good of those who live in them. Truss is wrong to claim anything else.

Apparently the Potato cannot. For it could be that higher GDP per capita gives politics more of other peoples’ money to looot…..

11 thoughts on “Can you distinguish between correlation and causation?”

  1. “High-tax states work for the good of those who live in them.”

    By spending their money, not on what they actually want and need but on what the government thinks they should have.
    Got it.

  2. I can’t even work out a mechanism by which removing people’s money from them increases their income. It’s not politics or economics, the basic sums don’t work.

  3. If you drill into this further:

    I wrote in chapter 2 of The Joy of Tax –

    The following graph shows the relationship between nominal GDP per head of population in 175 countries according to the CIA Factbook (a reliable source) and aggregate taxation as a proportion of that GDP (source, The Heritage Foundation, which seems reliable on this occasion). I added the linear trend line.

    First time I’ve seen him in favour of anything from the Heritage foundation.

    I also tested the relationship of states with very low tax rates (often tax havens or places heavily dependent upon oil revenues) were excluded from the sample. In that case the relationship is very strong if countries with aggregate tax rates of less than 10% are excluded:

    So any piece of data that disagrees with my pre-ordained conclusion is eliminated? He clearly wants to look at Scandinavia and Northern Europe (possibly the ANZAC countries as well these days) and like Polly Toynbee and myriad other Guardian ‘drones’ suggests these are to be emulated without pointing out any of the details that make the comparisons invalid. He is an utter buffoon bereft of even a scintilla of intelligence, and putting him onto the MPC would be like putting a caveman in charge of the nuclear button. I’d have to consider any publication describing him as an ‘expert’ in anything to be little better than a comic in terms of economic analysis.

  4. The Joy of Tax…..OK, who is going to take one for the team and buy a copy to read so the rest of us do not have to?

  5. @salamander: If you’re really that masochistic a quick google will find downloadable PDFs for nowt. After all, profit is bad and you wouldn’t want to spoil his moral purity.

  6. “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

    ― Winston S. Churchill

  7. I accidently visited Lord Spudcup’s site. Jeez! Only Murphy could put a horizontal best-fit line through a vertical scatter of data points.

  8. Fiscal drag. Taxes on incomes below the poverty line are stupid, often uncollectable, as well as wrong. So there is a geared rise collectable taxes as incomes rise.

    Murphy is trying to confuse his readers by reversing the cause and effect in correlated items but his need to Murphysplain away the high-income low-tax monarchies betrays his falsehood.

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